SEC Filing | Autodesk, Inc.

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-Q

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(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, 2001

[_]Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

Commission File Number: 0-14338

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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)

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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 October 31, 2001, there were approximately 54.8 million 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 Statements of Operations
Three and nine months ended October 31, 2001 and 2000................... 3

Condensed Consolidated Balance Sheets
October 31, 2001 and January 31, 2001................................... 4

Condensed Consolidated Statements of Cash Flows
Nine months ended October 31, 2001 and 2000............................. 5

Notes to Condensed Consolidated Financial Statements...................... 6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 12

Item 3. Quantitative and Qualitative Disclosures About Market Risk................ 20

PART II. OTHER INFORMATION

Item 1. Legal Proceedings......................................................... 21

Item 6. Exhibits and Reports on Form 8-K.......................................... 21

Signatures................................................................ 21

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUTODESK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

Three months ended Nine months ended
October 31, October 31,
------------------ ------------------
2001 2000 2001 2000
-------- -------- -------- --------
(Unaudited)

Net revenues......................................... $216,357 $229,177 $693,457 $693,277
-------- -------- -------- --------
Costs and expenses:
Cost of revenues.................................... 37,799 37,956 109,717 113,891
Marketing and sales................................. 81,109 81,234 254,666 235,701
Research and development............................ 39,637 42,658 129,379 125,185
General and administrative.......................... 32,492 32,387 98,131 97,315
Amortization of goodwill and purchased intangibles.. 5,198 5,856 15,679 20,916
Nonrecurring charges (credits)...................... 7,290 (434) 17,064 (1,234)
-------- -------- -------- --------
203,525 199,657 624,636 591,774
-------- -------- -------- --------
Income from operations............................... 12,832 29,520 68,821 101,503
Interest and other income, net....................... 4,325 6,372 17,313 13,646
Gain on disposal of affiliate........................ 9,461 -- 9,461 --
-------- -------- -------- --------
Income before income taxes........................... 26,618 35,892 95,595 115,149
Provision for income taxes........................... (5,147) (11,485) (25,840) (36,824)
Equity in net loss of affiliate...................... -- (5,896) (1,211) (13,455)
-------- -------- -------- --------
Net income........................................... $ 21,471 $ 18,511 $ 68,544 $ 64,870
======== ======== ======== ========
Basic net income per share........................... $ 0.39 $ 0.33 $ 1.27 $ 1.12
======== ======== ======== ========
Diluted net income per share......................... $ 0.38 $ 0.32 $ 1.23 $ 1.09
======== ======== ======== ========
Shares used in computing basic net income per share.. 54,370 56,681 54,093 57,825
======== ======== ======== ========
Shares used in computing diluted net income per share 56,010 57,073 55,751 59,319
======== ======== ======== ========

See accompanying notes.

AUTODESK, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

October 31, January 31,
2001 2001
----------- -----------
(Unaudited) (Audited)

ASSETS
Current assets:
Cash and cash equivalents......................................... $ 110,594 $ 116,391
Marketable securities............................................. 141,936 142,961
Accounts receivable, net.......................................... 141,438 157,422
Inventories....................................................... 20,788 17,255
Deferred income taxes............................................. 29,694 26,696
Prepaid expenses and other current assets......................... 39,151 30,596
--------- ---------
Total current assets............................................ 483,601 491,321
--------- ---------
Marketable securities.............................................. 175,113 163,148
Computer equipment, furniture, and leasehold improvements, at cost:
Computer equipment and furniture.................................. 198,242 171,176
Leasehold improvements............................................ 29,942 27,145
Less accumulated depreciation..................................... (158,509) (144,325)
--------- ---------
Net computer equipment, furniture, and leasehold improvements... 69,675 53,996
Purchased technologies and capitalized software, net............... 18,739 16,403
Goodwill, net...................................................... 47,580 54,273
Deferred income taxes.............................................. 47,136 18,242
Other assets....................................................... 11,329 10,376
--------- ---------
$ 853,173 $ 807,759
========= =========
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 48,732 $ 47,962
Accrued compensation.............................................. 51,662 55,907
Accrued income taxes.............................................. 103,805 97,109
Deferred revenues................................................. 59,900 50,993
Other accrued liabilities......................................... 96,810 81,942
--------- ---------
Total current liabilities....................................... 360,909 333,913
--------- ---------
Other liabilities..................................................
713 1,208
Commitments and contingencies

Minority interest..................................................
-- 12,964
Stockholders' equity:
Common stock and additional paid-in capital....................... 433,777 424,652
Accumulated other comprehensive loss.............................. (17,856) (16,104)
Deferred compensation............................................. (920) (1,172)
Retained earnings................................................. 76,550 52,298
--------- ---------
Total stockholders' equity...................................... 491,551 459,674
--------- ---------
$ 853,173 $ 807,759
========= =========

See accompanying notes.

AUTODESK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Nine months ended
October 31,
-------------------
2001 2000
-------- ---------
(Unaudited)

