Autodesk 2016 Annual Report Download - page 127

2016 Form 10-K 55
Interest and other expense, net, decreased $16.1 million during fiscal 2016, as compared to fiscal 2015, The decrease is
primarily related to non-recurring settlement gains on certain of our privately-held strategic investments and mark-to-mark
gains recognized on the derivative portion on certain of our other privately-held strategic investments during the current fiscal
year. Comparatively, we incurred non-recurring impairment losses on certain of our privately-held strategic investments in the
same periods in the prior fiscal year. This decrease was offset by an increase in interest expense resulting from the June 2015
issuance of $450.0 million aggregate principal amount of 3.125% senior notes due June 15, 2020 and $300.0 million aggregate
principal amount of 4.375% senior notes due June 15, 2025.
Interest and other expense, net, increased $32.8 million during fiscal 2015, as compared to fiscal 2014, primarily due to an
increase in losses on our privately held strategic investments. The increase in the loss on strategic investments during fiscal
2016 as compared to fiscal 2015 is primarily due to other-than-temporary impairments on two of our privately held strategic
investments and losses on the derivative portion of our strategic investments that are marked-to-market each period.
Provision for Income Taxes
We account for income taxes and the related accounts under the liability method. Deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax bases of assets and liabilities, using enacted rates
expected to be in effect during the year in which the basis differences reverse.
Income tax expense was $310.2 million and $1.2 million for fiscal 2016 and 2015, respectively, relative to a pre-tax loss
of $20.3 million and pre-tax income of $83.0 million, respectively, for the same periods. Tax expense for fiscal 2016 consists
primarily of foreign taxes and changes to valuation allowances, including a $230.8 million valuation allowance against the
Company's U.S. federal and remaining state deferred tax assets recorded in the second quarter of fiscal 2016. We regularly
assess the need for a valuation allowance against our deferred tax assets. In making that assessment, we consider both positive
and negative evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized. In
evaluating the need for a valuation allowance, we considered recent cumulative losses in the United States arising from the
Company's business model transition as a significant piece of negative evidence and determined that it was more likely than not
that the federal and state deferred tax assets would not be realized.
Income tax expense was $1.2 million and $51.1 million for fiscal 2015 and 2014, respectively, relative to pre-tax income
of $83.0 million and $279.9 million, respectively, for the same periods. Our effective tax rate was 1% and 18% during fiscal
2015 and 2014, respectively. Our effective tax rate decreased seventeen percentage points from fiscal 2014 to fiscal 2015 due to
an increase in tax benefits from foreign earnings taxed at different rates in fiscal 2015 compared to fiscal 2014, and increased
benefit from research credits, offset in part by lower tax benefits from stock-based compensation.
The Protecting Americans from Tax Hikes (PATH) Act of 2015 enacted on December 18, 2015 extended and made
permanent the federal R&D tax credit. As a result, our income tax provision for Fiscal 2016 includes a tax benefit of $9.4
million which was offset by the valuation allowance against our U.S. deferred tax assets.
Our future effective annual tax rate may be materially impacted by the amount of benefits and charges from tax amounts
associated with our foreign earnings that are taxed at rates different from the federal statutory rate, changes in valuation
allowances, level of profit before tax, accounting for uncertain tax positions, business combinations, closure of statute of
limitations or settlement of tax audits, and changes in tax laws including possible U.S. tax law changes that, if enacted, could
significantly impact how U.S. multinational companies are taxed on foreign subsidiary earnings. A significant amount of our
earnings is generated by our Europe and Asia Pacific subsidiaries. Our future effective tax rates may be adversely affected to
the extent earnings are lower than anticipated in countries where we have lower statutory tax rates or we repatriate certain
foreign earnings on which U.S. taxes have not previously been provided.
At January 31, 2016, we had non-current foreign net deferred tax assets of $9.2 million which management believes are
more likely than not to be realized in future years.
For additional information regarding our income tax provision and reconciliation of our effective rate to the federal
statutory rate of 35%, see Note 4, “Income Taxes,” in the Notes to Consolidated Financial Statements.
2016 Annual Report