XNAS:ADSK Autodesk Inc Quarterly Report 10-Q Filing - 4/30/2012

Effective Date 4/30/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2012
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to            
Commission File Number: 0-14338
 
 
AUTODESK, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
94-2819853
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. employer
Identification No.)
 
 
 
111 McInnis Parkway,
San Rafael, California
 
94903
(Address of principal executive offices)
 
(Zip Code)
(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 Exchange Act 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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
x
  
Accelerated filer
 
¨
 
 
 
 
 
 
 
Non-accelerated filer
 
¨
  
Smaller reporting company
 
¨

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of May 25, 2012, registrant had outstanding approximately 229.8 million shares of common stock.
 




AUTODESK, INC. FORM 10-Q
TABLE OF CONTENTS

 
 
Page No.
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
 





PART I. FINANCIAL INFORMATION
 
ITEM 1.
FINANCIAL STATEMENTS

AUTODESK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
 
 
Three Months Ended
 April 30,
 
2012
 
2011
Net revenue:
 
 
 
License and other
$
361.0

 
$
323.0

Maintenance
227.6

 
205.3

Total net revenue
588.6

 
528.3

Cost of revenue:
 
 
 
Cost of license and other revenue
47.1

 
42.6

Cost of maintenance revenue
11.7

 
12.0

Total cost of revenue
58.8

 
54.6

Gross profit
529.8

 
473.7

Operating expenses:
 
 
 
Marketing and sales
223.2

 
201.9

Research and development
152.7

 
136.6

General and administrative
59.9

 
56.6

Total operating expenses
435.8

 
395.1

Income from operations
94.0

 
78.6

Interest and other income, net
3.5

 
5.9

Income before income taxes
97.5

 
84.5

Provision for income taxes
(18.6
)
 
(15.2
)
Net income
$
78.9

 
$
69.3

Basic net income per share
$
0.35

 
$
0.30

Diluted net income per share
$
0.34

 
$
0.29

Weighted average shares used in computing basic net income per share
228.1

 
228.2

Weighted average shares used in computing diluted net income per share
234.1

 
237.1


See accompanying Notes to Condensed Consolidated Financial Statements.


3



AUTODESK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)

 
Three Months Ended April 30,
 
2012
 
2011
Net income
$
78.9

 
$
69.3

Other comprehensive income, net of tax and reclassifications:
 
 
 
Net loss on derivative instruments
(3.4
)
 
(7.8
)
Change in net unrealized gain on available-for-sale securities,
0.9

 
0.7

Net change in cumulative foreign currency translation gain
0.3

 
12.5

Total other comprehensive income (loss)
(2.2
)
 
5.4

Total comprehensive income
$
76.7

 
$
74.7


See accompanying Notes to Condensed Consolidated Financial Statements.

4





AUTODESK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
 
 
April 30, 2012
 
January 31, 2012
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
1,074.5

 
$
1,156.9

Marketable securities
437.5

 
254.4

Accounts receivable, net
300.6

 
395.1

Deferred income taxes
38.7

 
30.1

Prepaid expenses and other current assets
60.8

 
59.4

Total current assets
1,912.1

 
1,895.9

Marketable securities
284.1

 
192.8

Computer equipment, software, furniture and leasehold improvements, net
104.0

 
104.5

Purchased technologies, net
74.8

 
84.6

Goodwill
682.9

 
682.4

Deferred income taxes, net
129.3

 
135.8

Other assets
129.8

 
131.8

 
$
3,317.0

 
$
3,227.8

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
88.9

 
$
89.3

Accrued compensation
127.8

 
183.9

Accrued income taxes
17.4

 
14.4

Deferred revenue
584.7

 
582.3

Other accrued liabilities
56.7

 
84.2

Total current liabilities
875.5

 
954.1

Deferred revenue
142.2

 
136.9

Long term income taxes payable
171.7

 
174.8

Other liabilities
82.3

 
79.1

Commitments and contingencies
 
 
 
Stockholders’ equity:
 
 
 
Preferred stock

 

Common stock and additional paid-in capital
1,496.2

 
1,365.4

Accumulated other comprehensive income
3.7

 
5.9

Retained earnings
545.4

 
511.6

Total stockholders’ equity
2,045.3

 
1,882.9

 
$
3,317.0

 
$
3,227.8


See accompanying Notes to Condensed Consolidated Financial Statements.


5



AUTODESK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
 
Three Months Ended April 30,
 
2012
 
2011
Operating activities:
 
 
 
Net income
$
78.9

 
$
69.3

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
29.2

 
24.5

Stock-based compensation expense
33.4

 
25.9

Excess tax benefits from stock-based compensation
(9.9
)
 

Changes in operating assets and liabilities, net of business combinations
7.7

 
8.7

Net cash provided by operating activities
139.3

 
128.4

Investing activities:
 
 
 
Purchases of marketable securities
(447.8
)
 
(169.7
)
Sales of marketable securities
48.8

 
34.6

Maturities of marketable securities
128.5

 
96.5

Capital expenditures
(11.5
)
 
(23.2
)
Acquisitions, net of cash acquired

 
(76.4
)
Other investing activities
(5.0
)
 
(14.5
)
Net cash used in investing activities
(287.0
)
 
(152.7
)
Financing activities:
 
 
 
Proceeds from issuance of common stock, net of issuance costs
153.0

 
111.3

Repurchases of common stock
(99.2
)
 
(68.6
)
Excess tax benefits from stock-based compensation
9.9

 

Net cash provided by financing activities
63.7

 
42.7

Effect of exchange rate changes on cash and cash equivalents
1.6

 
(2.1
)
Net increase in cash and cash equivalents
(82.4
)
 
16.3

Cash and cash equivalents at beginning of fiscal year
1,156.9

 
1,075.1

Cash and cash equivalents at end of period
$
1,074.5

 
$
1,091.4


See accompanying Notes to Condensed Consolidated Financial Statements.


6



AUTODESK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tables in millions, except share and per share data, or as otherwise noted)
 
1. Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of Autodesk, Inc. (“Autodesk” or the “Company”) as of April 30, 2012, and for the three months ended April 30, 2012, have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information along with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles (“GAAP”) for annual financial statements. In management’s opinion, Autodesk has made all adjustments (consisting of normal, recurring and non-recurring adjustments) during the quarter that were considered necessary for the fair presentation of the financial position and operating results of the Company. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. In addition, the results of operations for the three months ended April 30, 2012 are not necessarily indicative of the results for the entire fiscal year ending January 31, 2013, or for any other period. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes, together with management’s discussion and analysis of financial position and results of operations contained in Autodesk’s Annual Report on Form 10-K for the fiscal year ended January 31, 2012, filed on March 15, 2012.

2. Recently Issued Accounting Standards

With the exception of those discussed below, there have been no recent changes in accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) or adopted by the Company during the three months ended April 30, 2012, that are of significance, or potential significance, to the Company.

Accounting Standards Adopted in the Three Months Ended April 30,2012

In September 2011, the FASB issued Accounting Standard Update (“ASU”) 2011-08 regarding Accounting Standards Codification (“ASC”) Topic 350 “Intangibles – Goodwill and Other.” This ASU allows for the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, it is more likely than not that the fair value of the reporting unit is greater than its carrying value, then performing the two-step impairment test is unnecessary. Autodesk adopted ASU 2011-08 effective February 1, 2012. The adoption of this ASU did not have a material impact on Autodesk's consolidated statements of financial position, results of operations or cash flows.

In June 2011, the FASB issued ASU 2011-05 regarding ASC Topic 220 “Comprehensive Income.” This ASU eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity and requires the presentation of the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In December 2011, the FASB issued ASU 2011-12, an amendment to an existing accounting standard which defers the requirement to present components of reclassifications of other comprehensive income on the face of the income statement. Autodesk adopted ASU 2011-05 and ASU 2011-12 effective February 1, 2012. This accounting pronouncement impacted the presentation of other comprehensive income but did not impact Autodesk's consolidated financial position, results of operations or cash flow.

In May 2011, FASB issued ASU 2011-04 regarding ASC Topic 820 “Fair Value Measurement.” This ASU amends the fair value measurement guidance and includes enhanced disclosure requirements primarily around Level 3 fair value measurements based on unobservable inputs. Autodesk adopted ASU 2011-4 effective February 1, 2012. The adoption of this ASU did not have a material impact on Autodesk's consolidated statements of financial position, results of operations or cash flows.

3. Concentration of Credit Risk
    
Autodesk places its cash, cash equivalents and marketable securities in highly liquid instruments with, and in the custody of, diversified financial institutions globally with high credit ratings and limits the amounts invested with any one institution, type of security and issuer. Autodesk’s primary commercial banking relationship is with Citibank and its global affiliates (“Citibank”). Citicorp USA, Inc., an affiliate of Citibank, is one of the lead lenders and agent in the syndicate of Autodesk’s

7



$400.0 million line of credit facility. It is Autodesk’s policy to limit the amounts invested with any one institution by type of security and issuer.