Operating activities
Net income....................................................................... $ 68,544 $ 64,870
Adjustments to reconcile net income to net cash provided by operating activities:
Charge for acquired in-process research and development........................ 3,180 --
Depreciation and amortization.................................................. 47,228 52,498
Equity in net loss of affiliate................................................ 1,211 13,455
Gain on disposal of affiliate.................................................. (9,461) --
Tax benefits from employee stock plans......................................... 8,268 20,043
Changes in operating assets and liabilities.................................... 10,516 (22,327)
-------- ---------
Net cash provided by operating activities.................................... 129,486 128,539
-------- ---------
Investing activities
Net (purchases) maturities of marketable securities.............................. (10,790) 96,206
Capital and other expenditures................................................... (36,706) (24,911)
Acquisitions, net of cash acquired............................................... (34,271) --
Investments in unconsolidated entities........................................... -- (23,800)
Other investing activities....................................................... (4,602) 6,769
-------- ---------
Net cash (used in) provided by investing activities.......................... (86,369) 54,264
-------- ---------
Financing activities
Repayment of notes payable and borrowings........................................ (276) (221)
Repurchases of common stock...................................................... (87,287) (292,744)
Proceeds from issuance of common stock, net of issuance costs.................... 53,605 107,029
Dividends paid................................................................... (9,753) (10,333)
Minority interest................................................................ (2,656) 13,957
-------- ---------
Net cash used in financing activities........................................ (46,367) (182,312)
-------- ---------
Effect of exchange rate changes on cash and cash equivalents...................... (2,547) (13,232)
-------- ---------
Net decrease in cash and cash equivalents......................................... (5,797) (12,741)
Cash and cash equivalents at beginning of year.................................... 116,391 108,641
-------- ---------
Cash and cash equivalents at end of period........................................ $110,594 $ 95,900
======== =========
Supplemental cash flow information:
Cash paid during the period for income taxes..................................... $ 18,853 $ 9,184
======== =========

See accompanying notes.

AUTODESK, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying condensed consolidated financial statements 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. These statements should
be read in conjunction with the consolidated financial statements and notes,
together with management's discussion and analysis of financial condition and
results of operations, contained in Autodesk's fiscal 2001 Annual Report on
Form 10-K. The results of operations for the three and nine months ended
October 31, 2001 are not necessarily indicative of the results for the entire
fiscal year ending January 31, 2002.

2. Recently Issued Accounting Standards

During July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS
141"). This Statement requires all business combinations to be accounted for
using the purchase method accounting and redefines goodwill and other
intangibles that should be recognized separate from goodwill. SFAS 141 is
effective for all business combinations initiated after June 30, 2001.

During July 2001, the Financial Accounting Standards Board also issued
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). This Statement requires, among other things,
that goodwill not be amortized, but be tested for impairment at least annually.
Application of SFAS 142 is required immediately for business combinations
completed after June 30, 2001; however, for transactions completed prior to
this date, Autodesk plans to adopt the provisions of SFAS 142 on February 1,
2002. The beneficial pre-tax impact resulting from the adoption of the goodwill
non-amortization provision of SFAS 142 will be less than $5.0 million per
quarter.

3. Business Combinations

Buzzsaw.com, Inc. ("Buzzsaw")

On August 20, 2001 Autodesk acquired the remaining outstanding stock of
Buzzsaw for $15.0 million in cash plus the assumption of $13.3 million of
liabilities. Prior to the acquisition, Autodesk held a 40 percent interest in
Buzzsaw, a privately held company that provides leading online collaboration
applications to improve efficiencies and reduce costs for the building
industry. The acquisition of Buzzsaw is part of Autodesk's strategy to extend
its business to complementary new markets. Buzzsaw's results of operations,
which are not material in relation to Autodesk, have been included in the
consolidated financial statements since the acquisition date. Prior to the
acquisition date, Autodesk accounted for its interest in Buzzsaw using the
equity method of accounting. The acquisition was accounted for under the
purchase method of accounting pursuant to SFAS 141.

The following unaudited pro forma summary is provided for illustrative
purposes only and is not necessarily indicative of the consolidated results of
operations for future periods or that actually would have been realized had
Autodesk acquired the remaining 60% interest in Buzzsaw on February 1, 2000.

AUTODESK, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The pro forma summary includes the impact of certain adjustments resulting
from the allocation of the purchase consideration and reversal of the equity in
net losses that Autodesk recognized.

Nine months ended
October 31,
---------------------
2001 2000
-------- --------
(In thousands, except
per share data)

Net revenues.............. $699,221 $696,831
Net income................ $ 51,838 $ 58,873
Basic earnings per share.. $ 0.96 $ 1.02
Diluted earnings per share $ 0.93 $ 0.99

Autodesk believes that Buzzsaw's future on-going operating losses will be
significantly less than what Buzzsaw historically incurred. In an effort to
reduce operating costs and expenses, Buzzsaw eliminated 141 positions (55% of
its workforce) between January 1, 2001 and August 20, 2001. Of the total number
of positions eliminated, 58 were eliminated in August 2001. Additionally,
Autodesk recently decided to close Buzzsaw's headquarters office in San
Francisco, California, and move the Buzzsaw employees to a new Autodesk office
location, which is also in San Francisco (see Note 8, Nonrecurring Charges for
further discussion). As a result of these recent actions, Autodesk does not
believe that the pro forma information above is indicative of Autodesk's future
combined operating results or financial position.

During the period from February 1, 2001 to August 20, 2001, Autodesk
recognized $1.2 million of losses associated with its equity investment in
Buzzsaw.com. None of these losses were recognized during the second or third
quarters since Autodesk had previously expensed all prior investments made.
During the nine months ended October 31, 2000, Autodesk recognized $13.5
million of losses, of which $5.9 million were recognized during the third
quarter of fiscal 2001.

Software Division of Media 100, Inc. ("Media 100")

During October 2001, Autodesk acquired the software division of Media 100
for $16.0 million in cash. The acquisition provides Autodesk with streaming
media technology for, among other things, the immediate playback of content
over the Internet.

The acquisition was accounted for under the purchase method of accounting
pursuant to SFAS 141. Management's preliminary allocation of the purchase
price, which is based on valuations of acquired assets performed by a third
party, is as follows (in thousands):

Inventory and computer hardware.................. $ 558
Intangible assets and amounts:
In-process research and development ("IPR&D"). 3,180
Developed technologies........................ 7,380
Brand names................................... 620
Goodwill......................................... 4,262
-------
$16,000
=======

The value assigned to IPR&D, which was expensed as a nonrecurring charge
during the third quarter, was determined by identifying projects in areas where
technological feasibility had not been achieved and alternative future uses did
not exist. The amounts assigned to developed technologies and brand names have
useful lives up to 3 and 6 years, respectively.

