Autodesk 2008 Annual Report Download - page 121

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Our effective tax rate increased by 3% from fiscal 2007 to fiscal 2008. The increase was primarily the result
of a reduction in tax benefits, as a percentage of pre-tax earnings, from the lapse of statute of limitations or audit
closures and the phase-out of extraterritorial income exclusion.
Our effective tax rate increased by 6% from fiscal 2006 to fiscal 2007. The increase was primarily the result
of non-deductible SFAS 123R expense and a reduction in tax benefits, as a percentage of pre-tax earnings, from
the repatriation of certain foreign dividends at a rate lower than the 35% Federal statutory rate under the
American Jobs Creation Act of 2004 (“DRD Legislation”). The DRD Legislation was not available after fiscal
2006.
Our future effective tax rate may be materially impacted by the amount of benefits associated with our
foreign earnings which are taxed at rates different from the Federal statutory rate, research credits, SFAS 123R,
FIN 48, U.S. Manufacturer’s deduction, closure of statute of limitations or settlement of tax audits, and changes
in tax law.
At January 31, 2008, we had net deferred tax assets of $149.4 million. Realization of these assets is
dependent on our ability to generate approximately $408 million of future taxable income in appropriate tax
jurisdictions. We believe that sufficient income will be earned in the future to realize these assets.
For additional information regarding our income tax provision, see Note 3, “Income Taxes,” in the Notes to
Consolidated Financial Statements.
Liquidity and Capital Resources
Our primary source of cash is from the sale of our products. Our primary use of cash is payment of our
operating costs which consist primarily of employee-related expenses, such as compensation and benefits, as well
as general operating expenses for marketing, facilities and overhead costs. In addition to operating expenses, we
also use cash to fund our stock repurchase program and to invest in our growth initiatives, which include business
acquisitions. See further discussion of these items below.
At January 31, 2008, our principal sources of liquidity were cash, cash equivalents and short-term
marketable securities totaling $949.3 million and net accounts receivable of $386.5 million. In addition, we also
have available a U.S. line of credit facility. This line of credit permits unsecured short-term borrowings of up to
$250.0 million, and is available for working capital or other business needs. The credit agreement contains
customary covenants which could restrict liens, certain types of additional debt and dispositions of assets if
Autodesk fails to maintain its financial covenants. Autodesk pays a quarterly commitment fee, ranging between
$62,500 and $156,250, to maintain this facility. This facility expires in August 2012 and there were no
borrowings outstanding at January 31, 2008.
At January 31, 2008, our investment portfolio included auction rate securities with an estimated fair value of
$8.4 million ($9.0 million cost basis). Autodesk’s auction rate securities are variable rate debt instruments that
have underlying securities with contractual maturities greater than ten years and interest rates that are reset at
auction every 28 days. These AAA-rated auction rate securities, which met Autodesk’s investment guidelines at
the time the investments were made, have failed to settle in auctions since August 2007. The failed auctions
resulted in the interest rate on these investments resetting at Libor plus 125 basis points, which represents a
premium interest rate on these investments. At this time, these investments are not currently liquid, and in the
event Autodesk needs to access these funds, the Company will not be able to do so without a loss of principal
unless a future auction on these investments is successful. Autodesk has reduced the carrying value of these
investments by $0.6 million through other comprehensive income or loss to reflect a temporary impairment on
these securities. Currently, Autodesk believes these investments are temporarily impaired, but it is not clear in
what period of time they will be settled. Based on our ability to access our cash and other short-term investments,
our expected operating cash flows and our other sources of cash, the Company has the intention and ability to
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2008 Annua
l Report