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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 PERIOD ENDED APRIL 30, 1997
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 June 9, 1997, there were 47,907,000 shares of the Registrant's Common
Stock outstanding.
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AUTODESK, INC.
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Statement of Operations
Three months ended April 30, 1997 and 1996................... 3
Condensed Consolidated Balance Sheet
April 30, 1997 and January 31, 1997.......................... 4
Condensed Consolidated Statement of Cash Flows
Three months ended April 30, 1997 and 1996................... 6
Notes to Condensed Consolidated Financial Statements......... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.................................... 8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS............................................ 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................. 14
Signatures................................................... 14
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
April 30,
--------------------
1997 1996
-------- --------
Revenues $122,123 $139,213
Direct commissions 3,139 2,932
-------- --------
Net revenues 118,984 136,281
Costs and expenses:
Cost of revenues 16,041 17,292
Marketing and sales 52,606 49,337
Research and development 27,609 22,862
General and administrative 18,437 18,665
Charge for acquired in-process
research and development 58,087 -
-------- --------
172,780 108,156
-------- --------
Income (loss) from operations (53,796) 28,125
Interest and other income, net 2,375 1,426
-------- --------
Income (loss) before income taxes (51,421) 29,551
Provision for income taxes 1,324 10,491
-------- --------
Net income (loss) $(52,745) $ 19,060
======== ========
Net income (loss) per share $ (1.15) $ 0.39
======== ========
Shares used in computing net (loss) income per share 45,940 48,470
======== ========
See accompanying notes.
3
AUTODESK, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
(In thousands)
April 30, 1997 January 31, 1997
--------------- -----------------
(Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 49,189 $ 64,814
Marketable securities 140,313 117,971
Accounts receivable, net 73,394 68,577
Inventories 7,152 7,340
Deferred income taxes 35,376 35,616
Prepaid expenses and other current assets 19,733 16,210
-------- --------
Total current assets 325,157 310,528
-------- --------
Marketable securities, including a restricted balance of
$28,000 at April 30, 1997 and January 31, 1997 110,207 103,523
Computer equipment, furniture, and leasehold
improvements, at cost:
Computer equipment and furniture 109,197 103,903
Leasehold improvements 17,983 17,818
Less accumulated depreciation (81,937) (77,671)
-------- --------
Net computer equipment, furniture, and leasehold improvements 45,243 44,050
Purchased technologies and capitalized software 24,922 15,916
Other assets 37,791 18,216
-------- --------
$543,320 $492,233
======== ========
See accompanying notes.
4
AUTODESK, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(In thousands)
April 30, 1997 January 31, 1997
--------------- -----------------
(Unaudited) (Audited)
Current liabilities:
Accounts payable $ 32,154 $ 24,557
Accrued compensation 18,587 18,099
Accrued income taxes 70,646 75,061
Other accrued liabilities 50,508 32,454
-------- --------
Total current liabilities 171,895 150,171
-------- --------
Deferred income taxes 4,947 2,974
Litigation accrual 29,328 29,328
Other liabilities 1,614 1,646
Put warrants 64,500 64,500
Stockholders' equity:
Common stock 245,460 147,091
Retained earnings 39,186 106,587
Foreign currency translation adjustment (13,610) (10,064)
-------- --------
Total stockholders' equity 271,036 243,614
-------- --------
$543,320 $492,233
======== ========
See accompanying notes.
5
AUTODESK, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Three months ended
April 30,
--------------------
1997 1996
-------- --------
Operating activities
Net income (loss) $(52,745) $ 19,060
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Charge for acquired in-process research and development 58,058 -
Depreciation and amortization 8,139 7,501
Changes in operating assets and liabilities, net of business combinations 6,597 (12,922)
-------- --------
Net cash provided by operating activities 20,049 13,639
-------- --------
Investing activities
Purchases of marketable securities (21,131) (15,980)
Business combinations, net of cash acquired (5,766) -
Purchases of computer equipment, furniture, and leasehold improvements (2,603) (3,809)
Purchases of software technologies and capitalization of software costs (2,350) -
Other 3,720 (5,594)
-------- --------
Net cash used in investing activities (28,130) (25,383)
-------- --------
Financing activities
Proceeds from issuance of common stock 8,050 10,211
Repurchase of common stock (12,722) (21,965)
Dividends paid (2,872) (2,862)
-------- --------
Net cash used in financing activities (7,544) (14,616)
-------- --------
Net decrease in cash and cash equivalents (15,625) (26,360)
Cash and cash equivalents at beginning of year 64,814 129,305
-------- --------
Cash and cash equivalents at end of quarter $ 49,189 $102,945
======== ========
See accompanying notes.
