1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended October 31, 2000April 30, 2001 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________.
COMMISSION FILE NUMBER 0-21180
INTUIT INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 77-0034661
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(State of incorporation) (IRS employer identification no.)
2535 GARCIA AVENUE, MOUNTAIN VIEW, CA 94043
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(Address of principal executive offices)
(650) 944-6000
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(Registrant's telephone number, including area code)
Indicate by a check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- -------- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Approximately 206,912,924209,143,388 shares of Common Stock,
$0.01 par value, as of November 30, 2000May 31, 2001
2
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FORM 10-Q
INTUIT INC.
INDEX
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PAGE
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NUMBER
PART I FINANCIAL INFORMATION PAGE
NUMBER
------
ITEM 1: Financial Statements
Condensed Consolidated Balance Sheets as of
July 31, 2000 and October 31, 2000.....................April 30, 2001............................. 3
Condensed Consolidated Statements of Operations for
the three and nine months ended October 31, 1999April 30, 2000 and 2000.......2001...... 4
Condensed Consolidated Statements of Cash Flows for
the threenine months ended October 31, 1999April 30, 2000 and 2000.......2001................ 5
Notes to Condensed Consolidated Financial Statements ................... 6
ITEM 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 18Operations.......................... 16
ITEM 3: Quantitative and Qualitative Disclosures about Market Risk...... 2627
PART II OTHER INFORMATION
ITEM 1: Legal Proceedings............................................... 28
ITEM 4: Submission of Matters to a Vote of Security Holders ............ 29
ITEM 5: Other Matters................................................... 3029
ITEM 6: Exhibits and Reports on Form 8-K................................ 3130
Signatures...................................................... 3230
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INTUIT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JULY 31, OCTOBER 31,APRIL 30,
(In thousands, except par value)thousands; Unaudited) 2000 20002001
----------- -----------
(unaudited)
ASSETS
ASSETS
Current assets:
Cash and cash equivalents ............................................................. $ 416,953 $ 278,719437,604
Short-term investments ................................................................... 1,050,220 1,092,6651,129,929
Marketable securities ..................................................................... 225,878 154,647117,494
Customer deposits .............................. 181,678 221,944
Accounts receivable, net ................................................................ 67,420 67,938103,310
Mortgage loans ................................. 60,330 145,964
Prepaid expenses and other current assets (1) ................... 368,323 396,364assets(1) ... 126,315 134,704
----------- -----------
Total current assets ............................................................... 2,128,794 1,990,3332,290,949
Property and equipment, net ........................................................... 167,707 183,243181,635
Goodwill and intangibles, net ....................................................... 438,878 529,318487,667
Investments ........................................................................................... 31,160 43,27921,311
Other assets (2) .................................................assets(2) ................................. 112,363 112,250110,354
----------- -----------
Total assets ......................................................................................... $ 2,878,902 $ 2,858,4233,091,916
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................................................... $ 79,145 $ 81,87774,709
Payroll tax obligations ........................ 177,002 197,700
Escrow liabilities ........................................................................... 32,077 36,571105,046
Deferred revenue ............................................................................... 107,578 121,16982,374
Income taxtaxes payable ......................................................................... 110,743 50,40166,374
Deferred income taxes ..................................................................... 53,934 31,55236,318
Other current liabilities ....................................... 423,360 446,493...................... 246,358 323,568
----------- -----------
Total current liabilities ..................................................... 806,837 768,063886,089
Long-term obligations ....................................................................... 538 18,50515,786
Minority interest ............................................................................... 238 288836
Commitments and contingencies ....................................
Stockholders' equity:
Preferred stock ................................................................................ -- --
Common stock and additional paid in capital ......................... 1,521,559 1,587,4671,682,138
Deferred compensation ..................................................................... (26,522) (24,750)(23,657)
Accumulated other comprehensive income, net ......................... 55,586 21,94931,562
Retained earnings ............................................................................. 520,666 486,901499,162
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Total stockholders' equity ................................................... 2,071,289 2,071,5672,189,205
----------- -----------
Total liabilities and stockholders' equity ............................. $ 2,878,902 $ 2,858,4233,091,916
=========== ===========
(1) Includes $7.2 million notes receivable from Venture Finance Software Corp.
as of July 31, 2000.
(2) Includes $6.5 million and $7.1$9.5 million loans due from affiliates as of July
31, 2000 and October 31, 2000,April 30, 2001, respectively.
See accompanying notes.
