NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2018
(Tables in millions of dollars, except per share data, unless otherwise indicated)
1
.
Business and Summary of Significant Accounting Policies
Business
Autodesk, Inc. (“Autodesk” or the “Company”) is a world leading design software and services company, offering customers productive business solutions through powerful technology products and services. The Company serves customers in the architecture, engineering, and construction; manufacturing; and digital media, consumer, and entertainment industries. The Company’s sophisticated software products, offered through a hybrid of desktop and cloud functionality, enable its customers to experience their ideas before they are real by allowing them to imagine, design, and create their ideas and to visualize, simulate, and analyze real-world performance early in the design process by creating digital prototypes. These capabilities allow Autodesk’s customers to foster innovation, optimize and improve their designs, help save time and money, improve quality, and collaborate with others. Autodesk software products are sold globally, both directly to customers and through a network of resellers and distributors.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Autodesk and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.
Change in Presentation
During the first quarter of fiscal 2018, the Company changed its historical presentation of its revenue and cost of revenue categories. Previously, the Company presented revenue and cost of revenue on two lines: subscription, and license and other. Included within subscription was maintenance revenue for all of the Company's software products and revenue for the Company's cloud service offerings. License and other revenue included product license revenue, standalone consulting services, and other immaterial items. Also, included within license and other revenue was an allocation of the estimated value of the software license from the Company's term-based product subscriptions and enterprise offerings, which contain a software license, maintenance and cloud services. For these arrangements, as there is no vendor-specific-objective evidence ("VSOE") for the related maintenance, the arrangement consideration was allocated between the license and maintenance deliverables based on best estimated selling prices in our consolidated statements of operations. The Company performed the allocation because it provided a meaningful presentation to investors based on the Company's then current product mix.
As part of the Company's technological and business model transition, the Company discontinued the sale of most of its perpetual licenses, transitioning away from selling a mix of perpetual licenses and term-based product subscriptions to a single subscription model involving a combined hybrid offering of desktop software and cloud functionality, which provides a device-independent, collaborative design workflow for designers and their stakeholders. Fiscal 2018 marks the first full year in the Company's history that it sold substantially all term-based product subscriptions. To better reflect this shift in its business, the Company adopted a revised presentation in the first quarter of fiscal 2018, including the separation of subscription revenue and maintenance revenue on distinct line items on the Company's consolidated statement of operations.
Subscription revenue now consists of our term-based product subscriptions, cloud service offerings, and flexible enterprise business arrangements. Note that with the change in presentation of revenue in the Company’s consolidated statement of operations in fiscal 2018, term-based product subscriptions and flexible enterprise business arrangements are classified and presented in a single line item.
Maintenance revenue is presented as a separate line item in the new presentation and consists of revenue from the Company's existing maintenance plan agreements and related renewals.
License and other revenue will continue to be presented as a separate line item and include any residual perpetual licenses sold, standalone consulting services, and other immaterial items.
In connection with these revisions, the Company also revised its cost of revenue classification to present cost of subscription and maintenance revenue and amortization of developed technology separately. Cost of license and other revenue will continue to be presented as a separate line item. This change in presentation does not affect the Company's total net revenues, total cost of net revenues or overall gross margin. The following table shows reclassified amounts to conform to the periods' presentation:
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Fiscal Year Ended January 31, 2017
|
|
Fiscal Year Ended January 31, 2016
|
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Previously Reported
|
|
Change in Presentation Reclassification
|
|
Current Presentation
|
|
Previously Reported
|
|
Change in Presentation Reclassification
|
|
Current Presentation
|
Net revenue:
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|
|
|
|
|
|
|
|
Maintenance (1)
|
N/A
|
|
$
|
1,103.1
|
|
|
$
|
1,103.1
|
|
|
N/A
|
|
$
|
1,152.5
|
|
|
$
|
1,152.5
|
|
Subscription
|
$
|
1,290.0
|
|
|
(846.9
|
)
|
|
443.1
|
|
|
$
|
1,277.2
|
|
|
(1,049.1
|
)
|
|
228.1
|
|
License and other
|
741.0
|
|
|
(256.2
|
)
|
|
484.8
|
|
|
1,226.9
|
|
|
(103.4
|
)
|
|
1,123.5
|
|
Total
|
$
|
2,031.0
|
|
|
$
|
—
|
|
|
$
|
2,031.0
|
|
|
$
|
2,504.1
|
|
|
$
|
—
|
|
|
$
|
2,504.1
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Cost of revenue:
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Maintenance and subscription (2)
|
$
|
151.3
|
|
|
$
|
40.4
|
|
|
$
|
191.7
|
|
|
$
|
156.1
|
|
|
$
|
6.2
|
|
|
$
|
162.3
|
|
License and other
|
190.6
|
|
|
(80.4
|
)
|
|
110.2
|
|
|
214.6
|
|
|
(55.2
|
)
|
|
159.4
|
|
Amortization of developed technology (1)
|
N/A
|
|
40.0
|
|
|
40.0
|
|
N/A
|
|
49.0
|
|
|
49.0
|
Total
|
$
|
341.9
|
|
|
$
|
—
|
|
|
$
|
341.9
|
|
|
$
|
370.7
|
|
|
$
|
—
|
|
|
$
|
370.7
|
|
_______________
(1) These lines were not previously reported in the Consolidated Statement of Operations.
(2) Previously, titled "Subscription."
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in Autodesk’s consolidated financial statements and notes thereto. These estimates are based on information available as of the date of the consolidated financial statements. On a regular basis, management evaluates these estimates and assumptions. Actual results may differ materially from these estimates.
Examples of significant estimates and assumptions made by management involve the determination of the fair value of acquired assets and liabilities, goodwill, financial instruments including strategic investments, long-lived assets and other intangible assets, the realizability of deferred tax assets, and the fair value of stock awards. The Company also makes assumptions, judgments, and estimates in determining the accruals for uncertain tax positions, provisional estimates associated with the December 22, 2017 enactment of the U.S. Tax Cuts and Jobs Act ("Tax Act"), variable compensation, partner incentive programs, product returns reserves, allowances for doubtful accounts, asset retirement obligations, and legal contingencies.
Foreign Currency Translation and Transactions
The assets and liabilities of Autodesk’s foreign subsidiaries are translated from their respective functional currencies into U.S. dollars at the rates in effect at the balance sheet date, and revenue and expense amounts are translated at exchange rates that approximate those rates in effect during the period in which the underlying transactions occur. Foreign currency translation adjustments are recorded as other comprehensive (loss) income.
Gains and losses realized from foreign currency transactions, those transactions denominated in currencies other than the foreign subsidiary’s functional currency, are included in interest and other income, net. Monetary assets and liabilities are remeasured using foreign currency exchange rates at the end of the period, and non-monetary assets are remeasured based on historical exchange rates.
Derivative Financial Instruments
Autodesk accounts for its derivative instruments as either assets or liabilities on the balance sheet and carries them at fair value. Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting. Derivatives that do not qualify for hedge accounting are adjusted to fair value through earnings. See Note
2
, "
Financial Instruments
" for information regarding Autodesk's hedging activities.
Cash and Cash Equivalents
Autodesk considers all highly liquid investments with insignificant interest rate risk and remaining maturities of three months or less at the date of purchase to be cash equivalents. Cash equivalents are recorded at cost, which approximates fair value.
Marketable Securities and Privately Held Company Investments
Marketable securities are stated at fair value. Marketable securities maturing within one year that are not restricted are classified as current assets. Substantially all marketable debt and equity investments held by Autodesk are classified as current based on the nature of the investments and their availability for use in current operations.
Autodesk determines the appropriate classification of its marketable securities at the time of purchase and re-evaluates such classification as of each balance sheet date. Autodesk carries all “available-for-sale securities” at fair value, with unrealized gains and losses, net of tax, reported in stockholders’ equity (deficit) until disposition or maturity. Autodesk carries all “trading securities” at fair value, with unrealized gains and losses, recorded in “Interest and other income, net” in the Company’s Consolidated Statements of Operations. The cost of securities sold is based on the specific-identification method.
Autodesk regularly invests in non-marketable debt and equity securities of privately held companies. The carrying values of such investments are included in other long-term assets. For the majority of our privately held company investments, we use the cost method of accounting.
All of Autodesk’s marketable securities and privately held company investments are subject to a periodic impairment review. The Company recognizes an impairment charge when a decline in the fair value of its investments below the cost basis is judged to be other-than-temporary. Autodesk considers various factors in determining whether to recognize an impairment charge, including the length of time and extent to which the fair value has been less than Autodesk’s cost basis, the financial condition and near-term prospects of the investee, and Autodesk’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in the market value. For additional information, see “Concentration of Credit Risk” within this Note
1
and Note
2
, “
Financial Instruments
.”
Accounts Receivable, Net
Accounts receivable, net, consisted of the following as of January 31:
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2018
|
|
2017
|
Trade accounts receivable
|
$
|
469.2
|
|
|
$
|
477.5
|
|
Less: Allowance for doubtful accounts
|
(2.3
|
)
|
|
(1.5
|
)
|
Product returns reserve
|
(0.2
|
)
|
|
(0.2
|
)
|
Partner programs and other obligations
|
(28.5
|
)
|
|
(23.5
|
)
|
Accounts receivable, net
|
$
|
438.2
|
|
|
$
|
452.3
|
|
Allowances for uncollectible trade receivables are based upon historical loss patterns, the number of days that billings are past due, and an evaluation of the potential risk of loss associated with problem accounts.
As part of the indirect channel model, Autodesk has a partner incentive program that uses quarterly attainment of monetary rewards to motivate distributors and resellers to achieve mutually agreed upon business goals in a specified time period. A portion of these incentives reduce license and other revenue in the current period. The remainder, which relates to incentives on our Subscription Program, is recorded as a reduction to deferred revenue in the period the subscription transaction is billed and subsequently recognized as a reduction to subscription revenue over the contract period. These incentive balance
s do not require significant assumptions or judgments. Depending on how the payments are made, the reserves associated with the partner incentive program are treated on the balance sheet as either contra account receivable or accounts payable.
Concentration of Credit Risk
Autodesk places its cash, cash equivalents, and marketable securities in highly liquid instruments with, and in the custody of, multiple diversified financial institutions globally with high credit ratings and limits the amounts invested with any one institution, type of security, and issuer.
Autodesk’s primary commercial banking relationship is with Citigroup Inc. and its global affiliates. Citibank, N.A., an affiliate of Citigroup, is one of the lead lenders and an agent in the syndicate of Autodesk’s $
400.0 million
line of credit facility. It is Autodesk’s policy to limit the amounts invested with any one institution by type of security and issuer.
The bank counterparties to the derivative contracts potentially expose Autodesk to credit-related losses in the event of their nonperformance. However, to mitigate that risk, Autodesk only contracts with counterparties who meet the Company's minimum requirements under its counterparty risk assessment process. Autodesk monitors counterparty risk on at least a quarterly basis and will adjust its exposure to various counterparties as necessary. Autodesk generally enters into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. However, Autodesk does not have any master netting arrangements in place with collateral features.
Autodesk’s accounts receivable are derived from sales to a large number of resellers, distributors, and direct customers in the Americas; EMEA; and APAC geographies. Autodesk performs ongoing evaluations of these partners' financial condition and limits the amount of credit extended when deemed necessary, but generally does not require collateral from such parties. Total sales to the Company's largest distributor Tech Data Corporation, and its global affiliates (“Tech Data”), accounted for
31%
,
30%
, and
25%
of Autodesk's net revenue for fiscal years ended
January 31, 2018
,
2017
, and
2016
, respectively. The majority of the net revenue from sales to Tech Data is for sales made outside of the United States. In addition, Tech Data accounted for
31%
and
20%
of trade accounts receivable as of
January 31, 2018
, and
2017
, respectively.
Computer Equipment, Software, Furniture, and Leasehold Improvements, Net
Computer equipment, software, and furniture are depreciated using the straight-line method over the estimated useful lives of the assets, which range from
three
to
five
years. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the lease term. Depreciation expense was $
67.6 million
in fiscal
2018
, $
73.1 million
in fiscal
2017
, and $
60.6 million
in fiscal
2016
.
Computer equipment, software, furniture, leasehold improvements and the related accumulated depreciation at January 31 were as follows:
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2018
|
|
2017
|
Computer hardware, at cost
|
$
|
217.1
|
|
|
$
|
206.1
|
|
Computer software, at cost
|
72.6
|
|
|
73.5
|
|
Leasehold improvements, land and buildings, at cost
|
228.9
|
|
|
206.3
|
|
Furniture and equipment, at cost
|
63.4
|
|
|
58.2
|
|
Computer software, hardware, leasehold improvements, furniture, and equipment, at cost
|
582.0
|
|
|
544.1
|
|
Less: Accumulated depreciation
|
(437.0
|
)
|
|
(385.5
|
)
|
Computer software, hardware, leasehold improvements, furniture, and equipment, net
|
$
|
145.0
|
|
|
$
|
158.6
|
|
Costs incurred for computer software developed or obtained for internal use are capitalized for application development activities, if material, and immediately expensed for preliminary project activities and post-implementation activities. These capitalized costs are amortized over the software’s expected useful life, which is generally
three
years.
Software Development Costs
Software development costs incurred prior to the establishment of technological feasibility are included in research and development expenses. Autodesk defines establishment of technological feasibility as the completion of a working model. Software development costs incurred subsequent to the establishment of technological feasibility through the period of general market availability of the products are capitalized and generally amortized over a three-year period, if material. Autodesk had no material capitalized software development costs at
January 31, 2018
, and
January 31, 2017
.
Other Intangible Assets, Net
Other intangible assets include developed technologies, customer relationships, trade names, patents, user lists and the related accumulated amortization. These assets are shown as “Developed technologies, net” and as part of “Other assets” in the Consolidated Balance Sheet. The majority of Autodesk’s other intangible assets are amortized to expense over the estimated economic life of the product, which ranges from
two
to
ten
years. Amortization expense for developed technologies, customer relationships, trade names, patents, and user lists was $
36.6 million
in fiscal
2018
, $
72.2 million
in fiscal
2017
and $
82.6 million
in fiscal
2016
.
Other intangible assets and related accumulated amortization at January 31 were as follows:
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|
|
|
|
|
|
|
|
2018
|
|
2017
|
Developed technologies, at cost
|
$
|
578.5
|
|
|
$
|
583.6
|
|
Customer relationships, trade names, patents, and user lists, at cost (1)
|
372.5
|
|
|
375.9
|
|
Other intangible assets, at cost (2)
|
951.0
|
|
|
959.5
|
|
Less: Accumulated amortization
|
(895.8
|
)
|
|
(862.0
|
)
|
Other intangible assets, net
|
$
|
55.2
|
|
|
$
|
97.5
|
|
_______________
|
|
(1)
|
Included in “Other assets” in the accompanying Consolidated Balance Sheets.
|
|
|
(2)
|
Includes the effects of foreign currency translation.
|
The weighted average amortization period for developed technologies, customer relationships, trade names, patents, and user lists during fiscal
2018
was
4.9
years. Excluding in-process research and development, expected future amortization expense for developed technologies, customer relationships, trade names, patents, and user lists for each of the fiscal years ended thereafter is as follows:
|
|
|
|
|
|
Fiscal Year ended January 31,
|
2019
|
$
|
28.0
|
|
2020
|
16.1
|
|
2021
|
7.7
|
|
2022
|
3.4
|
|
Thereafter
|
—
|
|
Total
|
$
|
55.2
|
|
Goodwill
Goodwill consists of the excess of the consideration transferred over the fair value of net assets acquired in business combinations. Autodesk tests goodwill for impairment annually in its fourth fiscal quarter or more often if circumstances indicate a potential impairment may exist, or if events have affected the composition of reporting units.
