==============================================================================================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
--------------------
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
- ---
Act of 1934
For the quarterly period ended October 31, 1999April 30, 2000
OR
_____ 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, California 94903
(Address of principal executive offices)
Telephone Number (415) 507-5000
(Registrant's telephone number, including area code)
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 ___
---__
-----
As of December 1, 1999,April 30, 2000, there were approximately 61.658.3 million shares of the
Registrant's Common Stock outstanding.
==============================================================================================================================================================
AUTODESK, INC.
INDEX
PART I. FINANCIAL INFORMATION Page No.No
-------
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Statement of Operations
Three and nine months ended October 31, 1999April 30, 2000 and 1998........1999.................... 3
Condensed Consolidated Balance Sheet
October 31, 1999April 30, 2000 and January 31, 1999........................2000........................... 4
Condensed Consolidated Statement of Cash Flows
NineThree months ended October 31, 1999April 30, 2000 and 1998..................1999.................... 6
Notes to Condensed Consolidated Financial Statements.......... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 11Operations..................................... 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................. 2316
Item 6. Exhibits and Reports on Form 8-K.............................. 2316
Signatures.................................................... 2316
2
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AUTODESK, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three months ended
Nine months ended
October 31, October 31,
------------------------------- -------------------------------April 30,
-----------------------------------
2000 1999
1998 1999 1998
---------- ---------- ---------- ------------------- ---------
Net revenues $ 202,072223,329 $ 204,609 $ 599,956 $ 654,338
---------- ---------- ---------- ----------194,939
--------- ---------
Costs and expenses:
Cost of revenues 35,220 31,009 107,242 100,61336,148 32,408
Marketing and sales 75,439 71,824 237,607 221,00270,150 80,145
Research and development 41,151 40,890 124,441 118,57740,255 38,598
General and administrative 32,168 28,288 101,210 82,88031,805 34,972
Amortization of goodwill and purchased intangibles 7,801 7,405 22,838 21,4077,788 7,244
Nonrecurring (credits) charges 14,728 - 36,510 19,694
Litigation accrual reversal - - - (18,605)
---------- ---------- ---------- ----------
206,507 179,416 629,848 545,568
---------- ---------- ---------- ----------(800) 21,781
--------- ---------
185,346 215,148
--------- ---------
Income (loss) from operations (4,435) 25,193 (29,892) 108,77037,983 (20,209)
Interest and other income, net 6,482 3,887 16,798 13,936
---------- ---------- ---------- ----------2,973 4,496
--------- ---------
Income (loss) before income taxes 2,047 29,080 (13,094) 122,70640,956 (15,713)
Provision for income taxes 654 11,456 2,268 48,819
---------- ---------- ---------- ----------(13,105) (1,431)
Equity in net loss of affiliate (2,245) -
--------- ---------
Net income (loss) $ 1,39325,606 $ 17,624 $ (15,362) $ 73,887
========== ========== ========== ==========(17,144)
--------- ---------
Basic net income (loss) per share $ 0.020.43 $ 0.31 $ (0.25) $ 1.31
========== ========== ========== ==========(0.29)
--------- ---------
Diluted net income (loss) per share $ 0.020.41 $ 0.31 $ (0.25) $ 1.25
========== ========== ========== ==========(0.29)
--------- ---------
Shares used in computing basic net income (loss) per
share 61,157 56,305 60,300 56,226
========== ========== ========== ==========59,005 58,930
--------- ---------
Shares used in computing diluted net income (loss)
per share 61,482 57,533 60,300 58,986
========== ========== ========== ==========62,583 58,930
========= =========
See accompanying notes.
3
AUTODESK, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
(In thousands)
October 31,1999April 30, 2000 January 31, 1999
---------------2000
-------------- ----------------
(Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 183,194105,363 $ 258,941108,641
Marketable securities 210,458 102,756138,965 250,290
Accounts receivable, net 123,382 114,901120,456 110,839
Inventories 23,101 23,16916,402 19,264
Deferred income taxes 28,253 20,32328,286 27,670
Prepaid expenses and other current assets 25,529 24,325
--------------- ----------------25,154 28,555
---------- ------------
Total current assets 593,917 544,415
--------------- ----------------434,626 545,259
---------- ------------
Marketable securities 156,239 66,265189,425 181,992
Computer equipment, furniture, and leasehold
improvements, at cost:
Computer equipment and furniture 147,375 140,513151,768 142,528
Leasehold improvements 26,378 24,76721,458 22,723
Less accumulated depreciation (130,495) (116,625)
--------------- ----------------(128,181) (123,367)
---------- ------------
Net computer equipment, furniture, and leasehold 45,045 41,884
improvements 43,258 48,655
Purchased technologies and capitalized software, net 32,837 40,63025,377 29,029
Goodwill, net 81,538 85,54668,352 75,489
Deferred income taxes 22,630 12,14729,458 27,818
Other assets 14,476 25,602
--------------- ----------------21,102 5,855
---------- ------------
$ 944,895813,385 $ 823,260
=============== ================907,326
========== ============
See accompanying notes.
4
AUTODESK, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(In thousands)
October 31, 1999April 30, 2000 January 31, 1999
---------------- ----------------2000
-------------- -----------------
(Unaudited) (Audited)
Current liabilities:
Accounts payable $ 40,66738,827 $ 49,05345,310
Accrued compensation 50,497 49,59239,188 50,448
Accrued income taxes 74,082 96,73183,493 88,006
Deferred revenues 43,703 24,83340,956 33,604
Other accrued liabilities 79,365 58,905
---------------- ----------------76,425 82,024
------------- ------------
Total current liabilities 288,314 279,114
---------------- ----------------278,889 299,392
------------- ------------
Deferred income taxes 1,067 3,3334,082 4,380
Other liabilities 1,518 3,4861,361 1,255
Commitments and contingencies
Stockholders' equity:
Common stock 620,125 470,801
Deferred compensation (256) (551)
Retained earnings 49,776 81,209545,443 561,814
Accumulated other comprehensive loss (15,649) (14,132)
---------------- ----------------(16,694) (14,822)
Deferred compensation (1,095) (1,338)
Retained earnings 1,399 56,645
------------- -------------
Total stockholders' equity 653,996 537,327
---------------- ----------------529,053 602,299
------------- -------------
$ 944,895813,385 $ 823,260
---------------- ----------------907,326
============= ============
See accompanying notes.
5
AUTODESK, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
NineThree months ended
October 31
-------------------------------April 30,
---------------------------------------------
2000 1999
1998
---------- ---------------------------- -------------------
Operating activities
Net income (loss) $ (15,362)25,606 $ 73,887(17,144)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 19,006 16,794
Net loss on asset disposals 709 408
Equity in net loss of affiliate 2,245 -
Charge for acquired in-process research and development 3,287 13,100
Depreciation and amortization 61,171 53,305
Litigation and related interest accrual reversal - (20,900)
Reversal of restructuring reserve, net - (1,003)
Net gain on disposition of business unit - (1,307)
Net gain on sale of investment - (2,500)
Write-off of purchased technology - 2,233
Net loss on fixed asset disposals 3,240 -3,287
Changes in operating assets and liabilities (25,701) (8,612)
---------- ----------(9,064) (15,068)
-------------- -------------
Net cash provided by (used in) operating activities 26,635 108,203
---------- ----------38,502 (11,723)
-------------- -------------
Investing activities
Net purchasesmaturities (purchases) of marketable securities (197,675) (55,802)103,741 (150,316)
Capital expenditures (10,481) (3,548)
Business combinations, net of cash acquired - (25,642)
(69,279)
Capital purchases of computer equipment, furniture, and leasehold (16,395) (17,496)
improvements
Proceeds from disposition of fixed assets 5,587Investments in unconsolidated entities (19,500) -
Proceeds from disposition of business unit - 5,137
Proceeds from sale of investment - 2,500
Purchases of software technologies, capitalization of software 2,560 (913)
costs, and other (242) (7,632)
---------- ------------------------ -------------
Net cash used inprovided by (used in) investing activities (234,367) (142,572)
---------- ----------76,320 (180,419)
-------------- -------------
Financing activities
Repayment of notes payable and borrowings (2) (1,589)
Repurchases of common stock (192,961) -
Proceeds from issuance of common stock, net of issuance costs 149,300 90,227
Repurchase of common stock - (48,866)83,615 133,967
Dividends paid (11,000) (8,394)
Decrease in credit line (1,921) -
Change in notes payable and short-term borrowings, net 1,334 4,864
---------- ----------(3,500) (3,593)
-------------- -------------
Net cash (used in) provided by financing activities 137,713 37,831
---------- ----------(112,848) 128,785
-------------- -------------
Effect of exchange rate changes on cash and cash equivalents (6,048) 11,278(5,252) (2,571)
Discreet Logic activity for the one month ended January 31, 1999 - 320
-
---------- ------------------------ -------------
Net increase (decrease)decrease in cash and cash equivalents (75,747) 14,740(3,278) (65,608)
Cash and cash equivalents at beginning of year 108,641 258,941
108,738
---------- ------------------------ -------------
Cash and cash equivalents at end of period $ 183,194105,363 $ 123,478
========== ==========193,333
============== =============
Supplemental cash flow information:
Cash paid during the period for income taxes $ 40,3333,921 $ 14,331
========== ==========
Supplemental noncash information:
Common stock received in relation to the equity collar $ - $ 4,265
========== ==========5,140
============== =============
See accompanying notes.