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INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31,
1999NINE MONTHS ENDED
APRIL 30, APRIL 30,
2000 2001 2000 2001
--------- --------- --------- -----------
(In thousands, except per share data; unaudited)Unaudited)
Net revenue ................................................................................................ $ 176,928329,139 $ 187,522425,210 $ 931,566 $ 1,070,292
Costs and expenses:
Cost of revenue ..................................................... 58,871 69,881................................. 77,647 81,888 232,074 259,446
Customer service and technical support .............................. 34,301 32,396.......... 31,596 37,538 113,554 116,068
Selling and marketing ............................................... 69,905 61,100........................... 60,173 68,479 216,188 215,146
Research and development ............................................ 41,713 47,878........................ 40,779 52,697 126,529 155,174
General and administrative .......................................... 21,492 27,783...................... 20,027 23,917 64,846 77,614
Charge for purchased research and development ... -- 238 1,312 238
Acquisition related costs ....................... 1,312 --
Amortization of acquisition costs ................................... 37,091 39,67938,404 122,575 121,710 205,328
Reorganization costs ............................................................................ -- -- 3,500 --
--------- --------- --------- -----------
Total costs &and expenses .............................................. 268,185 278,717........................ 268,626 387,332 879,713 1,029,014
--------- --------- Loss--------- -----------
Income from operations ................................................. (91,257) (91,195)........................... 60,513 37,878 51,853 41,278
Interest and other income and expense, net ........................... 8,476 16,118
Losses....... 14,516 15,070 29,981 47,736
Gain (loss) on marketable securities and other
investments, net ........... (17,309) (3,868)............................... 422,206 (11,504) 402,096 (87,307)
Gain on divestiture .............................. -- -- -- 1,639
--------- --------- Loss--------- -----------
Income before income tax, benefit, minority interest and
cumulative effect of accounting change ............................. (100,090) (78,945)......... 497,235 41,444 483,930 3,346
Income tax benefit ................................................... 34,170 30,916provision ............................. 200,204 55,294 195,617 38,566
Minority interest .................................................... 59 (50)(income) ....................... (54) 451 (203) 598
--------- --------- Loss--------- -----------
Income (loss) before cumulative effect of
accounting change ................... (65,861) (48,079).............................. 297,085 (14,301) 288,516 (35,818)
Cumulative effect of change in accounting for derivatives,change, net of
taxes ........................................................................................................ -- -- -- 14,314
--------- --------- --------- -----------
Net loss .............................................................income (loss) ................................ $ (65,861)297,085 $ (33,765)(14,301) $ 288,516 $ (21,504)
========= ========= ========= ===========
Basic and diluted net lossincome (loss) per share before
cumulative effect of accounting change ...................................... $ (0.33)1.47 $ (0.23)(0.07) $ 1.44 $ (0.17)
Cumulative effect of accounting change .......................................... -- -- -- 0.07
--------- --------- --------- -----------
Basic and diluted net lossincome (loss) per share ................................................. $ (0.33)1.47 $ (0.16)(0.07) $ 1.44 $ (0.10)
========= ========= ========= ===========
Shares used in per share amounts ..................................... 197,362 205,727................. 202,342 208,715 199,787 207,345
========= ========= ========= ===========
Diluted net income (loss) per share before
cumulative effect of accounting change ......... $ 1.39 $ (0.07) $ 1.37 $ (0.17)
Cumulative effect of accounting change ........... -- -- -- 0.07
--------- --------- --------- -----------
Diluted net income (loss) per share .............. $ 1.39 $ (0.07) $ 1.37 $ (0.10)
========= ========= ========= ===========
Shares used in per share amounts ................. 214,362 208,715 211,049 207,345
========= ========= ========= ===========
See accompanying notes.
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INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREENINE MONTHS ENDED
OCTOBER 31,
1999APRIL 30,
(In thousands; Unaudited) 2000 --------- ---------2001
---- ----
(In thousands; unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss .........................................................................income (loss) ........................................... $ (65,861)288,516 $ (33,765)(21,504)
Adjustments to reconcile net income (loss) to net cash
usedprovided by operating activities:
Amortization of goodwill and other purchased intangibles .................... 31,148 43,110Acquisition related costs .............................. 128,746 213,144
Depreciation ................................................................ 8,778 14,610........................................... 33,682 45,208
Net (gain) loss from marketable securities ......................................... 17,309 3,868and other
investments .......................................... (402,096) 87,307
Charge for purchased research and development .......... 1,312 238
Cumulative effect of accounting change ....................................................... -- (23,857)
Deferred income tax benefit (provision) ..................................... (3,691) 2,170
Tax benefit from employee stock options ..................................... 52,796 32,006(benefit) provision ................ (3,121) 49,793
Gain on divestiture .................................... -- (1,639)
Changes in operating assets and liabilities:
Customer deposits ...................................... 8,621 (40,266)
Accounts receivable ...................................................... (23,376) (95).................................... (64,390) (35,445)
Mortgage loans ......................................... 19,798 (85,634)
Prepaid expenses and other current assets ................................ 81,476 (1,462).............. 24,746 (10,071)
Other assets ............................................................. (5) (1,255)........................................... (17,050) 7,738
Accounts payable ......................................................... 24,657 (6,620)....................................... 27,034 (14,711)
Payroll tax obligations ................................ 10,077 20,702
Escrow liabilities ....................................................... (35,741) 3,937..................................... (26,594) 71,844
Deferred revenue ......................................................... 18,547 13,591....................................... 23,134 (25,204)
Income taxes payable ..................................................... (136,985) (60,342)................................... 106,535 (44,369)
Other accruedcurrent liabilities ................................................ 7,733 (1,144).............................. 43,601 40,932
Minority interest ........................................................ (59) 50...................................... (203) 598
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Net cash usedprovided by operating activities .................................. (23,274) (15,198)............ 202,348 234,804
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment ............................................... (27,257) (29,383).......................... (71,683) (58,011)
Proceeds from the sale of marketable securities .................................. -- 24,137............. 519,183 25,238
Purchase of marketable securities ................................................ (2,974)........................... (16,500) --
Purchase of short-term investments ............................................... (162,291) (998,903).......................... (728,504) (2,581,316)
Liquidation and maturity of short-term investments ............................... 83,587 956,458.......... 509,259 2,501,607
Acquisitions, and dispositions, net of cash acquired .............................. (95,561) (105,860).......................... (54,584) (164,059)
Purchase of long-term investments ................................................ (4,300) (1,000)........................... (7,157) (3,694)
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Net cash usedprovided (used) by investing activities .................................. (208,796) (154,551).... 150,014 (280,235)
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CASH FLOWS FROM FINANCING ACTIVITIES
Principal proceeds (payments)payments on long-term debt .................................. 2,419 (2,943)........................ (3,348) (2,610)
Net increasesproceeds (payments) under warehouse line of credit .......................... (8,660) 557...... (11,105) 1,125
Net proceeds from issuance of common stock ....................................... 10,556 33,901.................. 70,887 65,086
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Net cash provided by financing activities .............................. 4,315 31,515........... 56,434 63,601
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Effect of foreign currency translation on cash and
cash equivalents .................................. (919) 2,481
NET DECREASEINCREASE IN CASH AND CASH EQUIVALENTS .......................................... (227,755) (138,234)..................... 407,877 20,651
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ................................................. 554,230 416,953
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CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................................................. $ 326,475962,107 $ 278,719437,604
========= ====================
See accompanying notes.
