Autodesk 2005 Annual Report Download - page 42

The increase of $9.9 million between fiscal years 2005 and 2004 was due primarily to approximately $7.8
million of higher bonus accruals and benefits based on financial performance, $2.4 million of stock compensation
expense incurred in connection with the change in employment status of a senior executive officer, offset in
part by a reduction in IT-related expenses and headcount reductions due to restructuring efforts. In addition,
general and administrative expenses for fiscal 2004 included the effects of a $2.5 million reversal of a litigation
accrual related to the Spatial matter (see Note 5, “Commitments and Contingencies,” in the Notes to
Consolidated Financial Statements for further discussion). During fiscal 2005, we incurred significant incremental
costs related to our assessment of internal control over financial reporting as required by the Sarbanes-Oxley
Act of 2002 (“SOX”) for fiscal 2005. We estimate that we incurred approximately $6.0 million during fiscal 2005
and approximately $0.4 million in fiscal 2004 which include external consulting and auditing fees and internal
employee costs. We expect that general and administrative expense, as a percentage of net revenues, will
continue to be significant in future periods due to on-going costs related to SOX compliance.
The increase of $11.1 million between fiscal years 2004 and 2003 was due primarily to higher bonus accruals
based on the year’s financial performance offset in part by the reversal of the Spatial legal accrual established
in fiscal 2003.
In future periods, we expect general and administrative expenses to increase, in absolute dollars, as a result
of the impact of expensing employee stock-based compensation as required under SFAS 123R.
Restructuring Charges
Increase
compared to
prior
fiscal year
Decrease
compared to
prior
fiscal year
Fiscal 2005 $ percent Fiscal 2004 $ percent Fiscal 2003
(in millions)
Restructuring .......................... $26.7 $23.5 734% $3.2 $(22.7) (88)% $25.9
During the fourth quarter of fiscal 2004, the Board of Directors approved a restructuring plan involving the
elimination of employee positions and the closure of a number of offices worldwide originally having a total
expected cost of $37.0 million. This plan, which we refer to as the fiscal 2004 restructuring plan, was designed
to improve efficiencies across the organization, reduce operating expense levels to help achieve our targeted
operating margins and redirect resources to product development, sales development and other critical areas.
As a result of the restructuring activities completed during the fourth quarter of fiscal 2004 and throughout fiscal
2005 and through attrition, we achieved our targeted efficiencies with a lower level of involuntary terminations
than originally anticipated; consequently, the total charges under the fiscal 2004 restructuring plan, completed
by the end offiscal 2005, were $27.5million, rather than the $37.0 million estimate noted above.Ofthe $27.5 million,
approximately $23.4 million related to involuntary employee termination costs and approximately $4.0 million
related to office closure costs. As a result of the fiscal 2004 restructuring plan, we expect to realize pretax savings
of approximately $9.3 million per quarter, resulting in an annual savings of approximately $37.0 million to be
reflected across each on-going cost and expense line item in the consolidated statements of income. However,
a portion of these savings are being used to fund various growth initiatives in-line with our corporate strategy;
consequently, not all of these savings will directly reduce operating expenses but have helped contain cost
increases across each expense category described above.
During fiscal 2005 we recorded net restructuring charges of $26.7 million, of which $23.7 million related to
the fiscal 2004 restructuring plan. Of this amount, $19.8 million related to employee termination costs for 316
employees worldwide (186 in the United States and 130 outside the United States) and $3.9 million related to
the closure of facilities. Also, we recorded net restructuring charges of approximately $3.0 million related to the
fiscal 2002 restructuring plan for additional office closure costs originally established under the fiscal 2002
restructuring plan. Since the office closures in fiscal 2002, there has been a significant downturn in the
commercial real estate market, particularly in areas of the United Kingdom where some of the offices are located.
As such, Autodesk is unable to either buy-out the remaining lease obligations at favorable amounts or sub-lease
the space at amounts previously estimated.
During fiscal 2004, Autodesk recognized net restructuring charges of $3.2 million, of which $3.8 million
related to the fiscal 2004 restructuring plan, $1.1 million related to additional office closure costs under the fiscal
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