6
AUTODESK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
---------------------
The accompanying condensed consolidated financial statements of Autodesk, Inc. ("Autodesk" or
the "Company") at October 31, 1999 and for the three- and nine- month periods
then ended are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim periods. The condensed consolidated financialThese statements should
be read in conjunction with the consolidated financial statements and notes
thereto, together with management's discussion and analysis of financial
condition and results of operations, contained in the Company's Annual Report to Stockholders
incorporated by reference in the Company'sAutodesk's fiscal 2000 Annual
Report on Form 10-K for the
fiscal year ended January 31, 1999 and the Company's supplemental consolidated
financial statements (which combine the results of Autodesk and Discreet Logic
Inc. - see Note 2) on Form 8-K/A for the fiscal year ended January 31, 1999.10-K. The results of operations for the three and nine months ended October 31, 1999April
30, 2000 are not necessarily indicative of the results for the entire fiscal
year ending January 31, 2000.2001.
2. Business Combinations
---------------------
Discreet Logic Inc.
On March 16, 1999, Autodesk acquired Discreet Logic Inc. ("Discreet") by issuing
approximately 10.0 million shares of Autodesk common stock in exchange for
Discreet's outstanding common stock. Discreet develops, assembles, markets and
supports nonlinear digital systems and software for creating, editing, and
compositing imagery for film, video, and HDTV.
Autodesk accounted for this acquisition under the pooling of interests method.
Accordingly, all prior period consolidated financial statements presented have
been restated to include the combined results of operations, financial position
and cash flows as though it had always been part of Autodesk.
Prior to the acquisition, Discreet's fiscal year ended June 30. As a result,
the financial statements for the three- and nine- month periods ended October
31, 1998 combine Autodesk's historical financial statements with Discreet's
financial statements for the three- and nine- month periods ended September 30,
1998, respectively.
Results of Discreet for the one-month period ended January 31, 1999, have been
excluded from the reported results of the combined entity as a result of
changing Discreet's year-end to January 31, 1999. 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. There were no
other significant changes in stockholders' equity for the period excluded from
the reported results of operations.
VISION* Solutions
On April 22, 1999, the Company acquired VISION* Solutions ("VISION"), a vendor
of enterprise automated mapping/facilities management/geographic information
systems (AM/FM/GIS) solutions from MCI Systemhouse Corporation, a subsidiary of
MCI WorldCom Inc., for approximately $26 million in cash. Autodesk is
accounting for this acquisition under the purchase method of accounting.
Approximately $3.3 million of the VISION purchase price represented the value of
in-process research and development that had not yet reached technological
feasibility and had no alternative future use, and as such, was charged to
nonrecurring charges in the first quarter of fiscal year 2000. The remaining
purchase price was allocated, based on the Company's preliminary estimates,
primarily to assets acquired, developed technology, and other intangibles.
Specifically, costs of $17.6 million and $2.1 million have been allocated to
preliminary goodwill and other intangibles and are being amortized on a
straight-line basis over periods ranging from three to seven years. There may
be additional adjustments over the next several months as the
7
Company continues to evaluate the preliminary purchase price allocation. The
operating results of VISION, which have not been material in relation to those
of the Company, have been included in the accompanying condensed consolidated
financial statements since the date of acquisition.
3. Common Stock Follow-on Offering
-------------------------------
On March 16, 1999, Autodesk sold 3.0 million shares of Autodesk common stock at
$41 per share for net proceeds of $117.5 million.
4. Recently Issued Accounting Standards
------------------------------------
In June 1998,Autodesk has until fiscal 2002 to adopt the Financial Accounting Standards Board ("FASB") issuedprovisions of Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133")., which was issued in June, 1998. This
Statement requires Autodesk to recognize all derivatives on the balance sheet at
fair value. Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives are either offset against the change in fair value
of assets, liabilities, or firm commitments through earnings or recognized in
other comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. In June 1999, the FASB issued Statement of Financial
Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133 - an
amendment of FASB Statement No. 133" ("SFAS 137"). SFAS 137 delays the
effective date of SFAS 133 to the beginning of the Company's fiscal year 2002.
Autodesk is currently evaluating the impact of SFAS 133 as amended by SFAS 137,
on its
financial statements and related disclosures.
5.During the fourth quarter of fiscal 2000, the Staff of the Securities and
Exchange Commission issued Staff Accounting Bulletin No. 101 ("SAB 101"),
"Revenue Recognition in Financial Statements." Management believes that
Autodesk's practices and policies are in compliance with SAB 101.
3. Net Income (Loss) Per Share
---------------------------
Basic net income (loss) per share is calculated using the weighted average
number of common shares outstanding. Diluted net income (loss) per share is
computed using the weighted average number of common shares outstanding and
dilutive common stock equivalents outstanding during the period.
A reconciliation of the numerators and denominators used in the basic and
diluted net income (loss) per share amounts follows:
Three months ended Nine months ended
October 31, October 31,
------------------ -------------------
(In thousands) 1999 1998 1999 1998
-------- -------- --------- --------
Numerator:
Numerator for basic
and diluted per share
amounts--net income (loss) $ 1,393 $ 17,624 $ (15,362) $ 73,887Three months ended
April 30,
---------
(In thousands) 2000 1999
---- ----
Numerator:
Numerator for basic and diluted per share amount -- net
income (loss) $ 25,606 $ (17,144)
======== ========
Denominator:
Denominator for basic net income (loss) per share --
weighted average shares 59,005 58,930
Effect of dilutive common stock options 3,578 -
-------- --------
Denominator for dilutive net income (loss) per share 62,583 58,930
======== ======== ========= ========
Denominator:
Denominator for basic
net income (loss) per share--
weighted average shares 61,157 56,305 60,300 56,226
Effect of dilutive common
stock options 325 1,228 - 2,760
-------- -------- --------- --------
Denominator for
dilutive net income (loss)
per share 61,482 57,533 60,300 58,986
======== ======== ========= ========
In periods that the Company incurs a net loss, all outstanding options are
excluded from the calculation of diluted net loss per share. Had the Company
not been in a loss position for the nine months ended October 31, 1999, dilutive
options of 1.1 million shares would have been added to compute diluted net loss
per share.
8
For the three months ended October 31, 1999 and 1998,April 30, 2000, options to purchase 23.2
million and 8.92.0 million
shares respectively, have beenwere excluded from the computation of diluted net income per share.
These options were excluded because the options' exercise prices were greater
than the average market price of Autodesk's common stock.
For the ninethree months ended October
31,April 30, 1999, and 1998,all outstanding options to purchase 7.7 million and 3.5 million shares,
respectively, have beenwere excluded
from the computation of diluted net incomeloss per share. Such options were excludedshare because the options had exercise prices
greater than the average market prices of common stock during the respective
periods.
6.Autodesk incurred a
loss.
7
4. Comprehensive Income --------------------
Pursuant to Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130"), unrealized gains or losses on the Company's
available-for-sale marketable securities and foreign currency translation
adjustments are included in other comprehensive income.(Loss)
---------------------------
Autodesk's total comprehensive income (loss) was as follows:
Three months ended
April 30,
------------------------------
(In thousands) 2000 1999
---- ----
Net income (loss) $ 25,606 $ (17,144)
Other comprehensive loss, net (1,872) (1,393)
----------- -----------
Total comprehensive income (loss) $ 23,734 $ (18,537)
=========== ===========
5. Investment in Affiliate -- Buzzsaw.com, Inc.
--------------------------------------------
In April 2000, Autodesk invested an additional $17.5 million in Buzzsaw.com,
Inc., an Internet start-up formed by Autodesk during the third quarter of fiscal
2000. Autodesk currently maintains a 40 percent interest in Buzzsaw.com, and
accounts for this investment under the equity method of accounting.
During the first quarter of fiscal 2001, Autodesk recognized $2.2 million of
losses, representing its proportionate share of Buzzsaw.com's April losses. The
carrying value of Autodesk's investment in Buzzsaw.com was $11.3 million at
April 30, 2000, and is included in Other Assets in the Condensed Consolidated
Balance Sheet.
6. Restructuring Accruals
----------------------
The following table sets forth the activity during the first quarter of fiscal
2001 associated with restructurings that occurred during fiscal 2000:
Three months ended Nine months ended
October 31, October 31,
------------------ ---------------------Balance at Balance at
(In thousands) 1999 1998 1999 1998
---- ---- ---- ----February 1, Charges April 30,
2000 Additions Utilized Reversals 2000
------------- --------------- -------------- ------------- -------------
Net income (loss)
Employee termination costs $ 1,3931,000 $ 17,6240 $ (15,362)(315) $ 73,887
Other comprehensive income (loss) 3,479 17,544 (1,517) 13,612
-------- -------- --------- ---------(300) $ 385
Office closure costs 700 0 (78) (100) 522
Legal entity liquidations 500 0 (54) (200) 246
------------- ------------ ----------- ------------ -------------
Total comprehensive income (loss) $ 4,8722,200 $ 35,1680 $ (16,879)(447) $ 87,499
======== ======== ========= =========(600) $ 1,153
============= ============ =========== ============ =============
7.The $0.6 million of reversals is included in Nonrecurring Charges --------------------
Duringin the
nine months ended October 31, 1999, the Company recorded nonrecurring
charges totaling $36.5 million, which resulted from the acquisitionCondensed Consolidated Statement of Discreet
($17.7 million), acquisition of VISION ($3.3 million - see Note 2), and a
corporate restructuring that occurred during the third quarter of 1999 ($15.5
million).