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INTUIT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
Intuit Inc. develops, sells and supports small business accounting and
management, tax preparation and consumer finance desktop software products,
financial supplies (such as computer checks, envelopes and invoices), and
Internet-based products and services for individuals and small businesses. Our
products and services are designed to automate commonly performed financial
tasks and to simplify the way individuals and small businesses manage their
finances and businesses. We sell our products and services throughout North
America and in many global markets. Sales are made primarily through retail and
OEM distribution channels, traditional direct sales to customers and via the
Internet.
Basis of Presentation
Intuit has prepared the accompanying unaudited condensed consolidated financial
statements in accordance with generally accepted accounting principles for
interim financial statements. All intercompany balances and transactions have
been eliminated in consolidation. Certain other previously reported amounts have
been reclassified to conform to the current presentation format. We have
included all normal recurring adjustments considered necessary to give a fair
presentation of our operating results for the periods shown. Results for the
three and nine months ended October 31, 2000April 30, 2001 do not necessarily indicate the
results to be expected for the fiscal year ending July 31, 2001 or any other
future period. All financial statements presented are restated to includereflect the
combined results of Intuit and our Rock Financial Corporation ("Rock") and Title Source,
Inc. ("Title Source") subsidiaries that were acquired on December 8, 1999 in a transaction that
was accounted for as a pooling of interests. These statements and accompanying
notes should be read together with the audited consolidated financial statements
for the fiscal year ended July 31, 2000 included in Intuit's Form 10-K, filed
with the Securities and Exchange Commission.
Use of Estimates
To comply with generally accepted accounting principles, we make estimates and
assumptions that affect the amounts reported in the financial statements and the
disclosures made in the accompanying notes. Our most significant estimates are
related to reserves for product returns and exchanges, reserves for rebates and
the collectability of accounts receivable. We also use estimates to determine
the remaining economic lives and carrying value of goodwill, purchased
intangibles, fixed assets and fixeddeferred tax assets. Despite our intention to
establish accurate estimates and assumptions, actual results may differ from our
estimates.
Net Revenue
Intuit recognizesWe recognize revenue upon shipment of our shrink-wrapped software products, net
of returns reserves, based on "FOB shipping" terms. Under FOB shipping terms, title and risk of loss
are transferred,historical experience, provided that collection is
probable and we have no continuing obligations, once our products are
delivered to the shipper. We recognize revenue upon shipment, net of return
reserves based on historical experience. To recognize revenue, it must also be
probable that we will collect the accounts receivable from our customers.
Reserves are provided for returns of excess quantities of current product
versions, as well as previous versions of products still in the distribution
channel when new versions are launched.significant remaining obligations. In some situations,
we receive advance payments from our customers. Revenue associated with these
advance payments is deferred until the products are shipped or services are
provided. We also reduce revenue by the estimated cost of rebates when products
are shipped.
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We recognize revenue from Internet products and services when that revenueit is "earned"
based on the nature of the particular product or service. For Internet products
and services that are providedwe provide over a period of time, we recognize revenue is
recognized pro
rata based on the passage of the contractual time period during
which the productperiod. However, where we provide or service is to be provided or in accordance with agreed upon
performance criteria. However, wheredeliver
the Internet product or service is to be
provided or delivered at one point in time, we recognize revenue is recognized once upon
delivery of the product or completion of the service, rather than ratably over
time. For example, we earn advertising revenues from third parties that
advertise on certain of our websites and contract to run such advertisements for
a particular period of time. In that case, the associated advertising revenue is
recognized ratably over the contractual time period during which the advertising
is placed. By contrast, for on-line transactions for which we receive a payment
(such as the sale of mortgage loans through our Quicken Loans website), revenue
is recognized upon completion of the transaction, assuming there are no
remaining obligations on our part. To recognize revenue, it must be probable
that we will collect the accounts receivable from our customers.service.
Intuit also offers several plans under which customers are charged for technical
support assistance. FeesWe collect fees charged for these plans are collected in advance and are recognized aswe
recognize revenue over a period of time (generally one year) at a rate
that is based on historical call volumes for support, which approximates when
these services are performed. Costs. We include costs
incurred for fee for support plans are
included in cost of goods sold.
