Autodesk 2004 Annual Report Download - page 38

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of $4.0 million per quarter. These pretax savings have been reflected in each on-going cost and expense line
in the consolidated statements of income. Both the pretax and cash flow savings were re-invested in other
parts of the business.
For additional information regarding the restructuring and other charges recorded over the past three
fiscal years, see Note 11, “Restructuring and Other”, in the Notes to Consolidated Financial Statements.
Interest and Other Income
The following table sets forth the components of interest and other income, net (in millions):
2004 2003 2002
Interest and investment income ......................... $10.4 $ 9.4 $14.1
Gains (losses) on foreign currency transactions .......... 3.3 1.7 (0.4)
Minority interest in net loss of RedSpark ................. — — 2.7
Write-downs of cost method investments ............... (0.6) (3.4) (2.9)
Realized gains on sales of marketable securities ......... 1.6 2.1 2.8
Other ...................................................... 2.3 3.7 2.8
$17.0 $13.5 $19.1
Interest and investment income increased $1.0 million during fiscal 2004 as compared to fiscal 2003
primarily due to $4.2 million of interest income related to a one time tax benefit realized during the second
quarter of fiscal 2004 resulting from the favorable resolution with the IRS of an industry-wide issue regarding
Foreign Sales Corporations, partially offset by continued declining interest rates on the investment of cash
and marketable securities balances.
Investment income decreased between fiscal 2003 and 2002 primarily due to a trend of declining
interest rates on the investment of cash and marketable securities balances. Investment income fluctuates
based on average cash and marketable securities balances, average maturities and interest rates.
Gain on disposal of affiliate
During the third quarter of fiscal 2002 we recognized a one-time non-cash gain of $9.5 million related
to the dissolution of RedSpark. Because we owned greater than 50% of the voting stock, we had been
consolidating RedSpark’s operating losses since RedSpark was formed in April 2000. RedSpark’s expenses,
which were primarily research and development related, were included within the operating expense
categories of our consolidated statements of income. The gain, which resulted from the reversal of the
minority interest liability balance, represents the reversal of cumulative losses recognized in excess of the
$3.2 million we originally invested.
Provision for income taxes
Absent the impact of the non-recurring tax benefits from the resolution of a Foreign Sales Corporation
(“FSC”) issue and the Internal Revenue Service (“IRS”) audit resolution for fiscal 2000, described below, our
effective income tax rate was 24% in fiscal 2004, 27% in fiscal 2003 (absent the impact of the non-recurring
tax benefit from the IRS audit resolution for fiscal 1997-1999) and 30% in fiscal 2002 (absent the impact of
the gain on disposal of an affiliate). The effective tax rate for fiscal 2004 is less than the federal statutory rate
of 35% due to the extraterritorial income exclusion (“ETI”), research credits and tax-exempt interest. The fiscal
2004 tax rate was lower than the fiscal 2003 and 2002 tax rates due to a relatively higher impact of these items
offset by benefits associated with our foreign earnings which are taxed at rates different from the federal
statutory rate in the prior years.
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, ETI, research credits, tax-
exempt interest and changes in the tax law. We currently believe that our fiscal 2005 effective tax rate will
approximate 24% subject to any material changes related to our foreign earnings which are taxed at rates
different from the federal statutory rate, ETI, research credits, tax-exempt interest and changes in the tax law.
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