In connection with the acquisition of Discreet, the Company recorded
nonrecurring charges of $18.5 million during the first quarter of 1999. Of this
amount, $0.8 million was reversed during the third quarter since certain
liabilitiesOperations. Certain accruals established in
fiscal 2000 were settled for less than originally estimated.
Of the net amount
($17.7 million), $14.9 million related to transaction costs, $2.6 million
related to restructuring costs, and $0.2 million related to other one-time
costs. Transaction costs consisted primarily of fees for investment bankers,
attorneys, financial printing, accountants, and other related costs.
Restructuring costs included severance and exit costs.
In an effort to reduce on-going operating expenses, the Company incurred $15.5
million of restructuring charges during the third quarter of 1999, consisting of
termination and other employee-related costs associated with the elimination of
approximately 350 positions ($11.7 million); office closure-related costs ($3.2
million); and one-time costs ($0.6 million). Employee termination costs
included wage continuation, advance notice pay and medical and other benefits.
The liabilities associated with the employee terminations will be substantially
settled over the next several months. Office closure-related costs included
losses on operating lease payments and the write-off of leasehold improvements
and equipment.
At October 31, 1999, the remaining liabilities associated with the $15.5 million
of restructuring charges totaled $5.9 million.
8.7. Segments
--------
During the second quarter of fiscal 2000, the Company reorganized its operations
into four business divisions with industry-specific charters: the Design
Solutions Division (consisting mostly of the MCAD and AECAD market groups and
most of the Personal Solutions Group), the GIS Solutions Division, the Discreet
Division (consisting of the Kinetix business and recently acquired Discreet
business), and
9
Autodesk Ventures. In accordance with the aggregation criteria and the minimum
threshold levels specified by Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"), the Company'sAutodesk's operating results have been aggregated into two reportable segments:
the Discreet Segment and the Design Solutions Segment. Segment (which includesinformation
involving the GISGeographic Information Systems Solutions Division ("GIS") and
Autodesk Ventures) andVentures was aggregated with the Discreet Segment.Design Solutions Division
(collectively, referred to in these financial statements as the "Design
Solutions Segment"). The Design Solutions Segment develops and sells design software products for
professionals, occasional users, or consumers who design, draft,GIS divisions have similar
production processes, customer types and diagram.
The end users of the design software products include architects, engineers,
construction firms, designers, and drafters. 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. 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.distribution methods. Autodesk
Ventures' segment information is not material.
8
Autodesk evaluates each segment's performance on the basis of income from
operations before income taxes. The CompanyAutodesk currently does not separately
accumulate and report asset information by market group. Information concerning
the operations of the Company's reportable segments wasis as follows:
Three months ended Nine months ended
October 31, October 31,
-------------------- -------------------
(In millions) 1999 1998 1999 1998
------ ------ ------ ------
Net revenues:
Design Solutions $ 156.2 $ 166.8 $ 473.4 $ 520.7
Discreet 45.9 37.8 126.6 133.6
-------- -------- -------- --------
$ 202.1 $ 204.6 $ 600.0 $ 654.3
======== ======== ======== ========
Income (loss) from operations:
Design Solutions $ 73.9 $ 82.8 $ 219.8 $ 258.3
Discreet 5.3 2.5 (15.2) 17.4
Unallocated amounts/1/ (83.6) (60.1) (234.5) (166.9)
-------- -------- -------- --------
$ (4.4) $ 25.2 $ (29.9) $ 108.8
======== ======== ======== ========
Three months ended
April 30,
---------
(In thousands) 2000 1999
---- ----
Net revenues:
Design Solutions $ 177,009 $ 161,060
Discreet 46,320 33,879
----------- ----------
$ 223,329 $ 194,939
=========== ==========
Income (loss) from operations:
Design Solutions $ 122,919 76,906
Discreet 1,112 (24,708)
Unallocated amounts/1/ (86,048) (72,407)
----------- ---------
$ 37,983 $ (20,209)
=========== =========
/1/ Unallocated amounts in the three- and nine- month periods ended October 31,
1999 and 1998 are attributed primarily to other geographic costs and
expenses whichthat are managed outside the reportable segments.
9.8. Stock Repurchase Program
------------------------
During the first quarter of fiscal 2001, Autodesk repurchased and retired 4.0
million shares of its common stock at an average repurchase price of $48.06. As
a result, common stock and retained earnings were reduced by $115.6 million and
$77.3 million, respectively.
In November 1999, managementMarch 2000, Autodesk announced a plan to repurchase up to an additional 8.0
million shares of the Company'sits common stock. The primary purpose of the stock repurchase
program is to help offset the dilution to earnings per share caused by the
issuance of stock under the Company's employee stock plans.
The common
stock will be purchased from time to time at the direction of management, either
directly or through derivative instruments. The number of shares to be
purchased and the timing of purchases will be based on several factors,
including general market conditions and the trading price of Autodesk common
stock. Purchases may be made in the open market or in privately negotiated
transactions and will be funded from available working capital.
109
ITEM 2. 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"below 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 below relating to markets for Autodesk'sour
products and trends in revenue, as well as other statements including such words
as "anticipate," "believe," "plan," "estimate," "expect," "goal," and "intend"
and other similar expressions constitute forward-looking statements. These
forward-looking statements are subject to business and economic risks, and Autodesk'sour
actual results could differ materially from those set forth in the forward-lookingforward-
looking statements as a result of the factors set forth below, including "Certain Risk"Risk
Factors Which May Impact Future Operating Results," page 15,11, as well as factors
set forth in Autodesk'sour fiscal 2000 Annual Report on Form 10-K and in
Autodesk's Form 8-K/A filed on May 28, 1999.
On March 16, 1999, Autodesk, Inc. ("Autodesk" or the "Company") acquired
Discreet Logic Inc. ("Discreet"), in a business combination accounted for as a
pooling of interests. Accordingly, all prior period consolidated financial
statements presented have been restated to include the combined results of
operations, financial position, and cash flows of Discreet as though it had
always been a part of Autodesk. 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. Discreet develops, assembles,
markets, and supports nonlinear digital systems and software for creating,
editing, and compositing imagery for film, video, and HDTV.
Prior to the acquisition, Discreet's fiscal year ended June 30. As a result,
the financial statements for the three- and nine- month periods ended October
31, 1998 combine Autodesk's historical financial statements with Discreet's
financial statements for the three- and nine- month periods ended September 30,
1998, respectively.
On April 22, 1999, the Company acquired VISION* Solutions ("VISION"), a vendor
of enterprise automated mapping/facilities management/geographic information
systems (AM/FM/GIS) solutions. Autodesk is accounting for this acquisition
under the purchase method of accounting. Accordingly, VISION's operating
results, which are not material in relation to those of Autodesk, have been
included in Autodesk's consolidated financial statements since the date of the
acquisition.10-K.
Results of Operations
Three Months Ended October 31,April 30, 2000 and 1999
and 1998
- ---------------------------------------------------------------------------------------
Net revenues. The Company's thirdOur first quarter net revenues of $202.1$223.3 million decreasedincreased from
$204.6$194.9 million recognized in the thirdfirst quarter of the prior fiscal year.
Increases in Asia Pacific'sthe America's net revenues of 4326 percent wereas well as a 33 percent
increase in Asia/Pacific more than offset by decreasesa decrease of 12 percent and 6 percent in net
revenues in the
Americas and Europe, respectively, as compared to the same period in the prior fiscal year. In
addition, net revenues for the Discreet Segment, which includes
the Discreet business and the Kinetix business, increased 2137 percent compared
to the same periodfirst quarter in the prior fiscal year. The overall decreaseincrease in net
revenues was primarily due to a declinean increase in the sales of AutoCADvertical products and
AutoCAD LT.sales of VISION* Solutions, or VISION, which was acquired on April 22, 1999.
Sales of AutoCAD and AutoCAD upgrades accounted for approximately 37 percent and 5432 percent of
Autodesk'sour consolidated net revenues in the thirdfirst quarter of fiscal years 2000year 2001 and 1999, respectively.45
percent of net revenue in fiscal year 2000.
The value of the US dollar, relative to international currencies, did not havehad a significantnegative
impact of $4.1 million on net revenues in the thirdfirst quarter of the current
fiscal year as compared to the same period in the prior fiscal year.
International sales, including exports from the U.S., accounted for
approximately 6160 percent of Autodesk'sour net revenues in the thirdfirst quarter of fiscal year
20002001 as compared to 5856 percent in the same period of the prior fiscal year.
Autodesk derives a substantial portion of its revenues from sales of AutoCAD
software, AutoCAD upgrades, and vertical products that are interoperable with
AutoCAD, and expects this trend to continue. As such, any factor adversely
affecting sales of AutoCAD and AutoCAD upgrades, including such factors as
product life cycle, market acceptance, product performance and reliability,
reputation, price,
11
competition, and the availability of third-party applications, could have a
material adverse effect on Autodesk's business and consolidated results of
operations. Additionally, slowdowns in any of Autodesk's geographical markets
could also have a material adverse impact on Autodesk's business and
consolidated results of operations.