We defer loan origination revenue and the associated commissions and processing
costs on loans held for sale until the related loan is sold. We recognize gains
and losses on loans at the time we sell them, based upon the difference between
the selling price and the carrying value of the related loans sold. We recognize
loan servicing revenue as the related principal is collected. We recognize
interest income on mortgage loans held for sale as it is earned, and we
recognize interest expenses on related borrowings as we incur them.
Customer Service and Technical Support
Customer service and technical support costs include the costs associated with
performing order processing, answering customer inquiries through websites and
other electronic means and providing telephone assistance.customer assistance by telephone. In
connection with the sale of certain products, Intuit provides a limited amount
of free telephonetechnical support
service-6-
7
assistance to customers. This
free service, also referred to as post-contract customer support, is included in
this expense category. We do not defer the recognition of any revenue
associated with sales of these products, since the cost of providing this free
support is insignificant. The support is provided within one year after the
associated revenue is recognized and enhancements are minimal and infrequent. TheWe
accrue the estimated cost of providing this free support is accrued upon product shipment.
In situations where customers are charged for technical support assistance, the
costs incurred in providing services are included in cost of goods sold rather
than as customer service and technical support expenses.
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Cash, Cash Equivalents and Short-Term Investments
Intuit considers highly liquid investments with a maturitymaturities of three months or
less at the date of purchase to be cash equivalents. Short-term investments are
considered available-for-sale debt securities and are carried at amortized cost,
which approximates fair value. Available-for-sale debt securities are classified
as current assets based upon our intent and ability to use any and all of these
securities as necessary to satisfy the significant short-term liquidity
requirements that may arise from the highly seasonal and cyclical nature of our
business. Based on our significant business seasonality, cash flow requirements
within quarters may fluctuate dramatically and require us to use a significant
amount of the short-term investments held as available-for-sale debt securities.
The following schedule summarizes the estimated fair value of our cash, cash
equivalents, and short-term investments:
JULY 31, OCTOBER 31,APRIL 30,
2000 20002001
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(unaudited)
(In thousands)
Cash and cash equivalents:
Cash ..................................................................... $ 4,298 $ 16,97440,197
Certificate of deposits ............................... -- 8,0606,309
Money market funds ......................................... 338,462 180,138388,495
Commercial paper &and corporate notes ....... 29,543 25,531--
Municipal bonds ............................................... 44,650 48,0162,603
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$ 416,953 $ 278,719437,604
========== ==========
Short-term investments:
Certificates of deposit .......................... $ 5,053 $ --
Corporate notes .......................................... 75,640 82,96164,671
Municipal bonds .......................................... 920,360 945,6311,045,258
U.S. Government securities .................... 49,167 64,07320,000
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$1,050,220 $1,092,665$1,129,929
========== ==========
The following table outlines the estimated fair value of Intuit's
available-for-sale debt securities held in short-term investments classified by
the maturity date listed on the security.
JULY 31, OCTOBER 31,APRIL 30,
2000 20002001
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(unaudited)
(In thousands)
Due within one year .......................... $ 235,998 $ 266,823181,690
Due within two years ........................ 157,309 139,697201,044
Due within three years .................... 13,039 8,7001,785
Due after three years ...................... 638,821 677,445745,410
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$1,045,167 $1,092,665$1,129,929
========== ==========
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Marketable Securities
As explained in greater detail below, weWe currently hold several marketable securities, most of which we acquired in
connection with strategic business transactions and relationships. Our
available-for-sale marketableequity securities are carried at fair value and we include
unrealized gains and losses, net of tax, in stockholders' equity. We have
designated our investments in At Home Corporation (which does business as
Excite@ Home)Excite@Home), VeriSign and 724 Solutions as trading securities and fluctuations
in the market value of these shares are reported in net income. We held the
following marketable securities at July 31, 2000 and October 31, 2000:
AVAILABLE-FOR-SALE SECURITIESApril 30, 2001:
AVAILABLE-FOR-SALE EQUITY COST GROSS UNREALIZED -------------------------- ESTIMATED
COSTSECURITIES BASIS GAINS LOSSES FAIR VALUE
---------- ------------------------- -------- --------- --------- ----------
(In thousands)
JULY 31, 2000
Checkfree Corporation common stock $ 36,875 $ 115,000 $ -- $ 151,875$151,875
Homestore.com, Inc. common stock 1,689 10,626 -- 12,315
Quotesmith.com, Inc. common stock 5,645 -- (2,721) 2,924
S1 Corporation common stock 49,997 -- (25,302) 24,695
-------- --------- --------- --------- -----------------
$ 94,206 $ 125,626 $ (28,023) $ 191,809$191,809
======== ========= ========= ========= =========
OCTOBER 31, 2000
(unaudited)========
APRIL 30, 2001
Checkfree Corporation common stock $ 35,621 $ 84,52560,592 $ -- $ 120,146
Quotesmith.com, Inc.96,213
InsWeb Corporation common stock 5,64510,810 -- (4,592) 1,053(3,720) 7,090
S1 Corporation common stock 49,9979,769 -- (38,287) 11,710(3,313) 6,456
-------- --------- --------- --------- -----------------
$ 91,26356,200 $ 84,52560,592 $ (42,879) $ 132,909(7,033) $109,759
======== ========= ========= ========= =================
CUMULATIVE NET
COST RECOGNIZED ESTIMATED
TRADING SECURITIES
NET RECOGNIZED
-------------------------- ESTIMATED
COST GAINSBASIS LOSSES FAIR VALUE
--------- --------- --------- ----------------------- ----------
(In thousands)
JULY 31, 2000
Excite@Home common stock $ 119,366 $ -- $ (92,997) $ 26,369$26,369
VeriSign, Inc. common stock 4,916 -- (1,833) 3,083
724 Solutions, Inc. common stock 7,700 -- (3,083) 4,617
--------- --------- --------- ----------------
$ 131,982 $ -- $ (97,913) $ 34,069$34,069
========= ========= ========= =========
OCTOBER 31, 2000
(unaudited)=======
APRIL 30, 2001
Excite@Home common stock $ 119,366114,614 $(107,760) $ -- $ (99,942) $ 19,4246,854
VeriSign, Inc. common stock 2,458 -- (1,175) 1,283(1,960) 498
724 Solutions, Inc. common stock 2,118 -- (1,087) 1,031(1,735) 383
--------- --------- --------- ----------------
$ 123,942119,190 $(111,455) $ -- $(102,204) $ 21,7387,735
========= ========= ========= ================
In January 1997, we soldThe cost basis of our online banking and bill payment transaction
processing business to Checkfree Corporation. We obtained marketable securities reflect adjustments for other than
temporary impairments in Checkfreevalue as a resultwell as sales of this sale. We account for the investment in
Checkfree as an available-for-sale equity security, which accordingly is carried
at market value. Checkfree common stock issecurities.