Total sales to the distributor Tech Data Corporation, and its global affiliates (“Tech Data”), accounted for 22% of Autodesk’s total net revenue for the three months ended April 30, 2012, and 17% of Autodesk's total net revenue for the three months periods ended April 30, 2011. The majority of the net revenue from sales to Tech Data relates to Autodesk’s Platform Solutions and Emerging Business segment and is for sales made outside of the United States. In October 2011, Tech Data purchased certain assets of Mensch and Maschine Software (“MuM”), which has been a distributor of our products in Europe. The acquisition concentrates additional sales through Tech Data, which on a consolidated basis would have accounted for 23% of Autodesk’s total net revenue for the three months periods ended April 30, 2011, if the acquisition had taken place at the beginning of fiscal 2012. In addition, Tech Data accounted for 21% and 21% of trade accounts receivable at April 30, 2012 and January 31, 2012, respectively.

4. Financial Instruments

The following tables summarize the Company's financial instruments' amortized cost, gross unrealized gains, gross unrealized losses, and fair value by significant investment category as of April 30, 2012 and January 31, 2012:
 
 
 
 
 
April 30, 2012
 
 
 
 
Amortized Cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
 
Cash equivalents (1):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Certificates of deposit and time deposits
$
298.9

 
$

 
$

 
$
298.9

 
$
19.5

 
$
279.4

 
$

 
 
Commercial paper
256.7

 

 

 
256.7

 

 
256.7

 

 
 
U.S. government agency securities
1.0

 

 

 
1.0

 
1.0

 

 

 
 
Money market funds
185.2

 

 

 
185.2

 

 
185.2

 

 
Marketable securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term available for sale
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial paper and corporate debt securities
158.4

 

 

 
158.4

 
31.6

 
126.8

 

 
 
 
Certificates of deposit and time deposits
155.1

 

 

 
155.1

 

 
155.1

 

 
 
 
U.S. treasury securities
29.9

 

 

 
29.9

 
29.9

 

 

 
 
 
U.S. government agency securities
53.3

 

 

 
53.3

 
53.3

 

 

 
 
 
Municipal securities
5.8

 

 

 
5.8

 
5.8

 

 

 
 
 
Other
0.3

 

 

 
0.3

 
0.3

 

 

 
 
Short-term trading securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mutual funds
32.0

 
2.7

 

 
34.7

 
34.7

 

 

 
 
Long-term available for sale
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
123.4

 
1.0

 
(0.1
)
 
124.3

 
124.3

 

 

 
 
 
U.S. treasury securities
96.5

 
0.3

 

 
96.8

 
96.8

 

 

 
 
 
U.S. government agency securities
51.8

 
0.1

 

 
51.9

 
51.9

 

 

 
 
 
Municipal securities
5.8

 
0.1

 

 
5.9

 
5.9

 

 

 
 
 
Sovereign debt
1.0

 

 

 
1.0

 

 
1.0

 

 
 
 
Taxable auction-rate securities
4.2

 

 

 
4.2

 

 

 
4.2

 
Convertible debt securities (2)
20.2

 
2.0

 
(3.3
)
 
18.9

 

 

 
18.9

 
Derivative contracts (3)
12.2

 
7.7

 
(0.5
)
 
19.4

 

 
7.8

 
11.6

 
 
 
Total
$
1,491.7

 
$
13.9

 
$
(3.9
)
 
$
1,501.7

 
$
455.0

 
$
1,012.0

 
$
34.7

____________________ 
(1)
Included in “Cash and cash equivalents” in the accompanying Condensed Consolidated Balance Sheets.
(2)
Included in "Other assets" in the accompanying Condensed Consolidated Balance Sheets.
(3)
Included in “Prepaid expenses and other current assets,” "Other assets," or “Other accrued liabilities” in the accompanying Condensed Consolidated Balance Sheets.

8



 
 
 
 
 
January 31, 2012
 
 
 
 
Amortized Cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
 
Cash equivalents (1):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Certificates of deposit and time deposits
$
493.6

 
$

 
$

 
$
493.6

 
$
11.3

 
$
482.3

 
$

 
 
Commercial paper
297.9

 

 

 
297.9

 

 
297.9

 

 
 
Money market funds
62.1

 

 

 
62.1

 

 
62.1

 

 
Marketable securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term available for sale
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial paper and corporate debt securities
143.7

 
0.1

 

 
143.8

 
35.3

 
108.5

 

 
 
 
Certificates of deposit and time deposits
5.2

 

 

 
5.2

 

 
5.2

 

 
 
 
U.S. treasury securities
30.7

 

 

 
30.7

 
30.7

 

 

 
 
 
U.S. government agency securities
38.2

 

 

 
38.2

 
38.2

 

 

 
 
 
Municipal securities
4.7

 

 

 
4.7

 
4.7

 

 

 
 
 
Other
0.3

 

 

 
0.3

 
0.3

 

 

 
 
Short-term trading securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mutual funds
29.8

 
1.8

 
(0.1
)
 
31.5

 
31.5

 

 

 
 
Long-term available for sale
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
107.8

 
1.0

 
(0.2
)
 
108.6

 
108.6

 

 

 
 
 
U.S. treasury securities
23.6

 
0.2

 

 
23.8

 
23.8

 

 

 
 
 
U.S. government agency securities
51.4

 
0.2

 

 
51.6

 
51.6

 

 

 
 
 
Municipal securities
4.6

 

 

 
4.6

 
4.6

 

 

 
 
 
Taxable auction-rate securities
4.2

 

 

 
4.2

 

 

 
4.2

 
Convertible debt securities (2)
18.3

 

 

 
18.3

 

 

 
18.3

 
Derivative contracts (3)
11.6

 
6.5

 
(2.2
)
 
15.9

 

 
9.7

 
6.2

 
 
 
Total
$
1,327.7

 
$
9.8

 
$
(2.5
)
 
$
1,335.0

 
$
340.6

 
$
965.7

 
$
28.7

____________________ 
(1)
Included in “Cash and cash equivalents” in the accompanying Condensed Consolidated Balance Sheets.
(2)
Included in "Other assets" in the accompanying Condensed Consolidated Balance Sheets.
(3)
Included in “Prepaid expenses and other current assets,” "Other assets," or “Other accrued liabilities” in the accompanying Condensed Consolidated Balance Sheets.
    
Autodesk classifies its marketable securities as either short-term or long-term based on each instrument’s underlying contractual maturity date. Marketable securities with remaining maturities of less than 12 months are classified as short-term and marketable securities with remaining maturities greater than 12 months are classified as long-term. Autodesk may sell certain of its marketable securities prior to their stated maturities for strategic purposes or in anticipation of credit deterioration.

Autodesk applies fair value accounting for certain financial assets and liabilities, which consist of cash equivalents, marketable securities and other financial instruments, on a recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and (Level 3) unobservable inputs for which there is little or no market data, which require Autodesk to develop its own assumptions. When determining fair value, Autodesk uses observable market data and relies on unobservable inputs only when observable market data is not available. There have been no transfers between fair value measurement levels during the three months ended April 30, 2012.


9



Autodesk's cash equivalents, marketable securities and financial instruments are primarily classified within Level 1 or Level 2 of the fair value hierarchy. Autodesk values its available for sale securities on pricing from pricing vendors, who may use quoted prices in active markets for identical assets (Level 1) or inputs other than quoted prices that are observable either directly or indirectly in determining fair value (Level 2). Autodesk's Level 2 securities are valued primarily using observable inputs other than quoted prices in active markets for identical assets and liabilities. Autodesk's Level 3 securities consist of investments held in auction rate securities, convertible debt securities and derivative contracts which are valued using probability weighted discounted cash flow models and some of the inputs to the models are unobservable in the market.

A reconciliation of the change in Autodesk’s Level 3 items for the three months ended April 30, 2012 was as follows:

 
Fair Value Measurements Using
Significant Unobservable Inputs
 
(Level 3)
 
 
Derivative Contracts
 
Convertible Debt Securities
 
Taxable
Auction-Rate
Securities
 
Total
Balance at January 31, 2012
 
$
6.2

 
$
18.3

 
$
4.2

 
$
28.7

Purchases
 
1.0

 
1.9

 

 
2.9

Transfers into (out of) Level 3
 

 

 

 

Redemptions
 

 

 

 

Total unrealized gains (losses)
 
4.4

 
(1.3
)
 

 
3.1

Balance at April 30, 2012
 
$
11.6

 
$
18.9

 
$
4.2

 
$
34.7


The following table summarizes the estimated fair value of our “available-for-sale securities” classified by the contractual maturity date of the security:

 
April 30, 2012
 
Cost
 
Fair Value
Due in 1 year
$
402.8

 
$
402.8

Due in 1 year through 5 years
298.7

 
298.8

Due in 5 years through 10 years

 

Due after 10 years
4.2

 
4.2

Total
$
705.7

 
$
705.8


As of April 30, 2012 and January 31, 2012, Autodesk did not have any securities in a continuous unrealized loss position for greater than twelve months.
    
The sales or redemptions of “available-for-sale securities” in the three months periods ended April 30, 2012 and 2011 resulted in no gains or losses. Proceeds from the sale and maturity of marketable securities three months periods ended April 30, 2012 and 2011 were $177.3 million and $131.1 million, respectively.

Derivative Financial Instruments

Under its risk management strategy, Autodesk uses derivative instruments to manage its short-term exposures to fluctuations in foreign currency exchange rates which exist as part of ongoing business operations. Autodesk's general practice is to hedge a majority of transaction exposures denominated in euros, Japanese yen, Swiss francs, British pounds, Canadian dollars and Australian dollars. These instruments have maturities between one to twelve months in the future. Autodesk does not enter into derivative instrument transactions for trading or speculative purposes.