AUTODESK, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

All of the intangibles listed above, including the $4.3 million of goodwill,
are deductible for tax purposes. These assets were assigned to the Discreet
Segment of Autodesk.

4. Financial Instruments

On February 1, 2001 Autodesk adopted the provisions of Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). Under SFAS 133, all derivatives, whether
in hedging relationships or not, are required to be recorded on the balance
sheet at fair value. Gains and losses resulting from changes in fair value are
accounted for depending upon the use of the derivative and whether it is
designated and qualifies for hedge accounting. The adoption of SFAS 133 did not
have a material impact on Autodesk's financial position and results of
operations.

Autodesk uses derivative instruments to manage its earnings and cash flow
exposures to fluctuations in foreign currency exchange rates. Under its risk
management strategy, Autodesk uses foreign currency forward and option
contracts to manage its exposures of underlying assets, liabilities and other
obligations, which exist as part of the ongoing business operations. Generally,
Autodesk's practice is to hedge a majority of its short-term foreign exchange
transaction exposures. Contracts are primarily denominated in European and
Asian currencies, and Autodesk does not enter into any foreign exchange
derivative instruments for trading or speculative purposes.

Autodesk's forward contracts, which are not designated as hedging
instruments under SFAS 133, have average maturities of 60 days or less. The
forwards are used to reduce the exchange rate risk associated primarily with
receivables and payables. Forward contracts are marked-to-market at the end of
each reporting period, with gains and losses recognized as other income or
expense to offset the gains or losses resulting from the settlement of the
underlying foreign currency denominated receivables and payables.

In addition to the forward contracts, Autodesk utilizes foreign currency
option contracts to reduce the exchange rate impact on the net revenue of
certain anticipated transactions. These option contracts, which are designated
and documented as cash flow hedges and qualify for hedge accounting treatment
under SFAS 133, have maturities of less than three months and settle before the
end of each fiscal quarter. Autodesk's financial exposure is generally limited
to the amount paid for the options.

Gains, if any, from the effective portion of the option contracts, as
determinable under SFAS 133, are recognized as net revenues, while the
ineffective portion of the gain is recorded as other income. During the first
nine months of fiscal 2002, Autodesk recognized net settlement gains of $0.6
million as net revenues; of this amount, $0.3 million related to settlement
losses recognized during the third quarter. Amounts associated with net
settlement gains totaling $0.2 million were recorded as other income during the
first nine months of fiscal 2002.

AUTODESK, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

5. Net Income Per Share

The following is a reconciliation of the numerators and denominators used in
the basic and diluted net income per share amounts:

Three months ended Nine months ended
October 31, October 31,
------------------ -----------------
2001 2000 2001 2000
------- ------- ------- -------
(In thousands)

Numerator:
Numerator for basic and diluted per share--net income $21,471 $18,511 $68,544 $64,870
======= ======= ======= =======
Denominator:
Denominator for basic net income per share--weighted
average shares..................................... 54,370 56,681 54,093 57,825
Effect of dilutive common stock options.............. 1,640 392 1,658 1,494
------- ------- ------- -------
Denominator for dilutive net income per share........ 56,010 57,073 55,751 59,319
======= ======= ======= =======

For the three months ended October 31, 2001 and 2000, options to purchase
4.6 million and 10.3 million shares, respectively, were excluded from the
computation of diluted net income per share. For the nine months ended October
31, 2001 and 2000, options to purchase 4.7 million and 5.3 million shares,
respectively, were 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 prices of Autodesk's common stock during the
respective periods.

6. Comprehensive Income

Autodesk's total comprehensive income was as follows:

Three months ended Nine months ended
October 31, October 31,
----------------- ----------------
2001 2000 2001 2000
(In thousands)

Net income.................... $21,471 $18,511 $68,544 $64,870
Other comprehensive loss, net. 1,682 (2,872) (1,752) (3,919)
------- ------- ------- -------
Total comprehensive income. $23,153 $15,639 $66,792 $60,951
======= ======= ======= =======

7. Gain on Disposal of Affiliate

During October 2001, the shareholders of RedSpark, Inc. ("RedSpark")
approved a plan to dissolve the company. Autodesk has maintained a majority
interest in RedSpark's voting stock since RedSpark was formed in April 2000.
Accordingly, Autodesk consolidated RedSpark's financial position and results of
operations.

As a result of the plan to dissolve RedSpark, Autodesk recognized during the
third quarter a one-time non-cash gain of $9.5 million. This gain, which
resulted from the reversal of the minority interest liability balance,
represents the reversal of cumulative losses recognized in excess of the amount
that Autodesk originally invested.

AUTODESK, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

8. Nonrecurring Charges

During the nine months ended October 31, 2001 Autodesk recognized $17.1
million of nonrecurring charges. These charges resulted from restructuring and
reorganization activities ($10.3 million), the acquisition of the software
division of Media 100 ($3.2 million--see Note 3) and the wind-down costs
associated with the dissolution of RedSpark ($3.6 million--see Note 7).

Of the $3.6 million of RedSpark wind-down costs, $1.3 million related to
losses on asset disposals, $2.1 million related to employee termination costs
and $0.2 million related to one-time costs. At October 31, 2001 the remaining
liability totaled $1.2 million.

