Autodesk 2005 Annual Report Download - page 46

business. For further discussion of the Dividends Received Deduction Legislation, see Note 4, “Income Taxes”,
in the Notes to Consolidated Financial Statements. In addition, $14.3 million of our marketable securities at
January 31, 2005 are reserved for deferred compensation.
Our international operations are subject to currency fluctuations. To minimize the impact of these
fluctuations, we use foreign currency option contracts to hedge our exposure on anticipated transactions and
forward contracts to hedge our exposure on firm commitments, primarily certain receivables and payables
denominated in foreign currencies. Our foreign currency instruments, by policy, have maturities of less than three
months and settle before the end of each quarterly period. The principal currencies hedged during fiscal 2005
were the euro, Swiss franc, Canadian dollar, British pound and Japanese yen. We monitor our foreign exchange
exposures to ensure the overall effectiveness of our foreign currency hedge positions.
Contractual Obligations
The following table summarizes our significant financial contractual obligations at January 31, 2005 and the
effect such obligations are expected to have on our liquidity and cash flows in future periods. This table excludes
amounts already recorded on our balance sheet as current liabilities at January 31, 2005.
Payments due by period
Total FY 2006 FY 2007–2008 FY 2009–2010 Thereafter
(in millions)
Operating lease obligations ......... $109.4 $31.8 $ 37.1 $17.9 $22.6
Purchase obligations ................. 21.7 15.7 6.0 — —
Total (1) ......................... $ 131.1 $47.5 $43.1 $17.9 $22.6
(1) Total does not include contractual obligations recorded on the balance sheet or certain purchase obligations
as discussed below.
For the purposes of this table, contractual obligations for purchase of goods or services are defined as
agreements that are enforceable and legally binding on Autodesk and that specify all significant terms, including:
fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate
timing of the transaction. Purchase orders or contracts for the purchase of supplies, services and other goods
and services are not included in the table above. We are not able to determine the aggregate amount of such
purchase orders that represent contractual obligations, as purchase orders may represent authorizations to
purchase rather than binding agreements. Our purchase orders are based on our current procurement or
development needs and are fulfilled by our vendors within short time horizons. We do not have significant
agreements for the purchase of supplies, services or other goods specifying minimum quantities or set prices
that exceed our expected requirements for three months. We also enter into contracts for outsourced services;
however in most instances, the obligations under these contracts were not significant and the contracts contain
clauses allowing for cancellation without significant penalty. In addition, we have certain software royalty
commitments associated with the shipment and licensing of certain products. Royalty expense is generally based
on the number of units shipped or a percentage of the underlying revenue. Royalty expense, included in cost
of license and other revenues, was $9.2 million, $8.6 million and $7.6 million in fiscal 2005, 2004 and 2003,
respectively.
Principal commitments at January 31, 2005, consisted of obligations under operating leases for facilities and
computer equipment, IT infrastructure costs, marketing costs, contractual development costs and certain capital
expenditures related to the purchase and implementation of customer information and support management
software and services.
The expected timing of payment of the obligations discussed above is estimated based on current
information. Timing of payments and actual amounts paid may be different depending on the time of receipt
of goods or services or changes to agreed-upon amounts for some obligations.
We provide indemnifications ofvarying scopes and certain guarantees, including limited product warranties.
Historically, costs related to these warranties and indemnifications have not been significant, but because
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