When goodwill is assessed for impairment, Autodesk has the option to perform an assessment of qualitative factors of impairment (“optional assessment”) prior to necessitating a quantitative impairment test. Should the optional assessment be used for any given fiscal year, qualitative factors to consider include cost factors; financial performance; legal, regulatory, contractual, political, business, or other factors; entity specific factors; industry and market considerations, macroeconomic conditions, and other relevant events and factors affecting the reporting unit. If, after assessing the totality of events or
circumstances, it is more likely than not that the fair value of the reporting unit is greater than its carrying value, then performing the quantitative impairment test is unnecessary.
The quantitative impairment test is necessary when either Autodesk does not use the optional assessment or, as a result of the optional assessment, it is not more likely than not that the fair value of the reporting unit is greater than its carrying value.
As described in the "Accounting Standards Adopted" section of Note 1, Autodesk early adopted ASU 2017-04, which simplifies the subsequent measurement of goodwill to eliminate Step 2 from the goodwill impairment test, removing the need to determine the implied fair value of goodwill and comparing it to the carrying amount of that goodwill to measure the impairment loss, if any. In situations in which an entity's reporting unit is publicly traded, the fair value of the Company may be approximated by its market capitalization, in performing the quantitative impairment test.
Goodwill impairment exists when the estimated fair value of goodwill is less than its carrying value. If impairment exists, the carrying value of the goodwill is reduced to fair value through an impairment charge recorded in the Company's statements of operations. The process of evaluating the potential impairment of goodwill is subjective and requires significant judgment at many points during the analysis. The value of Autodesk’s goodwill could also be impacted by future adverse changes such as: (i) declines in Autodesk’s actual financial results, (ii) a sustained decline in Autodesk’s market capitalization, (iii) a significant slowdown in the worldwide economy or the industries Autodesk serves, or (iv) changes in Autodesk’s business strategy.
For the annual impairment test, Autodesk's market capitalization was substantially in excess of the carrying value of the Company as of
January 31, 2018
. Accordingly, Autodesk has determined there was no goodwill impairment during the year ended
January 31, 2018
. In addition, Autodesk did not recognize any goodwill impairment losses in fiscal
2017
or
2016
.
The following table summarizes the changes in the carrying amount of goodwill during the fiscal years ended
January 31, 2018
and
2017
:
|
|
|
|
|
|
|
|
|
|
January 31, 2018
|
|
January 31, 2017
|
Goodwill, beginning of the year
|
$
|
1,710.3
|
|
|
$
|
1,684.2
|
|
Less: accumulated impairment losses, beginning of the year
|
(149.2
|
)
|
|
(149.2
|
)
|
Additions arising from acquisitions during the year
|
—
|
|
|
62.8
|
|
Effect of foreign currency translation, measurement period adjustments, and other (1)
|
59.1
|
|
|
(36.7
|
)
|
Goodwill, end of the year
|
$
|
1,620.2
|
|
|
$
|
1,561.1
|
|
_______________
|
|
(1)
|
Purchase accounting adjustments reflect revisions made to the Company’s preliminary purchase price allocations during fiscal
2018
and
2017
.
|
Impairment of Long-Lived Assets
At least annually or more frequently as circumstances dictate, Autodesk reviews its long-lived assets for impairment whenever impairment indicators exist. Autodesk continually monitors events and changes in circumstances that could indicate the carrying amounts of its long-lived assets may not be recoverable. When such events or changes in circumstances occur, Autodesk assesses recoverability of these assets. Recoverability is measured by comparison of the carrying amounts of the assets to the future undiscounted cash flow the assets are expected to generate. If the long-lived assets are considered to be impaired, the impairment to be recognized is equal to the amount by which the carrying value of the assets exceeds its fair market value. Autodesk did not recognize any material impairments of long-lived assets during the fiscal years ended
January 31, 2018
,
2017
, and
2016
, respectively.
In addition to the recoverability assessments, Autodesk routinely reviews the remaining estimated useful lives of its long-lived assets. Any reduction in the useful life assumption will result in increased depreciation and amortization expense in the quarter when such determinations are made, as well as in subsequent quarters.
Deferred Tax Assets
Deferred tax assets arise primarily from tax credits, net operating losses, and timing differences for reserves, accrued liabilities, stock options, deferred revenue, purchased technologies, and capitalized intangibles, partially offset by U.S. deferred tax liabilities on acquired intangibles, and valuation allowances against U.S. and foreign deferred tax assets. Autodesk performed a quarterly assessment of the recoverability of these net deferred tax assets and believe it will generate sufficient
future taxable income in appropriate tax jurisdictions to realize the net deferred tax assets. They are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. Valuation allowances are established when necessary to reduce gross deferred tax assets to the amount that is "more likely than not" to be realized.
Revenue Recognition
Autodesk recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collection is probable.
For multiple element arrangements containing only software and software-related elements, Autodesk allocates the sales price among each of the deliverables using the residual method, under which a portion of the total arrangement consideration is allocated to undelivered elements based on their vendor-specific objective evidence (“VSOE”) of fair value and the remainder or residual of the total consideration is recognized as revenue for the delivered elements. VSOE is the price charged when an element is sold separately or a price set by management with the relevant authority. If Autodesk does not have VSOE of an undelivered element, revenue recognition is deferred on the entire sales arrangement until all elements for which Autodesk does not have VSOE are delivered. If Autodesk does not have VSOE for undelivered product subscriptions, maintenance or services, the total consideration for the arrangement is recognized ratably over the longest contractual service period in the arrangement.
For multiple element arrangements involving non-software elements, including cloud subscription services, our revenue recognition policy is based upon the accounting guidance contained in ASC 605,
Revenue Recognition
. For these arrangements, Autodesk first allocates the total arrangement consideration based on the relative selling prices of the software group of elements as a whole and to the non-software elements. Autodesk then further allocates consideration within the software group to the respective elements within that group using the residual method as described above. Autodesk exercises judgment and uses estimates in connection with the determination of the amount of revenue to be recognized in each accounting period.
Autodesk allocates the total arrangement consideration among the various elements based on a selling price hierarchy. The selling price for a deliverable is based on its VSOE if available, third-party evidence ("TPE") if VSOE is not available, or the best estimated selling price ("BESP") if neither VSOE nor TPE is available. BESP represents the price at which Autodesk would transact for the deliverable if it were sold regularly on a standalone basis. To establish BESP for those elements for which neither VSOE nor TPE are available, Autodesk performs a quantitative analysis of pricing data points for historical standalone transactions involving such elements for a twelve-month period. As part of this analysis, Autodesk monitors and evaluates the BESP against actual pricing to ensure that it continues to represent a reasonable estimate of the standalone selling price, considering several other external and internal factors including, but not limited to, pricing and discounting practices, contractually stated prices, the geographies in which Autodesk offers products and services, and the type of customer (i.e. distributor, value-added reseller, and direct end user, among others). Autodesk analyzes BESP at least annually or on a more frequent basis if a significant change in our business necessitates a more timely analysis, or if significant selling price variances are experienced.
In situations when Autodesk has multiple contracts with a single counterparty, Autodesk uses the guidance in ASC 985-605 to evaluate both the form and the substance of the arrangements to determine if they should be combined and accounted for as one arrangement or as separate arrangements.
Autodesk’s assessment of the likelihood of collection is also a critical factor in determining the timing of revenue recognition. If Autodesk does not believe that collection is probable, the revenue will be deferred until payment is received.
Autodesk's maintenance revenue consists of renewal fees for existing maintenance plan agreements that were initially purchased with a perpetual software license. Under the maintenance plan, customers are eligible to receive unspecified upgrades, when and if available, and technical support. Autodesk recognizes maintenance revenue ratably over the term of the maintenance agreement, which is generally between one and three years.
Autodesk's subscription revenue consists of term-based product subscriptions, cloud service offerings, and flexible enterprise business arrangements. With Autodesk's subscription plan, customers can use Autodesk software anytime, anywhere, and get access to the latest updates to previous versions. Revenue from these arrangements is recognized ratably over the contract term. Revenue for Autodesk's cloud service offerings is recognized ratably over the contract term, commencing with the date Autodesk's service is made available to customers and when all other revenue recognition criteria have been satisfied.
License and other revenue consists of two components: license revenue and other revenue. License revenue includes software license revenue from the sale of perpetual licenses. Other revenue includes revenue such as standalone consulting and training, and is recognized over time as the services are performed.
Taxes Collected from Customers
Autodesk nets taxes collected from customers against those remitted to government authorities in the consolidated financial statements. Accordingly, taxes collected from customers are not reported as revenue.
Shipping and Handling Costs
Shipping and handling costs are included in cost of revenue for all periods presented.
Stock-based Compensation Expense
The following table summarizes stock-based compensation expense for fiscal
2018
,
2017
, and
2016
, respectively, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2018
|
|
2017
|
|
2016
|
Cost of maintenance and subscription revenue
|
$
|
11.9
|
|
|
$
|
8.6
|
|
|
$
|
5.8
|
|
Cost of license and other revenue
|
4.0
|
|
|
5.5
|
|
|
6.0
|
|
Marketing and sales
|
107.3
|
|
|
94.1
|
|
|
85.2
|
|
Research and development
|
82.9
|
|
|
81.3
|
|
|
70.4
|
|
General and administrative
|
55.3
|
|
|
32.3
|
|
|
29.8
|
|
Stock-based compensation expense related to stock awards and Employee Qualified Stock Purchase Plan ("ESPP") purchases
|
261.4
|
|
|
221.8
|
|
|
197.2
|
|
Tax benefit
|
(2.6
|
)
|
|
(2.6
|
)
|
|
(1.6
|
)
|
Stock-based compensation expense related to stock awards and ESPP purchases, net
|
$
|
258.8
|
|
|
$
|
219.2
|
|
|
$
|
195.6
|
|
Autodesk determines the grant date fair value of its share-based payment awards using a Black-Scholes Merton ("BSM") option pricing model or the quoted stock price on the date of grant, unless the awards are subject to market conditions, in which case Autodesk uses a binomial-lattice model (e.g., Monte Carlo simulation model). The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that market conditions will be achieved. Autodesk uses the following assumptions to estimate the fair value of stock-based awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
Fiscal Year Ended
|
|
Fiscal Year Ended
|
|
|
January 31, 2018
|
|
January 31, 2017
|
|
January 31, 2016
|
|
|
Performance Stock Unit
|
|
ESPP
|
|
Performance Stock Unit
|
|
ESPP
|
|
Performance Stock Unit
|
|
ESPP
|
Range of expected volatilities
|
|
32%
|
|
31% - 34%
|
|
38 - 39%
|
|
30 - 40%
|
|
27%
|
|
28 -29%
|
Range of expected lives (in years)
|
|
N/A
|
|
0.5 - 2.0
|
|
N/A
|
|
0.5 - 2.0
|
|
N/A
|
|
0.5 - 2.0
|
Expected dividends
|
|
—%
|
|
—%
|
|
—%
|
|
—%
|
|
—%
|
|
—%
|
Range of risk-free interest rates
|
|
1.0% - 1.2%
|
|
0.9% - 1.4%
|
|
0.6 - 0.7%
|
|
0.5 - 0.9%
|
|
0.2%
|
|
0.1 - 0.7%
|
Autodesk estimates expected volatility for stock-based awards based on the average of the following two measures: (1) a measure of historical volatility in the trading market for the Company’s common stock, and (2) the implied volatility of traded forward call options to purchase shares of the Company’s common stock. The expected volatility for performance stock units subject to market conditions includes the expected volatility of Autodesk's peer companies within the S&P Computer Software Select Index or S&P North American Technology Software Index with a market capitalization over
$2.00 billion
, depending on the award type.
Autodesk estimates the expected life of stock-based awards using both exercise behavior and post-vesting termination behavior as well as consideration of outstanding options. The range of expected lives of ESPP awards are based upon the
four
,
six
-month exercise periods within a
24
-month offering period.
Autodesk did not pay cash dividends in fiscal
2018
,
2017
, or
2016
and does not anticipate paying any cash dividends in the foreseeable future. Consequently, an expected dividend yield of zero is used in the BSM option pricing model and the Monte Carlo simulation model.
The risk-free interest rate used in the BSM option pricing model and the Monte Carlo simulation model for stock-based awards is the historical yield on U.S. Treasury securities with equivalent remaining lives.
Autodesk recognizes expense only for the stock-based awards that ultimately vest. Autodesk accounts for forfeitures of stock-based awards as those forfeitures occur.
Advertising Expenses
Advertising costs are expensed as incurred. Total advertising expenses incurred were $
31.1 million
in fiscal
2018
, $
33.6 million
in fiscal
2017
, and $
29.8 million
in fiscal
2016
.
Net (Loss) Income Per Share
Basic net (loss) income per share is computed based on the weighted average number of shares of common stock outstanding for the period, excluding stock options and restricted stock. Diluted net (loss) income per share is computed based upon the weighted average shares of common shares outstanding for the period and potentially dilutive common shares, including the effect of stock options and restricted stock units under the treasury stock method.
Defined Benefit Pension Plans
The funded status of Autodesk's defined benefit pension plans is recognized in the Consolidated Balance Sheets. The funded status is measured as the difference between the fair value of plan assets and the projected benefit obligation for the fiscal years presented. The projected benefit obligation represents the actuarial present value of benefits expected to be paid upon retirement based on employee services already rendered and estimated future compensation levels. The fair value of plan assets represents the current market value of Autodesk's cumulative company and participant contributions made to the various plans in effect.
Net periodic benefit cost is recorded in the Consolidated Statements of Operations and includes service cost, interest cost, expected return on plan assets, amortization of prior service costs, and gains or losses previously recognized as a component of other comprehensive loss. Certain events, such as changes in the employee base, plan amendments, and changes in actuarial assumptions may result in a change in the defined benefit obligation and the corresponding change to other comprehensive income.
Gains and losses and prior service costs not recognized as a component of net periodic benefit cost in the Consolidated Statements of Operations as they arise are recognized as a component of other comprehensive (loss) income in the Consolidated Statements of Comprehensive (Loss) Income. Those gains and losses and prior service costs are subsequently amortized as a component of net periodic benefit cost over the average remaining service lives of the plan participants using a corridor approach to determine the portion of gain or loss subject to amortization.
The measurement of projected benefit obligations and net periodic benefit cost is based on estimates and assumptions that reflect the terms of the plans and use participant-specific information such as compensation, age and years of services, as well as certain assumptions, including estimates of discount rates, expected return of plan assets, rate of compensation increases, interest rates, and mortality rates.
Accounting Standards in Fiscal
2018
With the exception of those discussed below, there have been no recent changes in accounting pronouncements issued by FASB or adopted by the Company during the fiscal year ended
January 31, 2018
, that are of significance, or potential significance, to the Company.
Accounting Standards Adopted
Autodesk adopted FASB's Accounting Standards Update No. 2017-04 ("ASU 2017-04"), "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment" during the three months ended April 30, 2017. The ASU simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test. Under current guidance, Step 2 of the goodwill impairment test requires entities to calculate the implied fair value of goodwill in the same manner as the amount of goodwill recognized in a business combination by assigning the fair value of a reporting unit to all of the assets and liabilities of the reporting unit. The carrying value in excess of the implied fair value is recognized as goodwill impairment. Under the new standard, goodwill impairment is recognized based on Step 1 of the current guidance, which calculates the carrying value in excess of the reporting unit’s fair value. The new guidance is required to be applied on a prospective basis and as such, Autodesk used the simplified test in its annual fourth fiscal quarter testing. ASU 2017-04 did not have a material impact on Autodesk's consolidated financial statements.