Of the $10.3 million associated with restructuring and reorganization
activities, $0.5 million of which was recognized during the third quarter, $7.9
million related to office closure costs, $1.5 million related to employee
termination costs and $0.9 million related to one-time reorganization
activities. Office closure costs included losses on operating leases and the
write-off of leasehold improvements and equipment. Employee termination costs
associated with staff reductions mostly in the United States consisted of wage
continuation, advance notice pay and medical benefits.

During the nine months ended October 31, 2001, 130 employee positions were
terminated, most of which were held by RedSpark employees, as a result of the
dissolution of RedSpark.

The following table sets forth the restructuring and reorganization
activities, including RedSpark wind-down costs, that occurred during the
quarter ended October 31, 2001:

Balance at Balance at
July 31, Charges October 31,
2001 Additions Utilized Reversals 2001
---------- --------- -------- --------- -----------
(In thousands)

Office closure costs...... $7,981 $2,543 $ (18) $ -- $10,506
Employee termination costs 708 2,554 (1,529) -- 1,733
Losses on asset disposals. -- 1,292 (1,292) -- --
One-time costs............ 167 221 -- -- 388
------ ------ ------- ---- -------
Total.................. $8,856 $6,610 $(2,839) $ -- $12,627
====== ====== ======= ==== =======

In addition to the nonrecurring charges described above, Autodesk recorded a
$2.5 million liability during the third quarter for the closure of Buzzsaw's
headquarters. This liability, which consisted primarily of losses on the
underlying operating lease was recorded as part of the Buzzsaw purchase
consideration allocation.

During the first nine months of fiscal 2001, Autodesk reversed $1.2 million
related to one-time accruals ($1.0 million related to restructuring)
established in a prior year.

9. Segments

Autodesk's operating results have been aggregated into two reportable
segments: the Discreet Segment and the Design Solutions Segment.

AUTODESK, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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.

The Design Solutions Segment derives revenues from the sale of design
software products for professionals, occasional users or consumers who design,
draft and diagram, and from the sale of mapping and geographic information
systems technology to public and private users. The Design Solutions Segment
consists of the following business divisions, all of which have industry
specific focuses: Design Platforms Group; Manufacturing; Building Industry
Division; Location Services; and Geographic Information Services.

Autodesk evaluates the performance of each segment on the basis of income
from operations before income taxes. Autodesk currently does not separately
accumulate and report asset information by segment. Information concerning the
operations of the reportable segments is as follows:

Three months ended Nine months ended
October 31, October 31,
------------------ --------------------
2001 2000 2001 2000
-------- -------- --------- ---------
(In thousands)

Net revenues:
Design Solutions............. $179,607 $178,615 $ 567,879 $ 545,950
Discreet..................... 36,750 50,562 125,578 147,327
-------- -------- --------- ---------
$216,357 $229,177 $ 693,457 $ 693,277
======== ======== ========= =========
Income (loss) from operations:
Design Solutions............. $109,880 $112,472 $ 370,628 $ 375,911
Discreet..................... (2,446) 8,004 6,047 18,410
Unallocated amounts(1)....... (94,602) (90,956) (307,854) (292,818)
-------- -------- --------- ---------
$ 12,832 $ 29,520 $ 68,821 $ 101,503
======== ======== ========= =========

- --------
(1) Unallocated amounts are attributed primarily to other geographic costs and
expenses that are managed outside the reportable segments.

10. Stock Repurchase Program

During the nine months ended October 31, 2001, Autodesk repurchased and
retired 2.4 million shares of its common stock, of which 349,000 shares were
repurchased and retired during the third quarter, at an average repurchase
price of $35.30 per share. As a result of the stock repurchase activity during
the past nine months, common stock and additional paid-in capital and retained
earnings were reduced by $52.8 million and $34.5 million, respectively.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The discussion 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 our
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 involving future trends or
uncertainties, constitute forward-looking statements. These forward-looking
statements are subject to business and economic risks, and our actual results
could differ materially from those set forth in the forward-looking statements
as a result of the factors set forth below, including "Risk Factors Which May
Impact Future Operating Results" as well as factors set forth in our fiscal
2001 Annual Report on Form 10-K.

Results of Operations

Three Months Ended October 31, 2001 and 2000

Net revenues. Our net revenues for the third quarter of fiscal 2002 were
$216.4 million, as compared to $229.2 million for the third quarter of the
prior fiscal year. Net revenues decreased 9 percent in the Americas' and 5
percent in Asia/Pacific, while Europe's net revenues remained constant. Net
revenues for the Design Solutions Segment remained relatively constant compared
to the third quarter in the prior fiscal year. Sales of AutoCAD and AutoCAD
upgrades, which were reflected in the net revenues for the Design Solutions
Segment, accounted for approximately 29 percent of our consolidated net
revenues in the third quarter of fiscal 2002 and 32 percent of our consolidated
net revenues in the same period last year. Net revenues for the Discreet
Segment decreased to $36.8 million, a decline of 27 percent as compared to the
third quarter in the prior fiscal year.

The stronger value of the US dollar, relative to international currencies
and as compared to the third quarter of last year, had a negative impact on net
revenues. Had the rates from the prior year been in effect in the third quarter
of fiscal 2002, translated international revenue billed in local currencies
would have been $3.5 million higher. Most of the unfavorable exchange rate
differences were in Asia/Pacific currencies. If exchange rates move unfavorably
in the future, they will have a negative impact on net revenues. International
sales, including exports from the U.S., accounted for approximately 64 percent
of our net revenues in the third quarter of both fiscal 2002 and fiscal 2001.

Product returns, consisting principally of stock rotation, are recorded as a
reduction of net revenues. Product returns as a percentage of revenues have
historically ranged from two to six percent quarterly. 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. Cost of revenues as a percentage of net revenues remained
constant at 17 percent for the third quarter of fiscal 2002 and fiscal 2001.
Slightly lower material costs and software amortization costs were offset by
higher royalty expense. Cost of revenues as a percentage of net revenues will
continue to be impacted by the mix of product sales, software amortization
costs, royalty rates for licensed technology embedded in our products, and the
geographic distribution of sales.