Product returns, consisting principally of stock rotation, are recorded as a
reduction of revenues and represented approximately 72 percent of consolidated
revenues in the first quarter of fiscal year 2001 and 4 percent of
consolidated net revenues in the thirdfirst
quarter of fiscal years 2000 and 1999,
respectively. Management anticipatesyear 2000. We 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. When expressed as a percentage of net revenues, cost of
revenues increaseddecreased from 1517 percent of net revenues in the thirdfirst quarter of the
prior fiscal year to 1716 percent of net revenues in the thirdfirst quarter of the
current fiscal year. This increasedecrease is primarily due to increasesreduced royalty costs of
$1.9 million that resulted from the conclusion of some of our royalty
arrangements in royalties
and due to the acquisition of VISION, which has relatively higher cost of
revenues as a percentage of net revenues than other Autodesk or Discreet
products.fiscal 2000. Cost of revenues as a percentage of net revenues
has been and may continue to be impacted by the mix of product sales, software
amortization costs, royalty rates for licensed technology embedded in Autodesk'sour
products, and the geographic distribution of sales.
Marketing and sales. Marketing and sales expenses were 37 percent and 35decreased to 31 percent of net
revenues in the thirdfirst quarter of fiscal years 2000 and 1999,
respectively. Spending increased primarily as a resultyear 2001 from 41 percent of an increasenet
revenues in the expensefirst quarter of fiscal year 2000. This decrease is partially
due to lower employee-related expenses of $3.8 million. Additionally, during the
first quarter of last year, we incurred advertising and promotion costs related
to the March 1999 launch of MCAD related products in Europe and the
incremental costs due to the acquisition of VISION. Autodesk expectsAutoCAD 2000. We expect to continue to make
significant investments in marketing and sales, both in absolute dollars and as
a percentage of net revenues.
10
Research and development. ResearchFirst quarter research and development expenses represented 20
percent of
net revenues$40.3 million increased from $38.6 million recognized in both the third quarters of fiscal years 2000 and
1999. Spending increased largely as a resultfirst quarter of
the prior year. The incremental costs were due to the acquisition of VISION. Autodesk anticipates$2.0 million related to VISION
and increased employee-related spending. We anticipate that research and
development expenses will increase in future periods as a result of product
development efforts by Autodesk'sour market groups and incremental personnel costs.
General and administrative. General and administrative expenses were 16 percent
of net revenues in the third quarter of fiscal year 2000 as compared to 14 percent
of net revenues in the thirdfirst quarter of fiscal year 2001 as compared to 18
percent of net revenues in the first quarter of the prior fiscal year. Spending
increased dueLower
employee-related spending of $1.3 million and lower spending of $2.1 million
related to higher employee-relatedinformation systems contributed to the overall reduction in expenses.
The CompanyWe currently expectsexpect that general and administrative expenses will continue to be
significant in future periods to support spending on infrastructure, including
continued investment in Autodesk'sour worldwide information systems.
Amortization of goodwill and purchased intangibles. Amortization of goodwill and
purchased intangibles for the three months ended October 31, 1999, remained
relatively flatApril 30, 2000, increased
slightly as compared withto the same period in the prior fiscal year. The increase
is largely due to incremental amortization associated with the April 1999
acquisition of VISION.
Nonrecurring (credits) charges. In an effort to reduce operating expenses,During the Company
incurred $15.5 millionfirst quarter of restructuring costs during the three months ended
October 31, 1999. Of this amount, $11.7fiscal year 2001, we
reversed $0.8 million related to employee costs
associated withone-time accruals established in fiscal 2000.
Of the elimination of approximately 350 positions, $3.2$0.8 million,
related to office closure costs, and $0.6 million related to one-time costs. As
a result ofrestructuring accruals established
in fiscal 2000. The accruals were settled for less than originally estimated.
During the restructuring, quarterly savings of approximately $9.0 million,
which were partially realized during the third quarter, are expected to be
offset over time by costs associated with new businesses.
Additionally, during the thirdfirst quarter of 1999, the Company reversed $0.8last year, we recognized $21.8 million of
liabilities established earlier in the fiscal yearnonrecurring charges related to the acquisitionacquisitions of Discreet. The liabilities were settled for amounts less than
originally estimated.Discreet Logic Inc. and
VISION.
Interest and other income. Interest and other income, net was $6.5$3.0 million in
the thirdfirst quarter of fiscal year 20002001 compared to $3.9$4.5 million in the
corresponding period of the prior year. The increasedecrease is related to higherlower
investment balances resulting from cash cash equivalents, and marketable securities balances.
12
used for share repurchase activity.
Provision for income taxes. Excluding the impact of nonrecurring charges, the
Company's effective income tax rate was 32 percent in the third quarter of
fiscal 2000 compared to 39 percent in the same quarter of the prior fiscal year.
The decrease in the effective income tax rate was due primarily to incremental
tax benefits associated with the Company's foreign earnings that are taxed at
rates different than the U.S. statutory rate. A tax benefit of 32 percent was
recorded with respect to all nonrecurring charges incurred during the third
quarter of fiscal 2000.
Nine Months Ended October 31, 1999 and 1998
- -------------------------------------------
Net revenues. Autodesk's net revenues for the nine months ended October 31,
1999 of $600.0 million decreased from $654.3 million in the same period of the
prior fiscal year. The decrease in net revenues was primarily due to a decline
in the sales of AutoCAD products and upgrades.
Cost of revenues. Cost of revenues as a percentage of net revenues for the nine
months ended October 31, 1999 was 18 percent, compared to 15 percent in the same
period in the prior fiscal year. This increase is primarily due to increases in
royalties, amortization of capitalized software for AutoCAD 2000 and due to the
acquisition of VISION, which has relatively higher cost of revenues as a
percentage of net revenues than other Autodesk or Discreet products. Cost of
revenues as a percentage of net revenues has been and may continue to be
impacted by the mix of product sales, software amortization costs, royalty rates
for licensed technology embedded in Autodesk's products, and the geographic
distribution of sales.
Marketing and sales. As a percentage of net revenues, marketing and sales
expenses for the nine months ended October 31, 1999 was 40 percent compared to
34 percent in the same period in the prior fiscal year. Spending increased
primarily as a result of higher advertising and promotion costs related to the
launch of AutoCAD 2000 in March 1999, an increase in the expense related to the
launch of MCAD related products in Europe, increased employee costs, and the
acquisition of VISION.
Research and development. Research and development expenses as a percentage of
net revenues for the nine months ended October 31, 1999 increased to 21 percent
from 18 percent for the same period in the prior fiscal year. Spending
(including capitalized software costs of $4.7 million recorded during the nine
months ended October 31, 1999) increased due primarily to the addition of
employee-related expenses, rent and occupancy expenses, the incremental costs
due to the acquisition of VISION and professional fees related primarily to the
Design 2000 family of products.
General and administrative. General and administrative expenses were 17 percent
of net revenues for the nine months ended October 31, 1999, and 13 percent of
net revenues in the same period of the prior fiscal year. The increase was
primarily due to increased employee-related expenses and professional fees
primarily related to Autodesk's information technology infrastructure.
Amortization of goodwill and purchased intangibles. Amortization of goodwill
and purchased intangibles was $22.8 million for the nine months ended October
31, 1999 compared to $21.4 million for the nine months ended October 31, 1998.
The increase was largely due to incremental amortization associated with the May
1998 acquisition of Genius and the April 1999 acquisition of VISION.
Nonrecurring charges - -
During the nine months ended October 31, 1999
Corporate restructuring. In an effort to reduce operating expenses, the
Company incurred $15.5 million of restructuring costs during the third quarter
of 1999. Of this amount, $11.7 million related to employee costs, $3.2
million related to office closure costs, and $0.6 million related to one-time
costs.
Discreet acquisition. In connection with the acquisition of Discreet, the
Company recorded nonrecurring charges of $18.5 million during the first
quarter of 1999. Of this amount, $0.8 million was reversed during the third
quarter since certain liabilities were settled for less than originally
estimated. Of the net amount ($17.7 million), $14.9 million related to
transaction costs, $2.6 million
13
related to restructuring costs, and $0.2 million related to other one-time
costs. Transaction costs consisted primarily of fees for investment bankers,
attorneys, financial printing, accountants, and other related costs.
Restructuring costs included severance and exit costs.
VISION acquisition. In connection with the VISION acquisition, the Company
expensed $3.3 million as nonrecurring charges. This amount represented part
of the purchase price that was allocated to in-process research and
development that had not yet reached technological feasibility and had no
alternative future use.
The research and development projects in-process at the acquisition date
consisted of the development of two products, VISION* 5.3 (formerly Vision
6.x) and VISION* Electric 2.3 (formerly Electric 3.x), both of which are
expected to be introduced during fiscal year 2001.
The projected financial results used in the valuation were based on
expectations for VISION on a stand-alone basis that any third party acquirer
may expect excluding the specific synergistic benefits that Autodesk expects
to achieve after the acquisition.
The rate used to discount the net cash flows back to their present values is
based on the weighted average costs of capital, or "WACC". A discount rate of
25% was used for valuing the in-process research and development. In
utilizing a discount rate greater than Autodesk's WACC, management has
reflected the risk premium associated with achieving the forecasted cash flows
with these projects.
