Autodesk 2004 Annual Report Download - page 65

The valuation allowance increased by $11.9 million in fiscal 2004 and $7.6 million in fiscal 2003, and
decreased by $0.6 million in fiscal 2002. Approximately $21.1 million of the valuation allowance at January 31,
2004 and $9.0 million at January 31, 2003 relates to tax benefits of stock option deductions for fiscal 2004 and
2003 respectively, which will be credited to equity if and when realized.
No provision has been made for federal income taxes on unremitted earnings of certain of Autodesk’s
foreign subsidiaries (cumulatively $144.0 million at January 31, 2004) because Autodesk plans to reinvest
such earnings for the foreseeable future. At January 31, 2004, the unrecognized deferred tax liability for these
earnings was approximately $ 49.0 million.
Realization of the Company’s net deferred tax assets of $17.6 million is dependent upon the Company
generating approximately $46.0 million of future taxable income in appropriate tax jurisdictions to obtain
benefit from the reversal of temporary differences, net operating loss carryforwards and tax credits. The
amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates
of future taxable income are reduced.
Cash refunds for income taxes were approximately $19.3 million in fiscal 2004. Cash payments for
income taxes were approximately $19.3 million in fiscal 2003 and $20.0 million in fiscal 2002.
The Company has $164.2 million of cumulative federal tax loss carryforwards and $12.1 million of
cumulative state tax loss carryforwards, which may be available to reduce future income tax liabilities in
certain jurisdictions. The federal tax loss carryforwards will expire beginning January 31, 2008 through
January 31, 2025. The state tax loss carryforwards will expire beginning January 31, 2006 through January 31,
2015. Autodesk has recorded a valuation allowance against some deferred tax assets including the tax
benefit of certain tax loss carryforwards of acquired companies due to the uncertainty of their realizability.
The Company has $11.5 million of cumulative federal research tax credit carryforwards and $4.1 million
of cumulative state research tax credit carryforwards, which may be available to reduce future income tax
liabilities in the U.S. and California. The federal credit carryforwards will expire beginning January 31, 2019
through January 31, 2025. The state credit carryforwards may reduce future California income tax
liabilities indefinitely.
The Company also has $11.4 million of cumulative foreign tax credit carryforwards, which may be
available to reduce future U.S. tax liabilities. The federal credits will expire beginning January 31, 2009
through January 31, 2010.
As a result of certain employment actions and capital investments undertaken by Autodesk, income
earned in certain countries is subject to reduced tax rates and in some cases is wholly exempt from taxes
for years through fiscal 2009. The income tax benefits attributable to the tax status of these subsidiaries are
estimated to be $0 in fiscal 2004, $0.4 million ($0.00 impact on basic net income per share) in fiscal 2003 and
$4.4 million ($0.04 impact on basic net income per share) in fiscal 2002.
During the fiscal year 2004, the Company recognized an income tax benefit of $19.7 million due to a
favorable resolution of an industry-wide matter surrounding the Company’s Foreign Sales Corporation for
the fiscal years ended 1993 through 1998. In connection with the refund of these tax payments previously
made, the Company received payment and recognized interest income of $4.2 million during fiscal 2004.
During the fourth quarter of fiscal 2004, the statute of limitations lapsed with respect to the fiscal year
ended 2000. As a result of the Company’s resolution of its Internal Revenue Service (“IRS”) audit and closure
for that year, the Company recognized an income tax benefit of approximately $7.0 million for items dealing
primarily with various international tax matters and research and development tax credits.
In fiscal 2003, the Company resolved its IRS audit for the fiscal years ended 1997-1999, and the statute
of limitations lapsed with respect to these years in the fourth quarter of fiscal 2003. The closure of these years
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 4. Income Taxes (Continued)
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