===============================================================================
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, 1994
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)
California 94-2819853
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2320 MARINSHIP WAY
SAUSALITO, CALIFORNIA 94965
(Address of principal executive offices)
TELEPHONE NUMBER (415) 332-2344
(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 7, 1994, there were 23,586,741 shares of the Registrant's Common
Stock outstanding.
================================================================================
AUTODESK, INC.
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Statement of Income
Three months ended April 30, 1994 and 1993.............. 3
Condensed Consolidated Balance Sheet
April 30, 1994 and January 31, 1994..................... 4
Condensed Consolidated Statement of Cash Flows
Three months ended April 30, 1994 and 1993.............. 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........................................ 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................... 10
Signatures............................................... 11
2
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AUTODESK, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended
April 30,
-------------------
1994 1993
-------- --------
Revenues $109,550 $105,398
Direct commissions 2,972 3,733
-------- --------
Net revenues 106,578 101,665
Costs and expenses:
Cost of revenues 15,099 17,004
Marketing and sales 36,560 35,004
Research and development 15,583 13,188
General and administrative 14,996 14,639
-------- --------
82,238 79,835
-------- --------
Income from operations 24,340 21,830
Interest and other income, net 1,559 2,122
-------- --------
Income before income taxes 25,899 23,952
Provision for income taxes 9,453 8,510
-------- --------
Net income $ 16,446 $ 15,442
======== ========
Net income per share $ 0.65 $ 0.62
======== ========
Shares used in computing net income per share 25,120 24,890
======== ========
See accompanying notes.
3
AUTODESK, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
(In thousands)
April 30, 1994 January 31, 1994
-------------- ----------------
(Unaudited) (Audited)
Current assets:
Cash and cash equivalents $109,485 $ 85,604
Marketable securities 58,422 92,004
Accounts receivable, net 76,035 71,245
Inventories 5,452 8,803
Deferred income taxes 16,238 14,052
Prepaid expenses and other current assets 8,929 7,849
-------- --------
Total current assets 274,561 279,557
-------- --------
Marketable securities 48,864 39,403
Computer equipment, furniture and leasehold
improvements, at cost:
Computer equipment and furniture 79,633 76,165
Leasehold improvements 17,270 16,787
Less accumulated depreciation (54,933) (51,003)
-------- --------
Net computer equipment, furniture and leasehold improvements 41,970 41,949
Capitalized software 26,243 28,046
Other assets 14,601 15,919
-------- --------
$406,239 $404,874
======== ========
See Accompanying Notes
4
AUTODESK, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
(In thousands)
April 30, 1994 January 31, 1994
-------------- ----------------
(Unaudited) (Audited)
Current liabilities:
Accounts payable $15,490 $ 17,206
Accrued compensation 12,768 12,931
Accrued income taxes 38,657 45,136
Other accrued liabilities 26,427 27,043
------- --------
Total current liabilities 93,342 102,316
------- --------
Deferred income taxes 3,139 5,096
Other liabilities 663 583
Shareholders' equity:
Common stock 68,221 43,769
Retained earnings 240,890 257,052
Foreign currency translation adjustment (16) (3,942)
-------- --------
Total shareholders' equity 309,095 296,879
-------- --------
$406,239 $404,874
======== ========
See accompanying notes.
5
AUTODESK, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Three months ended
April 30,
--------------------------------
1994 1993
---------- ----------
Operating activities
Net income $ 16,446 $ 15,442
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,673 5,369
Changes in operating assets and liabilities (8,748) (9,315)
---------- ----------
Net cash provided by operating activities 13,371 11,496
---------- ----------
Investing activities
Sales (purchases) of marketable securities, net 24,121 (16,137)
Purchases of computer equipment, furniture
and leasehold improvements (3,186) (4,356)
Capitalization of software costs and
purchases of software technologies (92) (317)
Other 2,242 3,297
---------- ----------
Net cash provided (used) by investing activities 23,085 (17,513)
---------- ----------
Financing activities
Proceeds from issuance of common shares 21,024 5,782
Repurchase of common shares (30,743) (23,530)
Dividends paid (2,856) (2,786)
---------- ----------
Net cash used in financing activities (12,575) (20,534)
---------- ----------
Net increase (decrease) in cash and cash equivalents 23,881 (26,551)
Cash and cash equivalents at beginning of quarter 85,604 73,107
---------- ----------
Cash and cash equivalents at end of quarter $109,485 $ 46,556
========== ==========
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, 1994 and April 30, 1993 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 period. 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 Shareholders
incorporated by reference in the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 1994. The results of operations for the three
months ended April 30, 1994 are not necessarily indicative of the results for
the entire fiscal year ending January 31, 1995.
2. Effective February 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS No. 115"). SFAS No. 115 has been adopted on
a prospective basis and the financial statements of prior years have not been
restated. The cumulative effect as of February 1, 1994 of adopting SFAS No.
115 is immaterial.
