NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2020
(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.
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 revenue recognition for product subscriptions and EBAs, 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 liabilities for uncertain tax positions, variable compensation, partner incentive programs, product returns reserves, allowances for doubtful accounts, asset retirement obligations, legal contingencies and operating lease liabilities.
Segments
Autodesk operates in one operating segment and accordingly, all required financial segment information is included in the consolidated financial statements. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision makers ("CODM") in deciding how to allocate resources and assess performance. 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 CODM allocates resources and assesses the operating performance of the Company as a whole.
Information regarding Autodesk's long-lived assets by geographic area is as follows:
|
|
|
|
|
|
|
|
|
|
January 31,
|
|
2020
|
|
2019
|
Long-lived assets (1):
|
|
|
|
Americas
|
|
|
|
U.S.
|
$
|
434.2
|
|
|
$
|
97.5
|
|
Other Americas
|
33.2
|
|
|
17.5
|
|
Total Americas
|
467.4
|
|
|
115.0
|
|
Europe, Middle East, and Africa
|
75.8
|
|
|
23.0
|
|
Asia Pacific
|
57.3
|
|
|
11.7
|
|
Total long-lived assets
|
$
|
600.5
|
|
|
$
|
149.7
|
|
____________________
|
|
(1)
|
Long-lived assets exclude deferred tax assets, marketable securities, goodwill, and other intangible assets.
|
Revenue Recognition
Autodesk’s revenue is divided into three categories: subscription revenue, maintenance revenue, and other revenue. Subscription revenue consists of our term-based product subscriptions, cloud service offerings, and flexible enterprise business arrangements. Maintenance revenue consists of renewal fees for existing maintenance plan agreements that were initially purchased with a perpetual software license. Under our maintenance plan, customers are eligible to receive unspecified upgrades, when and if available, and technical support. Other revenue consists of revenue from consulting, training and other services. Other revenue also includes software license revenue from the sale of certain products which do not incorporate substantial cloud functionalities. Revenue is recognized when control for these offerings is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for products and services.
Autodesk's contracts with customers may include promises to transfer multiple products and services to a customer. Determining whether the products and services are considered distinct performance obligations that should be accounted for separately or as one combined performance obligation may require significant judgment. Judgment is required to determine the level of integration and interdependency between individual components of desktop software applications and cloud functionalities. This determination influences whether the desktop software is considered distinct and accounted for separately as a license performance obligation recognized at the time of delivery, or not distinct and accounted for together with the cloud functionalities as a single subscription performance obligation recognized over time.
For product subscriptions and flexible enterprise business agreement ("EBA") subscriptions in which the desktop software and related cloud functionalities are highly interrelated, the combined performance obligation is recognized ratably over the contract term as the subscription is delivered. For contracts involving distinct desktop software licenses, the license performance obligation is satisfied when delivered to our customers. For standalone maintenance subscriptions, cloud subscriptions, and technical support services, the performance obligation is satisfied ratably over the contract term as those services are delivered. For consulting services, the performance obligation is satisfied over a period of time as those services are delivered.
When an arrangement includes multiple performance obligations which are concurrently delivered and have the same pattern of transfer to the customer (the services transfer to the customer over the contract period), we account for those performance obligations as a single performance obligation.
For contracts with more than one performance obligation, the transaction price is allocated among the performance obligations in an amount that depicts the relative standalone selling price ("SSP") of each obligation. Judgment is required to determine the SSP for each distinct performance obligation. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, subsection "Critical Accounting Policies and Estimates," for details of the judgments made for SSP.
Our indirect channel model includes both a two-tiered distribution structure, where Autodesk sells to distributors that subsequently sell to resellers, and a one-tiered structure where Autodesk sells directly to resellers. For these arrangements, transfer of control begins at the time access to our subscriptions is made available electronically to our customer, provided all other criteria for revenue recognition are met. Judgment is required to determine whether our distributors and resellers have the ability to honor their commitment to pay, regardless of whether they collect payment from their customers. If we were to change this assessment, it could cause a material increase or decrease in the amount of revenue that we report in a particular period.
Costs To Obtain a Contract With a Customer
Sales commissions earned by our internal sales personnel and our reseller partners are considered incremental and recoverable costs of obtaining a contract with a customer. The commission costs are capitalized and included in "Prepaid expenses and other current assets" and "Other assets" on our Consolidated Balance Sheets. The deferred costs are then amortized over the period of benefit. Autodesk determined that sales commissions earned by internal sales personnel that are related to contract renewals are commensurate with sales commissions earned on the initial contracts, and we determined the period of benefit to be the term of the respective customer contract. Commissions paid to our reseller partners that are related to contract renewals are not commensurate with commissions earned on the initial contract, and we determined the estimated period of benefit by taking into consideration customer retention data, customer contracts, our technology and other factors. Deferred costs are periodically reviewed for impairment. Amortization expense is included in sales and marketing expenses in the Consolidated Statements of Operations.
Fair Value Measurement
Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In determining the fair value of our investments, we are sometimes required to use various alternative valuation techniques. Inputs to valuation techniques are either observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. These two types of inputs have created the following fair value hierarchy:
Level 1 - Quoted prices for identical instruments in active markets;
Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
Level 3 - Unobservable inputs for which there is little or no market data, which require Autodesk to develop its own assumptions.
This hierarchy requires us to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. This is generally true for our cash and cash equivalents and the majority of our marketable securities, which we consider to be Level 1 and Level 2 assets.
Key inputs for currency derivatives are spot rates, forward rates, interest rates, volatility, and credit default rates. The spot rate for each currency is the same spot rate used for all balance sheet translations at the measurement date. Autodesk reviews for any potential changes on a quarterly basis, in conjunction with our fiscal quarter-end close. It is Autodesk's assessment that the leveling best reflects current market activity when observing the pricing information for these assets. Autodesk's Level 2 securities and derivatives are valued primarily using observable inputs other than quoted prices in active markets for identical assets and liabilities. The Company has elected to use the income approach to value derivatives using the observable Level 2 market expectations at measurement date and standard valuation techniques to convert future amounts to a single present amount (discounted). Mid-market pricing is used as a practical expedient and when required, rates are interpolated from commonly quoted intervals published by market sources. See Note 3, "Financial Instruments" for information.
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 stated at estimated fair value.
Marketable Securities and Privately Held Company Investments
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.
Marketable securities are stated at fair value. Marketable securities maturing within one year that are not restricted are classified as current assets.
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 expense, net” in the Company’s Consolidated Statements of Operations. The cost of securities sold is based on the specific-identification method.
Privately held debt and equity securities (Level 3) are valued using significant unobservable inputs or data in an inactive market and the valuation requires the Company's judgment due to the absence of market prices and inherent lack of liquidity. These assumptions are inherently subjective and involve significant management judgment. Whenever possible, we use observable market data and rely on unobservable inputs only when observable market data is not available, when determining fair value.
The carrying value is not adjusted for the Company's privately held equity securities if there are no observable price changes in a same or similar security from the same issuer or if there are no identified events or changes in circumstances that may indicate impairment, as discussed below. Under the measurement alternative method, these investments are measured at cost, less any impairments, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer in the current period. To determine if a transaction is deemed a similar investment, Autodesk considers the rights and obligations between the investments and the extent to which those differences would affect the fair values of those investments with additional consideration for the stage of development of the investee company. The fair value would then be adjusted positively or negatively based on available information such as pricing in recent rounds of financing.
In determining the estimated fair value of its strategic investments in privately held companies, the Company utilizes the most recent data available to the Company. In addition, the determination of whether an orderly transaction is for a same or similar investment requires significant management judgment including: the rights and obligations of the investments, the extent to which those differences would affect the fair values of those investments, and the impact of any differences based on the stage of operational development of the investee.
All of Autodesk’s marketable securities and privately held company investments are subject to a periodic impairment review. Non-marketable equity securities investments are assessed based on available information such as current cash positions, earnings and cash flow positions, earnings and cash flow forecasts, recent operational performance and any other readily available market data. For any marketable debt securities, declines in fair value judged to be other-than-temporary on securities available for sale are included as a reduction to investment income. To determine whether a decline in value is other-than-temporary, the Company evaluates, among other factors: the duration and extent to which the fair value has been less than the carrying value and its intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value. For the purposes of computing realized and unrealized gains and losses, the cost of securities sold is based on the specific-identification method. Interest on securities classified as available for sale is also included as a component of investment income.
For Autodesk's quarterly impairment assessment of privately held debt and equity securities strategic investment portfolio, the analysis encompasses an assessment of the severity and duration of the impairment and qualitative and quantitative analysis
of other key factors including: the investee’s financial metrics, the investee’s products and technologies meeting or exceeding predefined milestones, market acceptance of the product or technology, other competitive products or technology in the market, general market conditions, management and governance structure of the investee, the investee’s liquidity, debt ratios and the rate at which the investee is using its cash. If the investment is impaired, the Company will record the investment at fair value by recognizing an impairment through the consolidated statement of operations and establishing a new carrying value for the investment.
For additional information, see “Concentration of Credit Risk” within this Note 1 and Note 3, “Financial Instruments.”
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 that exist as part of ongoing business operations. Autodesk's general practice is to hedge a portion of transaction exposures primarily denominated in euros, Japanese yen, British pounds, Canadian dollars, Australian dollars, Singapore dollars, Swiss francs, Swedish krona and Czech koruna. These instruments generally have maturities between one and twelve months in the future. Autodesk uses foreign currency contracts not designated as hedging instruments and foreign currency contracts designated as cash flow hedging but 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. Autodesk does not have any master netting arrangements in place with collateral features.
Autodesk accounts for these 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.
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”.
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 income (loss).
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 expense, 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.
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 currency collars and forward contracts are designated and documented as cash flow hedges. The effectiveness of the cash flow hedge contracts is assessed quantitatively using regression at inception and thereafter. To receive cash flow hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge relationship and the hedges are expected to be highly effective in offsetting changes to future cash flows on hedged transactions. The 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 and discloses 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. Derivative contracts and related gain (loss) are presented within "Net cash provided by operating activities" in the Company's Consolidated Statements of Cash Flow. See Note 3, "Financial Instruments" for additional information.
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 fiscal quarter 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.
Accounts Receivable, Net
Accounts receivable, net, consisted of the following as of January 31:
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Trade accounts receivable
|
$
|
716.1
|
|
|
$
|
529.3
|
|
Less: Allowance for doubtful accounts
|
(4.9
|
)
|
|
(4.9
|
)
|
Product returns reserve
|
(0.5
|
)
|
|
(0.3
|
)
|
Partner programs and other obligations
|
(58.4
|
)
|
|
(49.8
|
)
|
Accounts receivable, net
|
$
|
652.3
|
|
|
$
|
474.3
|
|
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. The majority of these incentives are recorded as a reduction to deferred revenue in the period the transaction is billed and subsequently recognized as a reduction to subscription or maintenance revenue over the contract period. The remainder reduces subscription or maintenance revenue in the current period.
These incentive balances 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 a reduction to accounts 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 $650.0 million line of credit facility.
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' and customers'
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 35%, 35%, and 31% of Autodesk's net revenue for fiscal years ended January 31, 2020, 2019, and 2018, 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 29% of trade accounts receivable as of January 31, 2020, and 2019, respectively. Ingram Micro Inc. ("Ingram Micro"), our second largest distributor, accounted for 10%, 11%, 8% of Autodesk's total net revenue for fiscal years ended January 31, 2020, 2019, and 2018. No other customer accounted for more than 10% of Autodesk's total net revenue or trade accounts receivable for each of the respective periods.
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 $51.0 million in fiscal 2020, $59.2 million in fiscal 2019, and $67.6 million in fiscal 2018.
Computer equipment, software, furniture, leasehold improvements and the related accumulated depreciation at January 31 were as follows:
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Computer hardware, at cost
|
$
|
159.7
|
|
|
$
|
190.2
|
|
Computer software, at cost
|
64.0
|
|
|
66.7
|
|
Leasehold improvements, land and buildings, at cost
|
284.0
|
|
|
247.8
|
|
Furniture and equipment, at cost
|
69.0
|
|
|
67.2
|
|
Computer software, hardware, leasehold improvements, furniture, and equipment, at cost
|
576.7
|
|
|
571.9
|
|
Less: Accumulated depreciation
|
(415.0
|
)
|
|
(422.2
|
)
|
Computer software, hardware, leasehold improvements, furniture, and equipment, net
|
$
|
161.7
|
|
|
$
|
149.7
|
|
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 straight-line 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, 2020, and January 31, 2019.