6
AUTODESK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements for the three month periods
ended April 30, 1997 and April 30, 1996 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 financial 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's Annual Report on Form 10-K for the
fiscal year ended January 31, 1997. The results of operations for the three
months ended April 30, 1997 are not necessarily indicative of the results for
the entire fiscal year ending January 31, 1998.
2. In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").
SFAS 128 specifies the computation, presentation and disclosure requirements
for earnings per share for entities with publicly held common stock or
potential common stock. This statement is effective for financial statements
issued for periods ending after December 15, 1997, including interim periods.
Earlier application of this statement is not permitted.
Under the new requirements, primary earnings per share (referred to as basic
earnings per share under the new pronouncement) will exclude the dilutive
effect of stock options. The adoption of this pronouncement is expected to
result in an increase in primary earnings per share for the first quarter
ended April 30, 1996 of approximately $0.02, but is not expected to impact
the calculation of primary loss per share for the first quarter ended April
30, 1997. The impact of Statement 128 on the calculation of fully diluted
earnings (loss) per share for these quarters is not expected to be material.
3. On March 31, 1997, the Company issued approximately 2.9 million shares of its
common stock for all outstanding shares of Softdesk, Inc. ("Softdesk"), a
leading supplier of AutoCAD-based application software for the architecture,
engineering, and construction market, and exchanged Autodesk options for
outstanding Softdesk options. Based upon the value of Autodesk stock and
options exchanged, the transaction was valued at approximately $94 million
for the Softdesk stockholders. This transaction has been accounted for using
the purchase method. The operating results of Softdesk, which have not been
material in relation to those of the Company, have been included in the
accompanying condensed consolidated financial statements from the acquisition
date.
To assist in the allocation of the purchase price, an independent valuation
of Softdesk was completed. Approximately $55.1 million of the Softdesk
purchase price represented the value of in-process research and development
that had not yet reached technological feasibility and had no alternative
future use. This amount was charged to operations in the first quarter of
fiscal year 1998.
7
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" contains trend analysis 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. Actual results could differ
materially from those set forth in the forward-looking statements as a result of
the factors set forth elsewhere herein, including "Certain Risk Factors Which
May Impact Future Operating Results".
RESULTS OF OPERATIONS
Net revenues. The Company's first quarter net revenues of $119.0 million
decreased 13 percent from the first quarter of the prior fiscal year resulting
principally from reductions in sales of AutoCAD and related updates as AutoCAD
Release 13 entered into the latter stages of its product life cycle. The
stronger value of the US dollar, relative to international currencies, primarily
the Japanese yen and the German mark, negatively impacted net revenues in the
first quarter of current fiscal year by $6.6 million when compared to the same
period in the prior fiscal year. Sales of AutoCAD and AutoCAD updates accounted
for approximately 70 percent of the Company's consolidated revenues in the
quarter compared to 75 percent in the same quarter of the prior fiscal year.
International sales, including exports from the U.S., accounted for
approximately 64 percent of the Company's revenues in the first quarter of
fiscal year 1998 as compared to 70 percent for the first quarter of fiscal year
1997.
The Company derives a substantial portion of its revenues from sales of AutoCAD
and AutoCAD updates. As such, any factors adversely affecting sales of AutoCAD
and AutoCAD updates, including customer acceptance and product performance of
the most recent version, AutoCAD Release 14, which was introduced in the second
quarter of fiscal year 1998, its compatibility with hardware equipment, and
interoperability problems with products designed to run in conjunction with
AutoCAD Release 14, could result in damage to the Autodesk and AutoCAD brand
names, and could have a material adverse effect on the Company's business and
consolidated results of operations.