Recently Issued Accounting Standards But Not Yet Adopted
In February 2018, the FASB issued Accounting Standards Update No. 2018-02 (“ASU 2018-02”), “Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” The amendment allows entities to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. The amendment only impacts the income tax effect of the passage of the Tax Cuts and Jobs Act but does not affect the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations. The amendment is effective for Autodesk fiscal year beginning February 1, 2019, with early adoption permitted. Autodesk is currently evaluating the accounting, transition, and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.
In August 2017, FASB issued Accounting Standards Update No. 2017-12 ("ASU 2017-12"), "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." The targeted amendments help simplify certain aspects of hedge accounting and result in a more accurate portrayal of the economics of an entity’s risk management activities in its financial statements. For cash flow and net investment hedges as of the adoption date, the guidance requires a modified retrospective approach. The amended presentation and disclosure guidance is required only prospectively. The amendments are effective for Autodesk's fiscal year beginning February 1, 2019, with early adoption permitted. Autodesk is currently evaluating the accounting, transition, and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.
In February 2017, FASB issued Accounting Standards Update No. 2017-05 ("ASU 2017-05"), "Other Income– Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets." The ASU, among other things, clarifies the scope of the derecognition of nonfinancial assets, the definition of in substance financial assets, and impacts the accounting for partial sales of nonfinancial assets by requiring full gain recognition upon the sale. The amendments are effective for Autodesk's fiscal year beginning February 1, 2018. The guidance may be applied retrospectively for all periods presented or retrospectively with a cumulative-effect adjustment at the date of adoption. The effect of the implementation will depend upon the nature of the Company's future acquisitions or dispositions, if any. The adoption of the guidance would not have had a material impact on acquisitions prior to the current period and on the Company's consolidated statements of financial condition and results of operations.
In January 2017, FASB issued Accounting Standards Update No. 2017-01 ("ASU 2017-01"), "Business Combinations: Clarifying the Definition of a Business" which provides a more robust framework to use in determining when a set of assets and activities is considered a business. The amendments will be effective for Autodesk's fiscal year beginning February 1, 2018. The new guidance is required to be applied on a prospective basis. The effect of the implementation will depend upon the nature of the Company's future acquisitions, if any.
In October 2016, FASB issued Accounting Standards Update No. 2016-16 ("ASU 2016-16"), “Income Taxes: Intra-Entity Transfers of Assets Other than Inventory” which requires that entities recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. The amendments will be effective for Autodesk's fiscal year beginning February 1, 2018. The new guidance is required to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Autodesk does not believe the ASU will have a material impact on its consolidated financial statements.
In June 2016, FASB issued Accounting Standards Update No. 2016-13 ("ASU 2016-13") regarding ASC Topic 326, "Financial Instruments - Credit Losses," which modifies the measurement of expected credit losses of certain financial instruments. Autodesk plans to adopt ASU 2016-13 as of the effective date which represents Autodesk’s fiscal year beginning February 1, 2020. Autodesk does not believe the ASU will have a material impact on its consolidated financial statements.
In February 2016, FASB issued Accounting Standards Update No. 2016-02 ("ASU 2016-02") regarding ASC Topic 842, "Leases." The amendments in this ASU require balance sheet recognition of lease assets and lease liabilities by lessees for leases classified as operating leases, with an optional policy election to not recognize lease assets and lease liabilities for leases with a term of 12 months or less. The amendments also require new disclosures, including qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. Autodesk plans to adopt ASU 2016-02 in Autodesk’s fiscal year beginning February 1, 2019. The amendments require a modified retrospective approach with optional practical expedients. Autodesk is currently evaluating the accounting, transition, and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.
In January 2016, FASB issued Accounting Standards Update No. 2016-01 ("ASU 2016-01") regarding ASC Topic 825-10, "Financial Instruments - Overall." The amendments address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments, and require equity securities to be measured at fair value, unless the measurement alternative method has been elected, with changes in fair value recognized through net income. The amendments also simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment for impairment quarterly at each reporting period. The amendments in ASU 2016-01 will be effective for Autodesk's fiscal year beginning February 1, 2018. An entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, with prospective adoption of the amendments related to equity securities without readily determinable fair values existing as of the date of adoption. Autodesk does not believe ASU 2016-01 will have a material impact on its consolidated financial statements.
In May 2014, FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (ASC Topic 606),” which supersedes the revenue recognition requirements in "Revenue Recognition (ASC Topic 605)." ASU 2014-09 provides principles for recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, FASB issued Accounting Standards Update No. 2015-14 to defer the effective date by one year with early adoption permitted as of the original effective date. In addition, FASB issued Accounting Standards Update No. 2016-08, Accounting Standards Update No. 2016-10, Accounting Standards Update No. 2016-12, and Accounting Standard Update No. 2016-20 in March 2016, April 2016, May 2016, and December 2016, respectively, to help provide interpretive clarifications on the new guidance in ASC Topic 606.
Autodesk will adopt ASU 2014-09 as of February 1, 2018, using the modified retrospective transition method. The Company's implementation efforts are substantially complete.
The Company has concluded that the desktop software and related cloud services that are included in the majority of its product subscription offerings and enterprise arrangements are not distinct in the context of the contract as they are considered highly interrelated and represent a single combined performance obligation that should be recognized over time. Therefore, the new standard will not result in a material change in the timing and amount of the recognition of revenue for the majority of the Company's product subscription offerings and enterprise arrangements.
One impact of the new standard relates to product subscriptions that do not incorporate substantial cloud services. A limited number of Autodesk's product subscriptions do not incorporate substantial cloud services, and under ASU 2014-09, will be recognized as distinct license and service performance obligations. Currently, under ASC Topic 605, licenses sold with undelivered elements without VSOE are recognized ratably over the term of the undelivered elements. Under ASC Topic 606, Autodesk is no longer required to establish VSOE to recognize software license revenue separately from the other elements and will recognize software licenses once the customer obtains control of the license, which is generally upon delivery of the license. Therefore, revenue allocated to the licenses in these offerings under Topic 606 will be recognized at a point in time instead of over the contract term. While the Company is still evaluating, Autodesk believes the impact of the change to the timing of revenue recognition is expected to have a balance sheet pre-tax impact at the date of adoption of approximately
$80
-
$100 million
reduction to the deferred revenue balance.
Another significant provision under ASU 2014-09 includes the capitalization and amortization of costs associated with obtaining a contract, most significantly sales commissions. The amortization period for the Company's deferred costs will be
recognized over the estimated period of benefit. The Company expects there to be a balance sheet pre-tax impact at the date of adoption recognizing the deferred sales commission capitalization costs of approximately
$102
-
$112 million
.
2
.
Financial Instruments
The following tables summarize the Company's financial instruments' amortized cost, gross unrealized gains, gross unrealized losses, and fair value by significant investment category as of January 31,
2018
and
2017
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2018
|
|
|
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Cash equivalents (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency bonds
|
$
|
5.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5.0
|
|
|
$
|
5.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Certificates of deposit
|
17.4
|
|
|
—
|
|
|
—
|
|
|
17.4
|
|
|
17.4
|
|
|
—
|
|
|
—
|
|
|
Commercial paper
|
324.2
|
|
|
—
|
|
|
—
|
|
|
324.2
|
|
|
—
|
|
|
324.2
|
|
|
—
|
|
|
Corporate debt securities
|
5.0
|
|
|
—
|
|
|
—
|
|
|
5.0
|
|
|
5.0
|
|
|
—
|
|
|
—
|
|
|
Custody cash deposit
|
5.2
|
|
|
—
|
|
|
—
|
|
|
5.2
|
|
|
5.2
|
|
|
—
|
|
|
—
|
|
|
Money market funds
|
278.8
|
|
|
—
|
|
|
—
|
|
|
278.8
|
|
|
—
|
|
|
278.8
|
|
|
—
|
|
|
Municipal bonds
|
5.0
|
|
|
—
|
|
|
—
|
|
|
5.0
|
|
|
5.0
|
|
|
—
|
|
|
—
|
|
|
Sovereign debt
|
2.0
|
|
|
—
|
|
|
—
|
|
|
2.0
|
|
|
—
|
|
|
2.0
|
|
|
—
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset backed securities
|
13.1
|
|
|
—
|
|
|
—
|
|
|
13.1
|
|
|
—
|
|
|
13.1
|
|
|
—
|
|
|
|
Commercial paper
|
27.5
|
|
|
—
|
|
|
—
|
|
|
27.5
|
|
|
—
|
|
|
27.5
|
|
|
—
|
|
|
|
Corporate debt securities
|
99.4
|
|
|
—
|
|
|
(0.1
|
)
|
|
99.3
|
|
|
99.3
|
|
|
—
|
|
|
—
|
|
|
|
Other (2)
|
9.2
|
|
|
—
|
|
|
—
|
|
|
9.2
|
|
|
7.7
|
|
|
1.5
|
|
|
—
|
|
|
|
U.S. government securities
|
37.1
|
|
|
—
|
|
|
—
|
|
|
37.1
|
|
|
37.1
|
|
|
—
|
|
|
—
|
|
|
Short-term trading securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
50.1
|
|
|
8.9
|
|
|
—
|
|
|
59.0
|
|
|
59.0
|
|
|
—
|
|
|
—
|
|
|
Long-term available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency bonds
|
13.7
|
|
|
—
|
|
|
(0.1
|
)
|
|
13.6
|
|
|
13.6
|
|
|
—
|
|
|
—
|
|
|
|
Asset backed securities
|
36.8
|
|
|
—
|
|
|
(0.2
|
)
|
|
36.6
|
|
|
—
|
|
|
36.6
|
|
|
—
|
|
|
|
Corporate debt securities
|
100.2
|
|
|
0.1
|
|
|
(0.4
|
)
|
|
99.9
|
|
|
99.9
|
|
|
—
|
|
|
—
|
|
|
|
Municipal bonds
|
12.7
|
|
|
—
|
|
|
(0.1
|
)
|
|
12.6
|
|
|
12.6
|
|
|
—
|
|
|
—
|
|
|
|
Sovereign debt
|
2.8
|
|
|
—
|
|
|
—
|
|
|
2.8
|
|
|
—
|
|
|
2.8
|
|
|
—
|
|
|
|
U.S. government securities
|
25.5
|
|
|
—
|
|
|
(0.2
|
)
|
|
25.3
|
|
|
25.3
|
|
|
—
|
|
|
—
|
|
Convertible debt securities (3)
|
7.5
|
|
|
0.5
|
|
|
(0.2
|
)
|
|
7.8
|
|
|
—
|
|
|
—
|
|
|
7.8
|
|
Derivative contract assets (4)
|
2.0
|
|
|
7.5
|
|
|
(1.3
|
)
|
|
8.2
|
|
|
—
|
|
|
7.2
|
|
|
1.0
|
|
Derivative contract liabilities (5)
|
—
|
|
|
—
|
|
|
(26.6
|
)
|
|
(26.6
|
)
|
|
—
|
|
|
(26.6
|
)
|
|
—
|
|
|
|
Total
|
$
|
1,080.2
|
|
|
$
|
17.0
|
|
|
$
|
(29.2
|
)
|
|
$
|
1,068.0
|
|
|
$
|
392.1
|
|
|
$
|
667.1
|
|
|
$
|
8.8
|
|
____________________
|
|
(1)
|
Included in “Cash and cash equivalents” in the accompanying Consolidated Balance Sheets.
|
|
|
(2)
|
Consists of agency bonds, certificates of deposit, sovereign debt, and municipal bonds.
|
|
|
(3)
|
Considered “available for sale” and included in “Other assets” in the accompanying Consolidated Balance Sheets.
|
|
|
(4)
|
Included in “Prepaid expenses and other current assets,” “Other assets,” or “Other accrued liabilities” in the accompanying Consolidated Balance Sheets.
|
|
|
(5)
|
Included in “Other accrued liabilities” in the accompanying Consolidated Balance Sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2017
|
|
|
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Cash equivalents (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency bonds
|
$
|
6.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6.0
|
|
|
$
|
6.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Certificates of deposit
|
63.1
|
|
|
—
|
|
|
—
|
|
|
63.1
|
|
|
63.1
|
|
|
—
|
|
|
—
|
|
|
Commercial paper
|
207.4
|
|
|
—
|
|
|
—
|
|
|
207.4
|
|
|
—
|
|
|
207.4
|
|
|
—
|
|
|
Corporate debt securities
|
40.2
|
|
|
—
|
|
|
—
|
|
|
40.2
|
|
|
40.2
|
|
|
—
|
|
|
—
|
|
|
Custody cash deposit
|
3.2
|
|
|
—
|
|
|
—
|
|
|
3.2
|
|
|
3.2
|
|
|
—
|
|
|
—
|
|
|
Money market funds
|
256.5
|
|
|
—
|
|
|
—
|
|
|
256.5
|
|
|
—
|
|
|
256.5
|
|
|
—
|
|
|
Municipal bonds
|
5.0
|
|
|
—
|
|
|
—
|
|
|
5.0
|
|
|
5.0
|
|
|
—
|
|
|
—
|
|
|
Sovereign debt
|
15.0
|
|
|
—
|
|
|
—
|
|
|
15.0
|
|
|
—
|
|
|
15.0
|
|
|
—
|
|
|
U.S. government securities
|
309.5
|
|
|
—
|
|
|
—
|
|
|
309.5
|
|
|
309.5
|
|
|
—
|
|
|
—
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency bonds
|
13.2
|
|
|
—
|
|
|
|
|
13.2
|
|
|
13.2
|
|
|
—
|
|
|
—
|
|
|
|
Asset backed securities
|
19.6
|
|
|
—
|
|
|
—
|
|
|
19.6
|
|
|
—
|
|
|
19.6
|
|
|
—
|
|
|
|
Certificates of deposit
|
157.3
|
|
|
—
|
|
|
—
|
|
|
157.3
|
|
|
157.3
|
|
|
—
|
|
|
—
|
|
|
|
Commercial paper
|
109.2
|
|
|
—
|
|
|
—
|
|
|
109.2
|
|
|
—
|
|
|
109.2
|
|
|
—
|
|
|
|
Corporate debt securities
|
234.7
|
|
|
—
|
|
|
(0.2
|
)
|
|
234.5
|
|
|
234.5
|
|
|
—
|
|
|
—
|
|
|
|
Municipal bonds
|
43.4
|
|
|
—
|
|
|
—
|
|
|
43.4
|
|
|
43.4
|
|
|
—
|
|
|
—
|
|
|
|
Sovereign debt
|
30.0
|
|
|
—
|
|
|
—
|
|
|
30.0
|
|
|
—
|
|
|
30.0
|
|
|
—
|
|
|
|
U.S. government securities
|
32.3
|
|
|
—
|
|
|
—
|
|
|
32.3
|
|
|
32.3
|
|
|
—
|
|
|
—
|
|
|
Short-term trading securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
44.8
|
|
|
2.5
|
|
|
—
|
|
|
47.3
|
|
|
47.3
|
|
|
—
|
|
|
—
|
|
|
Long-term available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency bonds
|
7.1
|
|
|
—
|
|
|
—
|
|
|
7.1
|
|
|
7.1
|
|
|
—
|
|
|
—
|
|
|
|
Asset backed securities
|
65.8
|
|
|
0.1
|
|
|
—
|
|
|
65.9
|
|
|
—
|
|
|
65.9
|
|
|
—
|
|
|
|
Corporate debt securities
|
172.1
|
|
|
0.1
|
|
|
(0.1
|
)
|
|
172.1
|
|
|
172.1
|
|
|
—
|
|
|
—
|
|
|
|
Municipal bonds
|
10.7
|
|
|
—
|
|
|
—
|
|
|
10.7
|
|
|
10.7
|
|
|
—
|
|
|
—
|
|
|
|
Sovereign debt
|
1.5
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
|
—
|
|
|
1.5
|
|
|
—
|
|
|
|
U.S. government securities
|
48.8
|
|
|
0.1
|
|
|
—
|
|
|
48.9
|
|
|
48.9
|
|
|
—
|
|
|
—
|
|
Convertible debt securities (2)
|
4.9
|
|
|
2.3
|
|
|
(1.6
|
)
|
|
5.6
|
|
|
—
|
|
|
—
|
|
|
5.6
|
|
Derivative contract assets (3)
|
2.2
|
|
|
12.3
|
|
|
(1.3
|
)
|
|
13.2
|
|
|
—
|
|
|
11.9
|
|
|
1.3
|
|
Derivative contract liabilities (4)
|
—
|
|
|
—
|
|
|
(10.4
|
)
|
|
(10.4
|
)
|
|
—
|
|
|
(10.4
|
)
|
|
—
|
|
|
|
Total
|
$
|
1,903.5
|
|
|
$
|
17.4
|
|
|
$
|
(13.6
|
)
|
|
$
|
1,907.3
|
|
|
$
|
1,193.8
|
|
|
$
|
706.6
|
|
|
$
|
6.9
|
|
____________________
|
|
(1)
|
Included in “Cash and cash equivalents” in the accompanying Consolidated Balance Sheets.
|
|
|
(2)
|
Considered "available for sale" securities and included in "Other assets" in the accompanying Consolidated Balance Sheets.
|
|
|
(3)
|
Included in “Prepaid expenses and other current assets,” "Other assets," or “Other accrued liabilities” in the accompanying Consolidated Balance Sheets.
|
|
|
(4)
|
Included in “Other accrued liabilities” in the accompanying Consolidated Balance Sheets.
|
Autodesk classifies its marketable securities as either short-term or long-term based on each instrument’s underlying contractual maturity date. Generally marketable securities with remaining maturities of less than
12 months
are classified as short-term and marketable securities with remaining maturities greater than
12 months
are classified as long-term. Autodesk may sell certain of its marketable securities prior to their stated maturities for strategic purposes or in anticipation of credit deterioration.