Cloud Computing Arrangements
Autodesk enters into certain cloud-based software hosting arrangements that are accounted for as service contracts. Costs incurred for these arrangements are capitalized for application development activities, if material, and immediately expensed for preliminary project activities and post-implementation activities. Autodesk amortizes the capitalized development costs straight-line over the fixed, non-cancellable term of the associated hosting arrangement plus any reasonably certain renewal periods. The capitalized costs are included in "Prepaid expenses and other current assets" and "Other assets" on our Consolidated Balance Sheets. Capitalized costs were $22.3 million and $4.9 million at January 31, 2020, and January 31, 2019, respectively. Amortization expense was $1.2 million and nil at January 31, 2020 and January 31, 2019, respectively.
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 $73.7 million in fiscal 2020, $33.5 million in fiscal 2019 and $36.6 million in fiscal 2018.
Other intangible assets and related accumulated amortization at January 31 were as follows:
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Developed technologies, at cost
|
$
|
647.1
|
|
|
$
|
670.2
|
|
Customer relationships, trade names, patents, and user lists, at cost (1)
|
532.2
|
|
|
533.1
|
|
Other intangible assets, at cost (2)
|
1,179.3
|
|
|
1,203.3
|
|
Less: accumulated amortization
|
(972.2
|
)
|
|
(922.5
|
)
|
Other intangible assets, net
|
$
|
207.1
|
|
|
$
|
280.8
|
|
_______________
|
|
(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 2020 was 5.5 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,
|
2021
|
$
|
64.7
|
|
2022
|
49.0
|
|
2023
|
37.6
|
|
2024
|
19.2
|
|
2025
|
13.0
|
|
Thereafter
|
23.6
|
|
Total
|
$
|
207.1
|
|
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 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, 2020, 2019, and 2018, 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.
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. 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, 2020. Accordingly, Autodesk has determined there was no goodwill impairment during the fiscal year ended January 31, 2020. In addition, Autodesk did not recognize any goodwill impairment losses in fiscal 2019 or 2018.
The following table summarizes the changes in the carrying amount of goodwill during the fiscal years ended January 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
January 31, 2020
|
|
January 31, 2019
|
Goodwill, beginning of the year
|
$
|
2,600.0
|
|
|
$
|
1,769.4
|
|
Less: accumulated impairment losses, beginning of the year
|
(149.2
|
)
|
|
(149.2
|
)
|
Additions arising from acquisitions during the year
|
—
|
|
|
866.9
|
|
Effect of foreign currency translation and measurement period adjustments (1)
|
(5.8
|
)
|
|
(36.3
|
)
|
Goodwill, end of the year
|
$
|
2,445.0
|
|
|
$
|
2,450.8
|
|
_______________
|
|
(1)
|
Measurement period adjustments reflect revisions made to the Company's preliminary determination of estimated fair value of assets and liabilities assumed.
|
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 believes 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.
Stock-based Compensation Expense
The following table summarizes stock-based compensation expense for fiscal 2020, 2019, and 2018, respectively, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2020
|
|
2019
|
|
2018
|
Cost of subscription and maintenance revenue
|
$
|
13.8
|
|
|
$
|
13.2
|
|
|
$
|
11.9
|
|
Cost of other revenue
|
5.8
|
|
|
4.3
|
|
|
4.0
|
|
Marketing and sales
|
149.0
|
|
|
109.4
|
|
|
107.3
|
|
Research and development
|
120.8
|
|
|
82.6
|
|
|
82.9
|
|
General and administrative
|
73.0
|
|
|
40.0
|
|
|
55.3
|
|
Stock-based compensation expense related to stock awards and Employee Qualified Stock Purchase Plan ("ESPP") purchases
|
362.4
|
|
|
249.5
|
|
|
261.4
|
|
Tax benefit
|
(1.1
|
)
|
|
(2.6
|
)
|
|
(2.6
|
)
|
Stock-based compensation expense related to stock awards and ESPP purchases, net
|
$
|
361.3
|
|
|
$
|
246.9
|
|
|
$
|
258.8
|
|
Autodesk measures stock-based compensation cost at the grant date fair value of the award, and recognizes expense ratably over the requisite service period, which is generally the vesting period. Autodesk determines the estimated fair value of stock-based payment awards for stock options and grants of employee stock purchases related to the employee stock purchase plan using either the Black-Scholes-Merton option-pricing model or a binomial-lattice model (e.g., Monte Carlo simulation model). To determine the grant-date fair value of our stock-based payment awards for restricted stock units and performance stock units, we use the quoted stock price on the date of grant, unless the awards are subject to market conditions, in which case we use the Monte Carlo simulation model. The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that market conditions will be achieved. These variables include our expected stock price volatility over the expected term of the award, actual and projected employee stock option exercise behaviors, the risk-free interest rate for the expected term of the award, and expected dividends. The variables used in these models are reviewed on a quarterly basis and adjusted, as needed. Share-based compensation cost for restricted stock is measured on the closing fair market value of our common stock on the date of grant. 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, 2020
|
|
January 31, 2019
|
|
January 31, 2018
|
|
|
Performance Stock Unit
|
|
ESPP
|
|
Stock Option Plans
|
Performance Stock Unit
|
|
ESPP
|
|
Performance Stock Unit
|
|
ESPP
|
Range of expected volatilities
|
|
36%
|
|
33 - 40%
|
|
37 - 42%
|
36%
|
|
33 - 38%
|
|
32%
|
|
31 - 34%
|
Range of expected lives (in years)
|
|
N/A
|
|
0.5 - 2.0
|
|
0.5 - 3.8
|
N/A
|
|
0.5 - 2.0
|
|
N/A
|
|
0.5 - 2.0
|
Expected dividends
|
|
—%
|
|
—%
|
|
—%
|
—%
|
|
—%
|
|
—%
|
|
—%
|
Range of risk-free interest rates
|
|
2.5%
|
|
1.7 - 2.5%
|
|
2.3 - 2.7%
|
2.0%
|
|
1.9 - 2.8%
|
|
1.0 - 1.2%
|
|
0.9 - 1.4%
|
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 companies within the 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 2020, 2019, or 2018 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 $42.2 million in fiscal 2020, $37.5 million in fiscal 2019, and $31.1 million in fiscal 2018.
Net Income (Loss) Per Share
Basic net income (loss) 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 income (loss) 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 loss.
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 income (loss) in the Consolidated Statements of Comprehensive Income (Loss). 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 2020
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, 2020, that are applicable to the Company.
Accounting Standards Adopted
Autodesk adopted ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities" on February 1, 2019. The amendment helps simplify certain aspects of hedge accounting and results 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 required a modified retrospective approach. The amended presentation and disclosure guidance is required only prospectively. The transition impact was immaterial and no substantive changes were made to Autodesk’s current processes, accounting, or disclosures for cash flow hedges.
Autodesk adopted ASU No. 2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” on February 1, 2019. The amendment allows entities the option to reclassify tax effects stranded in accumulated other comprehensive income as a result of the U.S. Tax Cuts and Jobs Act (the "Tax Act") to retained earnings. Upon adoption, the amount reclassified from other comprehensive loss to stockholders' deficit was not material.
Autodesk adopted ASU No. 2019-12 regarding ASC Topic 740, "Simplifying the Accounting for Income Taxes", which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740 on January 31, 2020. The ASU also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The adoption did not have a material impact on the consolidated financial statements.
Leases
FASB issued ASU No. 2016-02, "Leases (ASC Topic 842)", to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. The new standard requires entities to reflect the net present value of all future fixed lease payments for both operating and finance leases on the balance sheet. It also requires entities to disclose fixed and variable lease payments separately and by lease type (operating vs. finance leases). In addition, FASB issued ASU No. 2018-10, ASU No. 2018-11and ASU No. 2018-20 to help provide accommodations and interpretive clarifications on various issues raised by stakeholders. ASU No. 2018-10 clarifies ambiguous or potentially conflicting guidance in ASU No. 2016-02. ASU No. 2018-11 provides an additional transition option to apply ASU No. 2016-02 upon adoption of the new standard.
Adoption and policy elections
Autodesk adopted ASU No. 2016-02 as of February 1, 2019, using the modified retrospective method permitted under ASU No. 2018-11 for all existing leases which does not include retrospectively adjusting prior periods presented in the financial statements. Under ASU No. 2016-02, as the lessee, Autodesk recognized a right-of-use ("ROU") asset and offsetting lease liability for leases that existed on adoption. The asset and liability were measured at present value of all future fixed lease payments, discounted using the Company’s incremental borrowing rate. Autodesk has elected to opt for the practical expedients: to not reassess whether any existing contracts are leases or contain a lease; to not reassess the lease classification of existing leases; and to not reassess initial direct costs for existing leases. Autodesk has elected to combine lease and non-lease components for new leases post adoption for all lease assets.
Autodesk determines if an arrangement is a lease at inception. Operating leases are included in “Operating lease right-of-use assets”, “Operating lease liabilities”, and “Long-term operating lease liabilities” in the Consolidated Balance Sheets.
Operating lease ROU assets represent Autodesk’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Autodesk uses its incremental borrowing rate, if the Company's leases do not provide an implicit rate, adjusted for local country-specific borrowing rates as applicable, based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU assets also include any lease payments made and are reduced by any lease incentives. Options to extend or terminate the lease are considered in determining the lease term when it is reasonably certain that the option will be exercised. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Autodesk has lease agreements with lease and non-lease components. Autodesk accounts for the lease and non-lease components as a single lease component.
Quantitative effect of ASC Topic 842 adoption
Under the modified retrospective method, Autodesk recorded $(0.7) million to the opening balance of "Accumulated deficit" as of February 1, 2019. The comparative information has not been adjusted and continues to be reported as under previous accounting guidance. The adoption of ASC Topic 842 did not have a material impact to the Company’s consolidated statement of operations or net cash provided by operating activities as of February 1, 2019.
The following table shows line items that were materially impacted by the adoption of ASC Topic 842 on February 1, 2019 on Autodesk’s Consolidated Balance Sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported January 31, 2019
|
|
Impact from the adoption (1)
|
|
As adjusted
|
ASSETS
|
|
|
|
|
|
Prepaid expenses and other current assets
|
$
|
192.1
|
|
|
$
|
(5.9
|
)
|
|
$
|
186.2
|
|
Total current assets
|
1,620.0
|
|
(5.9
|
)
|
|
1,614.1
|
|
Operating lease right-of-use assets
|
—
|
|
|
283.4
|
|
|
283.4
|
|
Total assets
|
4,729.2
|
|
|
277.5
|
|
|
5,006.7
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Other accrued liabilities
|
142.3
|
|
|
(4.9
|
)
|
|
137.4
|
|
Operating lease liabilities
|
—
|
|
|
54.1
|
|
|
54.1
|
|
Long-term operating lease liabilities
|
—
|
|
|
245.9
|
|
|
245.9
|
|
Other liabilities
|
121.8
|
|
|
(16.9
|
)
|
|
104.9
|
|
Accumulated deficit
|
$
|
(2,147.4
|
)
|
|
$
|
(0.7
|
)
|
|
$
|
(2,148.1
|
)
|
____________________
|
|
(1)
|
Adoption of ASC Topic 842 did not have any other material impacts on Autodesk's consolidated financial statements.
|
See Note 9, "Leases" for disclosures under ASC Topic 842.
Recently Issued Accounting Standards But Not Yet Adopted
In March 2020, FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting", which provides optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. Autodesk is still currently evaluating the impact to the financial statements, the transition, and disclosure requirements of the standard.
In June 2016, FASB issued ASU No. 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 No. 2016-13 as of the effective date which represents Autodesk’s fiscal year beginning February 1, 2020. The adoption of the ASU will not have a material impact on its consolidated financial statements.