Marketing and sales. Marketing and sales expenses were 37 percent of net
revenues in the third quarter of fiscal 2002, as compared to 35 percent in the
third quarter of fiscal 2001. This difference was primarily due to higher
employee-related expenses as we increase our focus on direct sales to major
accounts offset by reduced discretionary spending. We expect to continue to
make significant investments in marketing and sales, both in absolute dollars
and as a percentage of net revenues.

Research and development. Research and development expenses were $39.6
million in the third quarter of fiscal 2002 as compared to $42.7 million in the
third quarter of the prior year. The difference was primarily due

to efforts to reduce discretionary spending and lower outside consultant fees.
We expect that research and development spending will continue to be
significant as we continue to support product development efforts by our market
groups.

General and administrative. General and administrative expenses were 15
percent of net revenues in the third quarter of fiscal 2002, as compared to 14
percent in the third quarter of fiscal 2001. Higher employee-related costs were
offset by lower professional fees, depreciation costs, and reduced
discretionary spending. We expect that general and administrative expenses, as
a percentage of net revenues, will remain consistent with levels recently
experienced.

Amortization of goodwill and purchased intangibles. Amortization of goodwill
and purchased intangibles was $5.2 million in the third quarter of fiscal 2002
as compared to $5.9 million in the same period last year. This decrease was due
to some intangibles becoming fully amortized.

Nonrecurring charges (credits). Nonrecurring charges for the third quarter
of fiscal 2002 were comprised of $3.2 million related to acquisition-related
charges resulting from our purchase of the software division of Media 100, $3.6
million related to the wind-down and dissolution of RedSpark, and the addition
of $0.5 million of restructuring and reorganization costs in connection with
our formal plan to reduce operating expense levels. We anticipate additional
restructuring and reorganization charges in future periods. For additional
information regarding nonrecurring charges see Note 8. Nonrecurring Charges, in
the Notes to Condensed Consolidated Financial Statements.

Interest and other income. Interest and other income, net was $4.3 million
in the third quarter of fiscal 2002 as compared to $6.4 million in the
corresponding period last year. The decrease was primarily related to
significantly lower interest rates on cash and investment balances.

Gain on disposal of affiliate. During the third quarter of fiscal 2002 we
recognized a one-time non-cash gain of $9.5 million related to the dissolution
of RedSpark. We have been consolidating RedSpark's results from operations
since RedSpark was formed in April 2000. The gain, which resulted from the
reversal of the minority interest liability balance, represents the reversal of
cumulative losses recognized in excess of the amount that we originally
invested.

Provision for income taxes. Our effective income tax rate, excluding the
non-taxable gain on the dissolution of RedSpark (as discussed above), was 30
percent for the third quarter of fiscal 2002 and 32 percent for the third
quarter of fiscal 2001. The lower effective tax rate is primarily due to the
impact associated with our foreign earnings, which are taxed at rates different
from the federal statutory rate, and non-deductible goodwill amortization. The
effective tax rate for both periods is less than the federal statutory rate of
35 percent due to the amount of benefits associated with our foreign earnings,
research credits and tax-exempt interest, partially offset by non-deductible
goodwill amortization.

Equity in net loss of affiliate. In August 2001, we acquired the remaining
60% of Buzzsaw for $15 million in cash plus the assumption of liabilities.
Consequently, from the date of acquisition Buzzsaw's on-going revenues and
costs and expenses are included in each of the respective line items in the
consolidated statements of operations.

Through the first quarter of fiscal 2002, we recognized net losses up to our
remaining equity investment balance in Buzzsaw. Consequently, no additional
losses were recognized subsequent to the first quarter of fiscal 2002. We
recognized $5.9 million of equity in net losses during the third quarter of
last year.

Nine Months Ended October 31, 2001 and 2000

Net revenues. Our net revenues for the nine months ended October 31, 2001
were $693.5 million, as compared to $693.3 million for the same period of the
prior fiscal year. Net revenues in the Americas' remained

relatively constant, while the 7 percent increase in Asia/Pacific's net
revenues was partially offset by a decrease of 3 percent in Europe's net
revenues. Net revenues for the Design Solutions Segment increased by 4 percent
as compared to the first nine months of the prior fiscal year. Sales of AutoCAD
and AutoCAD upgrades, which were reflected in the net revenues for the Design
Solutions Segment, accounted for approximately 31 percent of our consolidated
net revenues in the first nine months of fiscal 2002 and 32 percent of our
consolidated net revenues in the first nine months of fiscal 2001. Net revenues
for the Discreet Segment decreased to $125.6 million, a decline of 15 percent
as compared to the first nine months of the prior fiscal year.

The stronger value of the US dollar, relative to international currencies
and as compared to the first nine months of the prior fiscal year, had a
negative impact on net revenues. Had the rates from the prior year been in
effect during the first nine months of fiscal 2002, translated international
revenue billed in local currencies would have been $21.5 million higher. If
exchange rates move unfavorably in the future, they will have a negative impact
on net revenues.

Product returns, consisting principally of stock rotation, are recorded as a
reduction of revenues and represented approximately 5 percent of consolidated
revenues during the nine months ended October 31, 2001 as compared to 3 percent
during the same period last year. 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. Cost of revenues as a percentage of net revenues remained
constant at 16 percent for the first nine months of fiscal 2002 and fiscal
2001. Lower material costs, as a result of product mix, and lower software
amortization costs were offset by higher royalty expenses. Cost of revenues as
a percentage of net revenues will continue to be impacted by the mix of product
sales, software amortization costs, royalty rates for licensed technology
embedded in our products, and the geographic distribution of sales.