Under SFAS No. 115, management is required to determine the appropriate
classification of its securities at the time of purchase and reevaluate such
designation as of each balance sheet date. The Company has classified all of
its marketable securities as available-for-sale. Available-for-sale
securities are carried at fair value, with unrealized gains and losses, net
of tax, reported as a separate component of shareholders' equity until
disposition. Realized gains and losses and declines in value judged to be
other than temporary on available-for-sale securities are included in
interest and other income. The cost of securities sold is based on the
specific identification method.
Marketable securities include the following available-for-sale debt
securities as of April 30, 1994 (in thousands):
Short-term:
----------
Municipal bonds $ 49,327
Time deposits 9,095
--------
58,422
Long-term:
---------
Municipal bonds 48,864
--------
$107,286
========
The market value of the above available-for-sale securities approximates cost
as of April 30, 1994. Gross realized gains and losses on sales of securities
for the quarter ended April 30, 1994 were not material.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net revenues. The Company's first quarter worldwide net revenues of $106.6
million increased 5 percent over first quarter net revenues in the prior fiscal
year resulting principally from sales growth in Asia/Pacific. Also contributing
to the increase were incremental revenues from newer design automation products
such as AutoCAD LT, AutoCAD Data Extension, AutoCAD Designer and product
offerings from the Company's Emerging Businesses including AutoVision and HOOPS
developed by Ithaca Software, which was acquired by the Company in August 1993.
Compared to the same period in the prior fiscal year, net revenues in
Asia/Pacific increased approximately 36 percent due to sales of new AutoCAD
licenses, while net revenues in the Americas and Europe decreased by 1 and 2
percent, respectively. These decreases primarily resulted from a decline in
AutoCAD update revenues as AutoCAD Release 12 nears the end of its product life.
Consolidated revenues derived from AutoCAD and AutoCAD updates decreased from
prior periods to approximately 80 percent of net revenues for the quarter ended
April 30, 1994. International sales, including exports from the U.S., accounted
for approximately 63 percent of the Company's revenues in the first quarter of
fiscal year 1994 as compared to 58 percent for the first quarter of fiscal year
1994. Net revenues in the first quarter of fiscal year 1995, when compared to
the same period in the prior fiscal year, were not materially impacted by
changes in foreign exchange rates.
The Company believes that net revenues in the coming quarters will be
negatively impacted by an anticipated slowdown in sales of AutoCAD and related
updates as Release 12 nears the end of its product life cycle. As a result,
AutoCAD revenues are expected to continue to decline as a percentage of
consolidated revenues. The Company expects that the commencement of shipping of
AutoCAD Release 13, currently anticipated for release late in the fiscal quarter
ending October 31, 1994, will increase AutoCAD sales as a percentage of
consolidated revenues. While the Company expects that new products introduced
in recent quarters as well as products expected to be introduced during fiscal
year 1995 will offset the decrease in AutoCAD revenues, delays in the
introduction of these new products or lower-than-anticipated demand for these
products could adversely affect future revenues. Consequently, the Company does
not expect revenue growth during the coming quarters. Moreover, delays in the
introduction of AutoCAD Release 13, as well as the release of other new or
enhanced products or failure to achieve significant customer acceptance for
these new products may have an adverse effect on the Company's revenues and
results of operations in future periods. There can be no assurance that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of new products and product
enhancements or that its new products and product enhancements will adequately
meet the requirements of the marketplace and achieve market acceptance. In
addition, the Company's revenues in future periods could be impacted by the
effect of changes in currency exchange rates or uncertainties in the global
economic environment.
Cost of revenues. Cost of revenues as a percentage of net revenues decreased
in the first quarter of fiscal 1995 to 14 percent from 17 percent in the first
quarter of the prior fiscal year. The improved gross margin in the current
quarter resulted from a change in the mix of product sales, on-going cost
control measures and operating efficiencies. Sales of AutoCAD updates, which
have a lower gross margin than commercial versions of AutoCAD, represented a
lower percentage of total net revenues in the first quarter of the current
fiscal year than update sales in the first quarter of the prior fiscal year. The
Company's gross margin was also favorably impacted by cost control efforts in
production, particularly in the areas of disk duplication, assembly, packaging
and shipping. In future periods, the Company expects that cost of revenues as a
percentage of net revenues will continue to be impacted by the mix of product
sales including the level of AutoCAD updates.
8
Marketing and sales. Marketing and sales expenses were 34 percent of net
revenues in the first quarter of both fiscal years 1995 and 1994. While
remaining consistent as a percentage of net revenues, marketing and sales
expenses increased in absolute dollars by approximately $1.6 million, or 4
percent, due to higher personnel costs, partially offset by lower promotional
activities throughout the world. 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.
Research and development. Research and development expenses as a percentage of
net revenues for the first quarter of fiscal year 1995 increased to 15 percent
from 13 percent in the first quarter of the prior fiscal year. Actual research
and development spending increased by 18 percent in absolute dollars on a year
over year basis due to increased personnel costs to support ongoing research and
development and incremental costs associated with two business combinations
completed in the last half of the prior fiscal year. The Company anticipates
that research and development expenses in the second quarter will increase from
those recorded in the first quarter to support continued development efforts and
the translation and localization of foreign-language versions of the Company's
products. Additionally, the Company expects to continue recruiting and hiring
experienced software developers while at the same time considering the
acquisition of software businesses and technologies.
