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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 JULY 31, 1995
OR
__ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
COMMISSION FILE NUMBER: 0-14338
AUTODESK, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-2819853
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
111 MC INNIS PARKWAY
SAN RAFAEL, CALIFORNIA 94903
(Address of principal executive offices)
TELEPHONE NUMBER (415) 507-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
As of September 12, 1995, there were 46,985,000 shares of the Registrant's
Common Stock outstanding.
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AUTODESK, INC.
INDEX
PART I. FINANCIAL INFORMATION
Page No.
--------
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Statement of Income
Three and six months ended July 31, 1995 and 1994...... 3
Condensed Consolidated Balance Sheet
July 31, 1995 and January 31, 1995..................... 4
Condensed Consolidated Statement of Cash Flows
Six months ended July 31, 1995 and 1994................ 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.... 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K....................... 11
SIGNATURES............................................. 12
2
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AUTODESK, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended Six months ended
July 31, July 31,
------------------ -------------------
1995 1994 1995 1994
-------- -------- -------- --------
Revenues $143,947 $112,832 $285,724 $222,382
Direct commissions 3,261 2,573 6,380 5,545
-------- -------- -------- --------
Net revenues 140,686 110,259 279,344 216,837
Costs and expenses:
Cost of revenues 17,362 15,136 34,647 30,235
Marketing and sales 45,895 37,575 90,898 74,135
Research and development 19,496 16,862 38,662 32,445
General and administrative 19,036 16,288 37,832 31,284
-------- -------- -------- --------
101,789 85,861 202,039 168,099
-------- -------- -------- --------
Income from operations 38,897 24,398 77,305 48,738
Interest and other income, net 2,551 1,723 5,051 3,282
-------- -------- -------- --------
Income before income taxes 41,448 26,121 82,356 52,020
Provision for income taxes 15,149 9,534 30,080 18,987
-------- -------- -------- --------
Net income $ 26,299 $ 16,587 $ 52,276 $ 33,033
======== ======== ======== ========
Net income per share $.52 $.34 $1.03 $.67
======== ======== ======== ========
Shares used in computing
net income per share 50,460 49,000 50,535 49,620
======== ======== ======== ========
See accompanying notes.
3
AUTODESK, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
(In thousands)
July 31, 1995 January 31, 1995
-------------- -----------------
(Unaudited) (Audited)
Current assets:
Cash and cash equivalents $177,164 $195,038
Marketable securities 45,104 45,316
Accounts receivable, net 104,887 86,340
Inventories 8,416 5,769
Deferred income taxes 26,063 29,915
Prepaid expenses and other current assets 12,647 10,707
-------- --------
Total current assets 374,281 373,085
-------- --------
Marketable securities, including a restricted
balance of $28,000 at July 31, 1995 64,476 15,019
Computer equipment, furniture and leasehold
improvements, at cost:
Computer equipment and furniture 102,332 91,557
Leasehold improvements 21,264 20,048
Accumulated depreciation (73,969) (65,090)
-------- --------
Net computer equipment, furniture and leasehold improvements 49,627 46,515
Capitalized software 20,287 26,406
Other assets 20,648 21,051
-------- --------
$529,319 $482,076
======== ========
See accompanying notes.
4
AUTODESK, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(In thousands)
July 31, 1995 January 31, 1995
-------------- -----------------
(Unaudited) (Audited)
Current liabilities:
Accounts payable $ 24,407 $ 21,535
Accrued compensation 19,549 18,165
Accrued income taxes 42,452 53,202
Litigation accrual - 25,800
Other accrued liabilities 43,523 36,288
-------- --------
Total current liabilities 129,931 154,990
-------- --------
Deferred income taxes 1,289 2,625
Litigation accrual 26,720 -
Other liabilities 2,013 977
Stockholders' equity:
Common stock 133,642 100,870
Retained earnings 215,855 215,064
Foreign currency translation adjustment 19,869 7,550
-------- --------
Total stockholders' equity 369,366 323,484
-------- --------
$529,319 $482,076
======== ========
See accompanying notes.