2. Revenue Recognition
Revenue Disaggregation
Autodesk recognizes revenue from the sale of (1) product subscriptions, cloud service offerings, and EBAs, (2) renewal fees for existing maintenance plan agreements that were initially purchased with a perpetual software license, and (3) consulting, training and other goods and services. The three categories are presented as line items on Autodesk's Consolidated Statements of Operations.
Information regarding the components of Autodesk's net revenue from contracts with customers by geographic location, product family, and sales channel is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year ended January 31,
|
|
2020
|
|
2019
|
|
2018
|
Net revenue by product family:
|
|
|
|
|
|
Architecture, Engineering and Construction
|
$
|
1,377.1
|
|
|
$
|
1,021.6
|
|
|
$
|
787.5
|
|
Manufacturing
|
726.1
|
|
|
616.2
|
|
|
528.8
|
|
AutoCAD and AutoCAD LT
|
948.2
|
|
|
731.8
|
|
|
561.4
|
|
Media and Entertainment
|
199.2
|
|
|
182.0
|
|
|
152.1
|
|
Other
|
23.7
|
|
|
18.2
|
|
|
26.8
|
|
Total net revenue
|
$
|
3,274.3
|
|
|
$
|
2,569.8
|
|
|
$
|
2,056.6
|
|
|
|
|
|
|
|
Net revenue by geographic area:
|
|
|
|
|
|
Americas
|
|
|
|
|
|
U.S.
|
$
|
1,108.9
|
|
|
$
|
874.6
|
|
|
$
|
740.4
|
|
Other Americas
|
226.9
|
|
|
175.3
|
|
|
130.7
|
|
Total Americas
|
1,335.8
|
|
|
1,049.9
|
|
|
871.1
|
|
Europe, Middle East and Africa
|
1,303.5
|
|
|
1,034.3
|
|
|
815.4
|
|
Asia Pacific
|
635.0
|
|
|
485.6
|
|
|
370.1
|
|
Total net revenue
|
$
|
3,274.3
|
|
|
$
|
2,569.8
|
|
|
$
|
2,056.6
|
|
|
|
|
|
|
|
|
|
|
Net revenue by sales channel:
|
|
|
|
|
|
Indirect
|
$
|
2,282.2
|
|
|
$
|
1,830.8
|
|
|
$
|
1,443.8
|
|
Direct
|
992.1
|
|
|
739.0
|
|
|
612.8
|
|
Total net revenue
|
$
|
3,274.3
|
|
|
$
|
2,569.8
|
|
|
$
|
2,056.6
|
|
Payments for product subscriptions, industry collections, cloud subscriptions, and maintenance subscriptions are typically due up front with payment terms of 30 to 45 days. Payments on EBAs are typically due in annual installments over the contract term, with payment terms of 30 to 60 days. Autodesk does not have any material variable consideration, such as obligations for returns, refunds, warranties or amounts payable to customers for which significant estimation or judgment is required as of the reporting date.
Remaining performance obligations consist of total billed and unbilled deferred revenue. As of January 31, 2020, Autodesk had remaining performance obligations of $3.6 billion, which represents the total contract price allocated to remaining performance obligations, which are generally recognized over the next three years. We expect to recognize $2.4 billion or 67% of our remaining performance obligations as revenue during the next 12 months. We expect to recognize the remaining $1.2 billion or 33% of our remaining performance obligations as revenue thereafter.
The amount of remaining performance obligations may be impacted by the specific timing, duration and size of customer subscription and support agreements, varying billing cycles of such agreements, the specific timing of customer renewals, and foreign currency fluctuations.
Contract Balances
We receive payments from customers based on a billing schedule as established in our contracts. Contract assets relate to performance completed in advance of scheduled billings. Contract assets were not material as of January 31, 2020. Deferred revenue relates to billings in advance of performance under the contract. The primary changes in our contract assets and deferred revenues are due to our performance under the contracts and billings.
Revenue recognized during the fiscal year ended January 31, 2020 and 2019, that was included in the deferred revenue balances at January 31, 2019 and 2018, was $1.8 billion and $1.5 billion, respectively. The satisfaction of performance obligations typically lags behind payments received under revenue contracts from customers.
Revenue from contracts with customers adopted in Fiscal 2019
Effective in the first quarter of fiscal 2019, Autodesk adopted ASU No. 2014-09, “Revenue from Contracts with Customers" regarding Accounting Standards Codification (ASC Topic 606)” and the subsequent and related ASU No. 2015-14, ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12, and ASU No. 2016-20.
Under ASC Topic 606, the Company has concluded that the desktop software and related substantial cloud functionality 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 adoption of ASC Topic 606 has not resulted 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 functionality. A limited number of Autodesk's product subscriptions do not incorporate substantial cloud functionality, and therefore are not considered highly interrelated. Under ASU No. 2014-09, these limited number of product subscriptions are recognized as separate and distinct license and service performance obligations. Under ASU No. 2009-13, "Revenue Recognition" regarding Accounting Standards Codification (ASC Topic 605), licenses sold with undelivered elements without vendor-specific objective evidence ("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 recognizes 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 ASC Topic 606 is recognized at a point in time instead of over the contract term.
Autodesk adopted ASC Topic 606 using the modified retrospective method, with a cumulative decrease of $89.0 million to the opening balance of "Accumulated deficit" at February 1, 2018. Autodesk applied the standard only to contracts that are not completed as of the date of initial application. The comparative information has not been adjusted and continues to be reported under ASC Topic 605. The details of the quantitative impact of the adoption on the fiscal year ended January 31, 2019, are shown below.
Costs to acquire a contract from a customer
With the adoption of ASC Topic 606, Autodesk also adopted ASC Topic 340-40, "Other Assets and Deferred Costs—Contracts with Customers." Prior to the adoption of ASC Topic 340-40, Autodesk previously recognized compensation paid to sales employees and certain resellers related to obtaining customer contracts in marketing and sales expense in the Consolidated Statements of Operations when incurred. Under ASC Topic 340-40, Autodesk capitalizes this sales compensation as contract costs when they are incremental, directly incurred to obtain a contract with a customer and expected to be recoverable. The contract costs are amortized based on the transfer of goods or services to which the contract costs relate.
Under the modified retrospective method, Autodesk booked a cumulative decrease of $90.4 million to the opening balance of "Accumulated deficit" at February 1, 2018. The comparative information has not been adjusted and continues to be reported as incurred. The details of the quantitative impact of the adoption on the fiscal year ended January 31, 2019, are shown below. See Note 7, "Deferred Compensation" for disclosures under the new standard.
Quantitative effect of ASC Topics 606 and 340-40 adoption
Under the modified retrospective adoption, Autodesk calculated the impact of the adoption during fiscal 2019, as the first year of adoption. The following table shows select line items that were materially impacted by the adoption of ASC Topics 606 and 340-40 on Autodesk’s Consolidated Statements of Operations for the fiscal year ended January 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year ended January 31, 2019
|
|
|
As reported
|
|
Impact from the adoption of ASC 606 and 340-40
|
|
As adjusted
|
Net revenue (1)
|
|
|
|
|
|
|
Subscription
|
|
$
|
1,802.3
|
|
|
$
|
(16.6
|
)
|
|
$
|
1,785.7
|
|
Maintenance
|
|
635.1
|
|
|
5.7
|
|
|
640.8
|
|
Other
|
|
132.4
|
|
|
(11.3
|
)
|
|
121.1
|
|
Cost of revenue (1)
|
|
|
|
|
|
|
Cost of subscription and maintenance revenue
|
|
216.0
|
|
|
(0.1
|
)
|
|
215.9
|
|
Cost of other revenue
|
|
54.4
|
|
|
1.1
|
|
|
55.5
|
|
Operating expenses (1):
|
|
|
|
|
|
|
Marketing and sales
|
|
1,183.9
|
|
|
(17.9
|
)
|
|
1,166.0
|
|
Provision for income taxes
|
|
(38.1
|
)
|
|
(4.8
|
)
|
|
(42.9
|
)
|
Net loss (2)
|
|
$
|
(80.8
|
)
|
|
$
|
(10.1
|
)
|
|
$
|
(90.9
|
)
|
Basic net loss per share
|
|
$
|
(0.37
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.42
|
)
|
Diluted net loss per share
|
|
$
|
(0.37
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.42
|
)
|
____________________
|
|
(1)
|
While not shown here, gross margin, loss from operations, and loss before income taxes have consequently been affected as a result of the net effect of the adjustments noted above.
|
|
|
(2)
|
The impact on the Consolidated Statements of Comprehensive Loss is limited to the net effects of the impacts noted above on the Consolidated Statements of Operations, specifically on the line item "Net loss."
|
The following table shows select line items that were materially impacted by the adoption of ASC Topics 606 and 340-40 on Autodesk’s Consolidated Balance Sheet as of January 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
Impact from the adoption of ASC 606 and 340-40
|
|
As adjusted
|
ASSETS
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Accounts receivable, net
|
$
|
474.3
|
|
|
$
|
73.4
|
|
|
$
|
547.7
|
|
Prepaid expenses and other current assets (1)
|
192.1
|
|
|
(79.4
|
)
|
|
112.7
|
|
Deferred income taxes, net
|
65.3
|
|
|
7.0
|
|
|
72.3
|
|
Other assets (1)
|
337.8
|
|
|
(17.9
|
)
|
|
319.9
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Deferred revenue
|
1,763.3
|
|
|
140.6
|
|
|
1,903.9
|
|
Other accrued liabilities
|
142.3
|
|
|
1.7
|
|
|
144.0
|
|
Long-term deferred revenue
|
328.1
|
|
|
37.2
|
|
|
365.3
|
|
Long-term income taxes payable
|
21.5
|
|
|
(0.2
|
)
|
|
21.3
|
|
Long-term deferred income taxes
|
79.8
|
|
|
(6.7
|
)
|
|
73.1
|
|
Stockholders’ deficit:
|
|
|
|
|
|
Accumulated deficit (2)
|
$
|
(2,147.4
|
)
|
|
$
|
(189.5
|
)
|
|
$
|
(2,336.9
|
)
|
____________________
|
|
(1)
|
Short term and long term "contract assets" under ASC Topic 606 are included within "Prepaid expenses and other current assets" and "Other assets", respectively, on the Consolidated Balance Sheet.
|
|
|
(2)
|
Included in the "Accumulated deficit" adjustment is $179.4 million for the cumulative effect adjustment of adopting ASC Topic 606 and 340-40 on the opening balance as of February 1, 2018.
|
Adoption of the standard had no impact to net cash provided by or (used in) operating, financing, or investing activities on the Company’s Consolidated Statements of Cash Flows.
