10-QPeriod: Q2 FY2003

Autodesk, Inc. Quarterly Report for Q2 Ended Jul 31, 2002

Filed September 16, 2002For Securities:ADSK

Summary

Autodesk, Inc. reported its financial results for the quarter and six months ended July 31, 2002. Net revenues for the second quarter of fiscal 2003 decreased to $211.4 million from $231.4 million in the prior year's comparable period, reflecting weak economic conditions in the Americas and Asia/Pacific regions. While the Design Solutions segment saw a slight increase in manufacturing product sales, it was outpaced by declines in other areas, including Platform Technology. The Discreet Segment also experienced a decline in net revenues. Despite the revenue dip, the company saw a significant reduction in expenses due to the discontinuation of goodwill amortization under new accounting rules (SFAS 142). Restructuring charges also impacted the results. Autodesk's financial position remains solid with $406.7 million in cash and marketable securities, though cash flow from operations was lower year-over-year. The company continues to repurchase shares and pay dividends, and believes it has sufficient liquidity for its anticipated needs.

Key Highlights

  • 1Net revenues declined 8.6% year-over-year for the quarter ended July 31, 2002, to $211.4 million, primarily due to economic weakness in the Americas and Asia/Pacific.
  • 2Income from operations decreased significantly to $10.4 million from $19.4 million in the prior year's quarter, impacted by revenue declines and an increase in the cost of revenues as a percentage of net revenue.
  • 3The adoption of SFAS 142 led to a substantial decrease in amortization of goodwill and purchased intangibles, falling to $0.2 million for the six-month period from $10.5 million in the prior year.
  • 4Restructuring charges of $5.3 million were recognized in the first six months of fiscal 2003, related to office closures and employee terminations from a prior year's plan, with an additional $3.8 million added due to worsening real estate market conditions.
  • 5Net cash provided by operating activities decreased to $37.2 million for the six-month period, down from $96.3 million in the prior year, impacted by changes in operating assets and liabilities.
  • 6The company repurchased 2.4 million shares of common stock for $36.8 million during the six months ended July 31, 2002, and paid dividends of $6.8 million.
  • 7International sales accounted for 62% of net revenues in the second quarter, up from 57% in the prior year, indicating continued reliance on global markets.

Frequently Asked Questions

The primary driver for the decline in net revenues was weak economic conditions in the Americas and Asia/Pacific regions, which led to a decrease in sales, particularly in the Discreet Segment and certain divisions within the Design Solutions Segment.

The adoption of SFAS 142, which requires goodwill to be tested for impairment rather than amortized, significantly reduced expenses related to 'Amortization of goodwill and purchased intangibles.' This contributed to a lower effective tax rate and improved reported net income compared to what would have been reported under previous accounting rules.

Autodesk anticipates continued revenue challenges due to ongoing economic weakness in key regions. They expect marketing and sales expenses to remain significant, and research and development spending will continue to be substantial. General and administrative expenses as a percentage of net revenues are expected to remain consistent with recent levels. The company also faces potential for additional restructuring charges if real estate market conditions worsen.

Autodesk's principal sources of liquidity are cash and marketable securities, which totaled $406.7 million at July 31, 2002. While cash flow from operations decreased year-over-year, the company is also utilizing proceeds from marketable securities and stock issuances. They have a $75 million line of credit and believe their current resources are sufficient for anticipated needs, including acquisitions, product development, and share repurchases.