Product returns, consisting principally of stock rotation, are recorded as a
reduction of revenues and decreased from 10 percent of consolidated revenues in
the first quarter of fiscal year 1997 to 5 percent of consolidated revenues in
the same period of the current fiscal year. Fiscal year 1997 product returns
were impacted by product rotation resulting from performance issues with AutoCAD
Release 13 and transition and update cycles related to the Company's various
software products. While the Company experienced a decrease in product returns
in the first quarter of fiscal year 1998, management anticipates that product
returns, both in absolute dollar terms and as a percentage of net revenues, in
future periods will continue to be impacted by product update cycles, new
product releases, and software quality.
Cost of revenues. When expressed as a percentage of net revenues, cost of
revenues increased approximately 1 percent in the first quarter of fiscal year
1998 as compared to the same period of the prior fiscal year. Gross margins in
the first quarter of fiscal year 1998 were adversely impacted by the mix of
product sales, and to a lesser extent, the impact of increased fixed costs on a
lower revenue base. Revenues from commercial versions of AutoCAD software, which
historically have yielded a higher gross margin than many of Autodesk's other
commercial products, decreased as a percentage of consolidated revenues. Cost of
revenues as a percentage of net revenues has been and may continue to be
impacted by the mix of product sales, royalty rates for licensed technology
embedded in Autodesk's products, and the geographic distribution of sales.
8
Marketing and sales. Marketing and sales expenses were 44 and 36 percent of net
revenues in the first quarter of fiscal years 1998 and 1997, respectively.
Actual spending increased approximately 7 percent as a result of higher employee
costs, marketing and sales costs associated with the launch of AutoCAD Release
14 and new and enhanced product introductions from the Company's market groups.
The Company expects to continue its emphasis on marketing and sales activities
in the future to promote Autodesk's competitive position and to support sales
and marketing of its products. Accordingly, the Company expects marketing and
sales expenses to continue to be significant, both in absolute dollars and as a
percentage of net revenues.
Research and development. Research and development expenses represented 23 and
17 percent of net revenues in the first quarter of fiscal years 1998 and 1997,
respectively. Actual research and development spending, including capitalized
software development costs of $1,750,000 recorded in the current fiscal year,
increased by 28 percent in absolute dollars from the same period in the prior
fiscal year due to the addition of software engineers, expenses associated with
the development and translation of new products including AutoCAD Release 14,
and incremental expenses associated with fiscal year 1997 acquisitions and the
March 31, 1997 business combination with Softdesk, Inc. ("Softdesk"), a leading
supplier of architecture, engineering, and construction applications. The
Company anticipates that research and development expenses will increase in
future periods as a result of product development efforts by the Company's
market groups and incremental personnel costs resulting from recent business
combinations. Additionally, the Company intends to continue recruiting and
hiring experienced software developers and to consider the licensing and
acquisition of complementary software technologies and businesses.
General and administrative. General and administrative expenses increased to 16
percent of net revenues in the first quarter of fiscal year 1998 from 14 percent
of net revenues in the first quarter of the prior fiscal year. In absolute
dollar terms, general and administrative expenses decreased 1 percent from the
same period of the prior fiscal year resulting primarily from lower professional
fees and occupancy costs. The Company currently expects that general and
administrative expenses will increase in future periods to support spending on
infrastucture, including continued investment in Autodesk's worldwide
information systems.
Charge for acquired in-process research and development. On March 31, 1997, the
Company acquired the outstanding stock of Softdesk in exchange for Autodesk
common stock. This transaction was accounted for using the purchase method of
accounting with the purchase price being principally allocated to capitalized
software, purchased technologies, and intangible assets. Approximately $55.1
million of the total purchase price represented the value of in-process research
and development that had not yet reached technological feasibility and had no
alternative future use. Approximately $3.0 million of technology acquired from
another third party during the quarter also represented the value of in-process
research and development that had not yet reached technological feasibility and
had no alternative future use. The $55.1 million and the $3.0 million were
charged to operations in the first quarter of fiscal year 1998.
Interest and other income. Interest and other income in the first quarter was
$2.4 million, including foreign currency losses of approximately $56,000,
compared to $1.4 million in the same quarter of the prior fiscal year, net of
foreign exchange gains of approximately $60,000. The increase in interest
income is due primarily to higher average cash balances and higher interest
rates on the Company's portfolio.