Autodesk applies fair value accounting for certain financial assets and liabilities, which consist of cash equivalents, marketable securities, and other financial instruments, on a recurring basis. The Company defines fair value as the price that
would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and (Level 3) unobservable inputs for which there is little or no market data, which require Autodesk to develop its own assumptions. When determining fair value, Autodesk uses observable market data and relies on unobservable inputs only when observable market data is not available. There have been no transfers between fair value measurement levels during the year ended
January 31, 2018
.
Autodesk's cash equivalents, marketable securities, and financial instruments are primarily classified within Level 1 or Level 2 of the fair value hierarchy. Autodesk values it's available for sale securities on pricing from pricing vendors, who may use quoted prices in active markets for identical assets (Level 1) or inputs other than quoted prices that are observable either directly or indirectly in determining fair value (Level 2). Autodesk's Level 2 securities are valued primarily using observable inputs other than quoted prices in active markets for identical assets and liabilities. Autodesk's Level 3 securities consist of investments held in convertible debt securities, and derivative contracts which are valued using probability weighted discounted cash flow models as some of the inputs to the models are unobservable in the market.
A reconciliation of the change in Autodesk’s Level 3 items for the fiscal year ended January 31,
2018
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
Significant Unobservable Inputs
|
|
(Level 3)
|
|
|
Derivative Contracts
|
|
Convertible Debt Securities
|
|
Total
|
Balances, January 31, 2017
|
|
$
|
1.3
|
|
|
$
|
5.6
|
|
|
$
|
6.9
|
|
Purchases
|
|
1.1
|
|
|
5.9
|
|
|
7.0
|
|
Gains (losses) included in earnings (1)
|
|
(1.4
|
)
|
|
(3.2
|
)
|
|
(4.6
|
)
|
Gains included in OCI
|
|
—
|
|
|
(0.5
|
)
|
|
(0.5
|
)
|
Balances, January 31, 2018
|
|
$
|
1.0
|
|
|
$
|
7.8
|
|
|
$
|
8.8
|
|
____________________
|
|
(1)
|
Included in “
Interest and other expense, net
” in the accompanying Consolidated Statement of Operations.
|
The following table summarizes the estimated fair value of Autodesk's “available-for-sale securities” classified by the contractual maturity date of the security:
|
|
|
|
|
|
|
|
|
|
January 31, 2018
|
|
Cost
|
|
Fair Value
|
Due within in 1 year
|
$
|
193.8
|
|
|
$
|
194.0
|
|
Due in 1 year through 5 years
|
186.9
|
|
|
186.0
|
|
Due in 5 years through 10 years
|
3.7
|
|
|
3.7
|
|
Due after 10 years
|
1.1
|
|
|
1.1
|
|
Total
|
$
|
385.5
|
|
|
$
|
384.8
|
|
As of January 31,
2018
, and
2017
, Autodesk had no material securities, individually and in the aggregate, in a continuous unrealized loss position for greater than twelve months.
As of January 31,
2018
, and
2017
, Autodesk had
$112.3 million
and $
117.2 million
, respectively, in direct investments in privately held companies accounted for under the cost method, which are periodically assessed for other-than-temporary impairment. , Autodesk does not intend to sell these cost method investments and it is not more likely than not that Autodesk will be required to sell the investment before recovery of the amortized cost bases, which may be maturity. Therefore, Autodesk does not consider those investments to be other-than-temporarily impaired at
January 31, 2018
. Autodesk estimates fair value of its cost method investments considering available information such as pricing in recent rounds of financing, current cash positions, earnings and cash flow forecasts, recent operational performance, and any other readily available market data.
If Autodesk determines that an other-than-temporary impairment has occurred, Autodesk writes down the investment to its fair value. During fiscal
2018
and
2017
, Autodesk recorded
$15.5 million
and
$1.3 million
, respectively, in other-than-temporary impairment on its privately held equity and debt investments. The impairment expense was recorded in “
Interest and other expense, net
” on the Company's Consolidated Statements of Operations.
The sales or redemptions of “available-for-sale securities” in fiscal
2018
,
2017
, and
2016
resulted in a
loss
of $
0.3 million
, gain of $
1.5 million
, and gain of
$0.1 million
, respectively. The loss and gains were recorded in "
Interest and other expense, net
" on the Company's Consolidated Statements of Operations.
Proceeds from the sale and maturity of marketable securities for fiscal
2018
and fiscal
2017
were
$1.1 billion
and
$2.3 billion
, respectively.
Derivative Financial Instruments
Under its risk management strategy, Autodesk uses derivative instruments to manage its short-term exposures to fluctuations in foreign currency exchange rates which exist as part of ongoing business operations. Autodesk's general practice is to hedge a portion of transaction exposures denominated in euros, Japanese yen, Swiss francs, British pounds, Canadian dollars and Australian dollars. These instruments have maturities between one and twelve months in the future. Autodesk does not enter into derivative instrument transactions for trading or speculative purposes.
The bank counterparties to the derivative contracts potentially expose Autodesk to credit-related losses in the event of their nonperformance. However, to mitigate that risk, Autodesk only contracts with counterparties who meet the Company's minimum requirements under its counterparty risk assessment process. Autodesk monitors counterparty risk on at least a quarterly basis and will adjust its exposure to various counterparties as necessary. Autodesk generally enters into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. However, Autodesk does not have any master netting arrangements in place with collateral features.
Foreign currency contracts designated as cash flow hedges
Autodesk uses foreign currency contracts to reduce the exchange rate impact on a portion of the net revenue or operating expense of certain anticipated transactions. These contracts are designated and documented as cash flow hedges. The effectiveness of the cash flow hedge contracts is assessed quarterly using regression analysis as well as other timing and probability criteria. To receive cash flow hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge and the hedges are expected to be highly effective in offsetting changes to future cash flows on hedged transactions. The gross gains and losses on these hedges are included in “
Accumulated other comprehensive loss
” and are reclassified into earnings at the time the forecasted revenue or expense is recognized. In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, Autodesk reclassifies the gain or loss on the related cash flow hedge from “
Accumulated other comprehensive loss
” to “
Interest and other expense, net
” in the Company's Consolidated Financial Statements at that time.
The net notional amounts of these contracts are presented net settled and were $
619.9 million
at
January 31, 2018
and $
369.4 million
at
January 31, 2017
. Outstanding contracts are recognized as either assets or liabilities on the balance sheet at fair value. The majority of the net loss of $
16.6 million
remaining in “
Accumulated other comprehensive loss
” as of
January 31, 2018
, is expected to be recognized into earnings within the next twelve months.
Derivatives not designated as hedging instruments
Autodesk uses foreign currency contracts that are not designated as hedging instruments to reduce the exchange rate risk associated primarily with foreign currency denominated receivables, payables, and cash. These forward contracts are marked-to-market at the end of each month with gains and losses recognized as “
Interest and other expense, net
.” These derivative instruments do not subject the Company to material balance sheet risk due to exchange rate movements because gains and losses on these derivative instruments are intended to offset the gains or losses resulting from the revaluation and settlement of the underlying foreign currency denominated receivables, payables, and cash. The net notional amounts of these foreign currency contracts are presented net settled and were $
329.6 million
at
January 31, 2018
, and $
270.6 million
at
January 31, 2017
.
In addition to these foreign currency contracts, Autodesk holds derivative instruments issued by privately held companies, which are not designated as hedging instruments. These derivatives consist of certain conversion options on the convertible debt securities held by Autodesk and an option to acquire a privately held company. These derivatives are recorded at fair value as of each balance sheet date and are recorded in “Other assets.” Changes in the fair values of these instruments are recognized in “
Interest and other expense, net
.”
Fair Value of Derivative Instruments:
The fair value of derivative instruments in Autodesk’s Consolidated Balance Sheets were as follows as of
January 31, 2018
, and
January 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Location
|
|
Fair Value at
|
|
January 31, 2018
|
|
January 31, 2017
|
Derivative Assets
|
|
|
|
|
|
Foreign currency contracts designated as cash flow hedges
|
Prepaid expenses and other current assets
|
|
$
|
6.2
|
|
|
$
|
10.1
|
|
Derivatives not designated as hedging instruments
|
Prepaid expenses and other current assets and Other assets
|
|
2.0
|
|
|
3.2
|
|
Total derivative assets
|
|
|
$
|
8.2
|
|
|
$
|
13.3
|
|
Derivative Liabilities
|
|
|
|
|
|
Foreign currency contracts designated as cash flow hedges
|
Other accrued liabilities
|
|
$
|
18.7
|
|
|
$
|
4.5
|
|
Derivatives not designated as hedging instruments
|
Other accrued liabilities
|
|
7.9
|
|
|
6.0
|
|
Total derivative liabilities
|
|
|
$
|
26.6
|
|
|
$
|
10.5
|
|
The effects of derivatives designated as hedging instruments on Autodesk’s Consolidated Statements of Operations were as follows for the fiscal years ended January 31,
2018
,
2017
, and
2016
, respectively (amounts presented include any income tax effects):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Contracts
|
|
Fiscal Year Ended January 31,
|
|
2018
|
|
2017
|
|
2016
|
Amount of (loss) gain recognized in accumulated other comprehensive loss on derivatives (effective portion)
|
$
|
(21.3
|
)
|
|
$
|
6.3
|
|
|
$
|
2.2
|
|
Amount and location of gain (loss) reclassified from accumulated other comprehensive loss into (loss) income (effective portion)
|
|
|
|
|
|
Net revenue
|
$
|
8.0
|
|
|
$
|
9.2
|
|
|
$
|
39.8
|
|
Operating expenses
|
1.9
|
|
|
(1.8
|
)
|
|
(10.5
|
)
|
Total
|
$
|
9.9
|
|
|
$
|
7.4
|
|
|
$
|
29.3
|
|
Amount and location of loss recognized in (loss) income on derivatives (ineffective portion and amount excluded from effectiveness testing)
|
|
|
|
|
|
Interest and other expense, net
|
$
|
(0.2
|
)
|
|
$
|
(0.3
|
)
|
|
$
|
(0.7
|
)
|
The effects of derivatives not designated as hedging instruments on Autodesk’s Consolidated Statements of Operations were as follows for the fiscal years ended
January 31, 2018
,
2017
, and
2016
, respectively (amounts presented include any income tax effects):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2018
|
|
2017
|
|
2016
|
Amount and location of loss recognized in loss (income) on derivatives
|
|
|
|
|
|
Interest and other expense, net
|
$
|
(19.1
|
)
|
|
$
|
(11.1
|
)
|
|
$
|
(1.7
|
)
|
3
.
Employee and Director Stock Plans
Stock Plans
As of
January 31, 2018
, Autodesk maintained
two
active stock plans for the purpose of granting equity awards to employees and to non-employee members of Autodesk’s Board of Directors: the 2012 Employee Stock Plan (as amended, the “2012 Employee Plan”), which is available only to employees, and the Autodesk 2012 Outside Directors’ Stock Plan (“2012 Directors' Plan”), which is available only to non-employee directors.
The 2012 Employee Plan was approved by Autodesk's stockholders and became effective on
January 6, 2012
. Since the 2012 Stock Plan was adopted by stockholders in January 2012, Autodesk has received stockholder approval to increase the number of shares subject to the plan by
36.1 million
shares. The 2012 Employee Plan replaced the 2008 Employee Stock Plan, as amended ("2008 Plan"), and no further equity awards may be granted under the 2008 Plan. The 2012 Employee Plan reserves up to
57.3 million
shares which includes
51.3 million
shares reserved under the 2012 Employee Plan, as well as up to
6.0 million
shares forfeited under certain prior employee stock plans during the life of the 2012 Employee Plan. The 2012 Employee Plan permits the grant of stock options, restricted stock units, and restricted stock awards. Each restricted stock unit or restricted stock award granted will be counted against the shares authorized for issuance under the 2012 Employee Plan as
1.79
shares. If a granted option, restricted stock unit, or restricted stock award expires or becomes unexercisable for any reason, the unpurchased or forfeited shares that were granted may be returned to the 2012 Employee Plan and may become available for future grant under the 2012 Employee Plan. As of
January 31, 2018
,
41.1 million
shares subject to options or restricted stock awards have been granted under the 2012 Employee Plan. Options and restricted stock that were granted under the 2012 plan vest over periods ranging from
immediately upon grant
to
over a three year period
and options expire
10
years from the date of grant. The 2012 Employee Plan will expire on
June 30, 2022
. At
January 31, 2018
,
21.3 million
shares were available for future issuance under the 2012 Employee Plan.
The 2012 Director's Plan was approved by Autodesk's stockholders and became effective on
January 6, 2012
. The 2012 Directors' Plan replaced the 2010 Outside Directors' Stock Plan, as amended ("2010 Plan"). The 2012 Directors' Plan permits the grant of stock options, restricted stock units, and restricted stock awards to non-employee members of Autodesk’s Board of Directors. Each restricted stock unit or restricted stock award granted will be counted against the shares authorized for issuance under the 2012 Directors' Plan as
2.11
shares. As of
January 31, 2018
,
0.9 million
shares subject to restricted stock unit awards have been granted under the 2012 Directors' Plan. Restricted stock units that were granted under the 2012 Outside Directors' Plan vest over
one
to
three
years from the date of grant. On March 12, 2015, the Board reduced the number of shares reserved for issuance under the 2012 Directors' Plan by
0.9 million
shares, so that
1.7 million
shares are now reserved for issuance under the 2012 Directors' Plan. The 2012 Directors' Plan will expire on
June 30, 2022
. At
January 31, 2018
,
0.9 million
shares were available for future issuance under the 2012 Director's Plan.
The following sections summarize activity under Autodesk’s stock plans.