3. 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, 2020 and 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2020
|
|
|
(in millions)
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Cash equivalents (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency discount notes
|
$
|
6.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6.0
|
|
|
$
|
—
|
|
|
$
|
6.0
|
|
|
$
|
—
|
|
|
Commercial paper
|
36.8
|
|
|
—
|
|
|
—
|
|
|
36.8
|
|
|
—
|
|
|
36.8
|
|
|
—
|
|
|
Money market funds
|
1,135.5
|
|
|
—
|
|
|
—
|
|
|
1,135.5
|
|
|
1,135.5
|
|
|
—
|
|
|
—
|
|
|
Other (2)
|
2.3
|
|
|
—
|
|
|
—
|
|
|
2.3
|
|
|
1.3
|
|
|
1.0
|
|
|
—
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term trading securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
59.9
|
|
|
9.2
|
|
|
(0.1
|
)
|
|
69.0
|
|
|
69.0
|
|
|
—
|
|
|
—
|
|
Derivative contract assets (3)
|
1.1
|
|
|
9.7
|
|
|
(1.3
|
)
|
|
9.5
|
|
|
—
|
|
|
8.9
|
|
|
0.6
|
|
Derivative contract liabilities (4)
|
—
|
|
|
—
|
|
|
(4.7
|
)
|
|
(4.7
|
)
|
|
—
|
|
|
(4.7
|
)
|
|
—
|
|
|
|
Total
|
$
|
1,241.6
|
|
|
$
|
18.9
|
|
|
$
|
(6.1
|
)
|
|
$
|
1,254.4
|
|
|
$
|
1,205.8
|
|
|
$
|
48.0
|
|
|
$
|
0.6
|
|
____________________
|
|
(1)
|
Included in “Cash and cash equivalents” in the accompanying Consolidated Balance Sheets.
|
|
|
(2)
|
Consists of custody cash deposits and certificates of deposit.
|
|
|
(3)
|
Included in “Prepaid expenses and other current assets,” or “Other assets,” in the accompanying Consolidated Balance Sheets.
|
|
|
(4)
|
Included in “Other accrued liabilities” in the accompanying Consolidated Balance Sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2019
|
|
|
(in millions)
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Cash equivalents (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
$
|
1.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1.0
|
|
|
$
|
—
|
|
|
$
|
1.0
|
|
|
$
|
—
|
|
|
Commercial paper
|
87.9
|
|
|
—
|
|
|
—
|
|
|
87.9
|
|
|
—
|
|
|
87.9
|
|
|
—
|
|
|
Corporate debt securities
|
5.0
|
|
|
—
|
|
|
—
|
|
|
5.0
|
|
|
—
|
|
|
5.0
|
|
|
—
|
|
|
Custody cash deposit
|
0.8
|
|
|
—
|
|
|
—
|
|
|
0.8
|
|
|
0.8
|
|
|
—
|
|
|
—
|
|
|
Money market funds
|
281.4
|
|
|
—
|
|
|
—
|
|
|
281.4
|
|
|
281.4
|
|
|
—
|
|
|
—
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (2)
|
6.2
|
|
|
1.1
|
|
|
—
|
|
|
7.3
|
|
|
2.7
|
|
|
4.6
|
|
|
—
|
|
|
Short-term trading securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
56.6
|
|
|
3.7
|
|
|
—
|
|
|
60.3
|
|
|
60.3
|
|
|
—
|
|
|
—
|
|
Convertible debt securities (3)
|
4.6
|
|
|
1.9
|
|
|
(2.1
|
)
|
|
4.4
|
|
|
—
|
|
|
—
|
|
|
4.4
|
|
Derivative contract assets (4)
|
1.7
|
|
|
8.6
|
|
|
(1.8
|
)
|
|
8.5
|
|
|
—
|
|
|
7.7
|
|
|
0.8
|
|
Derivative contract liabilities (5)
|
—
|
|
|
—
|
|
|
(7.4
|
)
|
|
(7.4
|
)
|
|
—
|
|
|
(7.4
|
)
|
|
—
|
|
|
|
Total
|
$
|
445.2
|
|
|
$
|
15.3
|
|
|
$
|
(11.3
|
)
|
|
$
|
449.2
|
|
|
$
|
345.2
|
|
|
$
|
98.8
|
|
|
$
|
5.2
|
|
____________________
|
|
(1)
|
Included in “Cash and cash equivalents” in the accompanying Consolidated Balance Sheets.
|
|
|
(2)
|
Consists of corporate bonds, commercial paper, and common stock.
|
|
|
(3)
|
Considered "available for sale" securities 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.
|
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.
A reconciliation of the change in Autodesk’s Level 3 items for the fiscal year ended January 31, 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
Significant Unobservable Inputs
|
|
(Level 3)
|
(in millions)
|
|
Derivative Contracts
|
|
Convertible Debt Securities
|
|
Total
|
Balances, January 31, 2019
|
|
$
|
0.8
|
|
|
$
|
4.4
|
|
|
$
|
5.2
|
|
Impairments
|
|
—
|
|
|
(1.0
|
)
|
|
(1.0
|
)
|
Settlements
|
|
—
|
|
|
(3.5
|
)
|
|
(3.5
|
)
|
(Losses) gains included in earnings (1)
|
|
(0.2
|
)
|
|
0.2
|
|
|
—
|
|
Losses included in OCI
|
|
—
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
Balances, January 31, 2020
|
|
$
|
0.6
|
|
|
$
|
—
|
|
|
$
|
0.6
|
|
____________________
|
|
(1)
|
Included in “Interest and other expense, net” in the accompanying Consolidated Statements of Operations.
|
As of January 31, 2020 and 2019, Autodesk had no material unrealized losses, individually and in the aggregate, for securities that are in a continuous unrealized loss position for greater than twelve months.
There was no gain or loss for the sale or redemption of securities during fiscal 2020. The sales or redemptions of securities in fiscal 2019 and fiscal 2018 resulted in a loss of $1.3 million, and $0.3 million, respectively. The losses 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 2020, fiscal 2019 and fiscal 2018 were $27.4 million, $531.0 million and $1.08 billion, respectively.
Non-marketable equity securities
As of January 31, 2020 and 2019, Autodesk had $122.5 million and $111.6 million in direct investments in privately held companies. These non-marketable equity security investments do not have readily determined fair values and Autodesk uses the measurement alternative to account for the adjustment to these investments in a given quarter. During the fiscal years ended January 31, 2020 and 2019, Autodesk recorded an upward adjustment on certain of its privately held investments, reflected as a gain in "Interest and other expense, net" on the Company's Consolidated Statement of Operations of $3.2 million and $6.2 million, respectively. As of January 31, 2020, Autodesk has recorded $9.4 million in cumulative upward adjustments on certain of its privately held investments.
If Autodesk determines that an impairment has occurred, Autodesk writes down the investment to its fair value. During fiscal 2020, fiscal 2019 and fiscal 2018, Autodesk recorded $4.2 million, $4.8 million and $15.5 million, respectively, in impairments and negative adjustments on its privately held investments, reflected as a loss in "Interest and other expense, net" on the Company's Consolidated Statements of Operations. As of January 31, 2020, Autodesk has recorded $9.0 million in cumulative impairments and negative adjustments on its privately held investments. Autodesk does not consider the remaining investments to be impaired at January 31, 2020.
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 currency collars and forward contracts are designated and documented as cash flow hedges. The notional amounts of these contracts are presented net settled and were $981.3 million at January 31, 2020, and $803.5 million at January 31, 2019. Outstanding contracts are recognized as either assets or liabilities on the balance sheet at fair value. The majority of the net gain of $8.4 million remaining in “Accumulated other comprehensive loss” as of January 31, 2020, is expected to be recognized into earnings within the next twenty-four months.
The location and amount of gain or loss recognized in income on cash flow hedges together with the total amount of income or expense presented in the Company's Consolidated Statements of Operations where the effects of the hedge are recorded were as follows for the fiscal year ended January 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31, 2020
|
|
|
Net Revenue
|
|
Cost of revenue
|
|
Operating expenses
|
(in millions)
|
|
Subscription Revenue
|
|
Maintenance Revenue
|
|
Cost of subscription and maintenance revenue
|
|
Marketing and sales
|
|
Research and development
|
|
General and administrative
|
Total amounts of income and expense line items presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded
|
|
$
|
2,751.9
|
|
|
$
|
386.6
|
|
|
$
|
223.9
|
|
|
$
|
1,310.3
|
|
|
$
|
851.1
|
|
|
$
|
405.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on cash flow hedging relationships
|
Foreign exchange contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of gain (loss) reclassified from accumulated other comprehensive income into income
|
|
$
|
11.7
|
|
|
$
|
5.9
|
|
|
$
|
(0.9
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(0.7
|
)
|
|
$
|
(2.1
|
)
|
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. The notional amounts of these foreign currency contracts are presented net settled and were $736.2 million at January 31, 2020, and $579.8 million at January 31, 2019.
Fair Value of Derivative Instruments:
The fair value of derivative instruments in Autodesk’s Consolidated Balance Sheets were as follows as of January 31, 2020, and January 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Location
|
|
Fair Value at
|
(in millions)
|
January 31, 2020
|
|
January 31, 2019
|
Derivative Assets
|
|
|
|
|
|
Foreign currency contracts designated as cash flow hedges
|
Prepaid expenses and other current assets
|
|
$
|
1.0
|
|
|
$
|
4.3
|
|
Derivatives not designated as hedging instruments
|
Prepaid expenses and other current assets and Other assets
|
|
8.4
|
|
|
4.2
|
|
Total derivative assets
|
|
|
$
|
9.4
|
|
|
$
|
8.5
|
|
Derivative Liabilities
|
|
|
|
|
|
Foreign currency contracts designated as cash flow hedges
|
Other accrued liabilities
|
|
$
|
2.8
|
|
|
$
|
3.3
|
|
Derivatives not designated as hedging instruments
|
Other accrued liabilities
|
|
1.9
|
|
|
4.1
|
|
Total derivative liabilities
|
|
|
$
|
4.7
|
|
|
$
|
7.4
|
|
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, 2020, 2019, and 2018, respectively (amounts presented include any income tax effects):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Contracts
|
|
Fiscal Year Ended January 31,
|
(in millions)
|
2020
|
|
2019
|
|
2018
|
Amount of gain (loss) recognized in accumulated other comprehensive loss on derivatives (effective portion)
|
$
|
3.0
|
|
|
$
|
19.6
|
|
|
$
|
(21.3
|
)
|
Amount and location of gain (loss) reclassified from accumulated other comprehensive loss into income (loss) (effective portion)
|
|
|
|
|
|
Net revenue
|
$
|
17.6
|
|
|
$
|
(8.5
|
)
|
|
$
|
8.0
|
|
Cost of revenue
|
(0.9
|
)
|
|
—
|
|
|
—
|
|
Operating expenses
|
(7.1
|
)
|
|
(3.6
|
)
|
|
1.9
|
|
Total
|
$
|
9.6
|
|
|
$
|
(12.1
|
)
|
|
$
|
9.9
|
|
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, 2020, 2019, and 2018, respectively (amounts presented include any income tax effects):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
(in millions)
|
2020
|
|
2019
|
|
2018
|
Amount and location of gain (loss) recognized on derivatives in net income (loss)
|
|
|
|
|
|
Interest and other expense, net
|
$
|
6.0
|
|
|
$
|
6.6
|
|
|
$
|
(19.1
|
)
|
4. Employee and Director Stock Plans
Stock Plans
As of January 31, 2020, Autodesk maintained four 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, the Autodesk 2012 Outside Directors’ Stock Plan (“2012 Directors' Plan”), which is available only to non-employee directors, the PlanGrid 2012 Equity Incentive Plan ("PlanGrid 2012 Plan"), which is available to employees who held outstanding unvested options and restricted stock units that were assumed as part of our acquisition of PlanGrid, Inc. and the BuildingConnected, Inc. 2013 Stock Plan ("BuildingConnected 2013 Plan"), which is available to employees who held outstanding unvested options that were assumed as part of our acquisition of BuildingConnected, Inc. Additionally, there is one terminated plan with options outstanding.
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, 2020, 50.6 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 Employee 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, 2020, 13.8 million shares were available for future issuance under the 2012 Employee Plan.
The 2012 Directors' 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, 2020, 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, 2020, 0.8 million shares were available for future issuance under the 2012 Director's Plan.
Pursuant to the PlanGrid acquisition on December 19, 2018, the Company assumed the unvested options and restricted stock units under the PlanGrid 2012 Plan. No further equity awards will be granted under the PlanGrid 2012 Plan. As of January 31, 2020, 0.3 million shares subject to options remain outstanding under the PlanGrid 2012 Plan. Options that were granted under the PlanGrid 2012 Plan vest over a four-year period and expire 10 years from the date of grant. The PlanGrid 2012 Plan will expire on June 18, 2022.
Pursuant to the BuildingConnected acquisition on January 23, 2019, the Company assumed the unvested options under the BuildingConnected 2013 Plan. No further equity awards will be granted under the BuildingConnected 2013 Plan. As of January 31, 2020, 0.1 million shares subject to options remain outstanding under the BuildingConnected 2013 Plan. Options that were granted under the BuildingConnected 2013 Plan vest over a four-year period and expire 10 years from the date of grant. The BuildingConnected 2013 Plan will expire on May 6, 2023.
