Autodesk 2005 Annual Report Download - page 48

Graphics, Inc. (“SGI”). Failure of SGI to deliver products or product upgrades in a timely manner would likely
result in an adverse effect upon our financial results for a given period.
Our operating results fluctuate within each quarter and from quarter to quarter making our future revenues
and operating results difficult to predict.
Our quarterly operating results have fluctuated in the past and are likely to do so in the future. These
fluctuations could cause our stock price to change significantly or experience declines. Some of the factors that
could cause our operating results to fluctuate include the timing of the introduction of new products by us or
our competitors, slowing of momentum in upgrade or maintenance revenue, the adoption of the new accounting
pronouncement, SFAS 123R, that will require us to record compensation expense for shares issued under our stock
plans beginning in the third quarter of fiscal 2006 with a material impact on our results of operations, failure
to achieve anticipated levels of customer acceptance of key new applications, unexpected costs or changes in
marketing or other operating expenses, changes in product pricing or product mix, platform changes, delays in
product releases, failure to convert our 2D customer base to 3D products, distribution channel management,
changes in sales compensation practices, the timing of large systems sales, failure to effectively implement our
copyright legalization programs, especially in developing countries, and general economic or political conditions,
particularly in countries where we derive a significant portion of our net revenues.
We have also experienced fluctuations in operating results in interim periods in certain geographic regions
due to seasonality or regional economic conditions. In particular, our operating results in Europe during the third
quarter are usually affected by a slow summer period, and the Asia/Pacific operations typically experience
seasonal slowing in the third and fourth quarters.
Our operating expenses are based in part on our expectations for future revenues and are relatively fixed
in the short term. Accordingly, any revenue shortfall below expectations could have an immediate and significant
adverse effect on our profitability. Failure to continue to increase operating margins through rigorous cost
controls would negatively affect future profitability. Further, gross margins may be adversely affected if our sales
of AutoCAD LT, upgrades and advanced systems products, which historically have had lower margins, grow at
a faster rate than sales of our higher-margin products.
While we believe we currently have adequate internal control over financial reporting, we are required to evaluate
our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 and any adverse
results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse
effect on our stock price.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), beginning with the Annual
Report on Form 10-K for the fiscal year ended January 31, 2005, we are required to furnish a report by our
management on our internal control over financial reporting. Such report contains, among other matters, an
assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year,
including a statement as to whether or not our internal control over financial reporting is effective. This
assessment must include disclosure of any material weaknesses in our internal control over financial reporting
identified by management. Such report must also contain a statement that our auditors have issued an attestation
report on management’s assessment of such internal controls.
While we have determined in our Management Report on Internal Control over Financial Reporting included
in this Annual Report on Form 10-K, that our internal control over financial reporting is effective as of January 31,
2005, we must continue to monitor and assess our internal control over financial reporting. If our management
identifies one or more material weaknesses in our internal control over financial reporting and such weakness
remains uncorrected at fiscal year end, we will be unable to assert such internal control is effective at fiscal year
end. If we are unable to assert that our internal control over financial reporting is effective at fiscal year end
(or if our auditors are unable to attest that our management’s report is fairly stated or they are unable to express
an opinion on the effectiveness of our internal controls), we could lose investor confidence in the accuracy and
completeness of our financial reports, which would likely have an adverse effect on our business and stock price.
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