Our marketable securities are quoted on the Nasdaq National Market
underMarket. All of our
marketable securities are stocks of high technology companies that have been
extremely volatile. The market prices of a number of these companies' stocks
have declined substantially. Declines in the symbol CKFR. The closing pricemarket prices of Checkfree common stock atstocks we hold
could continue. These declines have resulted, and could continue to result, in a
material reduction in the carrying value of these assets and a negative impact
on our operating results. For example, if our available-for-sale securities
experience further declines in fair value that is considered other than
temporary, we will record the additional loss in the period when the subsequent
impairment becomes apparent.
During the nine months ended April 30, 2001, we recorded a loss of $40.2 million
to recognize an other than temporary decline in the value of our S1 shares for
the difference between our original cost of $51.50 per share and $10.06 per
share, the fair value as of October 31, 2000 was $49.75 per share. At October 31, 2000,the date we held approximately 2.4
million shares, or approximately 2.8%, of Checkfree's outstanding common stock.
-9-made the impairment
determination.
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In February 1999, we purchased one million shares of common stock of
Quotesmith.com, Inc. We purchased an additional 272,727 shares of Quotesmith.com
in August 1999 at the time of its initial public offering. We account for the
investment in Quotesmith.com as an available-for-sale equity security, which
accordingly is carried at market value. Quotesmith.com common stock is quoted on
the Nasdaq National Market under the symbol QUOT. The closing price of
Quotesmith.com common stock at October 31, 2000 was $0.88 per share. At October
31, 2000, we held approximately 1.2 million shares, or approximately 6.3%, of
Quotesmith.com's outstanding common stock.
In May 1999, we purchased 970,813 shares of common stock of Security First
Technologies. In November 1999, Security First Technologies changed its name to
S1 Corporation. We account for the investment in S1 as an available-for-sale
equity security, which accordingly is carried at market value. S1 common stock
is quoted on the Nasdaq National Market under the symbol SONE. The closing price
of S1 common stock at October 31, 2000 was $12.06 per share. At October 31,
2000, we held approximately 1.0 million shares, or approximately 1.7%, of S1's
outstanding common stock. In connection with the above purchase, we also
received an option to purchase up to additional 4.6 million shares of S1
exercisable at a per share purchase price of $51.50. At October 31, 2000, these
S1 options are now considered derivatives and were valued at $11.1 million using
the Black-Scholes model and are classified as long term investments.
In connection with At Home Corporation's acquisition of Excite in May 1999, our
shares of Excite were converted into Excite@Home common stock. We have elected
to report these converted Excite@Home shares as a trading security. As a result,
we are reporting both positive and negative fluctuations in the market value of
this stock in net income. At October 31, 2000, we owned approximately 1.9
million shares (less than 1%) of Excite@Home common stock and reported a
recognized cumulative valuation loss of approximately $99.9 million for these
securities. The closing price of Excite@Home (Nasdaq symbol ATHM) at October 31,
2000, was $10.31 per share.
In connection with VeriSign Corporation's acquisition of Signio in February
2000, our shares of Signio were converted into VeriSign common stock. We have
elected to report these converted VeriSign shares as a trading security. As a
result, we are reporting both positive and negative fluctuations in the market
value of this stock in net income. At October 31, 2000, we owned 9,716 shares
(less than 1%) of VeriSign common stock and reported a recognized cumulative
valuation loss of approximately $1.2 million for these securities. The closing
price of VeriSign (Nasdaq symbol VRSN) at October 31, 2000, was $132.00 per
share.
In connection with 724 Solutions Inc.'s acquisition of eZlogin in June 2000, our
shares of eZlogin were converted into 724 Solutions common stock. We have
elected to report these converted 724 Solutions shares as a trading security. As
a result, we are reporting both positive and negative fluctuations in the market
value of this stock in net income. At October 31, 2000, we owned 37,906 shares
(less than 1%) of 724 Solutions common stock and reported a recognized
cumulative valuation loss of approximately $1.1 million for these securities.
