TEXT-S&P rates Autodesk Inc. 'BBB', outlook stable

Wed Dec 5, 2012 11:29am EST

Overview
     -- San Rafael, Ca.-based Autodesk Inc., a leading provider of
design, engineering and entertainment software solutions, has a "satisfactory" 
business risk position in its design software solutions, and solid free cash 
flows generation.
     -- We are assigning our 'BBB' corporate credit rating to Autodesk Inc. 
     -- We expect Autodesk to maintain its market position and financial 
profile in line with the current rating in the intermediate term.
    
Rating Action
On Dec. 5, 2012, Standard & Poor's Ratings Services assigned its `BBB' 
corporate credit rating to Autodesk Inc. The outlook is stable. We also 
assigned our preliminary `BBB' senior unsecured rating to its WKSI shelf 
filing.

Rationale
The rating on Autodesk reflects the company's "satisfactory" business risk 
position in design, engineering and entertainment software solutions, a 
significant recurring base of revenues, and solid free cash flows generation. 
Although the company holds a leading position in several submarkets, the 
ratings are tempered by its niche focus, a highly competitive marketplace that 
includes larger, well-capitalized participants, and the potential for a 
moderate revenue and earnings impact during weak macroeconomic cycles.

With last-12-month (LTM) revenues of about $2.3 billion, Autodesk is a leading 
provider of design software solutions for architectural, engineering, and 
construction (AEC) (28% of fiscal-year 2012 net revenue), manufacturing (24%), 
Platform Solutions and Emerging Business (38%) and Media & Entertainment 
(10%). Its products are used to reduce the time-to-market and cost of the 
product design process. We believe the company has a defensible position in 
its markets based on its installed base and commitment to innovation--it 
consistently dedicates at least 20% of revenues to research and development 
(R&D), and has a recurring revenue base of about 40% from annual maintenance 
agreements. We expect recurring revenue as a portion of total revenue to 
increase further, as the company transitions over time to a subscription based 
model that would provide for greater earnings visibility. Revenues are 
diversified, with about two-thirds derived internationally with little 
customer concentration.

Autodesk's products are generally sold at lower price points, mostly through 
indirect channels (about 85%), and are less specialized than its competitors' 
offerings. Additionally, Autodesk does not customarily provide systems 
integration and professional services. Thus, competitors can gain market share 
by winning new projects in existing accounts by offering packages with 
superior features, offering additional services that Autodesk does not 
provide, and through new account development. However, the installed customer 
base tends to be loyal, using internal databases developed around the 
software, having product familiarity, and often requiring extensive training. 

In our assessment, the company's management and governance is "satisfactory." 
Autodesk has an "intermediate" financial risk profile. Profitability and cash 
flow measures are solid; the company has relatively stable EBITDA margins in 
the mid-20% area, in line with its peers'. Capital expenditures are modest at 
about 2.5% of revenues, and Autodesk has averaged above $480 million in free 
cash flow annually over the past five fiscal years. We expect the company to 
maintain total debt to EBITDA at less than 2.2x over time  as it pursues its 
growth objectives, which could entail acquisitions funded with some additional 
debt or by reducing existing liquidity. However, we do not expect it to pursue 
large transformational acquisitions.

Liquidity
Autodesk has strong liquidity. Our assessment of Autodesk's liquidity profile 
is based on the following:
     -- We see sources to be in excess of uses for the next 24 months, in part 
reflecting no near-term debt maturities;
     -- We expect that net sources would be positive in the next 12 months, 
even with a 50% decline in EBITDA from LTM levels.

Liquidity includes:
     -- $1.7 billion of cash and securities (as of Oct. 31, 2012);
     -- A $400 million revolving credit facility that expires in May 2016; and 
 
     -- Expected free operating cash flow generation in the $500 million area.

Outlook
The rating outlook is stable. We expect Autodesk to maintain its market 
position and financial profile in line with the current rating in the 
intermediate term. We do not currently expect to consider a higher rating 
based on the company's relatively narrow market focus, highly competitive 
industry conditions, and its potential use of financial flexibility to support 
its growth objectives, which could include debt-financed acquisitions. Debt to 
EBITDA sustained above 2.2x could lead to a rating downgrade.

Related Criteria And Research
     -- Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012
     -- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008

Ratings List
New Rating; Outlook Action

Autodesk Inc.
 Corporate Credit Rating                BBB/Stable/--      
 Senior Unsecured
  WKSI shelf filing                     BBB (prelim.)


Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.
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