Provision for income taxes. The Company's effective income tax rate, excluding
the one-time charge for acquired in-process research and development recorded in
connection with the Softdesk acquisition, which is not deductible for income tax
purposes, was 36 percent in the first quarter of fiscal year 1998 compared to
35.5 percent in the first quarter of the prior fiscal year. The increase in the
income tax rate was due to a change in the geographic mix of operations,
resulting primarily from the acquisition of Softdesk.
9
CERTAIN RISK FACTORS WHICH MAY IMPACT FUTURE OPERATING RESULTS
Autodesk operates in a rapidly changing global environment that involves a
number of risks, some of which are beyond the Company's control. The following
discussion highlights some of these risks and the possible impact of these
factors on future results of operations.
Fluctuations in quarterly operating results. The Company has experienced
fluctuations in operating results in interim periods in certain geographic
regions due to seasonality. The Company's operating results in Europe during the
third fiscal quarter are usually impacted by a slow summer period while the
Asia/Pacific operations typically experience seasonal slowing in the third and
fourth fiscal quarters.
The Company typically receives and fulfills a majority of its orders within the
quarter, with these orders frequently concentrated in the last weeks or days of
a fiscal quarter. As a result, the Company may not learn of revenue shortfalls
until late in a fiscal quarter. Additionally, the Company's operating expenses
are based in part on its expectations for future revenues and are relatively
fixed in the short term. Accordingly, any revenue shortfall below expectations
could have an immediate and significant adverse effect on the Company's
consolidated results of operations and financial condition.
Similarly, shortfalls in Autodesk's revenues or earnings from levels expected by
securities analysts could have an immediate and significant adverse effect on
the trading price of the Company's common stock. Moreover, the Company's 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 derives a substantial portion of its revenues
from sales of AutoCAD software, AutoCAD updates, and adjacent products which are
interoperable with AutoCAD. As such, any factor adversely affecting sales of
AutoCAD and AutoCAD updates, including such factors as 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 the Company's business and consolidated results of
operations.
A substantial portion of Autodesk's computer-aided design ("CAD") sales,
including sales of AutoCAD, AutoCAD updates, and product offerings from
Softdesk, are used in the architecture, engineering, and construction ("AEC")
industry. Autodesk's historical product sales to the AEC markets,
particularly in the US and in various European markets, including Germany,
France, and Italy, have been sluggish due in part to general market conditions.
Other factors which could affect the AEC market, including downward pricing
pressure, consolidation resulting in strengthened competitors, product
combinations which offer more-comprehensive solutions to customers,
technological innovation by competitors, entry of new competitors into the AEC
market, and changes in the design construction process resulting in changes in
the demand for the type of software produced by the Company, could have a
material adverse effect on the Company's business and consolidated results of
operations in future periods.
Product development and introduction. The software industry is characterized by
rapid technological change as well as changes in customer requirements and
preferences. The software products offered by the Company are internally
complex and, despite extensive testing and quality control, may contain errors
or defects ("bugs"), especially when first introduced. There can be no
assurance that defects or errors will not be discovered in the most recent
version of AutoCAD, Release 14, or in other software products offered by the
Company. Such defects or errors could result in corrective releases to the
Company's software products, damage to Autodesk's reputation, loss of revenues,
an increase in product returns, or lack of market acceptance of its products,
any of which could have a material and adverse effect on the Company's business
and consolidated results of operations.
10
The company believes that its future results will depend largely upon its
ability to offer products that compete favorably with respect to price,
reliability, performance, range of useful features, continuing product
enhancements, reputation, and training. The discovery of product defects could
result in the delay or cancellation of planned development projects, and could
have a material and adverse effect on the Company's business and consolidated
results of operations. Further, increased competition in the market for design,
mapping, multimedia, data management, or data publishing software products could
also have a negative impact on the Company's business and consolidated results
of operations .
Certain of the Company's historical product development activities have been
performed by independent firms and contractors, while other technologies are
licensed from third parties. Autodesk generally either owns or has an exclusive
license for use of the software developed by third parties. Because talented
development personnel are in high demand, there can be no assurance that
independent developers, including those who have developed products for the
Company in the past, will be able to provide development support to the Company
in the future. Similarly, there can be no assurance that the Company will 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 the Company's
business and consolidated results of operations.