Marketing and sales. Marketing and sales expenses were 37 percent of net
revenues in the first nine months of fiscal 2002, as compared to 34 percent in
the first nine months of fiscal 2001. This difference was primarily due to
higher employee-related expenses as we increase our focus on direct sales to
major accounts. We expect to continue to make significant investments in
marketing and sales, both in absolute dollars and as a percentage of net
revenues.

Research and development. Research and development expenses were $129.4
million in the first nine months of fiscal 2002 as compared to $125.2 million
in the first nine months of fiscal 2001. The difference was primarily due to
higher employee related costs, efforts associated with our location services
initiatives and research and development costs incurred by RedSpark, prior to
its dissolution during October 2001. We expect that research and development
spending will continue to be significant as we continue to support product
development efforts by our market groups.

General and administrative. General and administrative expenses as a
percentage of net revenues remained constant at 14 percent for the first nine
months of fiscal 2002 and 2001. Higher employee-related costs were offset by
lower professional fees and depreciation costs. We expect that general and
administrative expenses, as a percentage of net revenues, will remain
consistent with levels recently experienced.

Amortization of goodwill and purchased intangibles. Amortization of goodwill
and purchased intangibles decreased to $15.7 million in the first nine months
of fiscal 2002 from $20.9 million in the same period last year due to some
intangibles becoming fully amortized.

Nonrecurring charges (credits). During the first nine months of fiscal 2002,
we recognized $17.1 million of nonrecurring charges. These charges resulted
from restructuring and reorganization activities ($10.3 million), the
acquisition of the software division of Media 100 ($3.2 million) and wind-down
costs associated with the

dissolution of RedSpark ($3.6 million). As a result of the restructuring we
expect to realize quarterly savings of $2.4 million, of which $1.4 million per
quarter will be realized immediately.

These total savings are expected to last for the next several quarters and
will be reflected in each on-going cost and expense line item in the
consolidated statements of operations. See Note 8 for further discussion.

During the first nine months of fiscal 2001, we reversed $1.2 million
related to one-time accruals established in fiscal 2000. Of the $1.2 million,
$1.0 million related to restructuring accruals established in fiscal 2000. The
accruals were settled for less than originally estimated.

Interest and other income. Interest and other income, net was $17.3 million
in the first nine months of fiscal 2002 as compared to $13.6 million in the
same period last year. The increase was primarily due to higher investment
income, mostly due to realized gains from sales of marketable securities, and
one-time transactions.

Provision for income taxes. Our effective income tax rate, excluding the
non-taxable gain on the dissolution of RedSpark (as discussed above), was 30
percent for the first nine months of fiscal 2002 and 32 percent for the first
nine months of fiscal 2001. The lower effective tax rate is primarily due to
the impact associated with our foreign earnings, which are taxed at rates
different from the federal statutory rate, and non-deductible goodwill
amortization. The effective tax rate for both periods is less than the federal
statutory rate of 35 percent due to the amount of benefits associated with our
foreign earnings, research credits and tax-exempt interest, partially offset by
non-deductible goodwill amortization.

Equity in net loss of affiliate. We recognized $1.2 million of equity in net
losses during the first nine months of fiscal 2002 and $13.5 million during the
same period last year. These amounts are related to our former investment in
Buzzsaw.

Liquidity and Capital Resources

Cash, cash equivalents, and marketable securities totaled $427.6 million at
October 31, 2001, compared to $422.5 million at January 31, 2001. The primary
uses of cash during the first nine months of fiscal 2002 were: the repurchase
of 2.4 million shares of our common stock for $87.3 million, the acquisition of
businesses for $34.3 million, capital and other expenditures of $36.7 million,
and dividend payments totaling $9.8 million. The primary sources of cash were
cash provided by operating activities of $129.5 million and stock issuances
resulting from our employee stock plans of $53.6 million.

The Board of Directors has approved plans to repurchase up to 22.0 million
shares of our common stock. Of these 22.0 million shares, 14.5 million have
been repurchased as of October 31, 2001. The primary purpose of the stock
repurchase programs is to help offset the dilution to earnings per share caused
by the issuance of stock under our employee stock plans.

We have a U.S. line of credit permitting short-term, unsecured borrowings of
up to $75.0 million, which may be used from time to time for working capital or
other business needs. At October 31, 2001, there were no borrowings outstanding
under this agreement, which expires in January 2002. Management intends to
maintain adequate credit lines to carry out its business.

Principal commitments at October 31, 2001 consisted of obligations under
operating leases for facilities and some computer hardware.

We believe that our existing cash, cash equivalents, marketable securities,
available line of credit, and cash generated from operations will be sufficient
to satisfy our currently anticipated short-term and longer-term cash
requirements. Longer-term cash requirements, other than normal operating
expenses, are anticipated for the development of new software products and
incremental product offerings resulting from the enhancement of existing
products; financing anticipated growth; dividend payments; the share repurchase
programs; and the acquisition of businesses, software products or technologies
complementary to our business.

Our international operations are subject to currency fluctuations. To
minimize the impact of these fluctuations, we use foreign currency option
contracts to hedge our exposure on anticipated transactions and forward
contracts to 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 three months ended October 31, 2001 were the Euro, British
pound, and Japanese yen. We monitor our foreign exchange exposures to ensure
the overall effectiveness of our foreign currency hedge positions.

Risk Factors Which May Impact Future Operating Results

We operate in a rapidly changing environment that involves a number of
risks, many of which are beyond our 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 may be adversely impacted. In that case, the
trading price of our common stock could decline, and you could lose all or part
of your investment.

