Autodesk 2000 Annual Report Download - page 21

20 FY 00 Autodesk, Inc.
interest, partially offset by non-deductible goodwill
amortization. The fiscal 2000 rate is lower than the
fiscal 1999 rate due to a relatively higher impact of
these permanent items. The decrease in the effective
income tax rate in fiscal 1999 compared to fiscal 1998
was due to incremental tax benefits associated with
Autodesk’s foreign earnings, which are taxed at rates
different from the U.S. statutory rate, and a reduction
in the relative impact of amortization of certain intan-
gible assets, partially offset by a reduction of the
benefit from utilization of net operating losses.No tax
benefit was recorded with regard to the nonrecurring
charges incurred in connection with the Discreet and
VISION acquisitions.
Autodesk’s U.S. income tax returns for the fiscal years
ended January 31, 1992 through 1996, have been
examined by the Internal Revenue Service (“IRS”). On
August 27,1997, the IRS issued a Notice for Deficiency
proposing increases to the amount of Autodesk’s
federal income taxes for fiscal 1992 and 1993. On
November 25, 1997, Autodesk filed a petition with the
United States Tax Court to contest these alleged tax
deficiencies. In July 1999, Autodesk made tax pay-
ments with respect to all issues addressed as part of
the IRS audit. As a result, Autodesk has either resolved
all matters or made prepayments with respect to
remaining outstanding issues for the tax years ended
January 31, 1992 through 1996. The resolution of any
remaining adjustments that may ultimately result
from these examinations are not expected to have a
material adverse impact on Autodesk’s consolidated
results of operations or its financial position.
Business Combinations
In addition to the acquisition of Discreet,the following
acquisitions occurred over the past three years.
VISION
On April 22, 1999,Autodesk acquired VISION, a vendor
of enterprise automated mapping/facilities manage-
ment/geographic information systems (AM/FM/GIS)
solutions. 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 technological feasibility and had
no alternative future use, and as such, was expensed
during fiscal 2000. Of the remaining purchase price,
$17.6 million and $2.1 million were allocated to good-
will and other intangibles, respectively.
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 at an aggregate cost to complete of
$1.4 million, are expected to be introduced in fiscal
2001. At January 31, 2000, the estimated cost to com-
plete both projects was less than $0.2 million.
In valuing the developed and in-process technologies
at the acquisition date, Autodesk 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
technology,were based on expectations for VISION on
a stand-alone basis and excluded any special syner-
gistic benefits that Autodesk expected to achieve after
the acquisition.
The revenue projections for the developed tech-
nologies, which considered the release dates of new
products,assumed a gradual decline.The revenue pro-
jections for the IPR&D were based on expected trends
in technology and the timing of new product intro-
ductions by Autodesk.
Genius
On May 4, 1998, Autodesk entered into an agreement
with Genius, a German limited liability company, to
purchase various mechanical CAD software applica-
tions and technologies. Autodesk 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 intan-
gible 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
features and functionality that currently resides in
(1) Genius AutoCAD and AutoCAD LT, (2) Genius
Desktop, (3) Genius Vario and (4) Genius Modules
product families.The research and development proj-
ects were in varying stages of completion, ranging
from 20 percent to 45 percent complete as of the
acquisition date,with total estimated costs of $1.5 mil-
lion to reach technological feasibility at the time.The
in-process projects were completed in fiscal 2000, at
an aggregate amount approximately equal to the
original estimated costs to complete.