Stock Options:
A summary of stock option activity for the fiscal year ended
January 31, 2018
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares (in millions)
|
|
Weighted average exercise price per share
|
|
Weighted average remaining contractual term (in years)
|
|
Aggregate Intrinsic Value (1) (in millions)
|
Options outstanding at January 31, 2017
|
0.6
|
|
|
$
|
39.25
|
|
|
|
|
|
Exercised
|
(0.4
|
)
|
|
38.66
|
|
|
|
|
|
Options vested, exercisable and outstanding at January 31, 2018
|
0.2
|
|
|
$
|
40.49
|
|
|
2.87
|
|
$
|
16.4
|
|
Shares available for grant at January 31, 2018
|
22.2
|
|
|
|
|
|
|
|
_______________
|
|
(1)
|
Represents the total pre-tax intrinsic value, based on Autodesk’s closing stock price of
$115.62
per share as of
January 31, 2018
, which would have been received by the option holders had all option holders exercised their options as of that date.
|
As of
January 31, 2018
, compensation cost related to stock options has been fully recognized.
The following table summarizes information about the pre-tax intrinsic value of options exercised during the fiscal years ended
January 31, 2018
,
2017
, and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended January 31,
|
|
2018
|
|
2017
|
|
2016
|
Pre-tax intrinsic value of options exercised (1)
|
$
|
22.8
|
|
|
$
|
32.0
|
|
|
$
|
32.6
|
|
——————
|
|
(1)
|
The intrinsic value of options exercised is calculated as the difference between the exercise price of the option and the market value of the stock on the date of exercise.
|
The following table summarizes information about options vested and exercisable, and outstanding at
January 31, 2018
:
|
|
|
|
|
|
|
|
|
Number of Shares (in thousands)
|
|
Weighted average exercise price per share
|
Range of per-share exercise prices:
|
|
|
|
$28.56 - $36.44
|
32.6
|
|
|
$
|
34.23
|
|
$38.55 - $38.55
|
1.8
|
|
|
38.55
|
|
$41.62 - $41.62
|
184.4
|
|
|
41.62
|
|
|
218.8
|
|
|
$
|
40.49
|
|
These options will expire if not exercised at specific dates ranging through
September 2022
.
Restricted Stock Units:
A summary of restricted stock activity for the fiscal year ended
January 31, 2018
is as follows:
|
|
|
|
|
|
|
|
|
Unreleased Restricted Stock Units (in thousands)
|
|
Weighted average grant date fair value per share
|
Unvested restricted stock at January 31, 2017
|
7,622.4
|
|
|
$
|
60.13
|
|
Granted
|
2,481.8
|
|
|
106.55
|
|
Vested
|
(3,765.7
|
)
|
|
57.85
|
|
Canceled/Forfeited
|
(692.5
|
)
|
|
69.08
|
|
Performance Adjustment (1)
|
24.7
|
|
|
61.79
|
|
Unvested restricted stock at January 31, 2018
|
5,670.7
|
|
|
$
|
82.94
|
|
_______________
|
|
(1)
|
Based on Autodesk's financial results and relative total stockholder return for the fiscal 2017 performance period. The performance stock units were attained at rates ranging from
99.7%
to
114.7%
of the target award.
|
For the restricted stock granted during fiscal years ended January 31,
2018
,
2017
, and
2016
, the weighted average grant date fair value was
$106.55
, $
65.95
, and $
52.53
, respectively. The fair value of the shares vested during fiscal years ended January 31,
2018
,
2017
, and
2016
was
$399.7 million
,
$232.2 million
, and
$193.3 million
, respectively.
During the fiscal year ended
January 31, 2018
, Autodesk granted
2.2 million
restricted stock units. Restricted stock units vest over periods ranging from immediately upon grant to a pre-determined date that is typically within
three
years from the date of grant. Restricted stock units are not considered outstanding stock at the time of grant, as the holders of these units are not entitled to any of the rights of a stockholder, including voting rights. The fair value of the restricted stock units is expensed ratably over the vesting period. Autodesk recorded stock-based compensation expense related to restricted stock units of $
202.1 million
, $
173.0 million
, and $
146.4 million
during fiscal years ended January 31,
2018
,
2017
, and
2016
, respectively. As of January 31,
2018
, total compensation cost not yet recognized of $
310.2 million
related to non-vested awards, is expected to be recognized over a weighted average period of
1.65
years. At January 31,
2018
, the number of restricted stock units granted but unvested was
5.1 million
.
During the fiscal year ended January 31,
2018
, Autodesk granted
0.3 million
performance stock units for which the ultimate number of shares earned is determined based on the achievement of performance criteria at the end of the stated service and performance period. During the period, Autodesk granted two different types of performance stock units.
The performance criteria for the first type of performance stock units were based on a mix of net subscription additions, Annualized Recurring Revenue ("ARR"), non-GAAP total spend, and total subscription renewal rate goals adopted by the Compensation and Human Resource Committee, as well as total stockholder return compared against companies in the S&P Computer Software Select Index or the S&P North American Technology Software Index ("Relative TSR"). These performance stock units vest over a three-year period and have the following vesting schedule:
|
|
•
|
Up to one third of the performance stock units may vest following year one, depending upon the achievement of the performance criteria for fiscal 2018 as well as 1-year Relative TSR (covering year one).
|
|
|
•
|
Up to one third of the performance stock units may vest following year two, depending upon the achievement of the performance criteria for year two as well as 2-year Relative TSR (covering years one and two).
|
|
|
•
|
Up to one third of the performance stock units may vest following year three, depending upon the achievement of the performance criteria for year three as well as 3-year Relative TSR (covering years one, two and three).
|
The performance criteria for the second type of performance stock units granted to our Chief Executive Officer during the fiscal year ended January 31, 2018 were based on fiscal 2020 free cash flow per share and ARR goals adopted by the Compensation and Human Resource Committee. These performance stock units vest in March 2020 based on the Company's fiscal 2020 performance against the performance criteria.
Performance stock units are not considered outstanding stock at the time of grant, as the holders of these units are not entitled to any of the rights of a stockholder, including voting rights. Autodesk has determined the grant-date fair value for these awards using the stock price on the date of grant or if the awards are subject to a market condition, a Monte Carlo simulation model. The fair value of the performance stock units is expensed using the accelerated attribution over the vesting period. Autodesk recorded stock-based compensation expense related to performance stock units of $
33.7 million
,
$22.9 million
, and
$23.2 million
during fiscal years ended January 31,
2018
,
2017
, and
2016
respectively. As of January 31,
2018
, total compensation cost not yet recognized of $
6.8 million
related to unvested performance stock units, is expected to be recognized over a weighted average period of
0.76
years. At January 31,
2018
, the number of performance stock units granted but unvested was
0.6 million
. Autodesk recorded stock-based compensation expense related to the acceleration of eligible performance stock awards in conjunction with the Company's former CEO transition agreement of $
7.3 million
for the fiscal year ended January 31, 2018.
1998 Employee Qualified Stock Purchase Plan (“ESPP”)
Under Autodesk’s ESPP, which was approved by stockholders in 1998, eligible employees may purchase shares of Autodesk’s common stock at their discretion using up to
15%
of their eligible compensation, subject to certain limitations, at
85%
of the lower of Autodesk's closing price (fair market value) on the offering date or the exercise date. The offering period for ESPP awards consists of
four
,
six
-month exercise periods within a
24
-month offering period.
At
January 31, 2018
, a total of
9.1 million
shares were available for future issuance. Under the ESPP, the Company issues shares on the first trading day following March 31 and September 30 of each fiscal year. The ESPP expires during fiscal 2018.
A summary of the ESPP activity for the years ended
January 31, 2018
,
2017
and
2016
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
|
2018
|
|
2017
|
|
2016
|
Issued shares
|
|
2.0
|
|
|
2.3
|
|
|
2.1
|
|
Average price of issued shares
|
|
$
|
39.03
|
|
|
$
|
36.99
|
|
|
$
|
36.29
|
|
Weighted average grant date fair value of awards granted under the ESPP
|
|
$
|
32.41
|
|
|
$
|
19.20
|
|
|
$
|
11.85
|
|
Autodesk recorded $
25.7 million
, $
25.9 million
, and $
27.1 million
of compensation expense associated with the ESPP in fiscal
2018
,
2017
, and
2016
, respectively.
Equity Compensation Plan Information
The following table summarizes the number of outstanding options and awards granted to employees and directors, as well as the number of securities remaining available for future issuance under these plans as of
January 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Plan category
|
Number of securities to be issued upon exercise of outstanding options (in millions)
|
|
Weighted-average exercise price of outstanding options
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (in millions)
|
|
Equity compensation plans approved by security holders
|
5.9
|
|
|
$
|
40.49
|
|
|
31.3
|
|
(1)
|
Total
|
5.9
|
|
|
$
|
40.49
|
|
|
31.3
|
|
|
____________________
|
|
(1)
|
Included in this amount are
9.1 million
securities available for future issuance under Autodesk’s ESPP.
|
4
.
Income Taxes
The provision for income taxes consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended January 31,
|
2018
|
|
2017
|
|
2016
|
Federal:
|
|
|
|
|
|
Current
|
$
|
(0.8
|
)
|
|
$
|
1.6
|
|
|
$
|
(4.7
|
)
|
Deferred
|
(19.3
|
)
|
|
8.4
|
|
|
220.9
|
|
State:
|
|
|
|
|
|
Current
|
(0.3
|
)
|
|
(1.9
|
)
|
|
0.5
|
|
Deferred
|
2.2
|
|
|
1.3
|
|
|
20.9
|
|
Foreign:
|
|
|
|
|
|
Current
|
50.9
|
|
|
93.9
|
|
|
68.4
|
|
Deferred
|
(23.1
|
)
|
|
(45.0
|
)
|
|
4.2
|
|
|
$
|
9.6
|
|
|
$
|
58.3
|
|
|
$
|
310.2
|
|
Foreign pretax (loss) income was $
(76.2) million
in fiscal
2018
, $
(27.6) million
in fiscal
2017
, and $
218.2 million
in fiscal
2016
.
The differences between the U.S. statutory rate and the aggregate income tax provision are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended January 31,
|
2018
|
|
2017
|
|
2016
|
Income tax provision (benefit) at U.S. Federal statutory rate
|
$
|
(188.4
|
)
|
|
$
|
(177.0
|
)
|
|
$
|
(7.1
|
)
|
State income tax benefit, net of the U.S. Federal benefit
|
(21.9
|
)
|
|
(17.3
|
)
|
|
(7.6
|
)
|
Foreign income taxed at rates different from the U.S. statutory rate
|
(53.3
|
)
|
|
22.3
|
|
|
(29.4
|
)
|
U.S. valuation allowance
|
(82.5
|
)
|
|
233.0
|
|
|
345.0
|
|
Transition tax
|
408.4
|
|
|
—
|
|
|
—
|
|
Increase in attributes due to ASU 2016-9 adoption
|
|
|
|
(119.4
|
)
|
|
—
|
|
Change in valuation allowance from ASU 2016-9 adoption
|
—
|
|
|
119.4
|
|
|
—
|
|
Tax effect of non-deductible stock-based compensation
|
20.7
|
|
|
18.8
|
|
|
19.3
|
|
Stock compensation windfall / shortfall
|
(67.7
|
)
|
|
(23.0
|
)
|
|
—
|
|
Research and development tax credit benefit
|
(11.3
|
)
|
|
(10.3
|
)
|
|
(9.4
|
)
|
Closure of income tax audits and changes in uncertain tax positions
|
1.2
|
|
|
8.2
|
|
|
(4.7
|
)
|
Tax effect of officer compensation in excess of $1.0 million
|
2.2
|
|
|
2.2
|
|
|
1.4
|
|
Non-deductible expenses
|
2.1
|
|
|
2.0
|
|
|
2.6
|
|
Other
|
0.1
|
|
|
(0.6
|
)
|
|
0.1
|
|
|
$
|
9.6
|
|
|
$
|
58.3
|
|
|
$
|
310.2
|
|
Significant components of Autodesk’s deferred tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
January 31,
|
2018
|
|
2017
|
Stock-based compensation
|
$
|
26.7
|
|
|
$
|
37.6
|
|
Research and development tax credit carryforwards
|
170.3
|
|
|
136.7
|
|
Foreign tax credit carryforwards
|
162.2
|
|
|
127.3
|
|
Accrued compensation and benefits
|
25.9
|
|
|
39.5
|
|
Other accruals not currently deductible for tax
|
22.9
|
|
|
18.7
|
|
Purchased technology and capitalized software
|
43.4
|
|
|
76.9
|
|
Fixed assets
|
16.5
|
|
|
24.3
|
|
Tax loss carryforwards
|
85.7
|
|
|
173.6
|
|
Deferred revenue
|
120.3
|
|
|
128.3
|
|
Other
|
32.4
|
|
|
27.6
|
|
Total deferred tax assets
|
706.3
|
|
|
790.5
|
|
Less: valuation allowance
|
(634.2
|
)
|
|
(748.0
|
)
|
Net deferred tax assets
|
72.1
|
|
|
42.5
|
|
Indefinite lived intangibles
|
(57.0
|
)
|
|
(70.1
|
)
|
Total deferred tax liabilities
|
(57.0
|
)
|
|
(70.1
|
)
|
Net deferred tax assets
|
$
|
15.1
|
|
|
$
|
(27.6
|
)
|
Autodesk’s tax expense is primarily driven by the reduction in the U.S. tax rate from 35% to 21% on the deferred tax liabilities related to indefinite lived intangibles offset by tax expense in foreign locations, withholding taxes paid on payments made to the U.S. from foreign sources, and tax amortization on indefinite-lived intangibles.
Autodesk regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, Autodesk considers 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, Autodesk considered cumulative losses arising from the Company's business model transition as a significant piece of negative evidence. Consequently, in the fiscal year 2016, Autodesk determined that a valuation allowance was required on the accumulated domestic tax attributes. In the current year,
the U.S. created incremental deferred tax assets, primarily foreign tax and R&D credits, and those deferred tax attributes have also been offset by a full valuation allowance. As a result, Autodesk has no material federal income tax expense or benefit in the current fiscal year, other than the deferred tax liabilities related to indefinite lived intangibles and the revaluation of these liabilities as a result of U.S. tax reform. The valuation allowance decreased by $
113.8 million
in fiscal
2018
primarily due to a change in tax rates used to value deferred tax attributes. The valuation allowance increased by $
352.4 million
, and $
327.2 million
in fiscal
2017
, and
2016
, respectively, primarily related to U.S. and Canadian deferred tax attributes. As Autodesk continually strives to optimize the overall business model, tax planning strategies may become feasible and prudent allowing the Company to realize many of the deferred tax assets that are offset by a valuation allowance; therefore, Autodesk will continue to evaluate the ability to utilize the net deferred tax assets each quarter, both in the U.S. and in foreign jurisdictions, based on all available evidence, both positive and negative.
