================================================================================
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 OCTOBER 31, 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)
DELAWARE 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 November 18, 1994, there were 47,061,000 shares of the Registrant's
Common Stock outstanding.
AUTODESK, INC.
INDEX
PART I. FINANCIAL INFORMATION
Page No.
--------
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Statement of Income
Three and nine months ended October 31, 1994 and 1993.....3
Condensed Consolidated Balance Sheet
October 31, 1994 and January 31, 1994.....................4
Condensed Consolidated Statement of Cash Flows
Nine months ended October 31, 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.........................................11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..........................12
SIGNATURES................................................13
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 Nine months ended
October 31, October 31,
------------------ ------------------
1994 1993 1994 1993
-------- -------- -------- --------
Revenues $111,208 $101,224 $333,590 $313,532
Direct commissions 3,029 3,048 8,574 10,078
-------- -------- -------- --------
Net revenues 108,179 98,176 325,016 303,454
Costs and expenses:
Cost of revenues 14,185 14,695 44,420 48,447
Marketing and sales 38,204 33,429 112,339 102,921
Research and development 16,022 14,347 48,467 41,094
General and administrative 16,538 14,407 47,822 43,929
-------- -------- -------- --------
84,949 76,878 253,048 236,391
-------- -------- -------- --------
Income from operations 23,230 21,298 71,968 67,063
Interest and other income, net 1,803 2,027 5,085 5,750
-------- -------- -------- --------
Income before income taxes 25,033 23,325 77,053 72,813
Provision for income taxes 9,137 8,397 28,124 25,972
-------- -------- -------- --------
Net income $ 15,896 $ 14,928 $ 48,929 $ 46,841
======== ======== ======== ========
Net income per share $.32 $.30 $.99 $.94
======== ======== ======== ========
Shares used in computing
net income per share 49,590 49,760 49,610 50,020
======== ======== ======== ========
See accompanying notes.
3
AUTODESK, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
(In thousands)
October 31, 1994 January 31, 1994
---------------- ----------------
(Unaudited) (Audited)
Current assets:
Cash and cash equivalents $175,396 $ 85,604
Marketable securities 42,419 92,004
Accounts receivable, net 79,395 71,245
Inventories 3,661 8,803
Deferred income taxes 17,768 14,052
Prepaid expenses and other current assets 11,295 7,849
-------- --------
Total current assets 329,934 279,557
-------- --------
Marketable securities 15,460 39,403
Computer equipment, furniture and leasehold improvements, at cost:
Computer equipment and furniture 89,588 76,165
Leasehold improvements 19,732 16,787
Accumulated depreciation (64,917) (51,003)
-------- --------
Net computer equipment, furniture and leasehold improvements 44,403 41,949
Capitalized software 27,672 28,046
Other assets 23,893 15,919
-------- --------
$441,362 $404,874
======== ========
See accompanying notes.
4
AUTODESK, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(In thousands)
October 31, 1994 January 31, 1994
---------------- ----------------
(Unaudited) (Audited)
Current liabilities:
Accounts payable $ 18,617 $ 17,206
Accrued compensation 14,976 12,931
Accrued income taxes 42,337 45,136
Other accrued liabilities 35,600 27,043
-------- --------
Total current liabilities 111,530 102,316
-------- --------
Deferred income taxes 3,299 5,096
Other liabilities 787 583
Stockholders' equity:
Common stock 84,016 43,769
Retained earnings 231,602 257,052
Foreign currency translation
adjustment 10,128 ( 3,942)
-------- --------
Total stockholders' equity 325,746 296,879
-------- --------
$441,362 $404,874
======== ========
See accompanying notes.