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, 2020 is as follows:
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|
|
|
|
|
|
|
|
|
|
|
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, 2019
|
0.8
|
|
|
$
|
23.95
|
|
|
|
|
|
Granted
|
—
|
|
|
—
|
|
|
|
|
|
Exercised
|
(0.3
|
)
|
|
23.43
|
|
|
|
|
|
Canceled/Forfeited
|
(0.1
|
)
|
|
21.27
|
|
|
|
|
|
Options outstanding at January 31, 2020
|
0.4
|
|
|
$
|
24.80
|
|
|
6.6
|
|
$
|
73.8
|
|
Options vested and exercisable at January 31, 2020
|
0.2
|
|
|
$
|
31.73
|
|
|
3.9
|
|
$
|
25.3
|
|
Shares available for grant at January 31, 2020
|
14.6
|
|
|
|
|
|
|
|
_______________
|
|
(1)
|
Represents the total pre-tax intrinsic value, based on Autodesk’s closing stock price of $196.85 per share as of January 31, 2020.
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As of January 31, 2020, compensation cost of $30.4 million related to non-vested stock options is expected to be recognized over a weighted average period of 2.0 years.
The following table summarizes information about the pre-tax intrinsic value of options exercised and the weighted average grant date fair value per share of options granted during the fiscal years ended January 31, 2020, 2019, and 2018:
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|
|
|
|
|
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Fiscal year ended January 31,
|
|
2020
|
|
2019
|
|
2018
|
Pre-tax intrinsic value of options exercised (1)
|
$
|
44.1
|
|
|
$
|
9.7
|
|
|
$
|
22.8
|
|
Weighted average grant date fair value per share of stock options assumed from acquisition
|
$
|
—
|
|
|
$
|
110.40
|
|
|
$
|
—
|
|
——————
|
|
(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.
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Restricted Stock Units:
A summary of restricted stock activity for the fiscal year ended January 31, 2020, is as follows:
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|
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Unreleased Restricted Stock Units (in thousands)
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|
Weighted average grant date fair value per share
|
Unvested restricted stock at January 31, 2019
|
4,287.4
|
|
|
$
|
120.07
|
|
Granted
|
3,136.1
|
|
|
156.24
|
|
Vested
|
(2,276.5
|
)
|
|
112.50
|
|
Canceled/Forfeited
|
(422.5
|
)
|
|
133.82
|
|
Performance Adjustment (1)
|
7.8
|
|
|
142.17
|
|
Unvested restricted stock at January 31, 2020
|
4,732.3
|
|
|
$
|
147.24
|
|
_______________
|
|
(1)
|
Based on Autodesk's financial results and relative total stockholder return for the fiscal 2019 performance period. The performance stock units were attained at rates ranging from 105.2% to 122.5% of the target award.
|
For the restricted stock granted during fiscal years ended January 31, 2020, 2019, and 2018, the weighted average grant date fair values were $156.24, $144.37, and $106.55, respectively. The fair value of the shares vested during fiscal years ended January 31, 2020, 2019, and 2018 were $361.0 million, $425.4 million, and $399.7 million, respectively.
During the fiscal year ended January 31, 2020, Autodesk granted 2.6 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.
Additionally, during the fiscal year ended January 31, 2020, Autodesk granted 0.3 million restricted stock units for which the ultimate number of shares earned is based on the Autodesk closing stock price on each vesting date. As these awards will be settled in a fixed dollar amount of shares, the awards are accounted for as a liability-classified award and are expensed using the straight-line method over the vesting period. During the fiscal year ended January 31, 2020, Autodesk settled liability-classified awards of $23.5 million.
Autodesk recorded stock-based compensation expense related to restricted stock units of $274.5 million, $189.3 million, and $202.1 million during fiscal years ended January 31, 2020, 2019, and 2018, respectively. As of January 31, 2020, total compensation cost not yet recognized of $474.6 million related to non-vested awards is expected to be recognized over a weighted average period of 1.9 years. At January 31, 2020, the number of restricted stock units granted but unvested was 4.1 million.
During the fiscal year ended January 31, 2020, 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. The performance criteria for the performance stock units are based on Annualized Recurring Revenue ("ARR") and free cash flow goals adopted by the Compensation and Human Resources Committee, as well as total stockholder return compared against companies in the S&P North American Technology Software Index with a market capitalization over $2.0 billion ("Relative TSR"). These performance stock units vest over a three-year period and have the following vesting schedule:
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•
|
Up to one third of the performance stock units may vest following year one, depending upon the achievement of the performance criteria for fiscal 2020 as well as 1-year Relative TSR (covering year one).
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|
•
|
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).
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|
|
•
|
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).
|
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 $27.1 million, $28.6 million, and $33.7 million during fiscal years ended January 31, 2020, 2019, and 2018 respectively. As of January 31, 2020, total compensation cost not yet recognized of $6.7 million related to unvested performance stock units, is expected to be recognized over a weighted average period of 0.7 years. At January 31, 2020, the number of performance stock units granted but unvested was 0.6 million.
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, 2020, a total of 7.3 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 does not have an expiration date.
A summary of the ESPP activity for the fiscal years ended January 31, 2020, 2019, and 2018 is as follows:
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|
|
|
Fiscal year ended January 31,
|
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|
2020
|
|
2019
|
|
2018
|
Issued shares
|
|
0.9
|
|
|
1.0
|
|
|
2.0
|
|
Average price of issued shares
|
|
$
|
102.20
|
|
|
$
|
90.25
|
|
|
$
|
39.03
|
|
Weighted average grant date fair value of awards granted under the ESPP
|
|
$
|
47.78
|
|
|
$
|
42.75
|
|
|
$
|
32.41
|
|
Autodesk recorded $33.3 million, $27.2 million, and $25.7 million of compensation expense associated with the ESPP in fiscal 2020, 2019, and 2018, 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, 2020:
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(a)
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|
(b)
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(c)
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Plan category
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Number of securities to be issued upon exercise or vesting of outstanding options and awards (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
|
5.2
|
|
|
$
|
24.80
|
|
|
21.9
|
|
(1)
|
Total
|
5.2
|
|
|
$
|
24.80
|
|
|
21.9
|
|
|
____________________
|
|
(1)
|
Included in this amount are 7.3 million securities available for future issuance under Autodesk’s ESPP.
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5. Income Taxes
The provision for income taxes consists of the following:
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|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended January 31,
|
2020
|
|
2019
|
|
2018
|
Federal:
|
|
|
|
|
|
Current
|
$
|
(2.3
|
)
|
|
$
|
(13.3
|
)
|
|
$
|
(0.8
|
)
|
Deferred
|
7.6
|
|
|
(6.7
|
)
|
|
(19.3
|
)
|
State:
|
|
|
|
|
|
Current
|
(0.4
|
)
|
|
(1.8
|
)
|
|
(0.3
|
)
|
Deferred
|
2.1
|
|
|
0.1
|
|
|
2.2
|
|
Foreign:
|
|
|
|
|
|
Current
|
69.6
|
|
|
65.3
|
|
|
50.9
|
|
Deferred
|
3.7
|
|
|
(5.5
|
)
|
|
(23.1
|
)
|
|
$
|
80.3
|
|
|
$
|
38.1
|
|
|
$
|
9.6
|
|
Foreign pretax (loss) income was $475.5 million in fiscal 2020, $181.4 million in fiscal 2019, and $(76.2) million in fiscal 2018.
The differences between the U.S. statutory rate and the aggregate income tax provision are as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended January 31,
|
2020
|
|
2019
|
|
2018
|
Income tax provision (benefit) at U.S. Federal statutory rate
|
$
|
61.9
|
|
|
$
|
(9.0
|
)
|
|
$
|
(188.4
|
)
|
State income tax benefit, net of the U.S. Federal benefit
|
(5.3
|
)
|
|
(11.4
|
)
|
|
(21.9
|
)
|
Foreign income taxed at rates different from the U.S. statutory rate including GILTI
|
(41.2
|
)
|
|
117.8
|
|
|
(53.3
|
)
|
Valuation allowance adjustment
|
65.3
|
|
|
18.8
|
|
|
(82.5
|
)
|
Transition tax and revisions due to subsequent regulations
|
9.6
|
|
|
(16.0
|
)
|
|
408.4
|
|
Tax effect of non-deductible stock-based compensation
|
24.9
|
|
|
7.6
|
|
|
20.7
|
|
Stock compensation windfall / shortfall
|
(22.4
|
)
|
|
(39.4
|
)
|
|
(67.7
|
)
|
Research and development tax credit benefit
|
(19.8
|
)
|
|
(23.5
|
)
|
|
(11.3
|
)
|
Closure of income tax audits and changes in uncertain tax positions
|
(2.0
|
)
|
|
(12.7
|
)
|
|
1.2
|
|
Tax effect of officer compensation in excess of $1.0 million
|
3.4
|
|
|
5.0
|
|
|
2.2
|
|
Non-deductible expenses
|
5.4
|
|
|
1.5
|
|
|
2.1
|
|
Other
|
0.5
|
|
|
(0.6
|
)
|
|
0.1
|
|
|
$
|
80.3
|
|
|
$
|
38.1
|
|
|
$
|
9.6
|
|
Significant components of Autodesk’s deferred tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
January 31,
|
2020
|
|
2019
|
Stock-based compensation
|
$
|
32.8
|
|
|
$
|
25.9
|
|
Research and development tax credit carryforwards
|
263.4
|
|
|
238.7
|
|
Foreign tax credit carryforwards
|
253.9
|
|
|
198.6
|
|
Accrued compensation and benefits
|
3.4
|
|
|
6.5
|
|
Other accruals not currently deductible for tax
|
28.4
|
|
|
19.0
|
|
Purchased technology and capitalized software
|
37.7
|
|
|
32.6
|
|
Fixed assets
|
11.6
|
|
|
15.0
|
|
Lease liability
|
106.4
|
|
|
—
|
|
Tax loss carryforwards
|
241.2
|
|
|
237.2
|
|
Deferred revenue
|
29.2
|
|
|
49.0
|
|
Other
|
28.0
|
|
|
28.4
|
|
Total deferred tax assets
|
1,036.0
|
|
|
850.9
|
|
Less: valuation allowance
|
(883.4
|
)
|
|
(797.8
|
)
|
Net deferred tax assets
|
152.6
|
|
|
53.1
|
|
Indefinite lived intangibles
|
(76.5
|
)
|
|
(67.6
|
)
|
Right-of-use assets
|
(101.3
|
)
|
|
—
|
|
Unremitted earnings of foreign subsidiaries
|
(0.9
|
)
|
|
—
|
|
Total deferred tax liabilities
|
(178.7
|
)
|
|
(67.6
|
)
|
Net deferred tax assets (liabilities)
|
$
|
(26.1
|
)
|
|
$
|
(14.5
|
)
|
Autodesk’s fiscal 2020 tax expense is primarily driven by tax expense in foreign locations, withholding taxes on payments made to the U.S. or to Singapore from foreign sources, and tax amortization on indefinite-lived intangibles offset by a tax benefit resulting from valuation allowance release in Singapore.
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, Autodesk determined
that a valuation allowance was required on the accumulated U.S., Canada and Netherlands tax attributes as of January 31, 2020. In the current year, the U.S. created incremental deferred tax assets, primarily operating losses, foreign tax and R&D credits, Canada generated R&D credits and the Netherlands generated non-deductible interest expense. These U.S., Canada and Netherlands deferred tax attributes have been offset by a full valuation allowance. The valuation allowance increased by $85.6 million in fiscal 2020 primarily due to the generation of deferred tax attributes inclusive of the valuation allowance release of$42.0 million benefit in Singapore. The valuation allowance increased by $163.6 million, and decreased by $113.8 million in fiscal 2019 and 2018, respectively, primarily related to U.S. and Singapore tax attributes generated in fiscal year 2019 and the Tax Act reduction in rate in fiscal 2018.
Given the increase in our global earnings in the current year and the expectation of continued increase in global earnings, the Company anticipates a significant increase in U.S. taxable income beginning fiscal 2021. Moreover, if we are subject to GILTI in fiscal 2021, the inclusion of foreign earnings in our U.S. tax basis will be positive evidence in our evaluation of our need for a valuation allowance on our U.S. deferred tax assets. 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 deferred tax assets each quarter, both in the U.S. and in foreign jurisdictions, based on all available evidence, both positive and negative.
