Autodesk 2000 Annual Report Download - page 24

23
Autodesk, Inc. FY 00
and development projects due to changes in techno-
logical and market requirements. As a result of these
factors, Discreet missed market opportunities and
anticipates greater uncertainty regarding future reve-
nue levels, than originally forecasted.
Denim Software L.L.C.(“Denim”)
On June 12,1997, Discreet acquired substantially all of
the assets and assumed certain liabilities of Denim
pursuant to the terms of an asset purchase agreement.
The purchased assets consisted primarily of Denim
software products, including ILLUMINAIRE Paint,
ILLUMINAIRE Composition and ILLUMINAIRE Studio
and related know-how and goodwill. The aggregate
purchase price of $12.2 million consisted primarily of
a cash payment of $9.1 million and the assumption
of $2.2 million of liabilities.
Of the $12.2 million purchase price, $2.2 million was
allocated to IPR&D and was expensed in fiscal 1998;
$1.5 million was allocated to an intangible asset, pur-
chased technology; and $7.9 million was allocated
to goodwill.
As of the acquisition date, the in-process research and
development project involved next generation Denim
technology, which was 24 percent complete at the
time with an estimated cost to complete the project of
$1.0 million. The project was later completed and the
product was released in fiscal 2000 at an aggregate
amount approximately equal to the original estimated
costs to complete.
In valuing the developed and in-process technolo-
gies, Discreet 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 5-year period.The projected
financial results were discounted using a 20 percent
rate for the developed technology and a 25 percent rate
for the in-process technology.
The revenue projections for the developed tech-
nologies, which considered the release dates of new
products, assumed a gradual decline over the 5-year
period. The revenue projections for the IPR&D were
based on expected trends in technology and the
timing of new product introductions by Discreet.
Discreet believed that the assumptions used in the
valuations were reasonable at the time of the acqui-
sition. Actual results to date, however, have been
lower than forecasted due to the following factors:
(1) unanticipated delays in the integration of the
Denim product into Discreet’s corporate branding ini-
tiatives, resulting in a longer than anticipated period
of reduced marketing effort; (2) slow progress in the
development of a distribution channel; (3) delays in
the realization of synergies from fully integrated
products based on the Denim technology due to delays
in the integration of this technology; and (4) delays in
completing research and development projects due
to changes in technological and market requirements
for digital video systems. As a result of these factors,
Discreet missed market opportunities and anticipates
greater uncertainty regarding future revenue levels
than originally forecasted.
Recently Issued Accounting Standards
Autodesk has until fiscal year 2002 to adopt the provi-
sions of Statement of Financial Accounting Standards
No. 133, “Accounting for Derivative Instruments and
Hedging Activities,” or SFAS 133, which was issued in
June 1998.This Statement requires Autodesk to recog-
nize all derivatives on the balance sheet at fair value.
Autodesk is currently evaluating the impact of SFAS
133 on its financial statements and related disclosures.
During the fourth quarter of fiscal 2000, the Staff of
the Securities and Exchange Commission issued two
Staff Accounting Bulletins, involving the accounting
for restructuring charges and revenue recognition.
Management believes that Autodesk’s practices and
policies are in compliance with the Staff Accounting
Bulletins and that the impact will not have a material
effect on Autodesk’s financial position or results
of operations.
Liquidity and Capital Resources
Cash, cash equivalents and marketable securities,
which consist primarily of high-quality municipal
bonds, tax-advantaged money market instruments
and U.S. Treasury bills, totaled $540.9 million at Janu-
ary 31,2000,compared to $428.0 million at January 31,
1999.The $112.9 million increase was due primarily to
cash generated from operations ($103.3 million) and
cash proceeds from the issuance of common stock
($165.2 million). This increase was partially offset by
cash used to acquire VISION ($26.0 million), to repur-
chase shares of Autodesk’s common stock under a
program announced in November, 1999 ($90.1 mil-
lion),to purchase fixed and other assets ($14.9 million),
and to pay dividends ($14.6 million).