5
AUTODESK, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Nine months ended
October 31,
-----------------------
1994 1993
---------- --------
Operating activities
Net income $ 48,929 $ 46,841
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 19,314 16,017
Changes in operating assets and liabilities 613 (3,089)
-------- --------
Net cash provided by operating activities 68,856 59,769
-------- --------
Investing activities
Sales of marketable securities, net 73,528 672
Purchases of computer equipment, furniture and leasehold improvements (13,209) (12,631)
Capitalization of software costs and purchases of software technologies (5,333) (261)
Other 81 (2,551)
-------- --------
Net cash provided (used) by investing activities 55,067 (14,771)
-------- --------
Financing activities
Proceeds from issuance of common shares 42,559 36,225
Repurchase of common shares (68,217) (56,820)
Dividends paid (8,473) (8,656)
-------- --------
Net cash used in financing activities (34,131) (29,251)
-------- --------
Net increase in cash and cash equivalents 89,792 15,747
Cash and cash equivalents at beginning of year 85,604 73,107
-------- --------
Cash and cash equivalents at end of quarter $175,396 $ 88,854
======== ========
See accompanying notes.
6
AUTODESK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements at October 31, 1994 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 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
and nine months ended October 31, 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 was not material.
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 October 31, 1994 (in thousands):
Short-term:
- - - - ----------
Municipal bonds $40,797
Time deposits 1,622
-------
42,419
Long-term:
- - - - ---------
Municipal bonds 15,460
-------
$57,879
=======
The cost of the above available-for-sale securities approximates market as of
October 31, 1994. The contractual maturities for the Company's marketable
securities at October 31, 1994 were: one year or less-$42.4 million; due
between one and two years-$13.3 million; and due after three years-$2.2
million. Expected maturities will differ from contractual maturities because
the issuers of the securities may have the right to prepay obligations
without prepayment penalties. Gross realized gains and losses on sales of
available-for-sale securities for the quarter and nine months ended October
31, 1994 were not material.
3. Reference is made to Part II, Item 1 (page 11) regarding certain legal
matters.
4. On October 14, 1994, outstanding shares of the Company's Common Stock were
split two-for-one effected in the form of a 100 percent Common Stock
dividend. All shares and per share amounts have been restated to reflect the
stock split.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended October 31, 1994 and 1993
- - - - --------------------------------------------
Net revenues. The Company's third quarter net revenues of $108.2 million
increased 10 percent over third quarter net revenues in the prior fiscal year.
The increase principally resulted from sales growth in all sales geographies,
including a 25 percent increase in the Asia/Pacific region. Much of the growth
in consolidated net revenues resulted from sales of newer product offerings such
as AutoCAD LT, AutoCAD Designer and product offerings from the Company's
Emerging Businesses Group including sales of 3D Studio and AutoVision.
Consolidated revenues for the quarter ended October 31, 1994 derived from
AutoCAD and AutoCAD updates decreased as a percentage of consolidated net
revenues from the same period in the prior fiscal year resulting from lower
upgrade revenues as AutoCAD Release 12 nears the end of its product life cycle,
partially offset by increased sales of commercial and educational units
associated with the sales growth in Asia/Pacific and the Americas.
International sales, including exports from the U.S., accounted for
approximately 57 percent of the Company's revenues in the third quarter of
fiscal year 1995 as compared to 56 percent for the third quarter of fiscal year
1994. Net revenues in the third quarter of fiscal year 1995, when compared to
the same period in the prior fiscal year, were favorably impacted by changes in
foreign exchange rates.
The Company currently believes that it will begin shipping English-language
versions of AutoCAD Release 13 for the DOS and Windows platforms in late
November, 1994. The Company also plans to ship certain foreign-language
versions of AutoCAD Release 13 in the fourth quarter of fiscal year 1995. The
Company believes that the introduction of AutoCAD Release 13 will increase
AutoCAD sales as a percentage of consolidated revenues resulting from an
expected increase in update revenues. Any delays in the introduction of any of
the AutoCAD Release 13 versions planned in the Company's fourth fiscal quarter
beyond currently anticipated ship dates, or lower than anticipated demand for
AutoCAD Release 13, will have a material and adverse effect on revenues in the
quarter ending January 31, 1995. Delays in the introduction of other products
scheduled for release in the coming quarters, or failure to achieve significant
customer acceptance for AutoCAD Release 13 and other new and enhanced product
offerings could also 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, including English and foreign-language versions of AutoCAD Release
13, or that the Company's 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 third quarter of fiscal year 1995 to 13 percent from 15 percent in the
third quarter of the prior fiscal year. The improved gross margin in the
current quarter resulted from on-going cost control measures and operating
efficiencies, and to a lesser extent, the mix of product sales. Significant
factors contributing to the improved margin from the prior year include: reduced
packaging and shipping costs, as well as ongoing cost control efforts in disk
duplication and assembly. The Company's gross margin was also favorably
impacted by a lower percentage of revenues from sales of AutoCAD updates which
have a lower gross margin than commercial versions of AutoCAD. 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, in
particular, the level of AutoCAD updates which is expected to increase in the
quarters following the shipment of AutoCAD Release 13.