Realization of foreign net deferred tax assets of $56.4 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 determine that it is not more likely than not to realize such deferred tax assets.
The Tax Act provided broad and significant changes to the U.S. corporate income tax regime. In light of our fiscal year-end, the Tax Act reduced the statutory federal corporate rate from 35% to 34% for fiscal 2018 and to 21% for fiscal 2019 and forward. The Tax Act also, among many other provisions, imposed a one-time mandatory tax on accumulated earnings of foreign subsidiaries (commonly referred to as the "transition tax") to which we were subject in our fiscal year 2018, subjects the deemed intangible income of our foreign subsidiaries to current U.S. taxation (commonly referred to as "GILTI"), provides for a full dividends received deduction upon repatriation of untaxed earnings of our foreign subsidiaries, imposes a minimum taxation (without most tax credits) on modified taxable income, which is generally taxable income without deductions for payments to related foreign companies (commonly referred to as “BEAT”), modifies the accelerated depreciation deduction rules, and made updates to the deductibility of certain expenses. We completed our determination of the accounting implications of the Tax Act on our tax accruals in our fiscal year January 31, 2019; any subsequent adjustments would be solely related to issuance of regulations related to provision of Tax Act or tax audits in U.S. or foreign jurisdictions..
We recorded a tax benefit of the Tax Act in our financial statements as of January 31, 2018 of approximately $32.3 million mainly driven by the corporate rate re-measurement (from 35% to 21%) of the indefinite-lived intangible deferred tax liability.
As of January 31, 2018, we estimated taxable income associated with offshore earnings of $831.5 million, and as of January 31, 2019, we adjusted the taxable income to $819.6 million for transition tax. We had an incremental adjustment to our transition tax in our fiscal year 2020 of $45.5 million, as a result of additional Treasury Regulations published this year. Transition tax related to adjustments in the offshore earnings or correlated foreign tax credits resulted in no impact to the effective tax rate as it is primarily offset by net operating losses that are subject to a full valuation allowance. As a result of transition tax, we recorded a deferred tax asset of approximately $43.2 million for foreign tax credits, which are also subject to a full valuation allowance.
We have not had a GILTI inclusion in fiscal 2019 and fiscal 2020 resulting in no impact to the effective tax rates.
We anticipate that the U.S. Department of Treasury and other standard-setting bodies will continue to interpret or issue guidance on how provisions of the Tax Act will be applied or otherwise administered. As future guidance is issued, we may make adjustments to amounts that we have previously recorded that may materially impact our financial statements in the period in which the adjustments are made.
As of January 31, 2020, Autodesk had $742.8 million of cumulative U.S. federal tax loss carryforwards and $1,486.2 million of cumulative U.S. state tax loss carryforwards, which may be available to reduce future income tax liabilities in federal and state jurisdictions. The pre-fiscal 2019 U.S. federal tax loss carryforward will expire beginning fiscal 2021 through fiscal 2037. U.S. federal losses generated beginning in fiscal 2019 do not expire and are carried forward indefinitely. The U.S. state tax loss carryforward will expire beginning fiscal 2021 through fiscal 2039.
In addition to U.S. federal and state tax loss carryforwards, Ireland, Netherlands, and Singapore jurisdictions incurred federal tax losses totaling $277.7 million, which may be available to reduce future income tax liabilities. As discussed above, with the exception of our Irish and Singaporean losses, of $37.9million and $195.6 million, respectively, these cumulative assets have full valuation allowance against them on our balance sheet as the Company has determined it is more likely than not that these losses will not be utilized.
As of January 31, 2020, Autodesk had $186.3 million of cumulative U.S. federal research tax credit carryforwards, $98.0 million of cumulative California state research tax credit carryforwards, and $58.4 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 2040, the state credit carryforwards may reduce future California income tax liabilities indefinitely, and the Canadian tax credit carryforwards will expire beginning fiscal 2028 through fiscal 2040. Autodesk also has $267.1 million of cumulative U.S. federal foreign tax credit carryforwards, which may be available to reduce future U.S. tax liabilities. These foreign tax credits will expire beginning fiscal 2021 through fiscal 2030. 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 than 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. There were no permanent losses of U.S. federal and state tax attributes as a result of any ownership changes occurring through the balance sheet date.
As of January 31, 2020, the Company had $220.6 million of gross unrecognized tax benefits, of which $203.7 million would reduce our valuation allowance, if recognized. The remaining $16.9 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,
|
|
2020
|
|
2019
|
|
2018
|
Gross unrecognized tax benefits at the beginning of the fiscal year
|
$
|
209.0
|
|
|
$
|
337.6
|
|
|
$
|
261.4
|
|
Increases for tax positions of prior years
|
2.8
|
|
|
7.9
|
|
|
22.8
|
|
Decreases for tax positions of prior years
|
(0.4
|
)
|
|
(146.3
|
)
|
|
(22.5
|
)
|
Increases for tax positions related to the current year
|
11.1
|
|
|
10.3
|
|
|
78.4
|
|
Decreases relating to settlements with taxing authorities
|
—
|
|
|
—
|
|
|
(0.8
|
)
|
Reductions as a result of lapse of the statute of limitations
|
(1.9
|
)
|
|
(0.5
|
)
|
|
(1.7
|
)
|
Gross unrecognized tax benefits at the end of the fiscal year
|
$
|
220.6
|
|
|
$
|
209.0
|
|
|
$
|
337.6
|
|
It is the Company's continuing practice to recognize interest and/or penalties related to income tax matters in income tax expense. Autodesk had $2.3 million, $3.1 million, and $2.8 million, net of tax benefit, accrued for interest and penalties related to unrecognized tax benefits as of January 31, 2020, 2019, and 2018, respectively. There was $(0.8) million, $0.3 million, and $0.3 million of net expense for interest and penalties related to tax matters recorded through the consolidated statements of operations for the years ended January 31, 2020, 2019, and 2018, respectively.
Autodesk's U.S. and state income tax returns for fiscal year 2001 through fiscal year 2020 remain open to examination due to either net operating loss or credit carryforward. The Internal Revenue Service has examined the Company's U.S. consolidated federal income tax returns for fiscal years 2014 and 2015. This audit was finalized on January 31, 2019, and impacts from the finalization of the audit were recorded in the fiscal 2019 financial statements.
Autodesk files tax returns in multiple foreign taxing jurisdictions with open tax years ranging from fiscal year 2006 to 2020.
As a result of certain business and employment actions and capital investments undertaken by Autodesk, income earned in certain Europe and Asia Pacific countries was subject to reduced tax rates through fiscal 2019. Historically, the Company
incurred $11.4 million net benefit ($0.05 basic net income per share) in fiscal 2019 from the tax status of these business arrangements, and $0.0 million ($0.00 basic net income per share) in fiscal 2018.
6. Acquisitions
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 been presented for acquisitions that were material to Autodesk's Consolidated Financial Statements.
Fiscal 2020 Acquisitions
During the fiscal year ended January 31, 2020, Autodesk did not complete any business combinations or technology acquisitions.
Fiscal 2019 Acquisitions
BuildingConnected, Inc.
On January 23, 2019, Autodesk acquired BuildingConnected, Inc. ("BuildingConnected"). BuildingConnected is a leading provider of construction bid-management software.
The acquisition-date fair value of the consideration transferred totaled $253.2 million, which consisted of $248.1 million of cash, and $5.1 million attributable to the fair value of equity awards related to pre-combination services. Under the terms of the merger agreement, Autodesk replaced BuilidingConnected's unvested options with 116,279 Autodesk options.
PlanGrid, Inc.
On December 19, 2018, Autodesk acquired PlanGrid, Inc. ("PlanGrid"). PlanGrid is a leading provider of construction productivity software and this acquisition.
The acquisition-date fair value of the consideration transferred totaled $777.6 million, which consisted of $772.4 million of cash and $5.2 million attributed to the fair value of assumed PlanGrid equity awards for pre-combination services. Under the terms of the merger agreement, Autodesk replaced PlanGrid's unvested options and restricted stock awards with 602,051 Autodesk options and 41,069 Autodesk RSUs. Autodesk entered into a term loan agreement in the aggregate principal amount of $500.0 million to fund a portion of the purchase. See Note 8, "Borrowing Arrangements" for more information.
Assemble Systems, Inc.
On July 3, 2018, Autodesk acquired Assemble Systems, Inc. ("Assemble Systems"). Assemble Systems is a provider of software solutions that enable construction professionals to influence, query and connect BIM data to key workflows across bid management, estimating, scheduling, site management and finance.
The acquisition-date fair value of the consideration transferred totaled $93.6 million, which consisted of $38.2 million of cash, $44.8 million of Autodesk common stock (340,769 shares) and ascribed a value of $10.6 million to Autodesk's existing equity interest in Assemble Systems.
Prior to the acquisition date, Autodesk accounted for its approximate 14% equity interest in Assemble Systems as a cost-method investment. The acquisition-date fair value of Autodesk's existing equity interest was $10.6 million and was included in the measurement of the consideration transferred. Autodesk recognized a gain of $4.6 million as a result of remeasuring its prior equity interest in Assemble Systems held before the business combination using a control premium to calculate a discount for lack of control. The gain is included in “Interest and other expense, net” in the Consolidated Statements of Operations.
Purchase Price Allocation
For the Assemble Systems, PlanGrid, and BuildingConnected acquisitions that were 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 was primarily attributable to synergies expected to arise after the acquisition. There is no amount of goodwill that is deductible for U.S. income tax purposes.
The following table summarizes the fair value of the assets acquired and liabilities assumed by major class for the business combinations that were completed during the fiscal year ended January 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assemble Systems (1)
|
|
PlanGrid (2)
|
|
BuildingConnected (3)
|
|
Total
|
Developed technologies
|
$
|
4.4
|
|
|
$
|
78.0
|
|
|
$
|
12.5
|
|
|
$
|
94.9
|
|
Customer relationships and other non-current intangible assets
|
12.0
|
|
|
98.0
|
|
|
26.9
|
|
|
136.9
|
|
Trade name
|
2.8
|
|
|
20.0
|
|
|
6.8
|
|
|
29.6
|
|
Goodwill
|
71.8
|
|
|
589.5
|
|
|
206.7
|
|
|
868.0
|
|
Deferred revenue (current and non-current)
|
(1.7
|
)
|
|
(25.5
|
)
|
|
(2.8
|
)
|
|
(30.0
|
)
|
Net tangible assets
|
4.3
|
|
|
17.6
|
|
|
3.1
|
|
|
25.0
|
|
Total
|
$
|
93.6
|
|
|
$
|
777.6
|
|
|
$
|
253.2
|
|
|
$
|
1,124.4
|
|
_______________
|
|
(1)
|
During fiscal 2020, Autodesk recorded a measurement period adjustment related to the valuation of the deferred tax liability associated with the Assemble Systems acquisition. This adjustment reduced goodwill and increased net tangible assets by $0.2 million.
|
|
|
(2)
|
During fiscal 2020, Autodesk recorded measurement period adjustments to the preliminary determination of estimated fair value of assets and liabilities assumed associated with the PlanGrid acquisition in the amount of $0.8 million. These adjustments increased goodwill and reduced net tangible assets.
|
|
|
(3)
|
During fiscal 2020, Autodesk recorded measurement period adjustments to the preliminary determination of estimated fair value of assets and liabilities assumed associated with the BuildingConnected in the amount of $0.4 million. These adjustments increased goodwill and reduced net tangible assets.
|
For the three business combinations in fiscal 2019, the determination of estimated fair values of certain assets and liabilities was derived from estimated fair value assessments and assumptions by Autodesk. For PlanGrid and BuildingConnected, Autodesk's estimates and assumptions were subject to change within the measurement period (up to one year from the acquisition date). For the three business combinations in fiscal 2019, the tax impact of the acquisition was also subject to change within the measurement period.
Unaudited Pro Forma Results of Acquirees
Autodesk has included the financial results of each of the acquirees in the consolidated financial statements from the respective dates of acquisition; the revenues and the results of each of the acquirees, except for PlanGrid, have not been material both individually or in the aggregate to Autodesk's fiscal 2019 and 2018 results.