5
AUTODESK, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Six months ended
July 31,
---------------------
1995 1994
-------- -------
Operating activities
Net income $ 52,276 $ 33,033
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 13,589 12,777
Changes in operating assets and liabilities (18,957) (6,324)
-------- --------
Net cash provided by operating activities 46,908 39,486
-------- --------
Investing activities
Sales (purchases) of marketable securities, net (49,245) 40,560
Purchases of computer equipment, furniture and leasehold improvements (9,570) (8,934)
Capitalization of software costs and purchases of software technologies (105) (2,669)
Other 13,562 414
-------- --------
Net cash provided (used) by investing activities (45,358) 29,371
-------- --------
Financing activities
Proceeds from issuance of common shares 35,090 27,409
Repurchase of common shares (48,836) (52,223)
Dividends paid (5,678) (5,664)
-------- --------
Net cash used in financing activities (19,424) (30,478)
-------- --------
Net increase (decrease) in cash and cash equivalents (17,874) 38,379
Cash and cash equivalents at beginning of year 195,038 85,604
-------- --------
Cash and cash equivalents at end of quarter $177,164 $123,983
======== ========
See accompanying notes.
6
AUTODESK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements at July 31, 1995 and for the
three- and six-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 Stockholders
incorporated by reference in the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 1995. The results of operations for the three
and six months ended July 31, 1995 are not necessarily indicative of the
results for the entire fiscal year ending January 31, 1996.
2. In connection with a $25.5 million judgment against the Company in December
1994 on a claim of trade-secret misappropriation brought by Vermont
Microsystems, Inc., the Company was required by statute to post collateral
approximating the amount of the judgment plus accrued interest. The Company
has filed an appeal to this judgment. At July 31, 1995, the Company's long-
term marketable securities included a balance of $28.0 million which is
restricted as to its use until final adjudication of this matter. At July 31,
1995, the litigation accrual, representing the judgment and accrued interest
through the balance sheet date, has correspondingly been reclassified to
long-term liabilities.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended July 31, 1995 and 1994
-----------------------------------------
Net revenues. The Company's second quarter net revenues of $140.7 million
increased 28 percent over second quarter net revenues in the prior fiscal year.
The increase reflected sales growth in all sales geographies, including a 37
percent increase in Europe, 26 percent in Asia/Pacific and 21 percent in the
Americas. Much of the growth in consolidated net revenues resulted from strong
sales of commercial and upgrade sales of AutoCAD, the Company's flagship
product, as well increased revenues from AutoCAD LT and multimedia product
offerings. Consolidated revenues for the quarter ended July 31, 1995 derived
from AutoCAD and AutoCAD updates increased in absolute dollars from the same
period in the prior fiscal year but decreased as a percentage of consolidated
revenues due to increased revenues from multimedia products, AutoCAD LT and new
mechanical and data management product offerings. International sales, including
exports from the US, accounted for approximately 63 percent of the Company's
revenues in the second quarter of both fiscal years 1996 and 1995. The weaker
value of the dollar, relative to international currencies, favorably affected
second quarter revenues in fiscal year 1996 by approximately $6.5 million
compared to the same period in the prior fiscal year.
The Company believes that net revenues in its third fiscal quarter ending
October 31, 1995 may be negatively impacted by changes in foreign currency
exchange rates, and, to a lesser extent, a seasonal reduction in foreign
revenues. Consequently, the Company does not expect sequential revenue growth
during the quarter ending October 31, 1995. Moreover, delays in the introduction
of AutoCAD Release 13 for the Windows 95 operating system, delays in the
introduction of other new and enhanced products scheduled to be released during
fiscal year 1996, delays in product maintenance releases or failure to achieve
significant customer acceptance for these new products may have an adverse
effect on the Company's revenues and results of operations in future periods.
There can be no assurance that the Company will not experience difficulties that
could delay or prevent the successful development, introduction and marketing of
new products and product enhancements or that its new products and product
enhancements will adequately meet the requirements of the marketplace and
achieve market acceptance.