General and administrative. General and administrative expense were 14 percent
of net revenues in the first quarter of both fiscal years 1995 and 1994.
Expenses increased approximately 2 percent in absolute dollars over the same
period in the prior fiscal year resulting primarily from higher personnel costs
to support the Company's increased operations and infrastructure. As discussed
below in Part II, Item 1, "Legal Proceedings," the Company is party to two
lawsuits which include allegations of copyright and patent infringement.
Autodesk intends to vigorously oppose these claims. As a result, defense in
these matters may require the expenditure of financial resources which may
result in increased general and administrative expenses in future periods.
Interest and other income. Interest and other income in the first quarter was
$1.6 million, including foreign currency losses of approximately $150,000,
compared to $2.1 million in the same quarter of the prior fiscal year, net of
foreign exchanges gains of approximately $10,000. Interest income decreased by
approximately $280,000 from the same period in the prior fiscal year due to
lower interest rates throughout the world while other income decreased
approximately $110,000.
Provision for income taxes. The Company's effective income tax rate in the
first quarter was 36.5 percent compared to 35.5 percent in the first quarter of
the prior fiscal year. The increase is principally the result of a change in
the U.S. federal statutory rate from 34 percent to 35 percent resulting from
legislation that was enacted in August 1993.
Quarterly results. The Company's consolidated results of operations to date
have not been materially affected by seasonal trends. However, the Company
believes that in the future its results may reflect quarterly fluctuations
resulting from factors such as order deferrals in anticipation of new product
releases, delays in the shipment of new products, a slower growth rate in the
personal computer CAD market or adverse general economic and industry conditions
in any of the countries in which the Company does business. In addition, with a
significant portion of net revenues and net income contributed by international
operations, fluctuations of the U.S. dollar against foreign currencies and the
seasonality of the European, Asia/Pacific and other international markets could
impact the Company's results of operations and financial condition in a
particular quarter. Rapid technological change and the Company's ability to
develop, manufacture and market products that successfully adapt to that change
may also have an impact on the results of operations. Further, increased
competition in the market for design automation and multimedia software products
could also have a negative impact on the Company's results of operations.
9
Due to the factors noted above, the Company's future earnings and stock price
may be subject to significant volatility, particularly on a quarterly basis.
Any shortfall in 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. The Company typically receives and
fulfills a majority of its orders within the quarter, with a substantial portion
occurring in the third month of the fiscal quarter. As a result, the Company
may not learn of revenue shortfalls until late in a fiscal quarter, which could
result in an even more immediate and adverse effect on the trading price of the
Company's common stock.
LIQUIDITY AND CAPITAL RESOURCES
Working capital, which consists principally of cash, cash equivalents, accounts
receivable and marketable securities, was $181.2 million at April 30, 1994,
compared to $177.2 million at January 31, 1994. Cash, cash equivalents and
marketable securities, which consist primarily of high-quality municipal bonds
and tax-advantaged money market instruments, totaled $216.8 million at April 30,
1994 compared to $217.0 million at January 31, 1994. Significant changes to
cash, cash equivalents and marketable securities resulted from cash generated
from operations ($13.4 million) and cash proceeds from the issuance of shares
through employee stock option and stock purchase programs ($21.0 million).
These increases were offset by cash used to repurchase 525,000 shares of the
Company's common stock under an ongoing systematic repurchase program ($30.7
million), to purchase computer equipment, furniture and leasehold improvements
($3.2 million) and payment of dividends on the Company's common stock ($2.9
million).
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 possible acquisition of software products or
technologies complementary to the Company's business. The Company believes that
its existing cash, cash equivalents, marketable securities, cash generated from
operations and available line of credit will be sufficient to satisfy its
currently anticipated cash requirements for fiscal year 1995.
The Company's principal commitments at April 30, 1994, consisted of obligations
under operating leases for facilities.
PART II. OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS
On October 8, 1992, Vermont Microsystems, Inc. ("VMI") filed a complaint
against the Company in the United States District Court for the District of
Vermont, alleging copyright infringement, misappropriation of trade secrets,
interference with contractual relations and breach of contract. Management
believes these claims are without merit and intends to vigorously defend against
each allegation. VMI has filed a motion for a preliminary injunction against
the Company pending final resolution of the lawsuit. Management believes the
ultimate resolution of this matter will not have a material effect on the
Company's consolidated financial condition.
On August 9, 1993, Preco Industries, Inc. filed a complaint against the Company
in the United States District Court for the District of Kansas alleging patent
infringement and unfair competition. The complaint does not specify the amount
of damages sought. The Company intends to defend these actions vigorously and
management does not believe the outcome of this matter will have a material
impact on the Company's consolidated financial condition.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended April 30, 1994.
10
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 14 1994
AUTODESK, INC.
(Registrant)
/S/ Carol A. Bartz
------------------
Carol A. Bartz
President and Chief Executive Officer
/S/ Eric B. Herr
----------------
Eric B. Herr
Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
11