During the nine months ended October 31, 1998
Genius acquisition. On May 4, 1998, Autodesk entered into an agreement with
Genius CAD Software GmbH ("Genius"), a German limited liability company, to
purchase various mechanical computer-aided design software applications and
technologies. The acquisition was accounted for using the purchase method of
accounting and resulted in a nonrecurring charge for in-process research and
development, that had not yet reached technological feasibility and had no
alternative future use, of $13.1 million, all of which was recorded during the
three months ended July 31, 1998.
Of the five acquired Genius in-process technologies, two were completed and
introduced in fiscal year 1999. The remaining three technologies were
completed and introduced during the third quarter of fiscal year 2000.
Other. During the nine months ended October 31, 1998, the Company recorded
charges of approximately $8.9 million relating primarily to restructuring
charges associated with the consolidation of certain development centers ($1.5
million); the write-off of purchased technologies associated with these
operations ($2.2 million); staff reductions in Asia Pacific in response to
economic conditions in the region ($1.7 million); costs in relation to
potential legal settlements ($2.5 million); and the write-down to fair market
value of older computer equipment that the Company planned to dispose of ($1.0
million). The $8.9 million charge was offset by $2.3 million of excess
restructuring reserves that Discreet reversed during the quarter ended July
31, 1998.
Litigation accrual reversal. During the nine months ended October 31, 1998, the
Company recognized $18.2 million and $2.7 million as operating income and
interest income, respectively, to reflect the remaining unutilized litigation
and related interest accruals related to final adjudication of a claim of trade-
secret misappropriation brought by VMI.
Interest and other income. Interest and other income, net was $16.8 million for
the nine months ended October 31, 1999, as compared to $13.9 million for the
same period in the prior fiscal year. The prior fiscal year amount included
$2.7 million representing the interest portion of the VMI settlement and a $1.3
million gain realized upon the sale of technical programs and related
documentation, certain tangible fixed assets, copyrights, tradenames, and other
intangible assets associated with Autodesk's Picture This Home!(R) software
programs. These decreases were offset by increases to interest income related
to higher cash, cash equivalents, and marketable securities balances resulting
from common stock issuances.
14
Provision for income taxes. Excluding the impact of nonrecurring charges, the
Company'sOur effective income tax rate was 32 percent for the
first nine monthsquarter of fiscal 2000 compared to 37 percent2001 and 2000. Consistent with last year, the effective
tax rate for the same period infirst quarter of fiscal 2001 is less than the prior fiscal year.
The decrease infederal statutory
rate of 35 percent due to the effective income tax rate was due primarily to incremental
tax benefits associated with the Company'sour foreign earnings
thatwhich are taxed at rates different thanfrom the U.S.federal statutory rate. A tax benefitrate, research
credits and tax-exempt interest, partially offset by non-deductible goodwill
amortization.
Equity in net loss of 32 percent was
recorded with respect to all nonrecurring charges recognizedaffiliate. The $2.2 million equity in net loss of
affiliate represents our proportionate share of Buzzsaw.com's April 2000 losses.
During April 2000, we invested an additional $17.5 million in Buzzsaw.com, an
Internet start-up we formed during the third quarter of fiscal 2000. No tax benefit was recorded with respectWe expect
equity in net losses to the
nonrecurring charges incurredbe significant in connection with the Discreet and VISION
acquisitions in the first quarter of fiscal 2000.
The Company's United States income tax returns for fiscal years ended
January 31, 1992 through 1996, have been examined by the Internal Revenue
Service ("IRS"). On August 27, 1997, the IRS issued a Notice for Deficiency
proposing increases to the amount of the Company's federal income taxes for
fiscal years 1992 and 1993. On November 25, 1997, the Company filed a petition
with the United States Tax Court to contest these alleged tax deficiencies. In
July 1999, the Company made tax payments with respect to all issues addressed as
part of the IRS audit. As a result, the Company has either resolved all matters
or made prepayments with respect to remaining outstanding issues for the tax
years ended January 31, 1992 through 1996. The resolution of any remaining
adjustments that may ultimately result from these examinations are not expected
to have a material adverse impact on the Company's consolidated results of
operations or its financial position.
Certainfuture quarters.
Risk Factors Which May Impact Future Operating Results
Autodesk operatesWe operate in a rapidly changing environment that involves a number of risks,
many of which are beyond itsour 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 could be harmed. In that case, the trading price of our
common stock could decline, and you could lose all or part of your investment.
Fluctuations in quarterly operating results. From time to time, Autodesk
experiencesAt various times, we experience
fluctuations in itsour quarterly operations asoperations. These fluctuations are a result of,
periodic
release cycles,among other things: the timing of the introduction of new products by us or our
competitors; increases in personnel; marketing or operating expenses; changes in
product pricing or product mix; delays in product releases; competitive factorsfactors;
and general economic conditions among other
things. Recently, Autodesk has experienced reduced sales which Autodesk believes
may be attributable to a slowdown of customer purchases in response to product
transition issues relating to the introduction of AutoCAD 2000 before
introduction of corresponding associated products such as Mechanical Desktop 4.0
and AutoCAD LT 2000, and to general concerns about Year 2000 problems, in
particular diversion of software budgets to Year 2000 testing.conditions.
11
In addition, Autodesk has in the pastwe have experienced fluctuations in operating results in interim
periods in certain geographic regions due to seasonality. In particular, Autodesk'sour
operating results in Europe during the third fiscal quarter are usually impacted by a
slow summer period, and the Asia Pacific operations typically experience
seasonal slowing in the third and fourth fiscal
quarters.
The technology industry is particularly susceptible to fluctuations in operating
results from quarter to quarter. These fluctuations are caused by a number of
factors including the timing of the introduction of new products by Autodesk or
its competitors and other economic factors experienced by Autodesk's customers
in the geographic regions in which Autodesk does business.
Within the Discreet, business unit, a limited number of system sales may account for a substantial
percentage of Discreet's quarterly revenue because of the high average sales
price of products and the timing of purchase orders. Historically, Discreet has
generally experienced greater revenues during the period following the
completion of the NABNational Association of Broadcasters trade show, which
typically is held in April. In addition, the timing of revenue is influenced by
a number of other factors, includingincluding: the timing of individual orders and shipments,shipments;
introduction of new products; other industry trade shows, competition,shows; competition; seasonal
customer buying patterns,patterns; changes in customer buying patterns in response to
platform changes and changes in product development,development; and sales and marketing
expenditures.
Additionally, Autodesk'sour operating expenses are based in part on itsour expectations for
future revenues and are relatively fixed in the short term. Accordingly, any
revenue shortfall below expectations could have an 15
immediate and significant
adverse effect on Autodesk's consolidated results of
operations and financial condition.
Similarly, shortfallsour business.
Shortfalls in Autodesk'sour revenues or earnings from levels expected by securities
analysts could have an immediate and significant adverse effect on the trading
price of Autodesk'sour common stock. Moreover, Autodesk'sour stock price is subject to the
volatility generally associated with technology stocks and may also be affected
by broader market trends unrelated to performance.
Product concentration. Autodesk derivesConcentration. We derive a substantial portion of itsour revenues from
sales of AutoCAD software, AutoCAD upgrades, and adjacent products that are
interoperable with AutoCAD. As such, any factor adversely affecting sales of
AutoCAD and AutoCAD upgrades, including such factors asincluding: product life cycle, market acceptance,
product performance and reliability, reputation, price competition, and the
availability of third-party applications could have a
material adverse effect on Autodesk's business and consolidated results of
operations.would likely harm our business.
Competition. 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. 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 revenues and profit margins and loss of market share, any of which could
adversely affect Autodesk's business, consolidated results of operations,
and financial condition.harm our business. The design software market in particular is characterized by
vigorous competition in each of the vertical markets in which Autodesk and its individual market groupswe compete, both
by entry of competitors with innovative technologies and by consolidation of
companies with complementary products and technologies. The Design Solution familySome of products competes with products offered by
companies such as Bentley Systems, Inc. ("Bentley"); Computervision Corporation
(a subsidiary of Parametric Technology Corporation) ("Computervision"); CADAM
Systems Company, Inc.; Diehl Graphsoft, Inc.; Eagle Point Software;
International Microcomputer Software, Inc. ("IMSI"); Intergraph Corporation;
Nemetschek Systems, Inc.; Visio Corporation ("Visio"); Visionary Design Systems;
Hewlett-Packard Corporation; Parametric Technology Corporation; Structural
Dynamics Research Corporation; Unigraphics; Dassault Systemes ("Dassault");
Solidworks Corporation (a subsidiary of Dassault); Baystate Technologies, Inc.;
think3; MapInfo Corporation; Environmental Systems Research Institute ("ESRI");
Smallworldwide plc.; The Learning Company, a division of Mattel, Inc.;
Micrografx Inc.; and others. The Discreet Segment (see Note 8) product
offerings compete with products offered by Quantel Limited ("Quantel"), Avid
Technology, Inc., Sony Corporation, Adobe Systems Inc., Macromedia, Inc., and
Media 100 Inc. Certain of theour competitors of Autodesk
have greater financial, technical, sales and marketing and other resources than Autodesk.