The following unaudited pro forma financial information summarizes the combined results of operations for Autodesk and PlanGrid, as though the companies were combined as of the beginning of Autodesk's fiscal year 2018. The unaudited pro forma financial information was as follows (in millions):
|
|
|
|
|
|
|
|
|
|
Fiscal Year ended January 31,
|
|
2019
|
|
2018
|
Total revenues
|
$
|
2,632.6
|
|
|
$
|
2,099.2
|
|
Pretax loss
|
(157.5
|
)
|
|
(724.9
|
)
|
Net loss
|
(200.1
|
)
|
|
(734.5
|
)
|
The pro forma financial information for all periods presented includes the business combination accounting effects from the acquisition of PlanGrid including amortization expense from acquired intangible assets, compensation expense, and the
interest expense and debt issuance costs related to the term loan agreement. The historical financial information has been adjusted to give effect to pro forma events that are directly attributable to the business combinations and factually supportable. The pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the Company’s fiscal 2018.
The pro forma financial information for fiscal 2019 and 2018 combines the historical results of the Company, the adjusted historical results of PlanGrid for fiscal 2019 and 2018 considering the date the Company acquired PlanGrid and the effects of the pro forma adjustments described above.
7. Deferred Compensation
At January 31, 2020, Autodesk had marketable securities totaling $69.0 million, all of which related to investments in debt and equity securities that are held in a rabbi trust under non-qualified deferred compensation plans. Of the $69.0 million related to the deferred compensation liability at January 31, 2020, $5.3 million was classified as current and $63.7 million was classified as non-current liabilities. Of the $60.3 million related to the deferred compensation liability at January 31, 2019, $5.0 million was classified as current and $55.3 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 “Long-Term Other liabilities”, respectively.
Costs to obtain a contract with a customer
Sales commissions earned by our internal sales personnel and our reseller partners are considered incremental and recoverable costs of obtaining a contract with a customer. The ending balance of assets recognized from costs to obtain a contract with a customer was $98.8 million and $93.0 million as of January 31, 2020, and January 31, 2019, respectively. Amortization expense related to assets recognized from costs to obtain a contract with a customer was $101.6 million and $108.8 million during fiscal years ended January 31, 2020, and January 31, 2019, respectively. Autodesk did not recognize any contract cost impairment losses during the fiscal years ended January 31, 2020 and January 31, 2019.
8. Borrowing Arrangements
In January 2020, Autodesk issued $500.0 million aggregate principal amount of 2.85% notes due January 15, 2030 (“2020 Notes”). Net of a discount of $1.1 million and issuance costs of $4.8 million, Autodesk received net proceeds of $494.1 million from issuance of the 2020 Notes. Both the discount and issuance costs are being amortized to interest expense over the term of the 2020 Notes using the effective interest method. On March 4, 2020, proceeds of the 2020 Notes were used for the repayment of $450.0 million of debt due June 15, 2020, subject to a make-whole premium. See Note 17, "Subsequent Events," for further discussion on the repayment. The remainder will be used for general corporate purposes.
In December 2018, Autodesk entered into a credit agreement by and among Autodesk, the lenders from time to time party thereto and Citibank, N.A., as agent, which provides for an unsecured revolving loan facility in the aggregate principal amount of $650.0 million with an option, subject to customary conditions, to request an increase in the amount of the credit facility by up to an additional $350.0 million, and is available for working capital or other business needs. The credit agreement replaced and terminated Autodesk’s prior $400.0 million revolving credit facility. The credit agreement contains customary covenants that could, among other things, restrict the imposition of liens on Autodesk's assets, and restrict Autodesk's ability to incur additional indebtedness or make dispositions of assets if Autodesk fails to maintain compliance with the financial covenants. The credit agreement financial covenants consist of (1) a minimum interest coverage ratio of 2.50:1.0 starting with the fiscal quarter ending January 31, 2019 and increasing to 3.00:1.0 starting with the fiscal quarter ending April 30, 2019, and (2) a maximum leverage ratio of 3.50:1.0 starting with the fiscal quarter ending July 31, 2019, and dropping to 3.00:1.0 in the fiscal quarter ending January 31, 2020. At January 31, 2020, Autodesk was in compliance with the credit agreement covenants. Revolving loans under the credit agreement bear interest, at Autodesk's option, at either (i) a floating rate per annum equal to the base rate plus a margin of between 0.000% and 0.500%, depending on Autodesk’s Public Debt Rating (as defined in the credit agreement) or (ii) a per annum rate equal to the rate at which dollar deposits are offered in the London interbank market, plus a margin of between 0.900% and 1.500%, depending on Autodesk’s Public Debt Rating. The maturity date on the credit agreement is December 2023. At January 31, 2020, Autodesk had no outstanding borrowings under the credit agreement.
In December 2018, Autodesk also entered into a Term Loan Agreement by and among Autodesk, the lenders from time to time party thereto and Citibank, N.A., as agent, which provides for a delayed draw term loan facility in the aggregate principal amount of $500.0 million and was borrowed in full to consummate the PlanGrid, Inc. acquisition in Note 6, "Acquisitions". The term loan bears interest, at Autodesk's option, at either (i) a floating rate per annum equal to the base rate plus a margin between
0.000% and 0.625%, depending on Autodesk's Public Debt Rating or (ii) a per annum rate equal to the rate at which dollar deposits are offered in the London interbank market, plus a margin of between 0.875% and 1.625%, depending on Autodesk's Public Debt Rating. Based on Autodesk's current credit ratings the term loan bears interest at a per annum rate equal to the rate at which dollar deposits are offered in the London interbank market, plus a margin of 1.125% per annum. Interest under the term loan was 2.689% upon final payment. As of January 31, 2020, the term loan was repaid in full.
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 due December 15, 2017 and the remainder is available for general corporate purposes.
In June 2015, Autodesk issued $450.0 million aggregate principal amount of 3.125% notes due June 15, 2020 ("$450.0 million 2015 Notes") and $300.0 million aggregate principal amount of 4.375% notes due June 15, 2025 ("$300.0 million 2015 Notes") (collectively, the “2015 Notes”). Net of a discount of $0.6 million and $1.1 million, and issuance costs of $3.8 million and $2.5 million, Autodesk received net proceeds of $445.6 million and $296.4 million from issuance of the $450.0 million 2015 Notes and $300.0 million 2015 Notes, respectively. 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. On March 4, 2020, the proceeds of the 2020 Notes were used for the repayment of the $450.0 million 2015 Notes. See Note 17, "Subsequent Events," for further discussion on the repayment. As of January 31, 2020, the $450.0 million 2015 Notes are recorded in the Consolidated Balance Sheets under "Current portion of long-term notes payable, net", and the weighted average interest rate was 4.375%.
In December 2012, Autodesk issued $350.0 million aggregate principal amount of 3.6% notes due December 15, 2022 ("2012 Notes"). Autodesk received net proceeds of $346.7 million from issuance of the 2012 Notes, net of a discount of $0.5 million and issuance costs of $2.8 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.
The 2020 Notes, 2017 Notes, 2015 Notes and the 2012 Notes may all be redeemed 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 all the Notes, at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase. All 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 the quoted market prices, the approximate fair value of the notes as of January 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
Aggregate Principal Amount
|
|
Fair value
|
2012 Notes
|
$
|
350.0
|
|
|
$
|
364.0
|
|
$450 2015 Notes
|
450.0
|
|
|
451.5
|
|
$300 2015 Notes
|
300.0
|
|
|
331.9
|
|
2017 Notes
|
500.0
|
|
|
535.0
|
|
2020 Notes
|
500.0
|
|
|
513.3
|
|
The expected future principal payments for all borrowings as of January 31, 2020 are as follows:
|
|
|
|
|
Fiscal year ending
|
|
2021
|
$
|
450.0
|
|
2022
|
—
|
|
2023
|
350.0
|
|
2024
|
—
|
|
2025
|
—
|
|
Thereafter
|
1,300.0
|
|
Total principal outstanding
|
$
|
2,100.0
|
|
9. Leases
Autodesk has operating leases for real estate, vehicles and certain equipment. Leases have remaining lease terms of less than 1 year to 70 years, some of which include options to extend the lease with renewal terms from 1 year to 10 years and some of which include options to terminate the leases from less than 1 year to 10 years. Options to extend the lease are included in the lease liability if they are reasonably certain of being exercised. Options to terminate are considered in determining the lease liability if they are reasonably certain of being exercised. Payments under our lease arrangements are primarily fixed, however, certain lease agreements contain variable payments, which are expensed as incurred and not included in the operating lease assets and liabilities. These amounts include payments affected by the Consumer Price Index, payments for common area maintenance that are subject to annual reconciliation, and payments for maintenance and utilities. The Company’s leases do not contain residual value guarantees or material restrictive covenants. Short-term leases are recognized in the consolidated statement of operations on a straight-line basis over the lease term. Short-term lease expense was not material for the periods presented.
The components of lease cost were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31, 2020
|
|
Cost of subscription and maintenance revenue
|
Cost of other revenue
|
Marketing and sales
|
Research and development
|
General and administrative
|
Total
|
Operating lease cost
|
$
|
6.6
|
|
$
|
2.2
|
|
$
|
38.0
|
|
$
|
27.3
|
|
$
|
12.7
|
|
$
|
86.8
|
|
Variable lease cost
|
0.9
|
|
0.3
|
|
5.4
|
|
3.8
|
|
1.8
|
|
12.2
|
|
Supplemental operating cash flow information related to leases is as follows:
|
|
|
|
|
|
Fiscal Year Ended January 31, 2020
|
Cash paid for operating leases included in operating cash flows (1)
|
$
|
93.5
|
|
Non-cash operating lease liabilities arising from obtaining operating right-of-use assets
|
231.7
|
|
_______________
(1) Includes $12.2 million in variable lease payments not included in "Operating lease liabilities" and "Long-term operating lease liabilities" on the Consolidated Balance Sheet.
The weighted average remaining lease term for operating leases is 7.5 years at January 31, 2020. The weighted average discount rate was 3.41% at January 31, 2020.
Maturities of operating lease liabilities were as follows:
|
|
|
|
|
Fiscal year ending
|
|
2021
|
$
|
60.4
|
|
2022
|
90.9
|
|
2023
|
84.4
|
|
2024
|
71.3
|
|
2025
|
52.3
|
|
Thereafter
|
167.6
|
|
|
526.9
|
|
Less imputed interest
|
(67.1
|
)
|
Present value of operating lease liabilities
|
$
|
459.8
|
|
As of January 31, 2020, Autodesk has additional operating lease minimum lease payments of $22.7 million for executed leases that have not yet commenced, primarily for office locations.
Rent expense related to operating leases recognized on a straight-line basis over the lease period under previous accounting guidance, was as follows:
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2019
|
|
2018
|
Rent expense
|
$
|
60.7
|
|
|
$
|
55.9
|
|
10. Commitments and Contingencies
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, 2020, were approximately $402.0 million for periods through fiscal 2028. These purchase commitments primarily result from contracts entered into for the acquisition of cloud services, IT infrastructure, marketing, and software development services, as well as 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 fixed rate over a specified period, dollar amount per unit sold or a percentage of the underlying revenue. Royalty expense, which was recorded under cost of subscription and maintenance revenue and cost of other revenue on Autodesk’s Consolidated Statements of Operations, was $14.3 million in fiscal 2020, $6.4 million in fiscal 2019, and $15.3 million in fiscal 2018.
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, inquiries, investigations, and proceedings in the normal course of business including claims of alleged infringement of intellectual property rights, commercial, employment, tax, prosecution of unauthorized use, 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.
11. 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 2.7 million shares in fiscal 2020 at an average repurchase price of $168.63 per share, 2.2 million shares in fiscal 2019 at an average repurchase price of $130.15 per share, and 6.9 million shares in fiscal 2018 at an average repurchase price of $100.45.
At January 31, 2020, 14.7 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.