The bank counterparties in all contracts expose Autodesk to credit-related losses in the event of their nonperformance. However, to mitigate that risk, Autodesk only contracts with counterparties who meet the Company's minimum requirements under its counterparty risk assessment process. Autodesk monitors ratings, credit spreads and potential downgrades on at least a quarterly basis. Based on Autodesk's on-going assessment of counterparty risk, the Company will adjust its exposure to various counterparties. Autodesk generally enters into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty.  However, Autodesk does not have any master netting arrangements in

10



place with collateral features.

Foreign currency contracts designated as cash flow hedges

Autodesk utilizes foreign currency contracts to reduce the exchange rate impact on a portion of the net revenue or operating expense of certain anticipated transactions. These contracts are designated and documented as cash flow hedges. The effectiveness of the cash flow hedge contracts is assessed quarterly using regression analysis as well as other timing and probability criteria. To receive cash flow hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge and the hedges are expected to be highly effective in offsetting changes to future cash flows on hedged transactions. The gross gains and losses on these hedges are included in “Accumulated other comprehensive income (loss)” and are reclassified into earnings at the time the forecasted revenue or expense is recognized. In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, Autodesk reclassifies the gain or loss on the related cash flow hedge from “Accumulated other comprehensive income (loss)” to “Interest and other income (expense), net” in the Company's Condensed Consolidated Financial Statements at that time.

The net notional amount of these contracts are presented net settled and were $415.8 million at April 30, 2012 and $419.6 million at January 31, 2012. Outstanding contracts are recognized as either assets or liabilities on the balance sheet at fair value. The majority of the net gain of $5.8 million remaining in “Accumulated Other Comprehensive Income (Loss)” as of April 30, 2012 is expected to be recognized into earnings within the next twelve months.

Derivatives not designated as hedging instruments

Autodesk uses foreign currency contracts which are not designated as hedging instruments to reduce the exchange rate risk associated primarily with foreign currency denominated receivables and payables. These forward contracts are marked-to-market at the end of each fiscal quarter with gains and losses recognized as “Interest and other income (expense), net.” These derivative instruments do not subject the Company to material balance sheet risk due to exchange rate movements because gains and losses on these derivative instruments are intended to offset the gains or losses resulting from the settlement of the underlying foreign currency denominated receivables and payables. The net notional amounts of these foreign currency contracts are presented net settled and were $62.3 million at April 30, 2012 and $75.1 million at January 31, 2012.

In addition to these foreign currency contracts, Autodesk holds derivative instruments issued by privately held companies, which are not designated as hedging instruments. These derivatives consist of certain conversion options on the convertible debt securities held by Autodesk and an option to acquire a privately held company. These derivatives are recorded at fair value as of each balance sheet date and are recorded in “Other assets.” Changes in the fair values of these instruments are recognized in income as “Interest and other income (expense), net.”

Fair Value of Derivative Instruments:

The fair value of derivative instruments in Autodesk’s Condensed Consolidated Balance Sheets were as follows as of April 30, 2012 and January 31, 2012:

 
Balance Sheet Location
 
Fair Value at
 
April 30, 2012
 
January 31, 2012
Derivative Assets
 
 
 
 
 
Foreign currency contracts designated as cash flow hedges
Prepaid expenses and other current assets
 
$
8.2

 
$
11.9

Derivatives not designated as hedging instruments
Other assets
 
11.6

 
6.2

Total derivative assets
 
 
$
19.8

 
$
18.1

Derivative Liabilities
 
 
 
 
 
Foreign currency contracts designated as cash flow hedges
Other accrued liabilities
 
$
0.4

 
$
2.2

Total derivative liabilities
 
 
$
0.4

 
$
2.2







11



The effects of derivatives designated as hedging instruments on Autodesk’s Condensed Consolidated Statements of Operations were as follows for the three months periods ended April 30, 2012 and 2011, respectively (amounts presented include any income tax effects):

 
Foreign Currency Contracts
 
Three Months Ended April 30,
 
2012
 
2011
Amount of gain (loss) recognized in accumulated other comprehensive income on derivatives (effective portion)
$
1.5

 
$
(9.6
)
Amount and Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion)
 
 
 
Net revenue
$
6.3

 
$
(3.8
)
Operating expenses
(1.5
)
 
1.9

Total
$
4.8

 
$
(1.9
)
Amount and Location of Gain (Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
 
 
Interest and other income (expense), net
$
0.1

 
$
(0.3
)

The effects of derivatives not designated as hedging instruments on Autodesk’s Condensed Consolidated Statements of Operations were as follows for the three months periods ended April 30, 2012 and 2011, respectively (amounts presented include any income tax effects):

 
Foreign Exchange
Contracts
 
Three Months Ended April 30,
 
2012
 
2011
Amount and Location of Gain (Loss) Recognized in Income on Derivative
 
 
 
Interest and other income, net
$
1.0

 
$
(1.7
)

5. Stock-based Compensation Expense

Stock Plans

As of April 30, 2012, Autodesk maintained two active stock plans for the purpose of granting equity awards to employees and to non-employee members of Autodesk’s Board of Directors: the 2012 Employee Stock Plan (“2012 Employee Plan”), which is available only to employees, and the Autodesk 2012 Outside Directors’ Plan (“2012 Directors' Plan”), which is available only to non-employee directors. Additionally, there are eight expired or terminated plans with options outstanding. The exercise price of all stock options granted under these plans was equal to the fair market value of the stock on the grant date.

The 2012 Employee Plan was approved by Autodesk's stockholders in January 2012. The 2012 Employee Plan reserves up to 21.2 million shares which includes 15.2 million shares reserved upon the effectiveness of the 2012 Employee Plan as well as up to 6.0 million shares forfeited under certain prior employee stock plans during the life of the 2012 Employee Plan. The 2012 Employee Plan permits the grant of stock options, restricted stock units and restricted stock awards. Each restricted stock unit or restricted stock award granted will be counted against the shares authorized for issuance under the 2012 Employee Plan as 1.79 shares. If a granted option, restricted stock unit or restricted stock award expires or becomes unexercisable for any reason, the unpurchased or forfeited shares that were granted may be returned to the 2012 Employee Plan and may become available for future grant under the 2012 Employee Plan. As of April 30, 2012, 2.6 million options or restricted stock units have been granted under the 2012 Employee Plan. Options and restricted stock units that were granted under the 2012 Stock Plan vest over periods ranging from immediately upon grant to over a three year period and options expire ten years from the date of grant. The 2012 Employee Plan will expire on June 30, 2022. At April 30, 2012, 13.9 million shares were available for future issuance under the 2012 Employee Plan.


12



The 2012 Director's Plan was approved by Autodesk's stockholders in January 2012. The 2012 Directors' Plan permits the grant of stock options, restricted stock units and restricted stock awards to non-employee members of Autodesk’s Board of Directors. Each restricted stock unit or restricted stock award granted will be counted against the shares authorized for issuance under the 2012 Directors' Plan as 2.11 shares. As of April 30, 2012, no options or restricted stock have been granted under the 2012 Directors' Plan. The 2012 Directors' Plan reserved 2.6 million shares of Autodesk common stock. The 2012 Employee Plan will expire on June 30, 2022. At April 30, 2012, 2.6 million shares were available for future issuance under the 2012 Director's Plan.

The following sections summarize activity under Autodesk’s stock plans.

Stock Options:

A summary of stock option activity for the three months ended April 30, 2012 is as follows:
 
 
Number of
Shares
 
Weighted average exercise price per share
 
Weighted
average remaining contractual term
 
Aggregate Intrinsic Value
 
(in millions)
 
 
 
(in years)
 
(in millions)
Options outstanding at January 31, 2012
28.4

 
$
31.39

 
 
 
 
Granted
0.1

 
36.66

 
 
 
 
Exercised
(4.5
)
 
26.65

 
 
 
 
Canceled
(1.6
)
 
37.77

 
 
 
 
Options outstanding at April 30, 2012
22.4

 
$
31.92

 
4.3

 
$
202.1

Options vested and exercisable at April 30, 2012
15.7

 
$
30.81

 
3.1

 
$
161.9

Options vested and exercisable as of April 30, 2012 and expected to vest thereafter (1)
22.0

 
$
31.82

 
4.3

 
$
200.6

Options available for grant at April 30, 2012
13.9

 
 
 
 
 
 
 _______________
(1) Options expected to vest reflect an estimated forfeiture rate.

As of April 30, 2012, total compensation cost of $65.2 million related to non-vested options is expected to be recognized over a weighted average period of 1.8 years. The following table summarizes information about the pre-tax intrinsic value of options exercised, and the weighted average grant date fair value per share of options granted, during the three months ended April 30, 2012, and 2011.
 
 
Three Months Ended
 
April 30, 2012
 
April 30, 2011
Pre-tax intrinsic value of options exercised (1)
$
60.3

 
$
59.6

Weighted average grant date fair value per share of stock options granted (2)
$
13.43

 
$
14.40

 _______________
(1)
The intrinsic value of options exercised is calculated as the difference between the exercise price of the option and the market value of the stock on the date of exercise.
(2)
The weighted average grant date fair value of stock options granted is calculated, as of the stock option grant date, using the Black-Scholes-Merton option pricing model.