8
Marketing and sales. Marketing and sales expenses were 35 percent of net
revenues in the third quarter of fiscal year 1995 as compared to 34 percent for
the third quarter of the prior fiscal year. Actual spending increased 14
percent in order to support worldwide marketing efforts of new and enhanced
product introductions, including promotional activities related to AutoCAD
Release 13, the Autodesk Special Editions Series and product offerings from the
Company's Emerging Businesses Group. 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 were 15 percent of
net revenues in the third quarter of both fiscal years 1995 and 1994. While
remaining consistent as a percentage of net revenues, research and development
spending increased in absolute dollars by approximately $2.4 million, or 17
percent (including $750,000 of capitalized software development costs associated
with AutoCAD Release 13). This increase was the result of the development of
new and enhanced products, such as AutoCAD Release 13, costs associated with
translating these products into foreign languages and the addition of
development personnel. To maintain its competitive market position, the Company
expects to invest a significant amount of its resources in the development of
new products and product enhancements and 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 expenses were 15
percent of net revenues in the third quarter of fiscal year 1995 and 1994, while
absolute spending in the third quarter of fiscal year 1995 increased by 15
percent over the same period in the prior fiscal year. The increase resulted
from increased legal expenses, higher employee-related and facility costs
associated with increased operations and expenditures to support the Company's
infrastructure.
Interest and other income. Interest and other income, including foreign
currency losses of $174,000, was $1.8 million in the third quarter of fiscal
year 1995. Interest and other income for the third quarter of fiscal year 1994
was $2.0 million and included foreign currency losses of $205,000. Interest
income for the third quarter of fiscal year 1995 was less than interest income
in the same period of the prior fiscal year resulting from lower interest rates
on the Company's investment portfolio when compared to the same period in the
prior fiscal year, partially offset by a greater average quarterly balance of
cash, cash equivalents and marketable securities in fiscal year 1995.
Provision for income taxes. In the third quarter of fiscal year 1995, the
Company's effective income tax rate was 36.5 percent compared to 36.0 percent in
the third 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. The Company
anticipates that its effective income tax rate for the fiscal year ending
January 31, 1995 will be 36.5 percent.
Nine Months Ended October 31, 1994 and 1993
- - - - -------------------------------------------
Net Revenues. The Company's net revenues for the nine months ended October 31,
1994 were $325.0 million which represented a 7 percent increase from the same
period of the prior fiscal year. The increase resulted from revenue growth in
all sales geographies with the most significant growth coming from Asia/Pacific.
Consolidated revenues derived from AutoCAD and AutoCAD updates decreased as a
percentage of consolidated net revenues for the nine months ended October 31,
1994 as compared to the same period of the prior fiscal year primarily due to a
decrease in update revenues as AutoCAD Release 12 nears the end of its product
life cycle. The decrease in AutoCAD revenues was more than offset by
incremental revenues derived from newer products such as AutoCAD LT, AutoCAD
Designer and product offerings from the Company's Emerging Businesses Group
including sales of 3D Studio, AutoVision and HOOPS. International sales
accounted for approximately 60 percent of consolidated revenues for the first
nine months ended October 31, 1994 as compared to 58 percent for the same period
of the prior fiscal year. Net revenues for the first nine months of fiscal year
1995 were favorably impacted by changes in foreign exchange rates when compared
to the same period in the prior fiscal year.
9
Cost of revenues. Cost of revenues as a percentage of net revenues for the
nine months ended October 31, 1994 was 14 percent as compared to 16 percent for
the same period of the prior fiscal year. The improved gross margin resulted
from a change in the mix of product sales, specifically, a decrease in sales of
AutoCAD updates, cost control measures and operating efficiencies.