12. Interest and Other Expense, net
Interest and other expense, net, consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2020
|
|
2019
|
|
2018
|
Interest and investment expense, net
|
$
|
(54.0
|
)
|
|
$
|
(52.1
|
)
|
|
$
|
(34.5
|
)
|
Gain (loss) on foreign currency
|
3.9
|
|
|
5.1
|
|
|
(3.3
|
)
|
(Loss) gain on strategic investments
|
(3.3
|
)
|
|
12.5
|
|
|
(16.4
|
)
|
Other income
|
5.2
|
|
|
16.8
|
|
|
6.0
|
|
Interest and other expense, net
|
$
|
(48.2
|
)
|
|
$
|
(17.7
|
)
|
|
$
|
(48.2
|
)
|
13. Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss, net of taxes, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Unrealized (Losses) Gains on Derivative Instruments
|
|
Net Unrealized Gains (Losses) on Available for Sale Securities
|
|
Defined Benefit Pension Components
|
|
Foreign Currency Translation Adjustments
|
|
Total
|
Balances, January 31, 2018
|
$
|
(16.6
|
)
|
|
$
|
1.3
|
|
|
$
|
(29.3
|
)
|
|
$
|
(79.2
|
)
|
|
$
|
(123.8
|
)
|
Other comprehensive income (loss) before reclassifications
|
20.6
|
|
|
0.7
|
|
|
14.7
|
|
|
(58.3
|
)
|
|
(22.3
|
)
|
Pre-tax gains reclassified from accumulated other comprehensive income
|
12.1
|
|
|
1.3
|
|
|
0.3
|
|
|
—
|
|
|
13.7
|
|
Tax effects
|
(1.1
|
)
|
|
—
|
|
|
(2.0
|
)
|
|
0.5
|
|
|
(2.6
|
)
|
Net current period other comprehensive income (loss)
|
31.6
|
|
|
2.0
|
|
|
13.0
|
|
|
(57.8
|
)
|
|
(11.2
|
)
|
Balances, January 31, 2019
|
15.0
|
|
|
3.3
|
|
|
(16.3
|
)
|
|
(137.0
|
)
|
|
(135.0
|
)
|
Other comprehensive income (loss) before reclassifications
|
4.1
|
|
|
1.8
|
|
|
—
|
|
|
(13.7
|
)
|
|
(7.8
|
)
|
Pre-tax losses reclassified from accumulated other comprehensive income
|
(9.6
|
)
|
|
—
|
|
|
(8.1
|
)
|
|
—
|
|
|
(17.7
|
)
|
Tax effects
|
(1.1
|
)
|
|
(0.4
|
)
|
|
1.6
|
|
|
0.1
|
|
|
0.2
|
|
Net current period other comprehensive (loss) income
|
(6.6
|
)
|
|
1.4
|
|
|
(6.5
|
)
|
|
(13.6
|
)
|
|
(25.3
|
)
|
Balances, January 31, 2020
|
$
|
8.4
|
|
|
$
|
4.7
|
|
|
$
|
(22.8
|
)
|
|
$
|
(150.6
|
)
|
|
$
|
(160.3
|
)
|
Reclassifications related to gains and losses on available-for-sale debt securities are included in "Interest and other expense, net". Refer to Note 3, "Financial Instruments" for the amount and location of reclassifications related to derivative instruments. Reclassifications of the defined benefit pension components of net periodic benefit cost are included in "Interest and other expense, net".
14. Net Income (Loss) Per Share
Basic net income (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 income (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 income (loss) per share amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2020
|
|
2019
|
|
2018
|
Numerator:
|
|
|
|
|
|
Net income (loss)
|
$
|
214.5
|
|
|
$
|
(80.8
|
)
|
|
$
|
(566.9
|
)
|
Denominator:
|
|
|
|
|
|
Denominator for basic net income (loss) per share—weighted average shares
|
219.7
|
|
|
218.9
|
|
|
219.5
|
|
Effect of dilutive securities (1)
|
2.8
|
|
|
—
|
|
|
—
|
|
Denominator for dilutive net income (loss) per share
|
222.5
|
|
|
218.9
|
|
|
219.5
|
|
Basic net income (loss) per share
|
$
|
0.98
|
|
|
$
|
(0.37
|
)
|
|
$
|
(2.58
|
)
|
Diluted net income (loss) per share
|
$
|
0.96
|
|
|
$
|
(0.37
|
)
|
|
$
|
(2.58
|
)
|
____________________
|
|
(1)
|
The effect of dilutive securities of 3.1 million and 4.5 million shares for the fiscal years ended January 31, 2019 and 2018, 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 income (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. There were no potentially anti-dilutive shares excluded from the computation of diluted net income per share for the fiscal year
ended January 31, 2020. The effect of 0.5 million and 0.5 million potentially anti-dilutive shares were excluded from the computation of net loss per share for the fiscal years ended January 31, 2019 and 2018, respectively.
15. 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 $21.4 million in fiscal 2020, $17.1 million in fiscal 2019, and $17.3 million in fiscal 2018. Autodesk does not allow participants to invest in Autodesk common stock through the 401(k) plan.
Defined Benefit Pension Plans
Autodesk provides certain defined benefit pension plans to employees located in countries outside of the U.S., primarily the United Kingdom, Switzerland, and Japan. The Company deposits funds for specific plans, consistent with the requirements of local law, with insurance companies or third-party trustees, or into government-managed accounts, and accrues for the unfunded portion of the obligation, where material.
The projected benefit obligation was $103.5 million and $91.6 million as of January 31, 2020, and January 31, 2019, respectively. The accumulated benefit obligation was $97.3 million and $85.1 million as of January 31, 2020, and January 31, 2019. The related fair value of plan assets was $96.2 million and $80.8 million as of January 31, 2020, and January 31, 2019, respectively. Our defined pension plan assets are measured at fair value and consist primarily of insurance contracts categorized as level 2 in the fair value hierarchy and an investment fund valued using net asset value. The insurance contracts represent the immediate cash surrender value of assets managed by qualified insurance companies. The assets held in the investment fund are invested in a diversified growth fund actively managed by a third-party.
Autodesk recognized $11.6 million and $10.8 million in other long-term liabilities within the consolidated balance sheets as of January 31, 2020, and January 31, 2019, respectively. Our total net periodic pension plan cost (benefit) was $3.7 million, $(3.1) million and $6.7 million for fiscal years 2020, 2019, and 2018, respectively.
Our expected funding for the plans during fiscal 2021 is approximately $4.9 million.
Estimated Future Benefit Payments
Estimated benefit payments over the next 10 fiscal years are as follows:
|
|
|
|
|
(in millions)
|
Pension Benefits
|
2021
|
$
|
2.3
|
|
2022
|
2.1
|
|
2023
|
2.1
|
|
2024
|
2.1
|
|
2025
|
2.9
|
|
2026-2030
|
12.4
|
|
Total
|
$
|
23.9
|
|
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 $28.7 million in fiscal 2020, $29.6 million in fiscal 2019, and $27.2 million in fiscal 2018.
Cash Balance Plans
Autodesk provides a cash balance plan that insures the risks of disability, death, and longevity, in which the vested pension capital is reinvested and provides a 100% capital and interest guarantee. The weighted-average guaranteed interest
crediting rate for cash balance plans was 1%, 1%, and 1% for mandatory retirement savings and 0.1%, 0.3%, and 0.3% for supplementary retirement savings for fiscal 2020, 2019 and 2018, respectively.
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 7, “Deferred Compensation”, for further discussion.
16. Selected Quarterly Financial Information (Unaudited)
Summarized quarterly financial information for fiscal years 2020 and 2019 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
1st quarter
|
|
2nd quarter
|
|
3rd quarter
|
|
4th quarter
|
|
Fiscal year
|
Net revenue
|
$
|
735.5
|
|
|
$
|
796.8
|
|
|
$
|
842.7
|
|
|
$
|
899.3
|
|
|
$
|
3,274.3
|
|
Gross profit
|
652.8
|
|
|
717.3
|
|
|
763.2
|
|
|
816.1
|
|
|
2,949.4
|
|
Income from operations
|
24.8
|
|
|
73.8
|
|
|
110.6
|
|
|
133.8
|
|
|
343.0
|
|
(Provision) benefit for income taxes
|
(32.8
|
)
|
|
(26.3
|
)
|
|
(29.7
|
)
|
|
8.5
|
|
|
(80.3
|
)
|
Net (loss) income
|
(24.2
|
)
|
|
40.2
|
|
|
66.7
|
|
|
131.8
|
|
|
214.5
|
|
Basic net (loss) income per share (2)
|
$
|
(0.11
|
)
|
|
$
|
0.18
|
|
|
$
|
0.30
|
|
|
$
|
0.60
|
|
|
$
|
0.98
|
|
Diluted net (loss) income per share (2)
|
$
|
(0.11
|
)
|
|
$
|
0.18
|
|
|
$
|
0.30
|
|
|
$
|
0.59
|
|
|
$
|
0.96
|
|
(Loss) Income from operations includes the following items:
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
$
|
75.2
|
|
|
$
|
88.2
|
|
|
$
|
94.0
|
|
|
$
|
105.0
|
|
|
$
|
362.4
|
|
Amortization of acquisition related intangibles
|
19.0
|
|
|
18.3
|
|
|
18.1
|
|
|
18.0
|
|
|
73.4
|
|
Acquisition related costs
|
12.7
|
|
|
6.0
|
|
|
2.5
|
|
|
2.1
|
|
|
23.3
|
|
Restructuring and other exit costs, net
|
$
|
0.2
|
|
|
$
|
0.2
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
1st quarter
|
|
2nd quarter
|
|
3rd quarter
|
|
4th quarter
|
|
Fiscal year
|
Net revenue (1)
|
$
|
559.9
|
|
|
$
|
611.7
|
|
|
$
|
660.9
|
|
|
$
|
737.3
|
|
|
$
|
2,569.8
|
|
Gross profit (1)
|
493.1
|
|
|
541.9
|
|
|
588.6
|
|
|
660.3
|
|
|
2,283.9
|
|
(Loss) Income from operations (1)
|
(55.3
|
)
|
|
(24.7
|
)
|
|
14.7
|
|
|
40.3
|
|
|
(25.0
|
)
|
(Provision) benefit for income taxes
|
(18.6
|
)
|
|
(16.0
|
)
|
|
(35.2
|
)
|
|
31.7
|
|
|
(38.1
|
)
|
Net (loss) income (1)
|
(82.4
|
)
|
|
(39.4
|
)
|
|
(23.7
|
)
|
|
64.7
|
|
|
(80.8
|
)
|
Basic net (loss) income per share (1) (2)
|
$
|
(0.38
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
0.30
|
|
|
$
|
(0.37
|
)
|
Diluted net (loss) income per share (1) (2)
|
$
|
(0.38
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
0.29
|
|
|
$
|
(0.37
|
)
|
(Loss) Income from operations includes the following items:
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
$
|
54.4
|
|
|
$
|
56.9
|
|
|
$
|
64.2
|
|
|
$
|
74.0
|
|
|
$
|
249.5
|
|
Amortization of acquisition related intangibles
|
7.4
|
|
|
7.2
|
|
|
7.8
|
|
|
11.1
|
|
|
33.5
|
|
CEO transition costs
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
Acquisition related costs
|
—
|
|
|
2.5
|
|
|
1.8
|
|
|
11.9
|
|
|
16.2
|
|
Restructuring and other exit costs, net
|
$
|
22.5
|
|
|
$
|
13.8
|
|
|
$
|
3.7
|
|
|
$
|
1.9
|
|
|
$
|
41.9
|
|
____________________
|
|
(1)
|
Reflects the impact of the adoption of new accounting standards in fiscal year 2019 related to ASC Topic 606 and ASC Topic 340.
|
|
|
(2)
|
Net (loss) income per share were computed independently for each of the periods presented; therefore the sum of the net (loss) income per share amount for the quarters may not equal the total for the fiscal year.
|
17. Subsequent Events
On March 4, 2020, Autodesk redeemed in full $450.0 million in aggregate principal amount of its outstanding 3.125% senior notes due June 15, 2020. The redemption was completed pursuant to the optional redemption provisions. To redeem the 2015 Notes, Autodesk paid a redemption price of approximately $452.1 million, plus accrued and unpaid interest to, but not including, the date of the redemption. The Company did not incur any additional early termination penalties in connection with such redemption.