13



The following table summarizes information about options outstanding and exercisable at April 30, 2012:

 
Options Exercisable
 
Options Outstanding
 
Number of
Shares
(in millions)
 
Weighted
average
contractual
life
(in years)
 
Weighted
average
exercise
price
 
Aggregate
intrinsic
value (1)
(in millions)
 
Number of
Shares
(in millions)
 
Weighted
average
contractual
life
(in years)
 
Weighted
average
exercise
price
 
Aggregate
intrinsic
value (1)
(in millions)
Range of per-share exercise prices:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$2.28 - $17.39
4.0

 
 
 
$
13.46

 
 
 
4.6

 
 
 
$
13.79

 
 
$17.53 - $29.49
2.8

 
 
 
26.97

 
 
 
4.8

 
 
 
27.80

 
 
$29.50 - $38.55
3.5

 
 
 
32.79

 
 
 
4.6

 
 
 
32.90

 
 
$39.69 - $43.81
1.7

 
 
 
41.69

 
 
 
4.6

 
 
 
41.88

 
 
$45.20 - $49.80
3.7

 
 
 
45.76

 
 
 
3.8

 
 
 
45.76

 
 
 
15.7

 
3.1

 
$
30.81

 
$
161.9

 
22.4

 
4.3

 
$
31.92

 
$
202.1

 _______________
(1)
Represents the total pre-tax intrinsic value, based on Autodesk’s closing stock price of $39.37 per share as of April 30, 2012, which would have been received by the option holders had all option holders exercised their options as of that date.

These options will expire if not exercised at specific dates ranging through April 2022.

Restricted Stock:

A summary of restricted stock unit and restricted stock award activity for the three months ended April 30, 2012 is as follows:
 
 
Unreleased
Restricted
Stock
 
Weighted
average grant
date fair value
per share
 
(in thousands)
 
 
Unreleased restricted stock at January 31, 2012
2,184.1

 
$
36.65

Awarded
1,163.9

 
33.32

Released
(263.0
)
 
36.05

Forfeited
(24.2
)
 
38.72

Unreleased restricted stock at April 30, 2012
3,060.8

 
$
35.42


During the three months ended April 30, 2012, Autodesk granted 0.6 million restricted stock units. The restricted stock units vest over periods ranging from immediately upon grant to a pre-determined date that is typically within three years from the date of grant. Restricted stock units are not considered outstanding stock at the time of grant, as the holders of these units are not entitled to any of the rights of a stockholder, including voting rights. The fair value of the restricted stock units is expensed ratably over the vesting period. Autodesk recorded stock-based compensation expense related to restricted stock units of $10.8 million during three months ended April 30, 2012. Autodesk recorded stock-based compensation related to restricted stock units of $5.3 million, during the three months ended April 30, 2011. As of April 30, 2012, total compensation cost not yet recognized of $57.4 million related to non-vested restricted stock units, is expected to be recognized over a weighted average period of 1.6 years. At April 30, 2012, the number of restricted stock units granted but unreleased was 2.5 million.

During the three months ended April 30, 2012, Autodesk granted 0.5 million performance restricted stock units. Performance restricted stock units vest with the attainment of predetermined goals and requisite service periods. Performance stock units are not considered outstanding stock at the time of grant, as the holders of these units are not entitled to any of the rights of a stockholder, including voting rights. The fair value of the performance restricted stock units is expensed using the accelerated attribution method over the vesting period. Autodesk recorded stock-based compensation expense related to performance restricted stock units of $1.2 million during three months ended April 30, 2012. Autodesk recorded no stock-based compensation related to performance restricted stock units during the three months ended April 30, 2011. As of April 30, 2012, total compensation cost not yet recognized of $12.4 million related to non-vested performance restricted stock units, is expected to be recognized over a weighted average period of 1.9 years. At April 30, 2012, the number of performance restricted

14



stock units granted but unreleased was 0.5 million.

During the three months ended April 30, 2012, Autodesk granted no restricted stock awards. Restricted stock awards are granted to non-employee directors and vest on the date of the next annual meeting. Restricted stock awards are considered outstanding at the time of grant, as the stock award holders are entitled to many of the rights of a stockholder, including voting rights. The fair value of the restricted stock awards is expensed ratably over the vesting period. Autodesk recorded stock-based compensation expense related to restricted stock awards of $0.1 million during the three months ended April 30, 2012. Autodesk recorded stock-based compensation expense related to restricted stock awards of $0.1 million during the three months ended April 30, 2011. As of April 30, 2012, total compensation cost not yet recognized of $0.1 million related to non-vested restricted stock awards, is expected to be recognized over a weighted average period of 0.1 years. At April 30, 2012, the number of restricted stock awards granted but unreleased was 13,500.

1998 Employee Qualified Stock Purchase Plan (“ESP Plan”)

Under Autodesk’s ESP Plan, which was approved by stockholders in 1998, eligible employees may purchase shares of Autodesk’s common stock at their discretion using up to 15% of their eligible compensation subject to certain limitations, at not less than 85% of fair market value as defined in the ESP Plan. At April 30, 2012, a total of 32.9 million shares were available for future issuance. This amount automatically increases on the first trading day of each fiscal year by an amount equal to the lesser of 10.0 million shares or 2% of the total of (1) outstanding shares plus (2) any shares repurchased by Autodesk during the prior fiscal year. Under the ESP Plan, the Company issues shares on the first trading day following March 31 and September 30 of each fiscal year. The ESP Plan expires during fiscal 2018.

Autodesk issued 1.6 million shares under the ESP Plan during the three months ended April 30, 2012, at average prices of $21.63. During the three months ended April 30, 2011, Autodesk issued 1.8 million shares under the ESP Plan, at average prices of $15.28 per share, respectively. The weighted average grant date fair value of awards granted under the ESP Plan during the three months ended April 30, 2012, calculated as of the award grant date using the Black-Scholes-Merton option pricing model, was $14.00 per share. The weighted average grant date fair value of awards granted under the ESP Plan during the three months ended April 30, 2011, calculated as of the award grant date using the Black-Scholes-Merton option pricing model, was $13.46 per share.

Stock-based Compensation Expense

The following table summarizes stock-based compensation expense for the three months ended April 30, 2012 and 2011, respectively, as follows:
 
 
Three Months Ended April 30, 2012
 
Three Months Ended April 30, 2011
Cost of license and other revenue
$
1.3

 
$
0.9

Marketing and sales
14.6

 
11.8

Research and development
11.1

 
8.9

General and administrative
6.4

 
4.3

Stock-based compensation expense related to stock awards and ESP Plan purchases
33.4

 
25.9

Tax benefit
(8.7
)
 
(7.6
)
Stock-based compensation expense related to stock awards and ESP Plan purchases, net of tax
$
24.7

 
$
18.3



                            










15




Autodesk uses the Black-Scholes-Merton option-pricing model to estimate the fair value of stock-based awards based on the following assumptions:
 
 
Three Months Ended April 30, 2012
 
Three Months Ended April 30, 2011
 
Stock Option
Plans
 
ESP Plan
 
Stock Option
Plans
 
ESP Plan
Range of expected volatilities
44 - 45%
 
41 - 43%
 
40 - 43%
 
34 - 37%
Range of expected lives (in years)
3.6 - 4.6
 
0.5 - 2.0
 
2.6 - 4.4
 
0.5 - 2.0
Expected dividends
—%
 
—%
 
—%
 
—%
Range of risk-free interest rates
0.5 - 0.8
 
0.1 - 0.3%
 
0.9 - 1.9%
 
0.2 - 0.8%
Expected forfeitures
7.8%
 
7.8%
 
10.5%
 
10.5%

Autodesk estimates expected volatility for stock-based awards based on the average of the following two measures. The first is a measure of historical volatility in the trading market for the Company’s common stock, and the second is the implied volatility of traded forward call options to purchase shares of the Company’s common stock.

Autodesk estimates the expected life of stock-based awards using both exercise behavior and post-vesting termination behavior as well as consideration of outstanding options.

Autodesk does not currently pay, and does not anticipate paying any cash dividends in the foreseeable future. Consequently, an expected dividend yield of zero is used in the Black-Scholes-Merton option pricing model.

The risk-free interest rate used in the Black-Scholes-Merton option pricing model for stock-based awards is the historical yield on U.S. Treasury securities with equivalent remaining lives.

Autodesk recognizes expense only for the stock-based awards that are ultimately expected to vest. Therefore, Autodesk has developed an estimate of the number of awards expected to cancel prior to vesting (“forfeiture rate”). The forfeiture rate is estimated based on historical pre-vest cancellation experience and is applied to all stock-based awards. The Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates.

6. Income Tax

Autodesk’s effective tax rate was 19% and 18% during the three months ended April 30, 2012 and 2011, respectively. Autodesk’s effective tax rate increased during the three months ended April 30, 2012 as compared to the same period in the prior fiscal year primarily due to lower tax benefits in fiscal 2013 from foreign earnings taxed at lower rates, expiration of the federal research credit and increased non-deductible stock-based compensation expense, partially offset by discrete tax benefits from closure of statute of limitations during the first quarter of fiscal 2013. Excluding the impact of discrete tax benefits of $6.3 million primarily associated with tax benefits from stock-based compensation and closure of a foreign statute of limitations in the three months ended April 30, 2012, the effective tax rate for the three months ended April 30, 2012 was 26% and was lower than the Federal statutory tax rate of 35% primarily due to foreign income taxed at lower rates partially offset by the impact of non-deductible stock-based compensation expense.