The Tax Act was signed into law on December 22, 2017 and provides broad and significant changes to the U.S. corporate income tax regime. The Tax Act reduces the statutory federal corporate rate from 35% to 21% effective fiscal 2019 year and forward and provides for a blended rate of
33.81%
to fiscal 2018 year. The Tax Act also, among many other provisions, imposes a one-time mandatory tax on accumulated earnings of foreign subsidiaries (commonly referred to as a "transition tax"), introduces new tax regimes changing how foreign earnings are subject to U.S. tax, modifies the accelerated depreciation deduction rules, and makes updates to the deductibility of certain expenses. The SEC staff acknowledged the challenges companies face incorporating the effects of the Tax Act by the financial reporting deadlines. In response, on December 22, 2017, the SEC staff issued SAB 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete accounting for certain income tax effects of the Tax Act. Autodesk has not completed the determination of the accounting implications of the Tax Act but was able to calculate a reasonable estimate and recorded a provisional tax benefit of the Tax Act in the financial statements of approximately
$32.3 million
mainly driven by the corporate rate remeasurement of the indefinite-lived intangible deferred tax liability. The provisional amounts recorded are based on the Company’s current interpretation and understanding of the Tax Act and may change as the Company receives additional clarification and implementation guidance and finalizes the analysis of all impacts and positions with regard to the Tax Act. The tax impact of the mandatory one-time tax on accumulated earnings of foreign subsidiaries is primarily offset by other current year operating losses and fully valued net operating loss carryforwards resulting in no impact to the effective tax rate. As additional regulatory guidance is issued, the Company will continue to collect and analyze necessary data and may adjust provisional amounts previously recorded in the period in which the adjustments are made. Pursuant to SAB 118, the Company will complete the accounting for the tax effects of all provisions of the Tax Act within the required measurement period not to extend beyond one year from the enactment date.
Realization of foreign non-current net deferred tax assets of $
68.0 million
is dependent upon the Company's ability to generate future taxable income in appropriate tax jurisdictions to obtain benefit from the reversal of temporary differences, net operating loss carryforwards and tax credits. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are reduced and Autodesk then determines that it is not more likely than not to realize such deferred tax assets.
As of
January 31, 2018
, Autodesk had $
179.4 million
of cumulative federal tax loss carryforwards and $
939.1 million
of cumulative state tax loss carryforwards, which may be available to reduce future income tax liabilities in federal and state jurisdictions. As discussed above, these cumulative assets have full valuation allowance against them on our balance sheet as the Company has determined it is more likely that not that these losses will not be utilized. These federal and state tax loss carryforwards will expire beginning fiscal
2021
through fiscal
2038
and fiscal
2020
through fiscal
2039
, respectively.
As of
January 31, 2018
, Autodesk had $
138.4 million
of cumulative federal research tax credit carryforwards, $
72.6 million
of cumulative California state research tax credit carryforwards, and $
58.1 million
of cumulative Canadian federal tax credit carryforwards, which may be available to reduce future income tax liabilities in the respective jurisdictions. The federal tax credit carryforwards will expire beginning fiscal
2021
through fiscal
2039
, the state credit carryforwards may reduce future California income tax liabilities indefinitely, and the Canadian tax credit carryforwards will expire beginning fiscal
2027
through fiscal
2039
. Autodesk also has $
336.9 million
of cumulative foreign tax credit carryforwards, which may be available to reduce future U. S. tax liabilities. The foreign tax credit will expire beginning fiscal
2019
through fiscal
2029
. As discussed above, these cumulative assets have full valuation allowance against them on our balance sheet as the Company has determined it is more likely that not that these losses will not be utilized.
Utilization of net operating losses and tax credits may be subject to an annual limitation due to ownership change limitations provided in the Internal Revenue Code and similar state provisions. This annual limitation may result in the expiration of net operating losses and credits before utilization. No ownership change has occurred through the balance sheet date that would limit a material amount of U.S. federal and state tax attributes.
As of
January 31, 2018
, the Company had $
337.6 million
of gross unrecognized tax benefits, of which $
304.8 million
would reduce our valuation allowance, if recognized. The remaining
$32.8 million
would impact the effective tax rate.
It is possible that the amount of unrecognized tax benefits will change in the next twelve months; however, an estimate of the range of the possible change cannot be made at this time.
A reconciliation of the beginning and ending amount of the gross unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2018
|
|
2017
|
|
2016
|
Gross unrecognized tax benefits at the beginning of the fiscal year
|
$
|
261.4
|
|
|
$
|
254.3
|
|
|
$
|
245.8
|
|
Increases for tax positions of prior years
|
22.8
|
|
|
11.9
|
|
|
1.4
|
|
Decreases for tax positions of prior years
|
(22.5
|
)
|
|
(4.1
|
)
|
|
(7.0
|
)
|
Increases for tax positions related to the current year
|
78.4
|
|
|
11.1
|
|
|
15.8
|
|
Decreases relating to settlements with taxing authorities
|
(0.8
|
)
|
|
(10.8
|
)
|
|
(0.5
|
)
|
Reductions as a result of lapse of the statute of limitations
|
(1.7
|
)
|
|
(1.0
|
)
|
|
(1.2
|
)
|
Gross unrecognized tax benefits at the end of the fiscal year
|
$
|
337.6
|
|
|
$
|
261.4
|
|
|
$
|
254.3
|
|
It is the Company's continuing practice to recognize interest and/or penalties related to income tax matters in income tax expense. Autodesk had $
2.8 million
, $
2.5 million
, and $
3.3 million
, net of tax benefit, accrued for interest and penalties related to unrecognized tax benefits as of
January 31, 2018
,
2017
, and
2016
, respectively. There was $
0.3 million
, $
1.5 million
, and
$1.3 million
of net expense for interest and penalties related to tax matters recorded through the consolidated statement of operations for the years ended
January 31, 2018
,
2017
, and
2016
respectively.
Autodesk's U.S. and state income tax returns for fiscal year
2003
through fiscal year
2018
remain open to examination. The Internal Revenue Service has started an examination of the Company's U.S. consolidated federal income tax returns for fiscal years 2014 and 2015. While it is possible that the Company's tax positions may be challenged, the Company believes its positions are consistent with the tax law, and the balance sheet reflects appropriate liabilities for uncertain federal tax positions for the years being examined.
Autodesk files tax returns in multiple foreign taxing jurisdictions with open tax years ranging from fiscal year
2005
to
2018
.
As a result of certain business and employment actions and capital investments undertaken by Autodesk, income earned in certain Europe and Asia Pacific countries is subject to reduced tax rates through fiscal 2019. In fiscal
2018
, the Company incurred
no
net benefit from the tax status of these business arrangements, compared to
$27.1 million
benefit (
$0.12
basic net income per share) in fiscal
2017
, and
none
in fiscal
2016
.
5
.
Acquisitions
During the fiscal years ended
January 31, 2018
, and
January 31, 2017
, Autodesk completed the business combinations and technology purchases described below. The results of operations for the following acquisitions are included in the accompanying
Consolidated Statements of Operations
since their respective acquisition dates. Pro forma results of operations have not been presented because the effects of the acquisitions, individually and in the aggregate, were not material to Autodesk's Consolidated Financial Statements.
For acquisitions accounted for as business combinations, Autodesk recorded the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The fair values assigned to the identifiable intangible assets acquired were based on estimates and assumptions determined by management. Autodesk recorded the excess of consideration transferred over the aggregate fair values as goodwill. The goodwill recorded is primarily attributable to synergies expected to arise after the acquisitions.
Fiscal
2018
Acquisitions
During the fiscal year ended
January 31, 2018
, Autodesk did not complete any business combinations or technology acquisitions.
Fiscal
2017
Acquisitions
During the fiscal year ended
January 31, 2017
, Autodesk completed several business combination and technology acquisitions for total cash consideration of
$87.0 million
. These business combinations and technology acquisitions were not material individually or in aggregate to Autodesk's Consolidated Financial Statements.
The following table summarizes the fair value of the assets acquired and liabilities assumed by major class for each of the business combinations and technology acquisitions completed during the fiscal year ended
January 31, 2017
:
|
|
|
|
|
|
Developed technologies
|
|
$
|
18.8
|
|
Customer relationships
|
|
10.2
|
|
Trade name
|
|
3.8
|
|
Goodwill
|
|
62.8
|
|
Deferred revenue (current and non-current)
|
|
(2.1
|
)
|
Deferred tax liability
|
|
(7.1
|
)
|
Net tangible (liabilities) assets
|
|
0.6
|
|
Total
|
|
$
|
87.0
|
|
6
.
Deferred Compensation
At
January 31, 2018
, Autodesk had marketable securities totaling $
436.0 million
, of which $
59.0 million
related to investments in debt and equity securities that are held in a rabbi trust under non-qualified deferred compensation plans. The total related deferred compensation liability was $
59.0 million
at
January 31, 2018
, of which $
3.4 million
was classified as current and $
55.6 million
was classified as non-current liabilities. The total related deferred compensation liability at
January 31, 2017
was $
47.3 million
, of which $
3.1 million
was classified as current and $
44.2 million
was classified as non-current liabilities. The securities are recorded in the Consolidated Balance Sheets under the current portion of "Marketable securities". The current and non-current portions of the liability are recorded in the Consolidated Balance Sheets under “Accrued compensation” and “Other liabilities,” respectively.
7
.
Borrowing Arrangements
In June 2017, Autodesk issued $
500.0 million
aggregate principal amount of
3.5%
notes due
June 15, 2027
(collectively, the “2017 Notes”). Net of a discount of $
3.1 million
and issuance costs of $
4.9 million
, Autodesk received net proceeds of $
492.0 million
from issuance of the 2017 Notes. Both the discount and issuance costs are being amortized to interest expense over the term of the 2017 Notes using the effective interest method. The proceeds of the 2017 Notes have been used for the repayment of $
400.0 million
of debt originally due December 15, 2017 and the remainder is available for general corporate purposes. Autodesk may redeem the 2017 Notes at any time, subject to a make whole premium. In addition, upon the occurrence of certain change of control triggering events, Autodesk may be required to repurchase the 2017 Notes at a price equal to
101.0%
of their principal amount, plus accrued and unpaid interest to the date of repurchase. The 2017 Notes contain restrictive covenants that limit Autodesk's ability to create certain liens, to enter into certain sale and leaseback transactions and to consolidate or merge with, or convey, transfer or lease all or substantially all of its assets, subject to important qualifications and exceptions. Based on quoted market prices, the fair value of the 2017 Notes was approximately $
485.6 million
as of
January 31, 2018
.
In June 2015, Autodesk issued $
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
(collectively, the “2015 Notes”). Net of a discount of
$1.7 million
and issuance costs of
$6.3 million
, Autodesk received net proceeds of $
742.0 million
from issuance of the 2015 Senior Notes. Both the discount and issuance costs are being amortized to interest expense over the respective terms of the 2015 Notes using the effective interest method. The proceeds of the 2015 Notes are available for general corporate purposes. Autodesk may redeem the 2015 Notes at any time, subject to a make whole premium. In addition, upon the occurrence of certain change of control triggering events, Autodesk may be required to repurchase the 2015 Notes, at a price
equal to
101%
of their principal amount, plus accrued and unpaid interest to the date of repurchase. The 2015 Notes contain restrictive covenants that limit Autodesk's ability to create certain liens, to enter into certain sale and leaseback transactions and to consolidate or merge with, or convey, transfer or lease all or substantially all of its assets, subject to significant qualifications and exceptions. Based on quoted market prices, the fair value of the 2015 Notes was approximately $
763.8 million
as of
January 31, 2018
.
In December 2012, Autodesk issued $
400.0 million
aggregate principal amount of
1.95%
senior notes due
December 15, 2017
and $
350.0 million
aggregate principal amount of
3.6%
senior notes due
December 15, 2022
(collectively, the "2012 Notes"). Autodesk received net proceeds of $
739.3 million
from issuance of the 2012 Notes, net of a discount of $
4.5 million
and issuance costs of $
6.1 million
. Both the discount and issuance costs are being amortized to interest expense over the respective terms of the 2012 Notes using the effective interest method. The proceeds of the 2012 Notes are available for general corporate purposes. In July 2017, Autodesk redeemed in full $
400.0 million
in aggregate principal amount of its outstanding
1.95%
senior notes due
December 15, 2017
. The redemption was completed pursuant to the optional redemption provisions of the first supplemental indenture dated December 13, 2012. To redeem the notes, Autodesk used the proceeds of the 2017 Notes to pay a redemption price of approximately
$400.9 million
, plus accrued and unpaid interest. Total cash repayment was
$401.8 million
. The Company did not incur any additional early termination penalties in connection with such redemption. Based on the quoted market price, the fair value of the remaining 2012 Notes was approximately $
354.4 million
as of
January 31, 2018
.
Autodesk’s line of credit facility permits unsecured short-term borrowings of up to $
400.0 million
with an option to request an increase in the amount of the credit facility by up to an additional $
100.0 million
, and is available for working capital or other business needs. This credit agreement contains customary covenants that could restrict the imposition of liens on Autodesk’s assets, and restrict the Company’s ability to incur additional indebtedness or make dispositions of assets if Autodesk fails to maintain the financial covenants. The Company renegotiated the credit agreement's financial covenants in April 2017. The financial covenants now consist of a maximum debt to total cash ratio, a fixed charge coverage ratio through April 30, 2018, and after April 30, 2018, a minimum interest coverage ratio.
The line of credit is syndicated with various financial institutions, including Citibank, N.A., an affiliate of Citigroup, which is one of the lead lenders and an agent. The maturity date on the line of credit facility is
May 2020
. At
January 31, 2018
, Autodesk was in compliance with the credit facility’s covenants. At
January 31, 2018
, and
January 31, 2017
, Autodesk had
no
outstanding borrowings on this line of credit.
8
.
Commitments and Contingencies
Lease commitments
Autodesk leases office space and computer equipment under non-cancellable operating lease agreements that expire at various dates through
2090
. The leases generally provide that Autodesk pay taxes, insurance, and maintenance expenses related to the leased assets. Certain of these lease arrangements contain escalation clauses whereby monthly rent increases over time.
At
January 31, 2018
, the aggregate future minimum lease payments required were as follows:
|
|
|
|
|
|
|
2019
|
$
|
62.2
|
|
2020
|
46.3
|
|
2021
|
34.1
|
|
2022
|
24.7
|
|
2023
|
22.8
|
|
Thereafter
|
57.7
|
|
|
247.8
|
|
Less: Sublease income
|
0.8
|
|
|
$
|
247.0
|
|
Rent expense related to these operating leases recognized on a straight-line basis over the lease period, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2018
|
|
2017
|
|
2016
|
Rent expense
|
$
|
55.9
|
|
|
$
|
65.3
|
|
|
$
|
58.7
|
|
Purchase commitments
In the normal course of business, Autodesk enters into various purchase commitments for goods or services. Total non-cancellable purchase commitments as of
January 31, 2018
, were approximately $
147.6 million
for periods through fiscal 2028
. These purchase commitments primarily result from contracts entered into for the acquisition of IT infrastructure, marketing, and software development services, as well as includes commitments related to our investment agreements with limited liability partnership funds.
Autodesk has certain royalty commitments associated with the sale and licensing of certain products. Royalty expense is generally based on a dollar amount per unit sold or a percentage of the underlying revenue. Royalty expense, which was recorded under cost of maintenance and subscription revenue and cost of license and other revenue on Autodesk’s Consolidated Statements of Operations, was $
15.3 million
in fiscal
2018
, $
16.2 million
in fiscal
2017
, and $
17.4 million
in fiscal
2016
.
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 indemnification issues if a loss is probable and can be reasonably estimated. Historically, costs related to these indemnifications have not been significant, and because potential future costs are highly variable, Autodesk is unable to estimate the maximum potential impact of these indemnifications on its future results of operations.
In connection with the purchase, sale, or license of assets or businesses with third parties, Autodesk has entered into or assumed customary indemnification agreements related to the assets or businesses purchased, sold or licensed. Historically, costs related to these indemnifications have not been significant, and because potential future costs are highly variable, Autodesk is unable to estimate the maximum potential impact of these indemnifications on its future results of operations.