Autodesk believesresources.
We believe that the principal factors affecting competition in itsour markets areare:
product reliability, performance, ease of use, range of useful features,
continuing product enhancements, reputation, price, and training.
In addition, the availability of third-party application software is a
competitive factor within the CAD market. Autodesk believesWe believe that it competeswe compete favorably
in these areas and that itsour competitive position depends, in part, upon itsour
continued ability to enhance existing products and to develop and market new
products.
In April 1998, Autodesk received notice that the Federal Trade Commission
("FTC") has undertaken a nonpublic investigation to determine whether Autodesk
or others have engaged in or are engaging in unfair methods of competition. The
FTC has not made any claims or allegations regarding Autodesk's current business
practices or policies, nor have any charges been filed. Autodesk intends to
cooperate fully with the FTC in its inquiry. Autodesk does not believe that the
investigation will have a material impact on its business or consolidated
results of operations.
Product developmentDevelopment and introduction. The software industry is characterized by
rapidIntroduction. Rapid technological change as well as
changes in customer requirements and preferences.preferences characterize the software
industry. The software products offered by Autodeskwe offer are internally complex, and despite
extensive testing and quality control, may contain errors or 16
defects ("bugs").defects. Defects or
errors may occur in future releases of AutoCAD or other software products offered by Autodesk.we
offer. These defects or errors could result inin: corrective releases to Autodesk'sour
software products, damage to Autodesk'sour reputation, loss of revenues, an increase in
product returns or lack of market acceptance of itsour products, any of which could
have a material and
adverse effect on Autodesk's business and consolidated results of operations.
Autodesk believesharm our business.
12
We believe that itsour future results will depend largely upon itsour ability to offer
products that compete favorably with respect to reliability, performance, ease
of use, range of useful features, continuing product enhancements, reputation,
price and training. Delays or difficulties may result in the delay or
cancellation of planned development projects and could have a
material and adverse effect on Autodesk's business and consolidated results of
operations.harm our business.
Further, increased competition in the market for design, drafting, mapping, or
multimedia software products could also have a negative impact on
Autodesk'sharm our business and consolidated
results of operations. More specifically, gross margins may be adversely
affected if sales of low-end CAD products and AutoCAD upgrades, which
historically have had lower margins, grow at a faster rate than Autodesk's higher-marginour higher-
margin products.
The success of Autodesk'sthe Discreet business unitSegment will depend in part upon Autodesk'sour ability to
enhance Discreet's existing systems and software and to develop and introduce
new products and features whichthat meet changing customer requirements and emerging
industry standards on a timely basis. In addition,To date, creative professionals have
purchased Discreet's products for use in connection withproduction and postproduction in the
film and video industries and computer gaming. For the Discreet Segment to
achieve sustained growth, the market for Discreet's recent acquisitions, Autodeskproduct offerings must
fully integratecontinue to develop. We must expand this market to include additional
applications within the edit* (formerly D-Vision OnLine)film and video industries, broadcast, games and the
Internet, and develop new products for use in related markets. While we believe
that the market recognition that Discreet achieved through sales of flame*,
effect* (formerly Flint and Illuminaire
Composition)smoke*, paint* (formerly Illuminaire Paint)flint*, frost*, inferno*, and light* (formerly
Lightscape) products into its product line and operations. Discreet from time to
time experienced delaysfire* systems will facilitate our
marketing efforts in introducing new products and product enhancements,
andmarkets, the Discreet business unit may experience difficulties that could delay or
prevent the successful development, introduction, and marketing of new products
or product enhancements. In addition, such new products or product enhancementsSegment may not meetbe able to
successfully develop and market systems and software for other markets, and,
even if it does so, such systems and software may not be accepted at a rate, and
in levels, sufficient to maintain growth. Further, the distribution channels,
technical requirements, and levels and bases of the marketplace and achieve market acceptance.
Any such failure could have a material adverse effect on Autodesk's business and
consolidated results of operations. From time to time the Discreet business unit
or others may announce products, features or technologies which have the
potential to shorten the life cycle of or replace its then existing products.
Such announcements could cause customers to defer the decision to buy or
determine not to buy its products or cause its distributors to seek to return
products to the Discreet business unit, any of which could have a material
adverse effect on Autodesk's business and consolidated results of operations. In
addition, product announcements by Silicon Graphics, Inc. ("SGI") and otherscompetition in other markets are
different than those in the pastDiscreet's current market, so Discreet may not be
able to compete favorably in those markets.
Independent firms and contractors have caused customers to defer their decision to buy or determine not
to buy Discreet's products. In addition, products or technologies developed by
others may render the Discreet business unit's products or technology
noncompetitive or obsolete.
Certainperformed some of Autodesk's historicalour product development
activities, have been
performed by independent firms and contractors, while other technologies are licensed from third parties. AutodeskWe
generally either ownsown or licenseslicense the software developed by third parties. Because
talented development personnel are in high demand, independent developers,
including those who have developed products for Autodeskus in the past, may not be able
to provide development support to Autodeskus in the future. Similarly, Autodeskwe may not be
able to obtain and renew license agreements on favorable terms, if at all, and
any failure to do so could have a material adverse effect on Autodesk's business and
consolidated results of operations.
Autodesk'sharm our business.
Our business strategy has historically depended in large part on itsour relationships
with third-party developers, who provide products that expand the functionality
of Autodesk'sour design software. CertainSome developers may elect to support other products or
otherwise experience disruption in product development and delivery cycles. This disruption inIn
particular markets, this disruption could negatively impact these third-party
developers and end users, which could have a material
adverse effect on Autodesk's business and consolidated results of operations.harm our business. Further, increased
merger and acquisition activity currently experienced in the technology industry
could affect relationships with other third-party developers and thus adversely affectharm
operating results.
International operations. Autodesk anticipatesOperations. We anticipate that international operations will
continue to account for a significant portion of itsour consolidated revenues.
Risks inherent in Autodesk'sour international operations
17
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 Autodesk doeswe do business.
Autodesk'sOur risk management strategy uses derivative financial instruments in the form
of forward foreign exchangecurrency option contracts and forward contracts for the purpose of
hedging foreign currency market exposures, of underlying assets,
liabilities, and other obligations which exist as a part of itsour ongoing
business operations. Autodesk doesWe do not enter into derivative contracts for the purpose
of trading or speculative transactions. Autodesk'sOur international results may also be
impacted by general economic and political conditions in these foreign markets.
These and other factors may have a material adverse effect on
Autodesk'sadversely impact our future international operations
and consequently on Autodesk'sour business and consolidated results of operations.as a whole.
Dependence on distribution channels. Autodesk sells itsDistribution Channels. We sell our software products primarily to
distributors and resellers (value-addedvalue-added resellers, or "VARs").
Autodesk'sVARs. Our ability to effectively
distribute products depends in part upon the financial and business condition of
itsour VAR network. Although Autodesk haswe have not recently experienced any material
13
problems with itsthe financial viability of our VAR network, computer software
dealers and distributors are typically not highly capitalized, and 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 may impact our VAR network in the future. While no single customer
accounted for more than 10 percent of Autodesk'sour consolidated net revenues in the first
quarter of fiscal years 1999, 1998 or 1997,2001, the loss of or a significant reduction in business with
any one of Autodesk'sour major international distributors or large U.S. resellers could
have a material adverse
effect on Autodesk's business and consolidated results of operations in future
periods.harm our business.
Product returns.Returns. With the exception of certainvarious European distributors, agreements
with Autodesk'sour VARs do not contain specific product-return privileges. However, Autodesk permits itswe
permit our VARs to return product in certain instances, generally during periods
of product transition and during update cycles. Management
anticipatesWe anticipate that product
returns in future periods will continue to be impacted by product update cycles,
new product releases and software quality.
Autodesk establishesWe establish reserves, including reserves for stock balancing and product
rotation,rotation. The reserve is 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 Autodesk maintainswe maintain strict measures to monitor
channel inventories and to provide appropriate reserves, actual product returns
may differ from itsour reserve estimates, and such differences could have a material
adverse effect on Autodesk's business and consolidated results of operations.harm our
business.
Intellectual property. Autodesk reliesProperty. We rely on a combination of patents, copyright and
trademark laws, trade secrets, confidentiality procedures and contractual
provisions to protect itsour proprietary rights. Despite such efforts to protect
itsour proprietary rights, unauthorized parties from time to time have copied
aspects of Autodesk'sour software products or have obtained and used information that Autodesk regardswe
regard as proprietary. Policing unauthorized use of Autodesk'sour software products is
time-consuming and costly. While Autodesk haswe have received some revenues resulting from
the unauthorized use of itsour software products, it iswe are unable to measure the
extent to which piracy of itsour software products exists, and software piracy can
be expected to be a persistent problem. Autodesk'sOur means of protecting itsour proprietary
rights may not be adequate, and itsour competitors may independently develop
similar technology. Autodesk expectsWe expect that software product developers will be
increasingly subject to infringement claims as the number of products and
competitors in itsour industry segments grows and as the functionality of products
in different industry segments overlaps. Infringement or invalidity claims (or
claims for indemnification resulting from infringement claims) may be asserted
against Autodesk,us, and any such assertions could have a
material adverse effect on itsharm 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
Autodeskus 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 could have a material adverse effect on Autodesk's business and
consolidated results of operations.