Operating expenses. Operating expenses for the Company's marketing and sales,
research and development and general and administrative functions for the nine
months ended October 31, 1994 increased approximately 11 percent to $208.6
million as compared to $187.9 million for the same period of the prior fiscal
year. For the nine months ended October 31, 1994, expenses associated with the
Company's marketing and sales and research and development functions increased
in both absolute dollars and as a percentage of net revenues as compared to the
same period of the prior fiscal year in order to support the development and
launch of new and enhanced product offerings. General and administrative
expenses for the first nine months of fiscal year 1995 remained flat as a
percentage of net revenues when compared to the same period of the prior fiscal
year, but increased in absolute dollars in order to support the Company's
increased operations and related infrastructure and due to higher legal
expenses.
Interest and other income. Interest and other income for the nine months ended
October 31, 1994 was $5.1 million as compared to $5.8 million in the same period
of the prior fiscal year. Interest income was $5.8 million for the first nine
months of fiscal year 1995 as compared to $6.2 million in the same period of the
prior fiscal year. This decrease resulted from lower interest rates on the
Company's investment portfolio when compared to the same period in the prior
fiscal year, partially offset by a greater average quarterly balance of cash,
cash equivalents and marketable securities in fiscal year 1995.
Income taxes. The Company's effective income tax rate for the nine months
ended October 31, 1994 was 36.5 percent as compared to 35.7 percent in the same
period of the prior fiscal year. The increase in the effective income tax rate
in fiscal year 1995 is principally the result of the change in the U.S. federal
statutory rate from 34 percent to 35 percent resulting from legislation enacted
in August 1993.
Factors Affecting 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.
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. In addition, in the event of a material adverse outcome
in the litigation discussed in Part II, Item 1 below, the Company's results of
operations would be negatively impacted.
10
LIQUIDITY AND CAPITAL RESOURCES
Working capital, which consists principally of cash, cash equivalents,
marketable securities and accounts receivable, was $218.4 million at October 31,
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 $233.3 million at
October 31, 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 ($68.9 million) and cash proceeds from the issuance of
shares through employee stock option and stock purchase programs ($42.6
million). These increases were offset by cash used to: repurchase 2,398,000
shares of the Company's common stock under an ongoing systematic repurchase
program ($68.2 million); purchase computer equipment, furniture and leasehold
improvements ($13.2 million); and, pay dividends on the Company's common
stock ($8.5 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 businesses, 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.
The Company's principal commitments at October 31, 1994, consisted of
obligations under operating leases for facilities.
Cash paid for income taxes for the nine months ended October 31, 1994 and
1993 was $28.8 million and $24.1 million, respectively.
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. VMI is seeking damages of
approximately $75 million. Management believes these claims are without merit.
In October 1994, the case was tried before a Magistrate of the U.S. District
Court of Vermont where the Company vigorously contested the claims in this
lawsuit. The Company is awaiting a ruling in this matter which is expected
sometime during the quarter ending January 31, 1995. While management continues
to believe that the claims are without merit, outcome of litigation is always
uncertain and were the matter to be resolved unfavorably, there could be a
material adverse impact on the Company's financial condition and results of
operations for the period of adjudication.
11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 13, 1994, the Company held a Special Meeting of Stockholders and
approved an amendment to the Company's Certificate of Incorporation to increase
the number of authorized shares of Common Stock of the Company, $0.01 par value
per share, from 50,000,000 to 100,000,000 in order to effect a two-for-one split
of the Company's Common Stock in the form of a 100 percent Common Stock
Dividend.
Affirmative votes 16,664,246
Unvoted shares 6,450,801
Negative votes 273,943
Votes withheld 65,959
The record date for the stock split was October 14, 1994 and the split was
effected on October 28, 1994.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended October 31, 1994.
12
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: November 23, 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)
13
INDEX TO EXHIBITS
EXHIBITS
- - - - -------- ---
Exhibit 27 -- Article 5, Financial Data Schedule
5
1,000
9-MOS
JAN-31-1995
OCT-31-1994
175,396
42,419
84,637
5,242
3,661
329,934
109,320
64,917
441,362
111,530
0
84,016
0
0
241,730
441,362
325,016
325,016
44,420
208,628
0
1,682
0
77,053
28,124
48,929
0
0
0
48,929
0.99
0