As permitted under Delaware law, Autodesk has agreements whereby 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
Autodesk is involved in a variety of claims, suits, investigations, and proceedings in the normal course of business activities including claims of alleged infringement of intellectual property rights, commercial, employment, piracy prosecution, business practices, and other matters. Autodesk routinely reviews the status of each significant matter and assesses its potential financial exposure. If the potential loss from any matter is considered probable and the amount can be reasonably estimated, Autodesk records a liability for the estimated loss. Because of inherent uncertainties related to these legal matters, Autodesk bases its loss accruals on the best information available at the time. As additional information becomes available, Autodesk reassesses its potential liability and may revise its estimates. In the Company's opinion, resolution of pending matters is not expected to have a material adverse impact on its consolidated results of operations, cash flows, or its financial position. Given the unpredictable nature of legal proceedings, there is a reasonable possibility that an unfavorable resolution of one or more such proceedings could in the future materially affect the Company's results of operations, cash flows, or financial position in a particular period, however, based on the information known by the Company as of the date of this filing and the rules and regulations applicable to the preparation of the Company's financial statements, any such amount is either immaterial or it is not possible to provide an estimated amount of any such potential loss.
9
.
Stockholders' (Deficit) Equity
Preferred Stock
Under Autodesk’s Certificate of Incorporation,
2.0 million
shares of preferred stock are authorized. At
January 31, 2018
, there were no preferred shares issued or outstanding. The Board of Directors has the authority to issue the preferred stock in one or more series and to fix rights, preferences, privileges, and restrictions, including dividends and the number of shares constituting any series or the designation of such series, without any further vote or action by the stockholders.
Common Stock Repurchase Program
Autodesk has a stock repurchase program that is used to offset dilution from the issuance of stock under the Company’s employee stock plans and for such other purposes as may be in the interests of Autodesk and its stockholders, which has the effect of returning excess cash generated from the Company’s business to stockholders. Autodesk repurchased and retired approximately
6.9 million
shares in fiscal
2018
at an average repurchase price of $
100.45
per share,
9.7 million
shares in fiscal
2017
at an average repurchase price of $
64.73
per share, and
8.5 million
shares in fiscal
2016
at an average repurchase price of $
53.58
.
At
January 31, 2018
,
19.6 million
shares remained available for repurchase under the repurchase program approved by the Board of Directors.
The share repurchase program does not have an expiration date and the pace and timing of repurchases will depend on factors such as cash generation from operations, available surplus, the volume of employee stock plan activity, cash requirements for acquisitions, economic and market conditions, stock price and legal and regulatory requirements.
10
.
Interest and Other Expense, net
Interest and other expense, net, consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2018
|
|
2017
|
|
2016
|
Interest and investment expense, net
|
$
|
(34.5
|
)
|
|
$
|
(29.7
|
)
|
|
$
|
(33.9
|
)
|
Loss on foreign currency
|
(3.3
|
)
|
|
(3.3
|
)
|
|
—
|
|
(Loss) gain on strategic investments
|
(16.4
|
)
|
|
0.3
|
|
|
3.8
|
|
Other income
|
6.0
|
|
|
8.5
|
|
|
8.5
|
|
Interest and other expense, net
|
$
|
(48.2
|
)
|
|
$
|
(24.2
|
)
|
|
$
|
(21.6
|
)
|
11
.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss, net of taxes, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Unrealized Gains (Losses) on Derivative Instruments
|
|
Net Unrealized Gains (Losses) on Available for Sale Securities
|
|
Defined Benefit Pension Components
|
|
Foreign Currency Translation Adjustments
|
|
Total
|
Balances, January 31, 2016
|
$
|
15.7
|
|
|
$
|
0.2
|
|
|
$
|
(28.3
|
)
|
|
$
|
(108.7
|
)
|
|
$
|
(121.1
|
)
|
Other comprehensive income (loss) before reclassifications
|
7.4
|
|
|
3.3
|
|
|
(5.8
|
)
|
|
(52.3
|
)
|
|
(47.4
|
)
|
Pre-tax (gains) losses reclassified from accumulated other comprehensive income
|
(7.4
|
)
|
|
(1.5
|
)
|
|
1.2
|
|
|
—
|
|
|
(7.7
|
)
|
Tax effects
|
(1.1
|
)
|
|
(0.5
|
)
|
|
(0.9
|
)
|
|
0.2
|
|
|
(2.3
|
)
|
Net current period other comprehensive (loss) income
|
(1.1
|
)
|
|
1.3
|
|
|
(5.5
|
)
|
|
(52.1
|
)
|
|
(57.4
|
)
|
Balances, January 31, 2017
|
14.6
|
|
|
1.5
|
|
|
(33.8
|
)
|
|
(160.8
|
)
|
|
(178.5
|
)
|
Other comprehensive (loss) income before reclassifications
|
(24.5
|
)
|
|
(0.6
|
)
|
|
4.3
|
|
|
86.3
|
|
|
65.5
|
|
Pre-tax (gains) losses reclassified from accumulated other comprehensive income
|
(9.9
|
)
|
|
0.3
|
|
|
0.9
|
|
|
0.1
|
|
|
(8.6
|
)
|
Tax effects
|
3.2
|
|
|
0.1
|
|
|
(0.7
|
)
|
|
(4.8
|
)
|
|
(2.2
|
)
|
Net current period other comprehensive (loss) income
|
(31.2
|
)
|
|
(0.2
|
)
|
|
4.5
|
|
|
81.6
|
|
|
54.7
|
|
Balances, January 31, 2018
|
$
|
(16.6
|
)
|
|
$
|
1.3
|
|
|
$
|
(29.3
|
)
|
|
$
|
(79.2
|
)
|
|
$
|
(123.8
|
)
|
Reclassifications related to gains and losses on available-for-sale securities are included in
Interest and other expense, net
. Refer to Note 2, "
Financial Instruments
" for the amount and location of reclassifications related to derivative instruments. Reclassifications of the defined benefit pension components are included in the computation of net periodic benefit cost. Refer to Note 14, "
Retirement Benefit Plans
."
12
.
Net Loss Per Share
Basic net loss per share is computed using the weighted average number of shares of common stock outstanding for the period, excluding stock options and restricted stock units. Diluted net loss per share is based upon the weighted average number of shares of common stock outstanding for the period and potentially dilutive common shares, including the effect of stock options and restricted stock units under the treasury stock method. The following table sets forth the computation of the numerators and denominators used in the basic and diluted net loss per share amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2018
|
|
2017
|
|
2016
|
Numerator:
|
|
|
|
|
|
Net loss
|
$
|
(566.9
|
)
|
|
$
|
(582.1
|
)
|
|
$
|
(330.5
|
)
|
Denominator:
|
|
|
|
|
|
Denominator for basic net loss per share—weighted average shares
|
219.5
|
|
|
222.7
|
|
|
226.0
|
|
Effect of dilutive securities (1)
|
—
|
|
|
—
|
|
|
—
|
|
Denominator for dilutive net loss per share
|
219.5
|
|
|
222.7
|
|
|
226.0
|
|
Basic net loss per share
|
$
|
(2.58
|
)
|
|
$
|
(2.61
|
)
|
|
$
|
(1.46
|
)
|
Diluted net loss per share
|
$
|
(2.58
|
)
|
|
$
|
(2.61
|
)
|
|
$
|
(1.46
|
)
|
____________________
|
|
(1)
|
The effect of dilutive securities of
4.5 million
,
4.6 million
, and
4.7 million
shares for the fiscal year ended
January 31, 2018
,
2017
, and
2016
, respectively, have been excluded from the calculation of diluted net loss per share as those shares would have been anti-dilutive due to the net loss incurred during those fiscal years.
|
The computation of diluted net loss per share does not include shares that are anti-dilutive under the treasury stock method because their exercise prices are higher than the average market value of Autodesk’s stock during the fiscal year. The effect of
0.5 million
,
0.1 million
, and
0.1 million
potentially anti-dilutive shares were excluded from the computation of net loss per share for the fiscal years ended
January 31, 2018
,
2017
, and
2016
, respectively.
13
. Segment, Geographic and Product Family Information
Autodesk reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions, allocating resources and assessing performance as the source of the Company’s reportable segments. The Company's chief operating decision maker ("CODM") allocates resources and assesses the operating performance of the Company as a whole. As such, Autodesk has one segment manager (the CODM), and one operating segment.
Information regarding Autodesk’s revenue by geographic area and product family is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2018
|
|
2017
|
|
2016
|
Net revenue by geographic area (1):
|
|
|
|
|
|
Americas
|
|
|
|
|
|
U.S.
|
$
|
740.4
|
|
|
$
|
742.1
|
|
|
$
|
803.9
|
|
Other Americas
|
130.7
|
|
|
129.8
|
|
|
168.9
|
|
Total Americas
|
871.1
|
|
|
871.9
|
|
|
972.8
|
|
Europe, Middle East, and Africa
|
815.4
|
|
|
800.4
|
|
|
934.6
|
|
Asia Pacific
|
370.1
|
|
|
358.7
|
|
|
596.7
|
|
Total net revenue
|
$
|
2,056.6
|
|
|
$
|
2,031.0
|
|
|
$
|
2,504.1
|
|
|
|
|
|
|
|
Net revenue by product family:
|
|
|
|
|
|
Architecture, Engineering and Construction
|
$
|
866.5
|
|
|
$
|
880.9
|
|
|
$
|
949.1
|
|
Manufacturing
|
589.2
|
|
|
625.8
|
|
|
724.6
|
|
AutoCAD and AutoCAD LT
|
401.4
|
|
|
326.7
|
|
|
594.8
|
|
Media and Entertainment
|
152.0
|
|
|
138.9
|
|
|
160.0
|
|
Other
|
47.5
|
|
|
58.7
|
|
|
75.6
|
|
|
$
|
2,056.6
|
|
|
$
|
2,031.0
|
|
|
$
|
2,504.1
|
|
__________________
|
|
(1)
|
Revenue by geographic area is based on the bill to country.
|
Information regarding Autodesk’s long-lived assets by geographic area is as follows:
|
|
|
|
|
|
|
|
|
|
January 31,
|
|
2018
|
|
2017
|
Long-lived assets (1):
|
|
|
|
Americas
|
|
|
|
U.S.
|
$
|
99.3
|
|
|
$
|
118.8
|
|
Other Americas
|
14.6
|
|
|
5.9
|
|
Total Americas
|
113.9
|
|
|
124.7
|
|
Europe, Middle East, and Africa
|
16.7
|
|
|
18.7
|
|
Asia Pacific
|
14.4
|
|
|
15.2
|
|
Total long-lived assets
|
$
|
145.0
|
|
|
$
|
158.6
|
|
____________________
|
|
(1)
|
Long-lived assets exclude deferred tax assets, marketable securities, goodwill, and other intangible assets.
|
14
.
Retirement Benefit Plans
Pretax Savings Plan
Autodesk has a 401(k) plan that covers nearly all U.S. employees. Eligible employees may contribute up to
75%
of their pretax salary, subject to limitations mandated by the Internal Revenue Service. Autodesk makes voluntary cash contributions and matches a portion of employee contributions in cash. Autodesk’s contributions were $
17.3 million
in fiscal
2018
, $
16.4 million
in fiscal
2017
, and $
17.3 million
in fiscal
2016
. Autodesk does not allow participants to invest in Autodesk common stock through the 401(k) plan.
Defined Benefit Pension Plans
Autodesk maintains certain defined benefit pension plans to employees primarily located in countries outside of the U.S, particularly the United Kingdom, Switzerland, and Japan. The Company deposits funds for specific plans, consistent with the requirements of local law, with insurance companies, third-party trustees, or into government-managed accounts, and accrues for the unfunded portion of the obligation, where material. Depending on the design of the plan, local customs, and market circumstances, the liabilities of a plan may exceed qualified plan assets.
Benefit Obligation and Plan Assets
The changes in the projected benefit obligations and plan assets for the plans described above were as follows:
|
|
|
|
|
|
|
|
|
|
Fiscal year ended January 31,
|
|
2018
|
|
2017
|
Beginning projected benefit obligation
|
$
|
146.4
|
|
|
$
|
145.2
|
|
Service cost
|
5.2
|
|
|
5.6
|
|
Interest cost
|
2.7
|
|
|
3.0
|
|
Actuarial (gain) loss
|
(2.8
|
)
|
|
7.1
|
|
Benefits paid
|
(3.3
|
)
|
|
(2.6
|
)
|
Foreign currency exchange rate changes
|
13.9
|
|
|
(9.5
|
)
|
Curtailments and settlements
|
(8.2
|
)
|
|
(6.8
|
)
|
Contributions by plan participants
|
4.0
|
|
|
4.4
|
|
Plan amendment
|
0.2
|
|
|
—
|
|
Ending projected benefit obligation
|
$
|
158.1
|
|
|
$
|
146.4
|
|
|
|
|
|
Beginning fair value of plan assets
|
$
|
107.4
|
|
|
$
|
101.4
|
|
Actual return on plan assets
|
3.8
|
|
|
4.2
|
|
Contributions paid by employer
|
6.5
|
|
|
15.3
|
|
Contributions paid by plan participants
|
4.0
|
|
|
4.4
|
|
Benefit payments
|
(3.3
|
)
|
|
(2.6
|
)
|
Curtailments and settlements
|
(8.0
|
)
|
|
(6.8
|
)
|
Foreign currency exchange rate changes
|
10.7
|
|
|
(8.5
|
)
|
Ending fair value of plan assets
|
$
|
121.1
|
|
|
$
|
107.4
|
|
Funded status
|
$
|
(37.0
|
)
|
|
$
|
(39.0
|
)
|
The amounts recognized on the consolidated balance sheets at the end of each period were as follows:
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2018
|
|
2017
|
Other long-term liabilities
|
$
|
37.0
|
|
|
$
|
39.0
|
|
Accumulated other comprehensive loss, before tax
|
31.7
|
|
|
37.0
|
|
Net amount recognized
|
$
|
68.7
|
|
|
$
|
76.0
|
|
On a worldwide basis, the Company's defined benefit pension plans were
77%
funded as of
January 31, 2018
.
As of
January 31, 2018
, the aggregate accumulated benefit obligation was
$139.5 million
for the defined benefit pension plans compared to
$128.2 million
as of
January 31, 2017
. Included in the aggregate data in the following tables are the amounts applicable to the Company's defined benefit pension plans, with accumulated benefit obligations in excess of plan assets, as well as plans with projected benefit obligations in excess of plan assets. Amounts related to such plans at the end of each period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
|
2018
|
|
2017
|
Plans with accumulated benefit obligations in excess of plan assets:
|
|
|
|
|
Accumulated benefit obligations
|
|
$
|
130.7
|
|
|
$
|
119.2
|
|
Plan assets
|
|
112.1
|
|
|
98.3
|
|
Plans with projected benefit obligations in excess of plan assets:
|
|
|
|
|
Projected benefit obligations
|
|
$
|
158.1
|
|
|
$
|
146.4
|
|
Plan assets
|
|
121.1
|
|
|
107.4
|
|
Defined Benefit Pension Plan Assets
The investments of the plans are managed by insurance companies or third-party investment managers selected by Autodesk's Trustees, consistent with regulations or market practice of the country where the assets are invested. Investments managed by qualified insurance companies or third-party investment managers under standard contracts follow local regulations, and Autodesk is not actively involved in their investment strategies.
Defined benefit pension plan assets measured at fair value on a recurring basis consisted of the following investment categories at the end of each period as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2018
|
|
2017
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Total
|
Insurance contracts
|
$
|
—
|
|
|
$
|
53.0
|
|
|
$
|
—
|
|
|
$
|
53.0
|
|
|
$
|
46.3
|
|
Other investments
|
—
|
|
|
17.0
|
|
|
—
|
|
|
17.0
|
|
|
9.4
|
|
Total assets measured at fair value
|
$
|
—
|
|
|
$
|
70.0
|
|
|
$
|
—
|
|
|
70.0
|
|
|
55.7
|
|
Cash
|
|
|
|
|
|
|
0.2
|
|
|
—
|
|
Investment Fund valued using net asset value
|
|
|
|
|
|
|
50.9
|
|
|
51.7
|
|
Total pension plan assets at fair value
|
|
|
|
|
|
|
$
|
121.1
|
|
|
$
|
107.4
|
|
The insurance contracts in the preceding table represent the immediate cash surrender value of assets managed by qualified insurance companies. Autodesk does not have control over the target allocation or visibility of the investment strategies of those investments. Insurance contracts and investments held by insurance companies made up
44%
and
43%
of total plan assets as of
January 31, 2018
, and
January 31, 2017
, respectively.