Our operating results fluctuate within each quarter and from quarter to quarter
making our future revenues and operating results difficult to predict.

Our quarterly operating results have fluctuated in the past and are likely
to do so in the future. These fluctuations could cause our stock price to
significantly fluctuate or experience declines. Some of the factors that could
cause our operating results to fluctuate include, among other things the timing
of the introduction of new products by us or our competitors, changes in
marketing or operating expenses, changes in product pricing or product mix,
platform changes, delays in product releases, competitive factors, distribution
channel management, changes in compensation practices, the timing of systems
sales and general economic conditions.

We have also experienced fluctuations in operating results in interim
periods in certain geographic regions due to seasonality or regional economic
conditions. In particular, our operating results in Europe during the third
quarter are usually impacted by a slow summer period, and the Asia Pacific
operations typically experience seasonal slowing in the third and fourth
quarters.

Additionally, our operating expenses are based in part on our 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 our business. Further, gross margins may be
adversely affected if our sales of low-end CAD products and AutoCAD upgrades,
which historically have had lower margins, grow at a faster rate than sales of
our higher-margin products.

Because we derive a substantial portion of our net revenues from a limited
number of products, if these products are not successful, our net revenues will
be adversely affected.

We derive a substantial portion of our net revenues from sales of AutoCAD
software, AutoCAD upgrades, and products that are interoperable with AutoCAD.
As such, any factor adversely affecting sales of AutoCAD and AutoCAD upgrades,
including product life cycle, market acceptance, product performance and
reliability,

reputation, price competition and the availability of third-party applications,
would likely harm our operating results.

Existing and increased competition in the design software market may reduce our
net revenues, profits and market share.

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. Since customers
increasingly rely on the Internet, new platforms and technologies can be
expected to be developed in the design industries. The design software market
in particular is characterized by vigorous competition in each of the vertical
markets in which we compete, both by entry of competitors with innovative
technologies and by consolidation of companies with complementary products and
technologies. In addition, the availability of third-party application software
is a competitive factor within the CAD market. 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 net
revenues and profit margins and loss of market share, any of which could harm
our business. Furthermore, some of our competitors have greater financial,
technical, sales and marketing and other resources.

We believe that our future results depend largely upon our ability to offer
new products, and to continue to provide existing product offerings, that
compete favorably with respect to reliability, performance, ease of use, range
of useful features, continuing product enhancements, reputation, price and
training.

Our efforts to develop and introduce new products expose us to risks such as
costs related to product defects, large expenditures that may not result in
additional net revenues and dependence on third party developers.

Rapid technological change as well as changes in customer requirements and
preferences characterize the software industry. The software products we offer
are internally complex, and despite extensive testing and quality control, may
contain errors or defects. These defects or errors could result in corrective
releases to our software products, damage to our reputation, loss of revenues,
an increase in product returns or lack of market acceptance of our products,
any of which could harm our business.

With the prevalence of new Internet technologies and the demand for
increased customer connectivity, new platforms and technologies can be expected
to be developed in the design industries. We are devoting significant resources
to the development of such technologies as well as transitioning to new
business models, requiring a considerable investment of technical and financial
resources. Such investments may not result in sufficient revenue generation to
justify their costs, or competitors may introduce new products and services
that will achieve acceptance among our current customers, adversely affecting
our competitive position.

Independent firms and contractors perform some of our product development
activities, while other technologies are licensed from third parties. We
generally either own or license the software developed by third parties.
Because talented development personnel are in high demand, independent
developers, including those who currently develop products for us, may not be
able to provide development support to us in the future. Similarly, we may not
be able to obtain and renew license agreements on favorable terms, if at all,
and any failure to do so could harm our business.

Our business strategy has historically depended in part on our relationships
with third-party developers, who provide products that expand the functionality
of our design software. Some developers may elect to support other products or
may experience disruption in product development and delivery cycles. In
particular markets, this disruption could negatively impact these third-party
developers and end users, which could harm our business.

Our international operations expose us to significant regulatory, intellectual
property, collections, exchange fluctuations and other risks, which could
adversely impact our future net revenues.

We anticipate that international operations will continue to account for a
significant portion of our consolidated net revenues. Risks inherent in our
international operations 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 we do business.

Our risk management strategy uses derivative financial instruments in the
form of foreign currency option contracts and forward contracts for the purpose
of hedging foreign currency market exposures, which exist as a part of our
ongoing business operations. Our international results may also be impacted by
general economic and political conditions in these foreign markets. These and
other factors may adversely impact our future international operations and
consequently our business as a whole.

If we do not maintain our relationship with the members of our distribution
channel, our ability to generate net revenues will be adversely affected.

We sell our software products primarily to distributors and value-added
resellers, or VARs. Our ability to effectively distribute our products depends
in part upon the financial and business condition of our VAR network. Although
we have not recently experienced any material problems with the financial
viability of our VAR network, computer software dealers and distributors are
typically not highly capitalized, 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, from increased
focus on direct sales to major accounts or from two-tiered distribution may
impact our VAR network in the future. While no single customer accounted for
more than 10 percent of our consolidated net revenues in fiscal 2001, the loss
of or a significant reduction in business with any one of our major
international distributors or large U.S. resellers could harm our business.

Product returns by VARs could exceed our estimates and harm our net revenues.

With the exception of some distributors, agreements with our VARs do not
contain specific product-return privileges. However, we permit our VARs to
return product in certain instances, generally during periods of product
transition and during update cycles. We anticipate that product returns in
future periods will continue to be impacted by product update cycles, new
product releases and software quality.

We establish reserves, including reserves for stock balancing and product
rotation. These reserves are 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 we maintain strict measures to monitor
channel inventories and to provide appropriate reserves, actual product returns
may differ from our reserve estimates, and such differences could harm our
business.