Cost of revenues. Cost of revenues as a percentage of net revenues decreased in
the second quarter of fiscal year 1996 to 12 percent from 14 percent in the
second quarter of the prior fiscal year. The improved gross margin in the
current quarter resulted from on-going cost control measures in production,
particularly in the areas of media duplication, packaging, shipping and the
delivery of products on lower-cost compact disc media (CD-ROM). During the
quarter, a substantial portion of the Company's US and European production and
distribution was performed by third parties which did not significantly impact
margins for the period. In the future, the Company expects that cost of
revenues as a percentage of net revenues may be impacted by the mix of sales of
new products, the geographic distribution of sales, sales of AutoCAD updates,
which have a lower gross margin than commercial versions of AutoCAD, and the
volume of software sold on CD-ROM media.
Marketing and sales. Marketing and sales expenses were 33 percent of net
revenues in the second quarter of fiscal year 1996 as compared to 34 percent
for the second quarter of the prior fiscal year. Actual spending increased 22
percent to support worldwide marketing efforts of new and enhanced product
introductions, including promotional activities related to AutoCAD Release 13.
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.
8
Research and development. Research and development expenses decreased from 15
percent of net revenues in the second quarter of fiscal year 1995 to 14 percent
in the second quarter of fiscal year 1996, while absolute spending increased 16
percent. The increased spending was due to the development of new and enhanced
products, costs associated with translating certain of 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 14
percent of net revenues in the second quarter of fiscal year 1996 compared to 15
percent in the same period of fiscal year 1995, while absolute spending
increased 17 percent. The increase resulted from higher employee-related costs
associated with increased operations and expenditures to support the Company's
infrastructure, partially offset by a reduction in legal expenses.
In August 1995, the Company acquired certain assets of Automated Methods, a
Republic of South Africa company engaged in the development of automated mapping
and geographic information systems. The acquisition has been accounted for
using the purchase method of accounting with the purchase price being
principally allocated to capitalized software. The results of Automated Methods
will be included in the Company's consolidated financial results from the
acquisition date. In the short term, the Company expects the operating expenses
associated with this acquisition will exceed revenues, resulting in a negative
impact of up to $0.02 per share in each of the next three fiscal quarters.
Interest and other income. Interest and other income, including foreign
currency gains of $470,000, was $2.6 million in the second quarter of fiscal
year 1996. Second quarter interest income was $2.7 million, an increase of
approximately $800,000 from the second quarter of the prior fiscal year,
resulting from higher interest rates throughout the world and from a greater
average balance of cash, cash equivalents and marketable securities. Interest
and other income in the second quarter of fiscal year 1996 also included accrued
interest expense of $460,000 related to a legal judgment against the Company
which is being appealed. (See Note 2 to the Notes to Condensed Consolidated
Financial Statements.)
Provision for income taxes. The Company's effective income tax rate was 36.5
percent in the second quarter of both fiscal year 1996 and 1995.
Six Months Ended July 31, 1995 and 1994
---------------------------------------
Net Revenues. The Company's net revenues for the six months ended July 31, 1995
were $279.3 million which represented a 29 percent increase from the same period
of the prior fiscal year. The increase resulted from revenue growth in all
sales geographies including 37 percent growth in both Europe and Asia/Pacific.
The increase primarily resulted from new and upgrade sales of AutoCAD. Revenues
for AutoCAD LT also increased, as did sales of multimedia product offerings
which posted a 63 percent increase from the same period in the prior fiscal
year. International sales accounted for approximately 64 percent of
consolidated revenues for the six months ended July 31, 1995 as compared to 62
percent for the same period of the prior fiscal year. Net revenues for the
first six months of fiscal year 1996 were favorably affected by approximately
$13.3 million due to changes in foreign exchange rates when compared to the same
period in the prior fiscal year.
Cost of revenues. Cost of revenues as a percentage of net revenues for the six
months ended July 31, 1995 was 12 percent as compared to 14 percent for the same
period of the prior fiscal year. The improved gross margin resulted from cost
control measures in production, particularly in the areas of media duplication,
packaging, shipping and the delivery of products on lower-cost compact disc
media.
9
Operating expenses. Operating expenses for the Company's marketing and sales,
research and development and general and administrative functions for the six
months ended July 31, 1995 increased approximately 21 percent to $167.4 million
as compared to $137.9 million for the same period of the prior fiscal year. For
the six months ended July 31, 1995, expenses, when expressed as a percentage of
net revenues, decreased from the same period of the prior fiscal year but
increased in absolute dollars due to increased headcount, higher spending to
support the promotion and selling of new and enhanced products and increased
spending in order to support the Company's increased operations and related
infrastructure.