As of April 30, 2012, the Company had $203.2 million of gross unrecognized tax benefits, excluding interest, of which approximately $189.8 million represents the amount of unrecognized tax benefits that would impact the effective tax rate, if recognized. It is possible that the amount of unrecognized tax benefits will change in the next twelve months; however, an estimate of the range of the possible change cannot be made at this time.

At April 30, 2012, Autodesk had net deferred tax assets of $168.0 million. The Company believes that it will generate sufficient future taxable income in appropriate tax jurisdictions to realize these assets.








16




7. Other Intangible Assets, Net

Other intangible assets that include purchased technologies, customer relationships, trade names, patents, user lists and the related accumulated amortization were as follows:
 
 
April 30, 2012
 
January 31, 2012
Purchased technologies, at cost (1)
$
400.5

 
$
400.5

Customer relationships, trade names, patents, user list, at cost (2)
215.0

 
215.3

 
615.5

 
615.8

Less: Accumulated amortization (1)
(484.3
)
 
(467.0
)
Other intangible assets, net
$
131.2

 
$
148.8

_______________ 
(1)
As of April 30, 2012, the purchased technologies balances are presented gross. Previously, Autodesk reported the cost and amortization balance for purchased technologies net of fully amortized intangible assets. For comparability, the presentation of the purchased technologies cost and amortization balances at January 31, 2012 were adjusted to align to current year presentation.
(2)
Included in “Other assets” in the accompanying Condensed Consolidated Balance Sheets. Customer relationships and trade names include the effects of foreign currency translation.

8. Goodwill

The change in the carrying amount of goodwill during the three months ended April 30, 2012, is as follows:
 
 
Platform
Solutions and
Emerging
Business
 
Architecture,
Engineering
and
Construction
 
Manufacturing
 
Media and
Entertainment
 
Total
Balances as of January 31, 2012
 
 
 
 
 
 
 
 
 
Goodwill
$
76.6

 
$
247.7

 
$
323.3

 
$
184.0

 
$
831.6

Accumulated impairment losses

 

 

 
(149.2
)
 
(149.2
)
 
76.6

 
247.7

 
323.3

 
34.8

 
682.4

Effect of foreign currency translation, purchase accounting and other
0.1

 
0.8

 
(0.4
)
 

 
0.5

Balance as of April 30, 2012
 
 
 
 
 
 
 
 
 
Goodwill
76.7

 
248.5

 
322.9

 
184.0

 
832.1

Accumulated impairment losses

 

 

 
(149.2
)
 
(149.2
)
 
$
76.7

 
$
248.5

 
$
322.9

 
$
34.8

 
$
682.9


Goodwill consists of the excess of cost over the fair value of net assets acquired in business combinations. Autodesk assigns goodwill to the reportable segment associated with each business combination, and tests goodwill for impairment annually in its fourth fiscal quarter or more often if circumstances indicate a potential impairment. When assessing goodwill for impairment, Autodesk uses discounted cash flow models that include assumptions regarding reportable segments’ projected cash flows (“Income Approach”) and corroborates it with the estimated consideration that the Company would receive if there were to be a sale of the reporting segment (“Market Approach”). Variances in these assumptions could have a significant impact on Autodesk’s conclusion as to whether goodwill is impaired or the amount of any impairment charge. Impairment charges, if any, result from instances where the fair values of net assets associated with goodwill are less than their carrying values. The process of evaluating the potential impairment of goodwill is subjective and requires significant judgment at many points during the analysis. The value of Autodesk’s goodwill could also be impacted by future adverse changes such as: (i) declines in Autodesk’s actual financial results, (ii) a sustained decline in Autodesk’s market capitalization, (iii) significant slowdown in the worldwide economy or the industries Autodesk serves, or (iv) changes in Autodesk’s business strategy or internal financial results forecasts. A hypothetical 10% decrease in the fair value of any of Autodesk’s four reporting units would not have an impact on the carrying value, nor result in an impairment, of goodwill shown on Autodesk’s balance sheet as of April 30, 2012 for the respective reporting units.



17



9. Deferred Compensation

At April 30, 2012, Autodesk had marketable securities totaling $721.6 million, of which $34.7 million related to investments in debt and equity securities that are held in a rabbi trust under non-qualified deferred compensation plans. The total related deferred compensation liability was $34.7 million at April 30, 2012, of which $3.4 million was classified as current and $31.3 million was classified as non-current liabilities. The value of debt and equity securities held in the rabbi trust at January 31, 2012 was $31.5 million. The total related deferred compensation liability at January 31, 2012 was $31.5 million, of which $3.2 million was classified as current and $28.3 million was classified as non-current liabilities. The current and non-current portions of the liability are recorded in the Condensed Consolidated Balance Sheets under “Accrued compensation” and “Other liabilities,” respectively.

10. Computer Equipment, Software, Furniture and Leasehold Improvements, Net

Computer equipment, software, furniture, leasehold improvements and the related accumulated depreciation were as follows:
 
 
April 30, 2012
 
January 31, 2012
Computer software, at cost
$
133.7

 
$
133.5

Computer hardware, at cost
157.4

 
153.3

Leasehold improvements, land and buildings, at cost
142.8

 
139.5

Furniture and equipment, at cost
48.7

 
47.7

 
482.6

 
474.0

Less: Accumulated depreciation
(378.6
)
 
(369.5
)
Computer software, hardware, leasehold improvements, furniture
and equipment, net
$
104.0

 
$
104.5


11. Borrowing Arrangements

Autodesk’s line of credit facility permits unsecured short-term borrowings of up to $400.0 million, with an option to request an increase in the amount of the credit facility by up to an additional $100.0 million, and is available for working capital or other business needs. This credit agreement contains customary covenants that could restrict the imposition of liens on Autodesk’s assets, and restrict the Company’s ability to incur additional indebtedness or make dispositions of assets if Autodesk fails to maintain the financial covenants. The line of credit is syndicated with various financial institutions, including Citicorp USA, Inc., an affiliate of Citibank, which is one of the lead lenders and agent. At April 30, 2012, Autodesk had no outstanding borrowings on this line of credit. This facility expires in May 2016.

12. Commitments and Contingencies

Guarantees and Indemnifications

In the normal course of business, Autodesk provides indemnifications of varying scopes, including limited product warranties and indemnification of customers against claims of intellectual property infringement made by third parties arising from the use of its products or services. Autodesk accrues for known indemnification issues if a loss is probable and can be reasonably estimated. Historically, costs related to these indemnifications have not been significant, and because potential future costs are highly variable, Autodesk is unable to estimate the maximum potential impact of these indemnifications on its future results of operations.

In connection with the purchase, sale or license of assets or businesses with third parties, Autodesk has entered into or assumed customary indemnification agreements related to the assets or businesses purchased, sold or licensed. Historically, costs related to these indemnifications have not been significant, and because potential future costs are highly variable, Autodesk is unable to estimate the maximum potential impact of these indemnifications on its future results of operations.

As permitted under Delaware law, Autodesk has agreements whereby it indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at Autodesk’s request in such capacity. The maximum potential amount of future payments Autodesk could be required to make under these indemnification agreements is unlimited; however, Autodesk has directors’ and officers’ liability insurance coverage that is intended to reduce its financial exposure and may enable Autodesk to recover a portion of any future amounts paid. Autodesk believes the estimated fair value of these

18



indemnification agreements in excess of applicable insurance coverage is minimal.

Legal Proceedings

Autodesk is involved in a variety of claims, suits, investigations and proceedings in the normal course of business activities including claims of alleged infringement of intellectual property rights, commercial, employment, piracy prosecution, business practices and other matters. In the Company’s opinion, resolution of pending matters is not expected to have a material adverse impact on its consolidated results of operations, cash flows or its financial position. Given the unpredictable nature of legal proceedings, there is a reasonable possibility that an unfavorable resolution of one or more such proceedings could in the future materially affect the Company’s results of operations, cash flows or financial position in a particular period, however, based on the information known by the Company as of the date of this filing and the rules and regulations applicable to the preparation of the Company’s financial statements, any such amount is either immaterial or it is not possible to provide an estimated amount of any such potential loss.

13. Common Stock Repurchase Program

Autodesk has a stock repurchase program that is used largely to help offset the dilution from the issuance of stock under the Company’s employee stock plans and for such other purposes as may be in the interests of Autodesk and its stockholders, and has the effect of returning excess cash generated from the Company’s business to stockholders. During the three months ended April 30, 2012, Autodesk repurchased and retired 2.5 million shares at an average repurchase price of $39.79 per share. Common stock and additional paid-in capital and retained earnings were reduced by $54.1 million and $45.1 million, respectively, during the three months ended April 30, 2012.

At April 30, 2012, 12.2 million shares remained available for repurchase under repurchase plans approved by the Board of Directors. During the three months ended April 30, 2012, Autodesk repurchased its common stock through open market purchases. The number of shares acquired and the timing of the purchases are based on several factors, including general market conditions, the number of employee stock option exercises, stock issuance, the trading price of Autodesk common stock, cash on hand and available in the United States, and company defined trading windows.

