Autodesk 2001 Annual Report Download - page 24

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Autodesk, Inc. FY 01
results of operations of RedSpark are consolidated and
included within the operating expense categories of our
statement of operations.We expect to continue to consol-
idate RedSpark through most of fiscal 2002. The extent of
our exposure to RedSpark’s results of operations is
dependent upon our future level of ownership interest,
which will depend in part on the amount of RedSpark
equity issued to other investors in the future. For addi-
tional information regarding RedSpark, see Note 6.
Minority Interest—RedSpark, Inc. in the Notes to
Consolidated Financial Statements.
Business Combinations
Discreet
In March 1999, we acquired Discreet in a business combi-
nation accounted for as a pooling of interests. The
transaction resulted in the issuance of an aggregate of
approximately 10.0 million shares of Autodesk common
stock in exchange for Discreet’s outstanding common
stock. Accordingly, all prior period consolidated financial
statements presented were restated to include the com-
bined results of operations of Discreet as though it had
always been a part of Autodesk.
Prior to the acquisition, Discreet’s fiscal year ended on
June 30. As a result of differing year-ends, our consoli-
dated statements of operations, stockholders’
equity and cash flows for the fiscal years ended January
31, 1999 were combined with Discreet’s financial state-
ments for the twelve months ended December 31, 1998.
In addition, Discreet’s January 1999 results have been
excluded from the consolidated statement of operations
as a result of changing Discreet’s year-end to January 31.In
January 1999, Discreet recognized net revenues of
$3.8 million and incurred a net loss of $5.0 million. This
loss was recorded as an adjustment to retained earnings
during fiscal 2000.
VISION
On April 22, 1999, we acquired VISION, a vendor of enter-
prise automated mapping/facilities management/
geographic information systems (AM/FM/GIS) solutions.
At the time, Autodesk viewed the acquisition as a unique
opportunity to obtain server technology and an imple-
mentation service business that would allow Autodesk to
enter the enterprise market and market both VISION’s and
Autodesk’s products to all levels within an organization. Of
the $26.0 million purchase price, which was paid in cash,
$3.3 million represented the value of in-process research
and development (“IPR&D”) that had not yet reached tech-
nological feasibility and had no alternative future use, and
as such, was expensed during fiscal 2000.Of the remaining
purchase price, $17.6 million was allocated to goodwill
and $2.1 million was allocated to other intangibles.
As of the acquisition date, the IPR&D consisted of the
development of two products, VISION 5.3, which was 60
percent complete at the time, and VISION Electric 2.3,
which was 39 percent complete. Both projects, which were
originally expected to be completed in late fiscal 2000,
have already been released. The projects were completed
at an amount approximately equal to the original estimate
of $1.4 million.
In valuing the developed and in-process technologies at
the acquisition date, we used a discounted cash flow
analysis based on projected net revenues, cost of
revenues, operating expenses and income taxes
resulting from such technologies over a 4-year
period. The projected financial results, which were dis-
counted using a 20 percent rate for the developed
technology and a 25 percent rate for the in-process tech-
nology,were based on expectations for VISION
o n a stand-alone basis and excluded any synergistic
benefits that we expected to achieve after the acquisition.
The revenue projections for the developed technologies,
which considered the release dates of new products,
assumed a gradual decline. We based the revenue projec-
tions for the IPR&D on expected trends in technology and
the timing of our new product introductions.
Although actual financial results to date have been lower
than originally forecasted, Autodesk has successfully inte-
grated the VISION technology with new applications and
products that are expected to be released in fiscal 2002.
Genius
On May 4, 1998, we entered into an agreement with Genius,
a German limited liability company, to purchase various
mechanical CAD software applications and technologies.We
accounted for this acquisition under the purchase method
of accounting. Of the total purchase price of $68.9 million,
which was paid in cash, $13.1 million was allocated to IPR&D
and was expensed; $12.7 million was allocated to an intangi-
ble asset, purchased technology; and $41.6 million was
allocated to goodwill.
As of the acquisition date, Genius had initiated the
research and development effort related to product fea-
tures and functionality that currently resides in
mechanical products such as AutoCAD Mechanical,
Autodesk Inventor and to a lesser degree Mechanical
Desktop. The research and development projects were in
varying stages of completion, ranging from 20 percent to