Interest and other income. Interest and other income for the six months ended
July 31, 1995 was $5.1 million as compared to $3.3 million in the same period of
the prior fiscal year. Interest income was $5.6 million for the first six
months of fiscal year 1996 as compared to $3.6 million in the same period of the
prior fiscal year. The increase in interest income from the same period of the
prior fiscal year resulted from higher interest rates throughout the world and a
greater average balance of cash, cash equivalents and marketable securities.
Fiscal year 1996 interest and other income includes accrued interest expense of
$920,000 related to a legal judgment against the Company which is being
appealed.
Income taxes. The Company's effective income tax rate was 36.5 percent for the
first half of both fiscal year 1996 and 1995.
Factors Affecting Quarterly Results
-----------------------------------
The Company believes that in the future its quarterly results from operations
may reflect quarterly fluctuations resulting from factors such as order
deferrals in anticipation of new product releases or product maintenance
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 US 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.
Additionally, with a substantial portion of the Company's worldwide production
and distribution being performed by third parties, Autodesk could be adversely
impacted by any production difficulties and distribution delays experienced by
its third party vendors.
Due to the factors noted above, the Company's future earnings and stock price
may be subject to significant volatility, particularly on a quarterly basis.
Any shortfall in revenues or earnings from levels expected by securities
analysts could have an immediate and significant adverse effect on the trading
price of the Company's common stock. The Company typically receives and
fulfills a majority of its orders within the quarter, with a substantial portion
occurring in the third month of the fiscal quarter. As a result, the Company
may not learn of revenue shortfalls until late in a fiscal quarter, which could
result in an even more immediate and adverse effect on the trading price of the
Company's common stock.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and marketable securities, which consist primarily of
high-quality municipal bonds and tax-advantaged money market instruments,
totaled $286.7 million at July 31, 1995 compared to $255.4 million at January
31, 1995. The increase in cash, cash equivalents and marketable securities was
due primarily to cash generated from operations ($46.9 million) and cash
proceeds from the issuance of shares through the Company's stock option and
stock purchase programs ($35.1 million). This increase was partially offset by
cash used to purchase 1,225,500 shares of the Company's stock under an ongoing
systematic repurchase program ($48.8 million); to purchase
10
computer equipment, furniture and leasehold improvements ($9.6 million); and to
pay dividends on the Company's common stock ($5.7 million).
Longer term cash requirements, other than normal operating expenses, are
anticipated for development of new software products and enhancement of existing
products; financing anticipated growth; dividend payments; repurchases of the
Company's common stock; and the possible acquisition of software products,
technologies and businesses complementary to the Company's business. Management
believes that existing cash, cash equivalents, marketable securities, available
line of credit and anticipated cash generated from operations will be sufficient
to satisfy the Company's currently anticipated cash requirements for fiscal year
1996.
The Company's principal commitments at July 31, 1995 consisted of obligations
under operating leases for facilities.
PART II. OTHER INFORMATION
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Shareholders held on June 30, 1995, the
following individuals were elected to the Board of Directors:
Votes For Votes Withheld
---------- --------------
Carol A. Bartz 47,246,013 376,128
Mark A. Bertelsen 47,246,935 375,206
Crawford W. Beveridge 47,247,018 375,123
J. Hallam Dawson 47,247,765 374,376
Gregory P. Lutz 47,247,265 374,876
The following proposals were approved at the Company's Annual Meeting:
Affirmative Negative Votes
Votes Votes Withheld
---------- ----------- ------------
1. Amendment of the Company's 1987 Stock Option Plan, increasing the
reserved shares by 4,000,000. 22,485,627 16,286,023 8,850,491
2. Amendment of the Company's 1990 Directors' Option Plan, increasing the
reserved shares by 100,000. 22,708,790 16,378,596 8,534,755
3. Ratify the appointment of Ernst & Young LLP as independent
auditors for the fiscal year ending January 31, 1996. 41,876,880 22,822 5,722,439
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended July 31, 1995.
11
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: September 13, 1995
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)
12
EXHIBIT INDEX
Exhibit No. Description
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27 Financial Data Schedule