14. Accumulated Other Comprehensive Income

Accumulated other comprehensive income, net of taxes, was comprised of the following at April 30, 2012 and January 31, 2012:
 
 
April 30, 2012
 
January 31, 2012
Net gain on derivative instruments
$
5.8

 
$
9.2

Net unrealized gain on available-for-sale securities
3.5

 
2.6

Unfunded portion of pension plans
(8.6
)
 
(8.6
)
Foreign currency translation adjustments
3.0

 
2.7

Accumulated other comprehensive income
$
3.7

 
$
5.9


















19



15. Net Income Per Share

Basic net income per share is computed using the weighted average number of shares of common stock outstanding for the period, including restricted stock awards and excluding stock options and restricted stock units. Diluted net income per share is based upon the weighted average shares of common stock outstanding for the period and potentially dilutive common shares, including the effect of stock options and restricted stock units under the treasury stock method. The following table sets forth the computation of the numerators and denominators used in the basic and diluted net income per share amounts:

 
Three Months Ended April 30,
 
2012
 
2011
Numerator:
 
 
 
Net income
$
78.9

 
$
69.3

Denominator:
 
 
 
Denominator for basic net income per share—weighted average shares
228.1

 
228.2

Effect of dilutive securities
6.0

 
8.9

Denominator for dilutive net income per share
234.1

 
237.1

Basic net income per share
$
0.35

 
$
0.30

Diluted net income per share
$
0.34

 
$
0.29


The computation of diluted net income per share does not include shares that are anti-dilutive under the treasury stock method because their exercise prices are higher than the average market value of Autodesk’s stock during the period. For the three months ended April 30, 2012 and 2011, 9.1 million and 6.7 million potentially anti-dilutive shares, respectively, were excluded from the computation of net income per share.

16. Segments

Autodesk reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable segments. Autodesk has four reportable segments: Platform Solutions and Emerging Business (“PSEB”), Architecture, Engineering and Construction (“AEC”), Manufacturing (“MFG”) and Media and Entertainment (“M&E”). Autodesk has no material inter-segment revenue.

The PSEB, AEC and MFG segments derive revenue from the sale of licenses for software products and services to customers who design, build, manage or own building, manufacturing and infrastructure projects. Our M&E segment derives revenue from the sale of products to creative professionals, post-production facilities and broadcasters for a variety of applications, including feature films, television programs, commercials, music and corporate videos, interactive game production, web design and interactive web streaming.

PSEB includes Autodesk’s design product, AutoCAD. Autodesk’s AutoCAD product is a platform product that underpins the Company’s design product offerings for the industries it serves. For example, AEC and MFG offer tailored versions of AutoCAD software for the industries they serve. Autodesk’s AutoCAD product also provides a platform for Autodesk’s developer partners to build custom solutions for a range of diverse design-oriented markets. PSEB’s revenue primarily includes revenue from sales of licenses of Autodesk’s design products, AutoCAD and AutoCAD LT, as well as the Autodesk Design Suite and many other design products.

AEC software products help to improve the way building, civil infrastructure, process plant and construction projects are designed, built and managed. A broad portfolio of solutions enables greater efficiency, accuracy and sustainability across the entire project lifecycle. Autodesk AEC solutions include advanced technology for building information modeling ("BIM"), AutoCAD-based design and documentation productivity software, sustainable design analysis applications, and collaborative project management solutions. BIM, an integrated process for building and infrastructure design, analysis, documentation and construction, uses consistent, coordination information to improve communication and collaboration between the extended project team. AEC provides a comprehensive portfolio of BIM solutions that help customers deliver projects faster and more economically, while minimizing environmental impact. AEC’s revenue primarily includes revenue from the sales of licenses of Autodesk Revit standalone, Autodesk Building Design Suite, AutoCAD Civil 3D, AutoCAD Architecture and AutoCAD Map 3D products.


20



MFG provides the manufacturers in automotive and transportation, industrial machinery, consumer products and building products with comprehensive digital prototyping solutions that bring together design data from all phases of the product development process to develop a single digital model created in Autodesk Inventor software. Autodesk’s solutions for digital prototyping enable a broad group of manufacturers to realize benefits with minimal disruption to existing workflows. MFG’s revenue primarily includes revenue from the sales of licenses of Autodesk Inventor standalone, Autodesk Product Design Suite, AutoCAD Mechanical and Autodesk Moldflow products.

M&E is comprised of two product groups: Animation, including design visualization, and Creative Finishing. Animation products, such as Autodesk 3ds Max, Autodesk Maya and the Autodesk Entertainment Creation Suite, provide tools for digital sculpting, modeling, animation, effects, rendering and compositing, for design visualization, visual effects and games production. Creative Finishing products provide editing, finishing and visual effects design and color grading.

All of Autodesk’s reportable segments distribute their respective products primarily through authorized resellers and distributors and, to a lesser extent, through direct sales to end-users.

The accounting policies of the reportable segments are the same as those described in Note 1, “Business and Summary of Significant Accounting Policies” of our 2012 Annual Report on Form 10-K. Autodesk evaluates each segment’s performance on the basis of gross profit. Autodesk currently does not separately accumulate and report asset information by segment, except for goodwill, which is disclosed in Note 8, “Goodwill.”

Information concerning the operations of Autodesk’s reportable segments is as follows:
 
 
Three Months Ended April 30,
 
2012
 
2011
Net revenue:
 
 
 
Platform Solutions and Emerging Business
$
229.0

 
$
210.5

Architecture, Engineering and Construction
163.4

 
141.4

Manufacturing
145.7

 
123.2

Media and Entertainment
50.5

 
53.2

 
$
588.6

 
$
528.3

Gross profit:
 
 
 
Platform Solutions and Emerging Business
$
215.8

 
$
198.6

Architecture, Engineering and Construction
148.9

 
128.0

Manufacturing
134.4

 
113.2

Media and Entertainment
41.8

 
42.9

Unallocated (1)
(11.1
)
 
(9.0
)
 
$
529.8

 
$
473.7

 _______________
(1)
Unallocated amounts primarily relate to corporate expenses and other costs and expenses that are managed outside the reportable segments, including stock-based compensation expense.















21




Information regarding Autodesk’s operations by geographic area is as follows:
 
 
Three Months Ended April 30,
 
2012
 
2011
Net revenue:
 
 
 
Americas
 
 
 
U.S.
$
166.0

 
$
143.5

Other Americas
41.6

 
37.9

Total Americas
207.6

 
181.4

Europe, Middle East and Africa
224.4

 
215.0

Asia Pacific
 
 
 
Japan
76.3

 
60.7

Other Asia Pacific
80.3

 
71.2

Total Asia Pacific
156.6

 
131.9

Total net revenue
$
588.6

 
$
528.3


22




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

The discussion in our MD&A 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. Forward-looking statements are any statements that look to future events and consist of, among other things, our business strategies, including those discussed below in “Strategy” below, anticipated future net revenue, future operating margin and other future financial results (by product type and geography) and operating expenses, the effect of unemployment and availability of credit, the effects of the weak global economic conditions, our backlog, expected trends in certain financial metrics, expected market trends, including the growth of cloud, mobile and social computing, the impact of acquisitions and investment activities, the effect of fluctuations in exchange rates and our hedging activities on our financial results, our abilities to successfully expand adoption of our products, our ability to gain market acceptance of new businesses and sales initiatives, our ability to successfully increase sales of product suites as part of our overall sales strategy, and the impact of economic volatility and geopolitical activities in certain countries, particularly emerging economy countries, and the resulting effect on our financial results. In addition, forward-looking statements also consist of statements involving expectations regarding product acceptance, continuation of our stock repurchase program, statements regarding our liquidity and short-term and long-term cash requirements, as well as, statements involving trend analyses and statements including such words as “may,” “believe,” “could,” “anticipate,” “would,” “might,” “plan,” “expect,” and similar expressions or the negative of these terms or other comparable terminology. These forward-looking statements speak only as of the date of this Form 10-Q and are subject to business and economic risks. As such, our actual results could differ materially from those set forth in the forward-looking statements as a result of the factors set forth below in Part II, Item 1A, “Risk Factors,” and in our other reports filed with the U.S. Securities and Exchange Commission. We assume no obligation to update the forward-looking statements to reflect events that occur or circumstances that exist after the date on which they were made.

Note: A glossary of terms used in this Form 10-Q appears at the end of this Item 2.

Strategy

Autodesk’s vision is to help people imagine, design and create a better world. We do this by developing software for the world’s designers, architects, engineers, and digital artists—the people who create the world's products, buildings, infrastructure, films, and games. Autodesk serves customers in three primary markets: architecture, engineering and construction; manufacturing; and digital media and entertainment.

Our goal is to provide our customers with the world’s most valuable, innovative, and engaging software and services. Our product and services portfolio allows our customers to digitally visualize, simulate, and analyze their projects, helping them to better understand the consequences of their design decisions; save time, money, and resources; and become more innovative.

Today, complex challenges such as globalization, urbanization, and sustainable design are driving our customers to new levels of performance and competitiveness, and we are committed to helping them address those challenges and take advantage of new opportunities. To achieve these goals, we are capitalizing on two of our strongest competitive advantages: our ability to bring advanced technology to mainstream markets, and the breadth and depth of our product portfolio.