If we are not able to adequately protect our proprietary rights, our business
could be harmed.

We rely on a combination of patents, copyright and trademark laws, trade
secrets, confidentiality procedures and contractual provisions to protect our
proprietary rights. Despite such efforts to protect our proprietary rights,
unauthorized parties from time to time have copied aspects of our software
products or have obtained and used information that we regard as proprietary.
Policing unauthorized use of our software products is time-consuming and
costly. While we have recovered some revenues resulting from the unauthorized
use of our software products, we are unable to measure the extent to which
piracy of our software products exists, and software piracy can be expected to
be a persistent problem. Furthermore, our means of protecting our proprietary
rights may not be adequate, and our competitors may independently develop
similar technology.

We may face intellectual property infringement claims that could be costly to
defend and result in our loss of significant rights.

We expect that software product developers will be increasingly subject to
infringement claims as the number of products and competitors in our industry
segments grows and as the functionality of products in different industry
segments overlaps. Infringement, invalidity claims, or misappropriation claims
may be asserted against us, and any such assertions could harm 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 us 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 would likely harm our business.

We rely on third party technologies and if we are unable to use or integrate
these technologies, our product and service development may be delayed.

We rely on certain software that we license from third parties, including
software that is integrated with internally developed software and used in our
products to perform key functions. These 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 harm our business.

In addition, for certain of our on-line collaboration applications, we rely
on third party hardware and services. Financial difficulties or even failure of
these third parties may impact our ability to deliver such on-line
collaboration applications and, as a result, may adversely impact our business.

The loss of key personnel or the inability to attract and retain additional
personnel, particularly in Northern California where we are headquartered,
could harm our business.

Our continued growth and success depends significantly on the continued
service of highly skilled employees. Our ability to attract and retain
employees is dependent on a number of factors, including our continued ability
to grant stock incentive awards. The loss of key employees or inability to
recruit new employees would negatively impact our business. In addition, we may
experience increased compensation costs to attract and retain skilled personnel.

The transition to a single European currency could negatively impact our
international operations.

As a result of the introduction of the Euro and during the transition
period, which will end on January 1, 2002, we will continue to modify the
internal systems that will be affected by this conversion. We may not be able
to complete such modifications to comply with Euro requirements, which could
harm our business. We are currently evaluating the impact of the introduction
of the Euro on our foreign exchange activities, functional currency
designations, and pricing strategies in the new economic environment. In
addition, we face risks to the extent that banks and vendors upon whom we rely
and their suppliers are unable to make appropriate modifications to support our
operations with respect to Euro transactions.

Our business could suffer as a result of risks associated with strategic
acquisitions and investments.

We periodically acquire or invest in businesses, software products and
technologies that are complementary to our 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. We may not be successful in overcoming
such risks and such investments and acquisitions may negatively

impact our business. In addition, such investments and acquisitions may
contribute to potential fluctuations in quarterly results of operations. 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. These costs or charges could negatively impact
results of operations for a given period or cause lack of a consistent increase
quarter to quarter in our operating results and financial condition.

Fluctuations in the price of our common stock due to net revenues or earnings
shortfalls or the volatility of the market generally may cause the market price
of our stock to decline, which could harm our business.

The market price for our common stock has experienced significant
fluctuations and may continue to fluctuate significantly. The market price for
our common stock may be affected by a number of factors, including the
following: net revenues or earnings shortfalls and changes in estimates or
recommendations by securities analysts; the announcement of new products or
product enhancements by us or our competitors; quarterly variations in our or
our competitors' results of operations; developments in our industry; general
market conditions, technology sector fluctuations and other factors, including
factors unrelated to our operating performance or the operating performance of
our competitors.

General economic conditions may reduce our net revenues and harm our business.

As our business has grown, we have become increasingly subject to the risks
arising from adverse changes in domestic and global economic conditions.
Because of the recent economic slowdown in the U.S., many industries are
delaying or reducing technology purchases. The impact of this slowdown on us is
difficult to predict, but it may result in reductions in sales of our products,
longer sales cycles and increased price competition. As a result, if the
current economic slowdown continues or worsens, we may fall short of our
revenue expectations for the final quarter of fiscal 2002 or for the entire
year. These conditions would negatively affect our business and results of
operations. In addition, weakness in the end-user market could negatively
affect the cash flow of our distributors and VARs who could, in turn, delay
paying their obligations to us. This would increase our credit risk exposure,
which could harm our profitability and financial condition.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have no material changes to the disclosure on this matter made in our
report on Form 10-K for the fiscal year ended January 31, 2001.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in various legal proceedings arising from the normal course
of business activities. In our opinion, resolution of these matters is not
expected to have a material adverse impact on our consolidated results of
operations or our financial position. However, depending on the amount and
timing, an unfavorable resolution of a matter could materially affect our
future results of operations or cash flows in a particular period.

In 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 Securities Exchange Act of 1934. The United States District Court for
the Northern District of California consolidated these complaints into one
lawsuit in August 2000. On November 21, 2001 the Court granted our motion to
dismiss the lawsuit without leave to amend.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

Exhibits

No exhibits were filed as part of this Form 10-Q.

Reports on Form 8-K

Notice of Autodesk's acquisition of Buzzsaw.com, Inc., effective August 20,
2001, along with required financial statement information as filed on October
15, 2001 under Items 2 and 7.

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 30, 2001

AUTODESK, INC.
(Registrant)

/s/ CAROL A. BARTZ
_____________________________________
Carol A. Bartz
Chairman, Chief Executive Officer and
President

/s/ STEVE CAKEBREAD
_____________________________________
Steve Cakebread
Senior Vice President and Chief
Financial
Officer (Principal Financial Officer
and Principal Accounting Officer)