Autodesk 2002 Annual Report Download - page 33

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continued ability to grant stock incentive awards. The loss of key employees or inability to recruit new
employees would negatively impact our business. In addition, we may experience increased compensation costs
to attract and retain skilled personnel.
Our business could suffer as a result of risks associated with strategic acquisitions and investments.
We periodically acquire or invest in businesses, software products and technologies that are complementary
to our business through strategic alliances, debt and equity investments, and the like. For example, in April 2002
we acquired Revit. The risks associated with such acquisitions or investments include, among others, the
difficulty of assimilating the operations and personnel of the companies, the failure to realize anticipated
synergies, and the diversion of management’s time and attention. In addition, such investments and acquisitions
may involve significant transaction-related costs. We may not be successful in overcoming such risks and such
investments and acquisitions may negatively impact our business. In addition, such investments and acquisitions
may contribute to potential fluctuations in quarterly results of operations. The fluctuations could arise from
merger-related costs and charges associated with eliminating redundant expenses or write-offs of impaired assets
recorded in connection with acquisitions. These costs or charges could negatively impact results of operations for
a given period or cause lack of a consistent increase quarter to quarter in our operating results.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Foreign currency exchange risk
Our earnings and cash flows are subject to fluctuations due to changes in foreign currency exchange rates.
Our risk management strategy utilizes foreign currency forward and option contracts to manage our foreign
currency exposures that exist as part of our ongoing business operations. Contracts are primarily denominated in
Euro, Swiss francs, Canadian dollars, British pounds and Japanese yen. We do not enter into any foreign
exchange derivative instruments for trading or speculative purposes.
A sensitivity analysis was performed on our hedging portfolio as of January 31, 2002. This analysis
indicated that a hypothetical 10 percent appreciation of the U.S. dollar from January 31, 2002 would increase the
fair value of our forward exchange/option contracts by $7.7 million. Conversely, a hypothetical 10 percent
depreciation of the dollar from January 31, 2002 would decrease the fair value of our forward exchange/option
contracts by $6.4 million. We do not anticipate any material adverse impact to our consolidated financial
position, results of operations or cash flows as a result of these foreign currency forward and option contracts.
Interest rate sensitivity
We had an investment portfolio of fixed income securities, including those classified as security deposits, of
$367.8 million at January 31, 2002. These securities are subject to interest rate fluctuations and will decrease in
market value if interest rates increase.
A sensitivity analysis was performed on our investment portfolio as of January 31, 2002. This sensitivity
analysis is based on a modeling technique that measures the hypothetical market value changes that would result
from a parallel shift in the yield curve of plus 50, plus 100 or plus 150 basis points over 6-month and 12-month
time horizons. For the 6-month time horizon the market value changes for a 50, 100, or 150 basis point increase
were reductions of $1.8 million, $3.6 million and $5.3 million, respectively. For the 12-month time horizon the
market value changes for a 50, 100 or 150 basis point increase were reductions of $1.5 million, $3.1 million and
$4.6 million, respectively.
We do not use derivative financial instruments in our investment portfolio to manage interest rate risk. We
place our investments in instruments that meet high credit quality standards, as specified in our investment policy
guidelines, which limits the amount of credit exposure to any one issue, issuer or type of instrument.
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