By innovating in existing technology categories, we bring powerful new design capabilities to volume markets. Our products are designed to be easy-to-learn and use, and to provide customers with a low cost of deployment, a low total cost of ownership, and a rapid return on investment. In addition, our software architecture allows for extensibility and integration with other products. The breadth of our technology and product line gives us a unique competitive advantage, because it allows our customers to address a wide variety of problems in ways that transcend industry and disciplinary boundaries. This is particularly important in helping our customers address the complex challenges mentioned above. We also believe that our technological leadership and global brand recognition have positioned us well for long-term growth and industry leadership.

In addition to the competitive advantages afforded by our technology, our large global network of distributors, resellers, third-party developers, customers, educational institutions, faculty and students is a key competitive advantage. This network of relationships provides us with a broad and deep reach into volume markets around the world. Our distributor and reseller network is extensive and provides our customers with the resources to purchase, deploy, learn, and support our products quickly and easily. We have a significant number of registered third-party developers who create products that work well with Autodesk products and extend them for a variety of specialized applications. Users with expertise in our products are broadly and globally available from educational institutions and in the existing workforce. We offer extensive educational programs, including student versions of software, curricula, and faculty development. We have an extensive global community of students

23



who are experienced with our software and poised to become the next generation of professional users – thus reducing the cost of training and providing fresh talent for our customers. Our global network of distributors, resellers, third party developers, customers, educational institutions and students has been developed over our thirty year history. We believe it is an enduring competitive advantage that is difficult for others to replicate.

We continually strive to increase the business value of our design tools to our customers in a number of ways. First, we seek to address an increasing portion of our customers' workflow with products that extend the value of our customers' digital design information into visualization, analysis and simulation. Second, we seek to improve our product interoperability and usability, thus improving our customers' productivity and effectiveness. Third, we continue to develop new ways to deliver capability and value to our customers, such as product suites, cloud-based services, and delivery of our solutions on mobile devices and new hardware platforms. Fourth, we extend our customers' workflow with products for adjacent users and for the “customers of our customers,” thus increasing the value of the design information our customers produce. Finally, we continue to develop new lines of consumer products and services that are delivered and experienced through the Web, tablets, and mobile devices providing our advanced visualization technologies to consumers—a whole new category of Autodesk customer.

Autodesk was founded during the platform transition from mainframes and engineering workstations to personal computers. We developed and sustained a compelling value proposition based upon desktop software for the personal computer. Just as the transition from mainframes to personal computers transformed the industry thirty years ago, we believe our industry is undergoing a similar transition from the personal computer to cloud, mobile and social computing. During the three months ended April 30, 2012, we completed a number of important organizational changes to drive the success of our business. These changes were made in order to address major business initiatives including our desire to accelerate the business' move to the cloud, transform our customers' experience, increase industry focus to meet customer demands, and develop more effective marketing. The reorganization included changes to the structure and alignment of our product development and marketing teams and re-organizing our sales teams by industry. The changes are intended to better serve our customers and drive future growth.    

Our growth strategy is predicated upon leading the transition in the industries we serve into the cloud in three ways:

Grow. We believe sufficient opportunity remains in our PC-based software business, and we intend to continue to grow this business. In particular we are offering product suites with improved interoperability and usability to enhance our customers' productivity. We are continuing to drive maintenance and new licensing models to better match the business needs of our customers. We will continue to emphasize developing direct relationships with large, global customers and growing in emerging economies.

Transform. At the same time we grow our desktop software business, we are migrating many of our products to the cloud. This entails development of new cloud computing infrastructure and restructuring our applications to leverage the cloud. We are also developing new capabilities that are enabled by the cloud such as collaborative PLM and on line simulation. Our goal is to lead our industry in transitioning to the cloud.

Expand. We believe that the combination of cloud, mobile, and social computing affords us the opportunity to expand our business into new markets. Our consumer business is an example of this where we have added new customers. We intend to continue to develop businesses such as this to both add new customers and find new capabilities to incorporate in our core business.

We believe that expanding our customers' portfolios to include our suites presents a meaningful growth opportunity and is an important part of our overall strategy. As our customers in all industries adopt our design suites, we believe they will experience an increase in their productivity and the value of their design data. For the three months ended April 30, 2012, revenue from Suites increased 34%, as compared to the prior fiscal year. As a percentage of revenue, suites increased to 28% in the three months ended April 30, 2012 as compared to 23% in the three months ended April 30, 2011.

Expanding our geographic coverage is another key element of our growth strategy. While emerging economies are important for all global businesses, we believe they hold special opportunity for Autodesk. Much of the growth in the world’s construction and manufacturing is happening in emerging economies. Further, emerging economies face many of the challenges that our design technology can help address, for example infrastructure build-out. We believe that emerging economies continue to present long-term growth opportunities for us and revenue from emerging countries increased 6% during three months ended April 30, 2012 as compared to the same period of the prior fiscal year. Revenue from emerging countries represented 14% of net revenue during the three months ended April 30, 2012 and 15% of net revenue during the three months ended April 30, 2011. While we believe there are long-term growth opportunities in emerging economies, conducting business in these countries presents significant challenges, including economic volatility, geopolitical risk, local competition, intellectual

24



property protection, poorly developed business infrastructure, scarcity of talent and software piracy.

Our strategy includes improving our product functionality and expanding our product offerings through internal development as well as through the acquisition of products, technology and businesses. Acquisitions often increase the speed at which we can deliver product functionality to our customers; however, they entail cost and integration challenges and may, in certain instances, negatively impact our operating margins. We continually review these trade-offs in making decisions regarding acquisitions. We currently anticipate that we will acquire products, technology and businesses as compelling opportunities become available.

Our strategy depends upon a number of assumptions, including that we will be able to continue making our technology available to mainstream markets; leverage our large global network of distributors, resellers, third-party developers, customers, educational institutions, and students; improve the performance and functionality of our products; and adequately protect our intellectual property. If the outcome of any of these assumptions differs from our expectations, we may not be able to implement our strategy, which could potentially adversely affect our business. For further discussion regarding these and related risks see Part II, Item 1A, “Risk Factors.”

Critical Accounting Policies and Estimates

Our Condensed Consolidated Financial Statements are prepared in conformity with U.S. generally accepted accounting principles. In preparing our Condensed Consolidated Financial Statements, we make assumptions, judgments and estimates that can have a significant impact on amounts reported in our Condensed Consolidated Financial Statements. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. We regularly reevaluate our assumptions, judgments and estimates. Our significant accounting policies are described in Note 1, “Business and Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements in our Form 10-K for the fiscal year ended January 31, 2012 (the “2012 Form 10-K”). In addition, we highlighted those policies that involve a higher degree of judgment and complexity with further discussion of these judgmental areas in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2012 Form 10-K. We believe these policies are the most critical to aid in fully understanding and evaluating our financial condition and results of operations. Updates on the relevant periodic financial disclosures related to these policies are provided below.

Goodwill. As of April 30, 2012, a hypothetical 10% decrease in the fair value of our reporting units would not have an impact on the carrying value of goodwill, nor result in impairment of goodwill. For further discussion see Note 8, “Goodwill,” in the Notes to the Condensed Consolidated Financial Statements.

Income Taxes. We currently have $168.0 million of net deferred tax assets, primarily a result of tax credits, net operating losses, and timing differences for reserves, accrued liabilities, stock options and restricted stock units, purchased technologies and capitalized intangibles, partially offset by the establishment of U.S. deferred tax liabilities on unremitted earnings from certain foreign subsidiaries, deferred tax liabilities associated with tax method change on advanced payments and valuation allowances against California and Canadian deferred tax assets. We perform a quarterly assessment of the recoverability of these net deferred tax assets and believe that we will generate sufficient future taxable income in appropriate tax jurisdictions to realize the net deferred tax assets. Our judgments regarding future profitability may change due to future market conditions and other factors. Any change in future profitability may require material adjustments to these net deferred tax assets, resulting in a reduction in net income in the period when such determination is made. We believe our tax positions, including intercompany transfer pricing policies, are consistent with the tax laws in the jurisdictions in which we conduct our business. It is possible that these positions may be challenged by jurisdictional tax authorities and that such challenges may have a significant impact on our effective tax rate.

Overview of the Three Months Ended April 30, 2012
 
(in millions)
Three Months Ended April 30, 2012
 
As a % of Net
Revenue
 
Three Months Ended April 30, 2011
 
As a % of Net
Revenue
Net Revenue
$
588.6

 
100
%
 
$
528.3

 
100
%
Cost of revenue
58.8

 
10
%
 
54.6

 
10
%
Gross Profit
529.8

 
90
%
 
473.7

 
90
%
Operating expenses
435.8

 
74
%
 
395.1

 
75
%
Income from Operations
$
94.0

 
16
%
 
$
78.6

 
15
%
 
 
 
 
 
 
 
 

25



 
In the three months ended April 30, 2012, our business grew year over year as evidenced by our increases in revenue, gross profit and income from operations. Contributing to the year over year increases in revenue were increases in revenue from new seat license revenue and maintenance revenue. In addition, we experienced increases in revenue for most of our major products and reportable segments, and all of our major geographic areas during three months ended April 30, 2012 as compared to the same period in the prior fiscal year. The reasons for these increases are discussed below under the heading “Results of Operations.” In addition, we continued to control our operating costs, which led to year over year improvements in profitability. The 20% increase in income from operations in the three months ended April 30, 2012 as compared to the same periods in the prior fiscal year, was due to the increase in our net revenue, while controlling the growth of operating expenses.