The closing price of 724 Solutions (Nasdaq symbol SVNX) at October 31, 2000, was
$27.19 per share.9
During the first quarter of fiscalnine months ended April 30, 2001, we sold 85,000 shares of Checkfree,
351,865 shares of Homestore.com, and 99,902 shares of 724 Solutions. In
connection with these sales we recognized realized gains of $4.0 million, $ 11.1
million, and $0.1 million, respectively. In addition, we sold 9,715 shares of
VeriSign, 1,197,327 shares of Quotesmith.com and 75,000 shares of Excite@Home
and recognized aggregate realized losses of $0.2$5.1 million. Total net gains on
sales of marketable securities were $8.9$10.1 million for the first quarter of fiscalnine months ended
April 30, 2001. This gain was offset by recognized losses of $42.2 million to
reflect a recognizeddecline in valuations of our trading securities and S1 options, and a
loss for the quarter of $12.8$55.2 million for other than temporary declines in the valuation of our S1 options, resulting in a net loss on marketable
securities of $3.9 million.
Allvalue of our
marketable securities are stocksand other investments. This resulted in combined net
losses on marketable securities and other investments of high technology companies that
are subject to substantial volatility. Accordingly, it is possible that$87.3 million for the
market price of one or more of these companies' stocks could decline
substantially and quickly, which could result in a material reduction in the
carrying value of these assets and, in the case of securities treated as trading
securities, a negative impact on our operating results.
-10-
11nine months ended April 30, 2001.
Goodwill and Purchased Intangible Assets
We record goodwill when the costpurchase price exceeds the book value of net assets
we acquire exceeds their book
value.acquired. Goodwill is amortized on a straight-line basis over periods ranging
from 3 to 5 years. The cost of identified intangibles is generally amortized on
a straight-line basis over periods ranging from 1 to 1015 years.
When appropriate,
weWe regularly perform reviews to determine if the carrying valuevalues of our
long-lived assets isare impaired. The reviews look for the existence of facts or
circumstances, either internal or external, which indicate that the carrying
value of the asset cannot be recovered. No suchDuring the third quarter, events and
circumstances indicated possible impairment has been indicated to date. If,of our long-lived assets consisting
principally of acquired intangible assets and goodwill. These indicators
included deterioration in the business climate for web-based companies and
recent changes in our fiscal 2002 operating forecasts.
We measured the impairment loss related to long-lived assets based on the amount
by which the carrying amount of such assets exceeded their fair values. Our
measurement of fair value was based on an analysis of the future management determines the existence of impairment indicators, we would use
undiscounteddiscounted cash
flows at the enterprise level. In performing this analysis, we used the best
information available in the circumstances including reasonable and supportable
assumptions and projections. The discounted cash flow analysis considered the
likelihood of possible outcomes and was based on our best estimate of projected
future cash flows, including terminal value cash flows expected to initially determine whether impairment should be
recognized.result from
the disposition of the assets at the end of their useful lives. The anticipated
proceeds from the pending disposition of a portion of Venture Finance Software
Corp. ("VFSC"), our Quicken Bill Manager business, assisted management in the
determination of the fair value of the assets associated with VFSC as of April
30, 2001. Based on our analysis we recorded a charge of $51 million and $26
million to write down the goodwill associated with VFSC and SecureTax,
respectively. If necessary, we wouldwill perform a subsequent calculationcalculations to measure
the amount of the impairment loss based on the excess of the carrying value over
the fair value of the impaired assets. If quoted market pricesvalues for the assets are not
available, the fair value would be calculated using the present value of
estimated expected future cash flows. The cash flow calculations would be based
on management's best estimates, using appropriate assumptions and projections at
the time.
Goodwill and purchased intangible assets consisted of the following:
NET BALANCE AT
LIFE IN -----------------------------------------------------------------
YEARS JULY 31, 2000 OCTOBER 31 2000,
---- ------------ ---------------
(unaudited)APRIL 30, 2001
------- ------------- --------------
(in thousands)
(in thousands)
Goodwill ..........................Goodwill................................ 3-5 $358,890 $425,441$370,200
Customer lists ....................lists.......................... 3-5 57,890 53,37260,926
Covenant not to compete ...........compete................. 3-5 4,992 4,4953,501
Purchased technology ..............technology.................... 1-5 10,990 40,10444,276
Assembled workforce ...............workforce..................... 2-5 1,976 1,9894,216
Trade names and logos ............. 1-10logos................... 1-15 4,140 3,9174,548
Balances presented above are net of total accumulated amortization of $465.3
million and $506.6$569.6 million at July 31, 2000 and October 31, 2000,April 30, 2001, respectively.
-9-
10
Concentration of Credit Risk
We are subject to risks related to changes in the values of our significant
balances of, marketable securities, private equity investments and short-term
investments, and marketable securities andas well as risks related to the collectability of our trade
accounts receivable. At October 31, 2000,April 30, 2001, we held approximately $154.6$117.5 million in
marketable securities, as described in "Marketable Securities", above in Note 1.Securities," above.
Fluctuations in the market value of our shares in Excite@Home, VeriSign and 724
Solutions result in recognized gains and losses in our statement of operations
on an ongoing basis, since these investments are treated as trading securities.
If there is a permanent declinewere an other than temporary impairment in the value of any other marketable securities
below cost,held as available-for-sale, we would report this decline in our statement of
operations. See "Marketable Securities," above in Note 1 for a discussion of
risks associated with our marketable securities. At April 30, 2001, we held
approximately $19.8 million in private equity investments, net of reserves for
potential declines in value that are other than temporary. Our remaining
portfolio is diversified and consists primarily of short-term investment-grade
securities.