The assets held in the investment fund in the preceding table are invested in a diversified growth fund actively managed by Russell Investments in association with Aon Hewitt. The objective of the fund is to generate capital appreciation on a long-term basis through a diversified portfolio of investments. The fund aims to deliver equity-like returns in the medium to long term with around two-thirds the volatility of equity markets. The fair value of the assets held in the investment fund are priced monthly at net asset value without restrictions on redemption.
Estimated Future Benefit Payments
Estimated benefit payments over the next 10 fiscal years are as follows:
|
|
|
|
|
|
Pension Benefits
|
2019
|
$
|
7.1
|
|
2020
|
6.5
|
|
2021
|
6.4
|
|
2022
|
6.4
|
|
2023
|
6.4
|
|
2024-2028
|
34.8
|
|
Funding Expectations
Our expected required funding for the plans during fiscal
2019
is approximately
$4.7 million
.
Net Periodic Benefit Cost
The components of net periodic pension cost for the defined benefit pension plans for fiscal
2018
,
2017
, and
2016
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2018
|
|
2017
|
|
2016
|
Service cost for benefits earned during the period
|
$
|
5.2
|
|
|
$
|
5.6
|
|
|
$
|
5.7
|
|
Interest cost on projected benefit obligation
|
2.7
|
|
|
3.0
|
|
|
3.3
|
|
Expected return on plan assets
|
(3.9
|
)
|
|
(4.2
|
)
|
|
(3.9
|
)
|
Amortization of prior service credit
|
(0.3
|
)
|
|
(0.3
|
)
|
|
(0.1
|
)
|
Amortization of loss
|
1.2
|
|
|
1.5
|
|
|
1.4
|
|
Settlement loss
|
1.9
|
|
|
1.2
|
|
|
—
|
|
Curtailment gain
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
Net periodic benefit cost
|
$
|
6.7
|
|
|
$
|
6.8
|
|
|
$
|
6.4
|
|
Amounts Recorded in OCI
The components of other comprehensive income for the defined benefit pension plans before taxes for fiscal
2018
,
2017
, and
2016
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2018
|
|
2017
|
|
2016
|
Prior service credit for period
|
$
|
0.2
|
|
|
$
|
—
|
|
|
$
|
(2.2
|
)
|
Net (gain) loss for period
|
(2.5
|
)
|
|
7.2
|
|
|
9.1
|
|
Effect of settlement
|
(1.9
|
)
|
|
(1.2
|
)
|
|
—
|
|
Effect of curtailment
|
(0.2
|
)
|
|
—
|
|
|
—
|
|
Amortization of prior service credit
|
0.3
|
|
|
0.3
|
|
|
0.1
|
|
Amortization of net loss
|
(1.2
|
)
|
|
(1.5
|
)
|
|
(1.4
|
)
|
Other comprehensive (income) loss
|
$
|
(5.3
|
)
|
|
$
|
4.8
|
|
|
$
|
5.6
|
|
Amounts Recorded in Accumulated Other Comprehensive Loss
The amounts recorded in accumulated other comprehensive loss before taxes at the end of each period were as follows:
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2018
|
|
2017
|
Net prior service credit
|
$
|
(3.1
|
)
|
|
$
|
(3.6
|
)
|
Net actuarial loss
|
34.8
|
|
|
40.6
|
|
Accumulated other comprehensive loss, before tax
|
$
|
31.7
|
|
|
$
|
37.0
|
|
The estimated amounts that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year for the qualified defined benefit pension plans are as follows:
|
|
|
|
|
|
Pension Benefits
|
Amortization of prior service credit
|
$
|
0.2
|
|
Amortization of the net loss
|
(0.6
|
)
|
Total amortization
|
$
|
(0.4
|
)
|
Assumptions
Weighted average actuarial assumptions used to determine costs for the plans for each period were as follows:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2018
|
|
2017
|
|
2016
|
Discount rate
|
2.4
|
%
|
|
3.2
|
%
|
|
3.2
|
%
|
Expected long-term rate of return on plan assets
|
3.3
|
%
|
|
4.3
|
%
|
|
3.8
|
%
|
Rate of compensation increase
|
2.3
|
%
|
|
2.2
|
%
|
|
2.2
|
%
|
The weighted-average expected long-term rate of return for the plan assets is
3.3%
. The weighted-average expected long-term rate of return on plan assets is based on the interest rates guaranteed under the insurance contracts, and the expected rate of return appropriate for each category of assets weighted for the distribution within the diversified investment fund. The assumptions used for the plans are based upon customary rates and practices for the location of the plans. Factors such as asset class allocations, long-term rates of return (actual and expected), and results of periodic asset liability modeling studies are considered when constructing the long-term rate of return assumption for our defined benefit pension plans.
Weighted average actuarial assumptions used to determine benefit obligations for the plans at the end of each period were as follows:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2018
|
|
2017
|
|
2016
|
Discount rate
|
1.8
|
%
|
|
1.7
|
%
|
|
2.2
|
%
|
Rate of compensation increase
|
2.6
|
%
|
|
2.6
|
%
|
|
2.6
|
%
|
In selecting the appropriate discount rate for the plans, the Company uses country-specific information, adjusted to reflect the duration of the particular plan
.
The discount rate was based on highly rated long-term bond indexes and yield curves that match the duration of the plan’s benefit obligations.
Defined Contribution Plans
Autodesk also provides defined contribution plans in certain foreign countries where required by statute. Autodesk’s funding policy for foreign defined contribution plans is consistent with the local requirements in each country. Autodesk’s contributions to these plans were $
27.2 million
in fiscal
2018
, $
26.6 million
in fiscal
2017
, and $
23.0 million
in fiscal
2016
.
Other Plans
In addition, Autodesk offers a non-qualified deferred compensation plan to certain key employees whereby they may defer a portion (or all) of their annual compensation until retirement or a different date specified by the employee in accordance with terms of the plan. See Note
6
, “
Deferred Compensation
,” for further discussion.
15
.
Restructuring charges and other facility exit costs, net
During the fourth quarter of fiscal 2018, the Board of Directors approved a world-wide restructuring plan (“Fiscal 2018 Plan”) to support the Company's strategic priorities of completing the subscription transition, digitizing the Company, and re-imagining manufacturing, construction, and production. Through the restructuring, Autodesk seeks to reduce its investments in areas not aligned with its strategic priorities, including in areas related to research and development and go-to-market activities. At the same time, Autodesk plans to further invest in strategic priority areas related to digital infrastructure, customer success, and construction. By re-balancing resources to better align with the Company’s strategic priorities, Autodesk is positioning itself to meet its long-term goals. This world-wide restructuring plan includes a reduction in force that will result in the termination of approximately
13%
of the Company’s workforce, or approximately
1,150
employees, and the consolidation of certain leased facilities.
The Company expects to substantially complete the reduction in force and the facilities consolidation by the end of fiscal 2019. The Company anticipates incurring pre-tax restructuring charges of
$135 million
to
$149 million
, of which
$94 million
was incurred during the fourth quarter of fiscal 2018. Substantially all of the charges will result in cash expenditures,
$124 million
to
$137 million
of which will be for one-time employee termination benefits, and
$11 million
to
$12 million
of which will be for facilities-related and other costs.
Other costs primarily consist of legal, consulting, and other costs related to employee terminations and are expensed when incurred. During fiscal 2018, we incurred
$0.4 million
in lease termination costs not related to the Fiscal 2018 Plan.
The following tables set forth the restructuring charges and other facility exit costs, net during the fiscal years ended
January 31, 2018
and
2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, January 31, 2017
|
|
Additions
|
|
Payments
|
|
Adjustments (1)
|
|
Balances, January 31, 2018
|
Fiscal 2018 Plan
|
|
|
|
|
|
|
|
|
|
Employee terminations costs
|
$
|
—
|
|
|
$
|
87.3
|
|
|
$
|
(35.1
|
)
|
|
$
|
0.8
|
|
|
$
|
53.0
|
|
Facility terminations and other exit costs
|
—
|
|
|
6.3
|
|
|
(1.3
|
)
|
|
(2.5
|
)
|
|
2.5
|
|
Fiscal 2017 Plan
|
|
|
|
|
|
|
|
|
|
Employee terminations costs
|
1.1
|
|
|
0.1
|
|
|
(1.5
|
)
|
|
0.3
|
|
|
—
|
|
Facility terminations and other exit costs
|
1.9
|
|
|
0.1
|
|
|
(1.5
|
)
|
|
(0.3
|
)
|
|
0.2
|
|
Other Facility Termination Costs
|
|
|
|
|
|
|
|
|
|
Facility termination costs
|
4.5
|
|
|
0.3
|
|
|
(3.0
|
)
|
|
(0.3
|
)
|
|
1.5
|
|
Total
|
$
|
7.5
|
|
|
$
|
94.1
|
|
|
$
|
(42.4
|
)
|
|
$
|
(2.0
|
)
|
|
$
|
57.2
|
|
Current portion (2)
|
$
|
5.9
|
|
|
|
|
|
|
|
|
$
|
57.2
|
|
Non-current portion (2)
|
1.6
|
|
|
|
|
|
|
|
|
—
|
|
Total
|
$
|
7.5
|
|
|
|
|
|
|
|
|
$
|
57.2
|
|
____________________
|
|
(1)
|
Adjustments primarily relate to the accelerated depreciation of fixed assets and the impact of foreign exchanges rate changes.
|
|
|
(2)
|
The current and non-current portions of the reserve are recorded in the Consolidated Balance Sheets under “Other accrued liabilities” and “Other liabilities,” respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, January 31, 2016
|
|
Additions
|
|
Payments
|
|
Adjustments (1)
|
|
Balances, January 31, 2017
|
Fiscal 2017 Plan
|
|
|
|
|
|
|
|
|
|
Employee terminations costs
|
—
|
|
|
63.3
|
|
|
(62.2
|
)
|
|
—
|
|
|
1.1
|
|
Facility terminations and other exit costs
|
—
|
|
|
7.1
|
|
|
(3.2
|
)
|
|
(2.0
|
)
|
|
1.9
|
|
Other Facility Termination Costs
|
|
|
|
|
|
|
|
|
|
Facility termination costs
|
—
|
|
|
7.4
|
|
|
(1.8
|
)
|
|
(1.1
|
)
|
|
4.5
|
|
Total
|
$
|
—
|
|
|
$
|
77.8
|
|
|
$
|
(67.2
|
)
|
|
$
|
(3.1
|
)
|
|
$
|
7.5
|
|
Current portion (2)
|
$
|
—
|
|
|
|
|
|
|
|
|
$
|
5.9
|
|
Non-current portion (2)
|
—
|
|
|
|
|
|
|
|
|
1.6
|
|
Total
|
$
|
—
|
|
|
|
|
|
|
|
|
$
|
7.5
|
|
_______________
|
|
(1)
|
Adjustments include the impact of foreign currency translation.
|
|
|
(2)
|
The current and non-current portions of the reserve are recorded in the Consolidated Balance Sheets under “Other accrued liabilities” and “Other liabilities,” respectively.
|
16
.
Selected Quarterly Financial Information (Unaudited)
Summarized quarterly financial information for fiscal
2018
and
2017
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
1st quarter
|
|
2nd quarter
|
|
3rd quarter
|
|
4th quarter
|
|
Fiscal year
|
Net revenue
|
$
|
485.7
|
|
|
$
|
501.8
|
|
|
$
|
515.3
|
|
|
$
|
553.8
|
|
|
$
|
2,056.6
|
|
Gross profit
|
407.5
|
|
|
427.2
|
|
|
437.8
|
|
|
480.7
|
|
|
1,753.2
|
|
Loss from operations
|
(119.6
|
)
|
|
(107.6
|
)
|
|
(100.0
|
)
|
|
(181.9
|
)
|
|
(509.1
|
)
|
Provision for income taxes
|
(8.2
|
)
|
|
(17.6
|
)
|
|
(8.6
|
)
|
|
24.8
|
|
|
(9.6
|
)
|
Net loss
|
(129.6
|
)
|
|
(144.0
|
)
|
|
(119.8
|
)
|
|
(173.5
|
)
|
|
(566.9
|
)
|
Basic net loss per share
|
$
|
(0.59
|
)
|
|
$
|
(0.66
|
)
|
|
$
|
(0.55
|
)
|
|
$
|
(0.79
|
)
|
|
$
|
(2.58
|
)
|
Diluted net loss per share
|
$
|
(0.59
|
)
|
|
$
|
(0.66
|
)
|
|
$
|
(0.55
|
)
|
|
$
|
(0.79
|
)
|
|
$
|
(2.58
|
)
|
Loss from operations includes the following items:
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
$
|
59.0
|
|
|
$
|
58.8
|
|
|
$
|
65.1
|
|
|
$
|
62.1
|
|
|
$
|
245.0
|
|
Amortization of acquisition related intangibles
|
10.4
|
|
|
8.9
|
|
|
8.7
|
|
|
8.6
|
|
|
36.6
|
|
CEO transition costs
|
11.0
|
|
|
10.6
|
|
|
—
|
|
|
(0.2
|
)
|
|
21.4
|
|
Restructuring charges and other facility exit costs, net
|
(0.3
|
)
|
|
0.5
|
|
|
—
|
|
|
93.9
|
|
|
94.1
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
1st quarter
|
|
2nd quarter
|
|
3rd quarter
|
|
4th quarter
|
|
Fiscal year
|
Net revenue
|
$
|
511.9
|
|
|
$
|
550.7
|
|
|
$
|
489.6
|
|
|
$
|
478.8
|
|
|
$
|
2,031.0
|
|
Gross profit
|
419.5
|
|
|
465.6
|
|
|
408.1
|
|
|
395.9
|
|
|
1,689.1
|
|
Loss from operations
|
(149.7
|
)
|
|
(62.9
|
)
|
|
(119.9
|
)
|
|
(167.1
|
)
|
|
(499.6
|
)
|
Provision for income taxes
|
(14.4
|
)
|
|
(25.2
|
)
|
|
(13.5
|
)
|
|
(5.2
|
)
|
|
(58.3
|
)
|
Net loss
|
(167.7
|
)
|
|
(98.2
|
)
|
|
(142.8
|
)
|
|
(173.4
|
)
|
|
(582.1
|
)
|
Basic net loss per share
|
$
|
(0.75
|
)
|
|
$
|
(0.44
|
)
|
|
$
|
(0.64
|
)
|
|
$
|
(0.78
|
)
|
|
$
|
(2.61
|
)
|
Diluted net loss per share
|
$
|
(0.75
|
)
|
|
$
|
(0.44
|
)
|
|
$
|
(0.64
|
)
|
|
$
|
(0.78
|
)
|
|
$
|
(2.61
|
)
|
Loss from operations includes the following items:
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
$
|
51.6
|
|
|
$
|
54.3
|
|
|
$
|
56.6
|
|
|
$
|
59.3
|
|
|
$
|
221.8
|
|
Amortization of acquisition related intangibles
|
18.8
|
|
|
18.5
|
|
|
17.2
|
|
|
17.3
|
|
|
71.8
|
|
Restructuring charges, net
|
52.3
|
|
|
16.0
|
|
|
3.2
|
|
|
9.0
|
|
|
80.5
|
|