Autodeskwould likely harm our business.
We also reliesrely on certain software that itwe licenses from third parties, including
software that is integrated with internally developed software and used in itsour
products to perform key functions. These
18
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 have a
material adverse effect on Autodesk's business and consolidated results of
operations.
Until fiscal year 1996, substantially all of Discreet's systems were sold
without written license agreements. Autodesk may be involved in litigation
relating to these sales, and the outcome of any such litigation may be more
unfavorable to Autodesk as a result of such omissions. The Discreet business
unit uses both software and hardware keys with respect to its systems and
software but otherwise does not copy-protect its systems and software. It may be
possible for unauthorized third parties to copy the Discreet business unit's
products or to reverse-engineer or obtain and use information that the Discreet
business unit regards as proprietary. Competitors may independently develop
technologies that are substantially equivalent or superior to the Discreet
business unit's technologies.harm our business.
Attraction and Retention of Employees. Autodesk'sOur continued growth and success
of the Company 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. Autodesk'sOur ability to attract and retain employees is dependent
on a number of factors including itsour continued ability to grant stock incentive
awards. AutodeskThe growth of well-financed Internet start-up companies, particularly in
the San Francisco Bay Area, may not be successful in continuingnegatively impact our ability to recruit new
personnel or retain existing personnel. The loss of key employees or inability
to recruit new employees could have a material adversewould negatively impact on
Autodesk.our business. In addition, Autodeskwe
may experience increased compensation costs to attract and retain skilled
personnel.
Impact of Year 2000. SomePrior to January 1, 2000, we completed our remediation and
testing of the computer programs used by Autodesksystems for Year 2000 readiness. As a result of those planning and
implementation efforts, we experienced no
14
significant disruptions in its
internal operations rely on time-sensitive software that was written using two
digits rather than four to identify the applicable year. These programs may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
Autodesk has completed the remediation phase for business systems with the
exception of some desktop remediation in Latin America, Asia and Canada
scheduled to be completed by the end of the year. The testing phase of a six-
phase year 2000 compliance program related tomission critical information technology ("IT")
systems will continue through the end of November 1999 with all current
milestones being met. The business continuity planning or final phase is in
process with final detailed planning expected to be complete in November. During
the third quarter of fiscal year 2000, Autodesk spent approximately $0.15
million on the IT year 2000 project. Autodesk expects to spend an additional
$0.15 million to complete this project. All expenditures to date have been
captured either in prior year or current year budgets. Autodesk believes that
the key components of the IT year 2000 project have either been replaced or
remediated. Further, Autodesk estimates that if any component of the current
systems fail due to year 2000 related issues, Autodesk would be able to divert
people and systems traffic, causing delays of between one to three days in
service interruptions and processing Autodesk information. Autodesk has a
contingency plan in place in order to prevent the loss of critical data, which
includes the back up of all critical data processing interactions and a disaster
recovery plan. However, there may be a delay in the completion of these
procedures and the cost of such procedures may exceed original estimates, either
of which could have a material adverse effect on future results of operations.
In addition to correcting the business and operating systems used by Autodesk in
the ordinary course of business as described above, Autodesk has also reviewed
its non-IT systems to determine year 2000 compliance of these systems. Autodesk
is in a monitoring program that continually checks the status of all non-ITother
systems and does not anticipate an adverse impact on service and business
capabilities with regardbelieve those systems successfully responded to these non-IT systems. Expenditures related to these
monitoring procedures have been minimal and are not expected to be significant
in future periods.
Autodesk has also tested and continues to test all products it currently
produces internally for sale to third parties to determine yearthe Year 2000 compliance.
Autodesk is currently in the third phase of a three-phase year
19
2000 compliance testing and documentation program that is related to its
products. There have been delays in the submission of some testing results, but
all documentation should be ready by the end of the year. During the third
quarter of fiscal year 2000, Autodesk spent approximately $0.23 million on the
product year 2000 project. Autodesk expects to spend an additional $0.15 million
to complete this project. All expenditures to date
have been captured either in
prior year or current year budgets. Currently-sold products either have been
found to be substantially compliant or are currently being tested for
compliance. However, many Autodesk products run on operating systems or hardware
produced and sold by third-party vendors. These operating systems or hardware
may not be converted in a timely manner, or at all, and any failure in this
regard may cause Autodesk products not to function as designed. Autodesk will
continue to evaluate each product in the currently supported inventory. Any
future costs associated with ensuring Autodesk's products are compliant with the
year 2000 are not expected to have a material impact on Autodesk's results of
operations or financial position. Furthermore, commentators have stated that a
significant amount of litigation may arise out of year 2000 compliance issues,
and Autodesk is aware of a growing number of lawsuits against other software
vendors. Because of the unprecedented nature of such litigation, it is uncertain
whether and to what extent Autodesk may be affected by it.change.
Single European Currency. Autodesk isWe are in the process of addressing the issues raised
by the introduction of the Single European Currency ("Euro")Euro as of January 1, 1999 and during the transition
period ending January 1, 2002. AutodeskWe will continue to modify the internal systems
that will be affected by this conversion during fiscal year 2000,2001, and doesdo not expect
the costs of further system modifications to be material. AutodeskWe may not be able to
complete such modifications to comply with Euro requirements, which could have a
material adverse effect on Autodesk's operating results. Autodesk isharm
our business. We are currently evaluating the impact of the introduction of the
Euro on itsour foreign exchange activities, functional currency designations, and
pricing strategies in the new economic environment. In addition Autodesk faceswe face risks to
the extent that banks and vendors upon whom Autodesk relieswe rely and their suppliers are
unable to make appropriate modifications to support Autodesk'sour operations with respect
to Euro transactions. While Autodesk maywe will continue to evaluate the impact of the Euro,
management doeswe do not believe its introduction will have a material adverse effect
upon Autodesk's results of operationsharm our business.
Risks Associated with Acquisitions and Investments. We periodically acquire or
financial condition.
Risks associated with acquisitions and investments. Autodesk periodically
acquires or investsinvest in businesses, software products and technologies whichthat are complementary
to Autodesk'sour 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. AutodeskWe may not be successful in
overcoming such risks and such investments and acquisitions may have a material adversenegatively
impact on Autodesk's business,
financial condition, or results of operations.our business. In addition, such investments and acquisitions may
contribute to potential fluctuations in quarterly results of operations due tooperations. 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, any of whichacquisitions. These costs or charges could negatively impact
results of operations for a given period or cause lack of linearity quarter to
quarter in Autodesk'sour operating results and financial condition.
Failure to achieve beneficial synergies from Discreet acquisition. Autodesk hasWe acquired Discreet with the expectation that the acquisition willwould result in
beneficial synergies. These include mutual benefits from complementary strengths
in the 3D modeling and animation tools markets, the competitive advantages
resulting from offering a comprehensive suite of integrated product offerings,
combined industry experience and market knowledge, and shared distribution
channels. Achieving these anticipated synergies will depend on a number of
factors including, without limitation, the successful integration of Autodesk
and Discreet's operations and general and industry-specific economic factors.
Even if Autodesk and Discreet are able to integrate their operations and
economic conditions remain unchanged, the anticipated synergies may not be
achieved. The failure to achieve such synergies could have a material adverse
effect on Autodesk's business, results of operations, and financial condition.would likely harm
our business. The future financial performance of Autodesk's recently acquiredthe Discreet business unit
will depend in part on the successful development, introduction, and customer
acceptance of existing and new or enhanced 20
products. In addition, in order for the unitDiscreet
to achieve sustained growth, the market for its systems and software must
continue to develop, and Autodeskwe must expand this market to include additional
applications within the film, broadcast and video industries and Internet-
related businesses and develop or acquire new products for use in related
markets. AutodeskWe may not be successful in marketing itsthe existing or new or enhanced
products. In addition, as Autodesk enterswe enter new markets, distribution channels, technical
requirements and levels and bases of competition may be different from those in Autodesk'sour current markets; Autodeskmarkets,
and we may not be able to compete favorably.
Integration of Discreet's operations and technologies. Achieving the anticipated
benefits of the Discreet acquisition will dependWe periodically make investments in part upon whether the
integration of the two companies' businesses is accomplished in an efficient and
effective manner, and this may not occur. The combination of the two companies
will require, among other things, integration of the companies' respective
operations, products, technologies, management information systems, distribution
channels, and key personnel and the coordination of their sales, marketing, and
research and development efforts. In particular, Autodesk will be required to
integrate its existing sales channel, which consists principally of independent
resellers, with Discreet's sales force,related Internet entities, such as
Buzzsaw.com, Inc., which typically sells product directlydo not expect to customers. As a result of these and other factors, the integration may not be
accomplished smoothly or successfully, if at all. Ifearn significant difficulties
are encounteredrevenues in
the integration of the existing operations, products, or
technologies or the development of new products and technologies, resources
could be diverted from new product development, and delays in new product
introductions could occur. Compared to Autodesk's products, Discreet's products
have traditionally experienced longer, more complex sales cycles. Autodesk may
not be able to take full advantage of the combined sales efforts. In addition,
the difficulties of integrating Autodesk and Discreet may be increased by the
necessity of coordinating organizations with distinct corporate cultures and
widely dispersed operations in two different countries. The integrationinitial period of operations and technologies of these entities is a significant challenge to
Autodesk management and will require substantial effort and dedication of
management and other personnel, which incur considerable start-up costs.
