Autodesk 2006 Annual Report Download - page 110

Of these amounts, approximately $7.0 million has been included in Autodesk’s restructuring accruals at
January 31, 2006. Rent expense was $38.0 million in fiscal 2006, $34.2 million in fiscal 2005 and $33.5 million in
fiscal 2004.
Purchase commitments
Autodesk, in the normal course of business, enters intovarious purchase commitments for goods or services.
Total non-cancelable purchase commitments as of January 31, 2006, were approximately $38.5 million for periods
through fiscal 2008. These purchase commitments primarily relate to IT infrastructure costs, marketing costs
and contractual development costs. Purchase commitments also include $15.5 million related to a termination
fee for an outsource application hosting services agreement entered into during fiscal 2006. This fee is reduced
as time lapses during the five-year contract period.
Autodesk has certain royalty commitments associated with the shipment and licensing of certain products.
Royalty expense is generally based ona dollar amount per unit shipped or a percentage of the underlying revenue.
Royalty expense, which was recorded under cost of license and other revenues on Autodesk’s Consolidated
Statements of Income, was approximately $12.1 million, $9.2 million and $8.6 million in fiscal 2006, 2005 and
2004, respectively.
Guarantees and Indemnifications
In the normal course of business, Autodesk provides indemnifications of varying scopes, including limited
product warranties and indemnification of customers against claims of intellectual property infringement made
by third parties arising from the use of its products or services. Autodesk accrues for known warranty and
indemnification issues if a loss is probable and can be reasonably estimated. Historically, costs related to these
warranties and indemnifications have not been significant, but because potential future costs are highly variable,
Autodesk is unable to estimate the maximum potential impact of these indemnities or guarantees on its future
results of operations.
In connection with the purchase, sale or license transactions of assets or businesses with third parties,
Autodesk has entered into or assumed customary indemnity agreements related to the assets or businesses
purchased, sold or licensed. Historically, costs related to these indemnities or guarantees have not been
significant, but because potential future costs are highly variable, Autodesk is unable to estimate the maximum
potential impact of these indemnities or guarantees on its future results of operations.
As permitted under Delaware law, Autodesk has agreementswhereby it indemnifies its officers and directors
for certain events or occurrences while the officer or director is, or was, serving at Autodesk’s request in such
capacity. The maximum potential amount of future payments Autodesk could be required to make under these
indemnification agreements is unlimited; however, Autodesk has Directors’ and Officers’ Liability insurance
coverage that is intended to reduce its financial exposure and may enable Autodesk to recover a portion of any
future amounts paid. Autodesk believes the estimated fair value of these indemnification agreements in excess
of applicable insurance coverage is minimal.
Legal Proceedings
On December 27, 2001, Spatial Corp. (“Spatial”) filed suit in Marin County Superior Court against Autodesk
and one of its consultants, D-Cubed Ltd., seeking among other things, termination of a development and license
agreement between Spatial and Autodesk and an injunction preventing Autodesk from working with contractors
under the agreement. On October 2, 2003, a jury found that Autodesk did not breach the agreement. As the
prevailing party in the action, the court awarded Autodesk approximately $2.4 million for reimbursement of
attorneys’ fees and the costs of trial, whichwas paid during the second quarter of fiscal 2005. Spatial filed a notice
of appeal on December 2, 2003 appealing the decision of the jury. Spatial claims that certain testimony of a
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 7. Commitments and Contingencies (Continued)
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