To reduceappropriately manage the credit risk associated with accounts receivable,
Intuit performs ongoing evaluations of customer credit. Generally, no collateral
is required. We maintain reserves for estimated credit losses and these losses
have historically been within our expectations. At April 30, 2001, we had one
distributor, that accounted for approximately 25% of our accounts receivable
balance.
In the normal course of our mortgage business, we enter into loan commitments to
extend credit in order to meet the financing needs of our customers. Loan
commitments are agreements to lend to a customer as long as all conditions
specified in the contract are met. Commitments generally have fixed expiration
dates or other termination clauses and may require the customer to pay a fee. We
evaluate each customer's creditworthiness on a case-by-case basis. The amount of
collateral we obtain is based on our credit evaluation of the customer.
Loan commitments subject us to market risks and credit risks. Market risk occurs
if interest rates rise after a loan commitment is made. To offset this risk on
conventional loans that are in process, we utilize mandatory forward sale
commitments and purchase puts and calls on U.S. Treasury securities. At October 31, 2000,April
30, 2001, we held callshad $214.3 million in the amountmandatory forward sale commitments for future
delivery of $8.0
million. The credit risk associated with these putsFNMA and calls on U.S. Treasury
securities is a small fraction of the notional amount of the securities and is
reflected in their fair value.FHLMC securities. Loan commitments also involve credit risk
relating to the customer, which is not reflected on the balance sheet. We use
the same credit policies for making credit commitments as we do for the
underlying loan product.
-11-
12
Loan commitments to extend credit at July 31, 2000 and October 31, 2000April 30, 2001 were as
follows:
JULY 31, 2000 OCTOBER 31, 2000
------------------------------- -------------------------------APRIL 30, 2001
-------------------------- --------------------------
FIXED-RATE VARIABLE-RATE FIXED-RATE VARIABLE-RATE
---------- ------------- ---------- -------------
(unaudited)(In thousands)
(In thousands)
Conventional prime loans .....loans... $167,000 $ 31,100 $141,101 $ 19,795$31,100 $377,091 $48,390
Sub-prime loans ..............loans............ 4,200 1,700 3,002 1,1823,239 587
High-LTV loans ...............loans............. 600 -- 11525 --
-------- ------- -------- -------- ---------------
$171,800 $ 32,800 $144,218 $ 20,977$32,800 $380,355 $48,977
======== ======= ======== ======== ===============
Recent Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued FAS 133,
"Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments and
hedging activities. It requires us to recognize all derivatives as either assets
or liabilities on the balance sheet and measure those instruments at fair value.
It further provides criteria for designating derivative instruments at fair
value, cash flow, or foreign currency hedges, and establishes accounting
standards for reporting changes in the fair value of the derivative instruments.
Upon the date of adoption, August 1, 2000, we recorded the cumulative effect of
the change in accounting for derivatives for our 4.6 million S1 options held.held in
long term investments. This resulted in a one-time cumulative effect of $14.3
million, net of taxes totaling $9.5 million, as of August 1, 2000. The one-time
cumulative effect created a decrease of $0.07 per share on the basic and diluted
net loss per share for the nine month period ended April 30, 2001. FAS 133
requires the derivatives to be carried at fair value, so subsequent fluctuations
in the fair value of these options will be included in our net income. DuringFor the
first quarter of fiscalthree and nine months ended April 30, 2001 these fluctuations resulted in a loss
of $7.6$3.4 million and $13.4 million net of taxes, this created a
decrease of $0.04 per share on the basic and diluted net loss per share for the
period.respectively.
The following table shows what adjusted net loss from continuing
operations and basicincome and diluted net lossincome per
share from continuing operation of
Intuit would have been as if we had adopted this standard as of the beginning of
fiscal 2000:
-10-
11
ThreeNine Months Ended October 31, 1999
-----------------------------------April 30, 2000
--------------------------------
As Adjusted As Reported
------------ ------------
----------- -----------
(In thousands, except per share data; unaudited)data)
Net loss from continuing operationsincome ....................................... $ (54,733) $ (65,861)
Basic and diluted loss$323,657 $288,516
Diluted net income per share from continuing operations .................................... $ (0.28)1.53 $ (0.33)1.37
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin 101, Revenue Recognition in Financial Statements ("SAB 101"), andas
amended it in March and June 2000. SAB 101 provides guidance on the recognition,
presentation and disclosure of revenue in financial statements for all public
registrants. Changes inWe are required to adopt SAB 101 no later than our revenue recognition policy, if any, resulting from
the interpretationfourth quarter
of 2001. The adoption of SAB 101 would be reported as a change in accounting
principle. We are currently reviewing the impact of SAB 101 on our previously
reported results of operations and anticipate that we will adopt SAB 101 during
the fourth quarter of fiscal 2001.
In April 2000 the FASB issued FASB Interpretation Accounting for Certain
Transactions Involving Stock Compensation - an Interpretation of APB 25 ("FIN
44"). FIN 44 specifically answers twenty-nine questions on the implementation of
APB 25 that were derived from a survey of members of the Emerging Issues Task
Force ("EITF") and the task force on stock compensation. FIN 44 was effective
July 1, 2000, but certain conclusions in FIN 44 cover specific events that occur
after December 15, 1998. To the extent that FIN 44 covers events occurring
during the period after December 15, 1998, but before the effective date of July
1, 2000, the effects of applying FIN 44 are recognized on a prospective basis
from July 1, 2000. The adoption of FIN 44 hasis not hadexpected to have a material effect on
our financial position andor results of operations.