Such investments may distract their attention from the day-
to-day business of these entities, the development or acquisition of new
technologies, and the pursuit of other business opportunities. In addition,
certain Discreet product offerings currently include computer hardware, which
may present business issues as to which Autodesk management has limited
experience. Failure to successfully accomplish the integration of the two
companies' operations, technologies, and personnel would likely have a material
adverse effect on Autodesk's business, financial condition and results of
operations. In addition, during the period of integration, aggressive
competitors may undertake initiatives to attract customers or employees through
various incentives, which could have a material adverse effect on the business,negatively impact our results of operations and financial
conditions of Autodesk.
Discreet's customers. Discreet's customers may not continue their current buying
patterns in light of the acquisition. Certain customers may defer purchasing
decisions as they evaluate the acquisition, other recent acquisitions and
product announcements in the multimedia and design software industries,
Autodesk's postacquisition product strategy, current and anticipated product
offerings of competitors, and any other outside forces which may affect customer
buying patterns. Customers may ultimately decide to purchase competitors'
products in lieu of Discreet products. Historically, Discreet and Autodesk have
had significantly different types of customers. These different customer types
may evaluate postacquisition Autodesk differently. The decision of customers to
defer their purchasing decisions or to purchase products elsewhere could have a
material adverse effect on Autodesk's business, results of operations, and
financial condition.
Integration of operations of a non-U.S. company. Cross-border acquisitions
entail certain special risks beyond those normally encountered in a domestic
acquisition. These include the difficulty of integrating employees from a
different corporate culture into the acquiring organization; the need to
understand different incentives that motivate employees in a non-U.S. company;
the greater difficulty of transplanting the acquiring company's corporate
culture to an organization that is physically distant; and the difficulty and
expense of relocating employees from one country to another in the event of an
internal group restructuring following an acquisition. These factors can reduce
the likelihood of the long-term success of a cross-border acquisition. Although
Autodesk derives the majority of its revenues from non-U.S. sales and has
significant operations outside the United States, it has limited experience
integrating the management, sales, product development, and marketing
organizations of a significant non-U.S. business with its existing
21
operations. Although Discreet has sales and marketing operations in the United
States and derives a significant portion of its revenue from U.S. sales, its
management and product development personnel are predominantly based in Canada.
Autodesk may not be able to successfully integrate the personnel and operations
of Discreet into the existing Autodesk organization.
Single market for Discreet's product offerings; risks associated with expansion
into new markets. To date, Discreet's products have been purchased primarily by
creative professionals for use in production and postproduction in the film and
video industries. In order for Autodesk's Discreet business unit to achieve
sustained growth, the market for Discreet's product offerings must continue to
develop, and Autodesk must expand this market to include additional applications
within the film and video industries and develop new products for use in related
markets. Discreet recently announced its multiplatform software initiative to
develop and market software across Apple Macintosh, Microsoft Windows NT, and
Unix operating systems, in addition to its existing real-time turnkey systems
solutions, targeted at two new market segments: institutional customers and
prosumers (professional consumers). While Autodesk believes that the market
recognition which Discreet achieved through sales of Flame(R), Smoke(R),
effect*, Inferno(R), and Fire(R) systems to creative professionals will
facilitate Autodesk's marketing efforts in new markets, Autodesk's Discreet
business unit may not be able to successfully develop and market systems and
software for other markets, and, even if it does so, such systems and software
may not be accepted at a rate, and in levels, sufficient to maintain growth.
Further, the distribution channels, technical requirements, and levels and bases
of competition in other markets are different than those in the Discreet
business unit's current market, so the Discreet business unit may not be able to
compete favorably in those markets.
Liquidity and Capital Resources
Cash, cash equivalents, and marketable securities which consist primarily of
high-quality municipal bonds, tax-advantaged money market instruments and U.S.
treasury bills, totaled $549.9$433.8 million at
October 31, 1999,April 30, 2000, compared to $428.0$540.9 million at January 31, 1999.2000. The $121.9 million increase in cash, cash
equivalents, and marketable securities was due primarily to $26.6 millionprimary uses
of cash generated from operations, $149.3during the first quarter of fiscal 2001 were: the repurchase of 4.0
million shares of net proceeds from the issuance
ofour common stock largely related to a 3.0 million share issuance in March 1999,
and $5.6 million of proceeds from the disposition of fixed assets. These
increases were partially offset by the acquisition of VISION ($26.0193.0 million), purchases of long-term assetscapital expenditures ($16.610.5
million), dividend payments ($3.5 million) and dividends paidan additional investment in
Buzzsaw.com ($11.017.5 million). The primary sources of cash were cash provided by
operating activities ($38.5 million) and stock issuances resulting from our
employee stock plans ($83.6 million).
In November 1999, managementMarch 2000, we announced aanother plan to repurchase up to an additional 8.0
million shares of the Company'sour common stock. The primary purpose of the stock repurchase
programprograms is to help offset the dilution to earnings per share caused by the
issuance of stock under the Company'sour employee stock plans.
The common
stock will be purchased from time to time at the direction of management, either
directly or through derivative instruments. The number of shares to be purchased
and the timing of purchases will be based on several factors, including general
market conditions and the trading price of Autodesk common stock. Purchases may
be made in the open market or in privately negotiated transactions and will be
funded from available working capital.
The Discreet business unit has15
We have a revolving demandU.S. line of credit with a bank,
under which it may borrowpermitting short-term, unsecured borrowings of up
to Cdn$7.0 million (approximately $4.8 million at
October 31, 1999). Additionally, the agreement provides for a Cdn$0.6 million
(approximately $0.4 million at October 31, 1999) demand leasing facility, and a
Cdn$0.6 million (approximately $0.4 million at October 31, 1999) demand research
and development tax credit facility. As of October 31, 1999, there were no
amounts outstanding under the demand leasing and demand research and development
tax credit facilities. The amount available under the revolving demand line of
credit was reduced by letters of guarantee totaling Cdn$5.6 million
(approximately $3.8 million at October 31, 1999).
In addition to Discreet's line of credit, Autodesk has an unsecured $40.0 million, bank line of credit, of which $20.0 million is guaranteed, that may be used from time to time to facilitate short-term
cash flow. At October 31, 1999,April 30, 2000, there were no borrowings outstanding under this
credit agreement, which expires in January, 2000. Management intends to maintain adequate credit lines to carry
on its business.
22
2001.
Principal commitments at October 31, 1999April 30, 2000, consisted of obligations under
operating leases for facilities.
Autodesk believesWe believe that itsour existing cash, cash equivalents, marketable securities,
available line of credit, and cash generated from operations will be sufficient
to satisfy itsour currently anticipated short-term and longer-term cash
requirements for the next twelve months.requirements. Longer-term cash requirements, other than normal operating
expenses, are anticipated for the development of new software products including theand
incremental product offerings resulting from the acquisitions of Discreet, Genius, and
VISION and enhancement of existing
products; financing anticipated growth; dividend payments; the share repurchase
program;programs; investments in related Internet entities; and the acquisition of
businesses, software products, or technologies complementary to Autodesk'sour business.
Autodesk believes that its existing cash, cash equivalents, marketable
securities, available lineOur international operations are subject to currency fluctuations. To minimize
the impact of credit,these fluctuations, we use foreign currency option contracts to
hedge our exposure on anticipated transactions and cash generated from operations will be
sufficientforward contracts to satisfy its currently anticipated longer-term cash requirements.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 a quarterly period. The principal currencies hedged during the
first quarter of the fiscal year were the Euro and the Japanese yen. We monitor
our foreign exchange exposures to ensure the overall effectiveness of our
foreign currency hedge positions.
PART II. OTHER INFORMATION
- -----------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
Autodesk is a party toWe are involved in various legal proceedings arising from the normal course of
business activities. WhileIn 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 outcomeSecurities Exchange Act of these matters cannot be predicted
with certainty, in management's1934. The plaintiffs seek
to act on behalf of purchasers of Autodesk common stock during the period
between September 14, 1998 and May 4, 1999. We believe the complaints are
without merit and intend to vigorously defend the actions.
In our opinion, resolution of these matters is not expected to have a material
adverse impact on Autodesk'sour consolidated results of operations or itsour financial
position. However, depending on the amount and timing, an unfavorable resolution
of a matter could materially affect Autodesk'sour future results of operations or cash
flows in a particular period.
On September 7, 1999, the Superior Court in Marin County, California, dismissed
the purported class action lawsuit against Discreet and its directors with
prejudice as to all defendants named in the Amended Complaint, with each side
bearing their own expenses, costs and fees. Under the Dismissal Stipulation, no
consideration is to be paid to plaintiffs or the proposed class.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
--------
27.0 Financial Data Schedule for the periodquarter ended October 31, 1999April 30, 2000
Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended October 31,
1999.April 30, 2000
SIGNATURES
Pursuant to the requirements 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.
Dated: December 10, 1999May 30, 2000
AUTODESK, INC.
(Registrant)
/s/16
/S/ CAROL A. BARTZ
-------------------------------------
Carol A. Bartz
Chairman, President and Chief Executive Officer
/s//S/ STEVE CAKEBREAD
---------------------------------------
Steve Cakebread
Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
2317