Autodesk's business strategy has historically depended in large part on its
relationships with third-party developers, who provide products that expand the
functionality of Autodesk's design software. In the AEC market in particular, a
number of developer partners, including the former operations of Softdesk, have
contributed to demand for AutoCAD software by providing application products
with high levels of functionality. Because products acquired in the Softdesk
business combination compete with the product offerings of some of these
developers, the Softdesk merger may negatively impact certain of Autodesk's
relationships with these third parties. However, Autodesk's commitment to
maintain an open architecture for AutoCAD and for certain products acquired in
the Softdesk merger should permit third-party developers to continue to develop
and market specific applications. While Autodesk's management believes that the
Softdesk merger will ultimately improve the quality of the platform on which
developer products are based and permit achievement of higher functionality and
greater customer satisfaction, thereby benefiting Autodesk and the developer
base, there can be no assurance that certain developers will not elect to
support other products or otherwise experience disruption in product development
and delivery cycles. Such disruption in particular markets could negatively
impact these third-party developers and end users during the transitional
period, which could have a material adverse effect on Autodesk's business and
consolidated results of operations.
International revenues. The Company anticipates that international revenues will
continue to account for a significant portion of its consolidated revenues.
Risks inherent in the Company's international sales include the following:
unexpected changes in regulatory practices and tariffs; difficulties in staffing
and managing foreign operations; longer collection cycles; potential changes in
tax laws; greater difficulty in protecting intellectual property; and the impact
of fluctuating exchange rates between the US dollar and foreign currencies in
markets where Autodesk does business. During the first quarter of fiscal year
1998, changes in exchange rates from the same period of the prior fiscal year
adversely impacted revenues, principally due to changes in the Japanese yen and
German mark. The Company's international results may also be impacted by general
economic and political conditions in these foreign markets, including an ongoing
slowdown in the German market experienced since the middle of fiscal year 1997,
and its adverse impact on other European markets. There can be no assurance that
these and other factors will not have a material adverse effect on the Company's
future international sales and consequently, on the Company's business and
consolidated results of operations.
11
Dependence on distribution channels. The Company sells its software products
primarily to distributors and dealers (value-added resellers, or "VARs").
Autodesk's ability to effectively distribute products depends in part upon the
financial and business condition of its VAR network. Although the Company has
not, to date, experienced any material problems with its VAR network, computer
software dealers and distributors are typically not highly capitalized and have
experienced difficulties during times of economic contraction and may do so in
the future. The loss of or a significant reduction in business with any one of
the Company's major international distributors or large US dealers could have a
material adverse effect on the Company's business and consolidated results of
operations in future periods.
Product returns. With the exception of certain European distributors,
agreements with the Company's VARs do not contain specific product-return
privileges. However, Autodesk permits its VARs to return product in certain
instances, generally during periods of product transition and during update
cycles. While the Company experienced a decrease in product returns both in
absolute dollars and as a percentage of consolidated revenues during the first
quarter of fiscal year 1998 as compared to the same period in the prior fiscal
year, management anticipates that product returns in future periods will
continue to be impacted by product update cycles, new product releases, and
software quality.
Autodesk establishes reserves, including reserves for stock balancing and
product rotation, 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 the Company maintains strict measures to monitor
channel inventories and to provide appropriate reserves, actual product returns
may differ from the Company's reserve estimates, and such differences could be
material to Autodesk's consolidated financial statements.
Intellectual property. The Company relies on a combination of patent, copyright
and trademark laws, trade secrets, confidentiality procedures, and contractual
provisions to protect its proprietary rights. Despite such efforts to protect
the Company's proprietary rights, unauthorized parties may attempt to copy
aspects of the Company's software products or to obtain and use information that
Autodesk regards as proprietary. Policing unauthorized use of the Company's
software products is time-consuming and costly. Although the Company is unable
to measure the extent to which piracy of its software products exists, software
piracy can be expected to be a persistent problem. There can be no assurance
that the Company's means of protecting its proprietary rights will be adequate
or that its competitors will not independently develop similar technology. The
Company expects that software product developers will be increasingly subject to
infringement claims as the number of products and competitors in its market
grows and the functionality of products in different market segments overlap.
There can be no assurance that infringement or invalidity claims (or claims for
indemnification resulting from infringement claims) will not be asserted against
the Company or that any such assertions will not have a material adverse effect
on its 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 the Company to enter into royalty or licensing
agreements. 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 the Company's business and consolidated results of operations.
