Autodesk 2003 Annual Report Download - page 26

subleasing income amounts were calculated by using information provided by third-party real estate brokers and
management judgments and were based on assumptions for each of the real estate markets where the leased
offices were located. Should real estate markets worsen and we are not able to sublease the properties as
expected, we will record additional expenses in the period when such determinations are made. This situation
occurred during fiscal 2002 and 2003 and we therefore recorded additional charges as a result of the inability to
sublease abandoned offices. If the real estate markets subsequently improve, and we are able to sublease the
properties earlier or at more favorable rates than projected, we will reverse some of the underlying restructuring
accruals, which will result in increased net income in the period when such determinations are made.
Legal Contingencies. As described in Item 3. Legal Proceedings and Note 7, Commitments and
Contingencies, in the Notes to the Consolidated Financial Statements, we are periodically involved in various
legal claims and proceedings. We routinely review the status of each significant matter and assess our potential
financial exposure. If the potential loss from any matter is considered probable and the amount can be reasonably
estimated, we record a liability for the estimated loss. During the fourth quarter of fiscal 2003 we recorded a $2.5
million reserve related to the Spatial matter. Because of inherent uncertainties related to these legal matters, we
base our loss reserves on the best information available at the time. As additional information becomes available,
we reassess our potential liability and may revise our estimates. Such revisions could have a material impact on
future quarterly results of operations.
Stock Option Accounting. We do not record compensation expense when stock option grants are awarded
to employees at exercise prices equal to the fair market value of Autodesk common stock on the date of grant.
Had we recorded compensation expense, our net income would have been substantially less. The impact of
expensing employee stock awards is further described in Note 1 in the Notes to Consolidated Financial
Statements.
Recently Issued Accounting Standards
During November 2002, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 45,
“Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB
Interpretation No. 34” (“FIN 45”). FIN 45 elaborates on the existing disclosure requirements for a guarantor in
its interim and annual financial statements about its obligations under guarantees issued. It also clarifies that at
the time a guarantee is issued, the guarantor must recognize an initial liability for the fair value of the obligations
it assumes under the guarantee and must disclose that information in its financial statements. The initial
recognition and measurement provisions apply on a prospective basis to guarantees issued or modified after
December 31, 2002, and the disclosure requirements apply to guarantees outstanding as of December 31, 2002.
We adopted the provisions of FIN 45 effective January 31, 2003. Some of the software licenses we grant contain
provisions that indemnify licensees of our software from damages and costs resulting from claims alleging that
our software infringes the intellectual property rights of a third party. We have historically received only a
limited number of requests for indemnification under these provisions and have not been required to make
material payments pursuant to these provisions. Accordingly, we have not recorded a liability related to these
indemnification provisions.
Overview of Fiscal 2003 Results of Operations
(in thousands)
For the year ended
January 31, 2003
Asa%of
Net Revenues
For the year ended
January 31, 2002
Asa%of
Net Revenues
NetRevenues ........................... $824,945 100% $947,491 100%
Costofrevenues ..................... 140,162 17% 151,203 16%
Operating expenses ................... 633,635 77% 643,581 68%
Amortization of goodwill and
purchased intangibles ............... 299 — 20,903 2%
Restructuring and other ............... 25,887 3% 33,630 4%
Income from Operations ................... $ 24,962 3% $ 98,174 10%
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