Our total operating margin increased as a percentage of revenue from 15% for the three months ended April 30, 2011 to 16% during the three months ended April 30, 2012. The increase in our operating margin was primarily because net revenue increased at a faster rate than the increase in our costs due to proportionally less spending per revenue dollar earned. Net revenue increased $60.3 million or 11% for the three months ended April 30, 2012, as compared to the same period in the prior fiscal year, while our operating expenses increased $40.7 million, or 10% for the three months ended April 30, 2012. The 10% increase in operating expenses in the three months ended April 30, 2012, as compared to the three months ended April 30, 2011 was due to an increase in salaries and benefits due to increased headcount and merit increases.

We generate a majority of our revenue in the U.S., Japan, Germany, France, and Canada. Included in the overall increase in revenue were impacts associated with foreign currency. Our revenue benefited from foreign exchange rate changes during the three months ended April 30, 2012, as compared to the same period in the prior fiscal year. During the three months ended April 30, 2012, net revenue increased 11% compared to the same period in the prior fiscal year; had applicable exchange rates from the three months ended April 30, 2011 been in effect during the three months ended April 30, 2012, and had we excluded foreign exchange hedge gains and losses from the three months ended April 30, 2012 and 2011 (“on a constant currency basis”), net revenue would have increased 9% respectively, compared to the same period in the prior fiscal year. During the three months ended April 30, 2012, total spend, defined as cost of revenue plus operating expenses, increased 10% compared to the same period in the prior fiscal year as reported and increased 10% on a constant currency basis. Changes in the value of the U.S. dollar may have a significant effect on net revenue, total spend and income from operations in future periods. We use foreign currency contracts to reduce the exchange rate effect on a portion of the net revenue of certain anticipated transactions, but do not attempt to completely mitigate the impact of fluctuation of such foreign currency against the U.S. dollar.

We rely significantly upon major distributors and resellers in both the U.S. and international regions, including Tech Data Corporation and its global affiliates (collectively, “Tech Data”). Tech Data accounted for 22% of our total net revenue during the three months ended April 30, 2012. Tech Data accounted for 17% of Autodesk's total net revenue for the three months ended April 30, 2011. In October 2011, Tech Data purchased certain assets of Mensch and Maschine Software (“MuM”), which has been a distributor of our products in Europe. The acquisition concentrates additional sales through Tech Data, which on a consolidated basis would have accounted for 23% of our total net revenue for the three months periods ended April 30, 2011, if the acquisition had taken place at the beginning of fiscal 2012. We believe our business is not substantially dependent on Tech Data. Our customers through Tech Data are the resellers and end users who purchase our software licenses and services. Should any of the agreements between us and Tech Data be terminated for any reason, we believe the resellers and end users who currently purchase our products through Tech Data would be able to continue to do so under substantially the same terms from one of our many other distributors without substantial disruption to our revenue.

Our primary goals for the remainder of fiscal 2013 are to grow revenue and improve our operating margin percentage by delivering our market-leading products and solutions to our customers and investing in product functionality and new product lines, including suites offerings. However, there can be no assurance that we will achieve our financial goals and improve our financial results. Additionally, we believe that unemployment rates and the availability of credit to major industries we serve are important indicators for our business; if global economic conditions deteriorate we may not achieve our financial goals.

Revenue from flagship products was 57% of total net revenue during the three months ended April 30, 2012 and increased 4% for the three months ended April 30, 2012, as compared to the same period in the prior fiscal year. Revenue from suites was 28% of total net revenue for the three months ended April 30, 2012, and increased 34% as compared to the same period in the prior fiscal year. Suites revenue and growth rates for suites consist primarily of revenue from our pre-existing suite families, such as Inventor and Revit suites. Revenue from new and adjacent products was 15% of total net revenue during the three months ended April 30, 2012 and increased 9% as compared to the same period in the prior fiscal year. We anticipate, as our new and existing customers migrate from our stand-alone products, that our revenue from suites will increase as a percentage of revenue and that our revenue from our flagship and new and adjacent products will decline as a percentage of revenue.


26



At April 30, 2012, we had $1,796.1 million in cash and marketable securities. We completed the quarter ended April 30, 2012 with a higher deferred revenue balance and a lower accounts receivable balance as compared to the fiscal year ended January 31, 2012. Deferred revenue at April 30, 2012 was $726.9 million. Deferred revenue consists primarily of deferred maintenance revenue. To a lesser extent, deferred revenue consists of deferred license and other revenue derived from collaborative project management services, consulting services and deferred license sales. We repurchased 2.5 million shares of our common stock for $99.2 million during the three months ended April 30, 2012. Comparatively, we repurchased 1.7 million shares of our common stock for $68.6 million during the three months ended April 30, 2011.

Results of Operations

Net Revenue

 
Three Months Ended April 30, 2012
 
Increase/(Decrease) compared to
prior fiscal year
 
Three Months Ended April 30, 2011
(in millions)
$    
 
%    
 
Net Revenue:
 
 
 
 
 
 
 
License and other
$
361.0

 
$
38.0

 
12
 %
 
$
323.0

Maintenance
227.6

 
22.3

 
11
 %
 
205.3

 
$
588.6

 
$
60.3

 
11
 %
 
$
528.3

Net Revenue by Geographic Area:
 
 
 
 
 
 
 
Americas
$
207.6

 
$
26.2

 
14
 %
 
$
181.4

Europe, Middle East and Africa
224.4

 
9.4

 
4
 %
 
215.0

Asia Pacific
156.6

 
24.7

 
19
 %
 
131.9

 
$
588.6

 
$
60.3

 
11
 %
 
$
528.3

Net Revenue by Operating Segment:
 
 
 
 
 
 
 
Platform Solutions and Emerging Business
$
229.0

 
$
18.5

 
9
 %
 
$
210.5

Architecture, Engineering and Construction
163.4

 
22.0

 
16
 %
 
141.4

Manufacturing
145.7

 
22.5

 
18
 %
 
123.2

Media and Entertainment
50.5

 
(2.7
)
 
(5
)%
 
53.2

 
$
588.6

 
$
60.3

 
11
 %
 
$
528.3


License and Other Revenue

License and other revenue is comprised of two components: all forms of product license revenue and other revenue. Product license revenue includes revenue from the sale of new seat licenses and upgrades. Other revenue consists of revenue from Creative Finishing, consulting and training services and hosted technology solutions.

Total license and other revenue increased 12% during the three months ended April 30, 2012, as compared to the three months ended April 30, 2011. This increase was primarily due to the 19% increase in revenue from commercial new seat licenses during the three months as compared to the same period in the prior fiscal year. During the three months ended April 30, 2012, 13 percentage points of the 19% increase in commercial new seat licenses was due to the increase in the number of seats sold and 6 percentage points was due to an increase in the average net revenue per seat. Commercial new seat license revenue, as a percentage of license and other revenue, was 72% and 67% for the three months ended April 30, 2012 and 2011, respectively.

The increase in license and other revenue during the three months ended April 30, 2012, as compared to the same periods in the prior fiscal year, was partially offset by the 11% decrease in upgrade revenue. Upgrade revenue was lower during the three months ended April 30, 2012, as compared to the same period of the prior fiscal year, primarily due to an ACAD LT upgrade promotion run during the three months ended April 30, 2011.

Backlog related to current software license product orders that had not shipped at the end of the quarter decreased by $20.7 million during the three months ended April 30, 2012 from $27.1 million at January 31, 2012 to $6.4 million at April 30, 2012. Backlog from current software license product orders that we have not yet shipped consists of orders for currently available licensed software products from customers with approved credit status and may include orders with current ship dates

27



and orders with ship dates beyond the current fiscal period.

Revenue from the sales of our services, training and support, included in “License and other revenue,” represented less than 3% of total net revenue for all periods presented.

Maintenance Revenue

Our maintenance revenue relates to a program known by our user community as the Subscription Program. Our maintenance program provides our commercial and educational customers with a cost effective and predictable budgetary option to obtain the productivity benefits of our new releases and enhancements when and if released during the term of their contracts. Under our maintenance program, customers are eligible to receive unspecified upgrades when and if available, downloadable training courses and online support. We recognize maintenance revenue ratably over the maintenance contract periods.

Maintenance revenue increased 11% during the three months ended April 30, 2012, as compared to the three months ended April 30, 2011, primarily due to an 11% increase in commercial maintenance revenue. The 11% increase in commercial maintenance revenue was due to a 15 percentage point increase from commercial enrollment during the corresponding maintenance contract term and a 4 percentage point decrease from net revenue per maintenance seat. Commercial maintenance revenue represented 98% of maintenance revenue for both the three months ended April 30, 2012 and 2011, respectively.

Changes in maintenance revenue lag changes in net billings for maintenance contracts because we recognize the revenue from those contracts ratably over their contract terms. Our maintenance contracts are for a term of predominantly one year, but may be two or three years, or occasionally as long as five year terms. Net maintenance billings increased 1% during the three months ended April 30, 2012 as compared to the three months ended April 30, 2011. Net maintenance billings experienced low growth primarily due to maintenance billings weakness in the EMEA geography and the M&E business segment and early maintenance renewal activity in the fourth quarter of fiscal 2012, primarily in EMEA.

Our deferred revenue balance at April 30, 2012 and January 31, 2012 included $647.8 million and $633.3 million, respectively, related to customer maintenance contracts, which will be recognized as revenue ratably over the life of the contracts. Our maintenance contracts are for a term of predominantly one