The Company also relies on certain software that it licenses from third parties,
including software that is integrated with internally developed software and
uses in its products to perform key functions. There can be no assurance that
these third-party software licenses will continue to be available on
commercially reasonable terms, or that the software will be appropriately
supported, maintained, or enhanced by the licensors. The loss of licenses, 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 would have a material adverse effect on the Company's business and
consolidated results of operations.
12
Risks associated with recent acquisitions. Autodesk consummated several
acquisitions in fiscal year 1997, including acquisitions of Teleos Research,
Argus Technologies, Inc., and Creative Imaging Technologies, Inc., as well as
the March 1997 acquisition of Softdesk. The Company is integrating the
operations acquired in the Softdesk merger with its own. There can be no
assurance that the anticipated benefits of the Softdesk merger and other
business combinations completed in fiscal year 1997 will be realized. The
Softdesk merger entails a number of risks, including managing a larger and more
geographically disparate business. In addition, the Softdesk merger could
require significant additional management attention. If Autodesk is unsuccessful
in integrating and managing the Softdesk business and the businesses of other
recently acquired entities, the Company's business and consolidated results of
operations in future periods could be adversely affected.
LIQUIDITY AND CAPITAL RESOURCES
Working capital, which consists principally of cash, cash equivalents, and
marketable securities, was $153.3 million at April 30, 1997, compared to $160.4
million at January 31, 1997. Cash, cash equivalents, and marketable securities,
which consist primarily of high-quality municipal bonds, tax-advantaged money
market instruments, and US treasury notes, totaled $299.7 million at April 30,
1997, compared to $286.3 million at January 31, 1997. The $13.4 million increase
in cash, cash equivalents, and marketable securities was due primarily to cash
generated from operations ($20.0 million) and cash proceeds from the issuance of
shares through employee stock option and stock purchase programs ($8.1 million).
This increase was partially offset by cash used to repurchase shares of the
Company's common stock under an ongoing, systematic repurchase program ($12.7
million); to pay dividends on the Company's common stock ($2.9 million); and to
purchase computer equipment, furniture, and leasehold improvements ($2.6
million).
The Company has an unsecured $40 million bank line of credit that may be used
from time to time to facilitate short-term cash flow. At April 30, 1997, there
were no borrowings outstanding under this credit agreement which expires in
January 1999.
The Company's principal commitments at April 30, 1997, consisted of obligations
under operating leases for facilities.
Longer-term cash requirements, other than normal operating expenses, are
anticipated for development of new software products and enhancement of existing
products; financing anticipated growth; dividend payments; repurchases of the
Company's common stock; and the acquisition of businesses, software products, or
technologies complementary to the Company's business. The Company believes that
its existing cash, cash equivalents, marketable securities, available line of
credit, and cash generated from operations will be sufficient to satisfy its
currently anticipated cash requirements for fiscal year 1998.
PART II. OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS
In May 1997, the Company settled a lawsuit filed by Tektronix, Inc. alleging a
patent infringement whereby all claims will be dismissed.
In December 1994, the US District Court for the District of Vermont entered a
$25.5 million verdict against the Company in a trade secret misappropriation
lawsuit brought by Vermont Microsystems, Inc. ("VMT"), which was recorded in the
fourth quarter of fiscal year 1995. After an initial appeal and remand, that
award was reduced to $14,209,000, plus interest. Because this case is still
under appeal, the Company has not reflected the reduction of damages in its
financial statements.
13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended April 30, 1997.
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: June 13, 1997
AUTODESK, INC.
(Registrant)
/s/ CAROL A. BARTZ
------------------
Carol A. Bartz
Chairman and Chief Executive Officer
/s/ STEVE CAKEBREAD
-------------------
Steve Cakebread
Vice President and Chief Financial Officer
(Principal Accounting Officer)
14
5
1,000
3-MOS
JAN-31-1998
APR-30-1997
49,189
140,313
83,654
10,260
7,152
325,157
127,180
81,937
543,320
171,895
0
0
0
245,460
25,576
543,320
118,984
118,984
16,041
156,378
0
361
0
(51,421)
(1,324)
(52,745)
0
0
0
(52,745)
(1.15)
0