-12-
13
2. PER SHARE DATA
Basic income per share is computed using the weighted average number of common
shares outstanding during the period. Diluted income per share is computed using
the weighted average number of common and dilutive common equivalent shares
outstanding during the period. Common equivalent shares consist of the shares
issuable upon the exercise of stock options under the treasury stock method. In
loss periods, basic and dilutive loss per share is identical since the impact of
common equivalent shares is anti-dilutive.
On September 8, 1999, our Board of Directors declared a three-for-one stock
split, which was effected as a stock dividend of two shares of common stock for
each share of Intuit's common stock outstanding. Stockholders of record on
September 20, 1999 were issued two additional shares of common stock for each
share of Intuit's common stock held on that date. The payment date for the stock
dividend was September 30, 1999. We have restated all share and per share
amounts referred to in the financial statements and notes to reflect this stock
split.
3. COMPREHENSIVE NET INCOME
SFASStatement of Financial Accounting No. 130, "Reporting Comprehensive Income"
("SFAS 130") establishes standards for the
reporting and display ofdisplaying comprehensive
net income and its components.components in stockholders' equity. However, it has no impact
on our net income as presented in our financial statements. SFAS 130 requires
foreign currency translation adjustments and changes in the fair value of
available-for-sale securities to be included in comprehensive income.
The components of comprehensive net income, net of tax, are as follows:
THREENINE MONTHS ENDED OCTOBER 31,
-------------------------------
1999APRIL 30,
---------------------------
2000 2001
--------- -----------------
(In thousands)
(In thousands; unaudited)
Beginning balance, gain, net of tax .................tax..................... $ 79,144 $ 55,586
Unrealized gain (loss) on marketable securities .... 145,747 (72,449)securities... 447,333 (72,560)
Realized gain (loss)(gain) loss on marketable securities ...... -- 16,492securities..... (435,713) 28,518
Tax benefit (effect)effect on marketable securities ...... (58,299) 22,383securities............... 20,241 17,808
Translation adjustment gain (loss), net of tax ..... (2,485) (63)tax.... (910) 2,211
--------- -----------------
Ending balance, gain, net of tax ....................tax........................ $ 164,107110,095 $ 21,94931,562
========= =================
4. ACQUISITIONS
On August 30, 2000, we purchased all of the outstanding securities of VFSCVenture
Finance Software Corp. ("VFSC") that were not already held by Intuit
(approximately 51%) for approximately $118 million in cash (including
approximately $4.5 million in option exercise and tax payments in connection
with VFSC options exercised immediately prior to the purchase). We participated in the formation of VFSC in May 1998 in order to
facilitate the development of certain Web-oriented finance products. We acquired
the remaining securities of VFSC pursuant to the exercise of a purchase option
that we received in connection with the formation of VFSC. We accounted for
the acquisition of VFSC as a purchase for accounting purposes and allocated
approximately $113 million to identified intangible assets and goodwill. These
assets were determined to be impaired by $51 million as of April 30, 2001. The
remaining balance of $52.8 million, net of accumulated depreciation year to
date, is being amortized over approximately three years.
-11-
12
On December 20, 2000, we acquired all of the outstanding stock of
EmployeeMatters, Inc., in exchange for approximately $41.9 million in Intuit
stock, the elimination of approximately $8.0 million in bridge loans we extended
to EmployeeMatters prior to the closing, and the assumption of approximately
$3.4 million of liabilities. We accounted for the acquisition of EmployeeMatters
as a purchase for accounting purposes and allocated approximately $53.3 million
to identified intangible assets and goodwill. These assets are being amortized
over a periodperiods of three to five years.
Eric Dunn, who was Senior Vice PresidentOn April 17, 2001, we acquired substantially all of the assets of Tax and
Chief Technology OfficerAccounting Software Corporation ("TAASC"), for $63.0 million in cash and
approximately $7.8 million in accrued costs. We accounted for the acquisition of
Intuit
through July 31, 2000,TAASC as wella purchase for accounting purposes and allocated approximately $69.8
million to identified intangible assets and goodwill. These assets are being
amortized over five years.
We classify the following expenses as VFSC's Presidentacquisition related costs in our statement
of operations:
Three Months Ended April 30, Nine Months Ended April 30,
(In thousands) 2000 2001 2000 2001
-------- -------- -------- --------
Amortization of goodwill $ 29,515 $ 37,880 $ 89,101 $106,504
Amortization of intangibles 6,758 6,458 20,573 18,184
Deferred compensation 1,137 1,233 2,882 3,563
Impairment charge -- 77,000 -- 77,000
Other 994 4 9,154 77
-------- -------- -------- --------
$ 38,404 $122,575 $121,710 $205,328
======== ======== ======== ========
5. DISCONTINUED OPERATIONS AND DIVESTITURES
On January 24, 2001, we sold selected assets of our Quicken Insurance business
to InsWeb Corp. for approximately $10.8 million of InsWeb common stock. As a
result of the divestiture, we recorded a pre-tax gain of $1.6 million and a
directorrelated tax provision of VFSC, was
an option holder$0.6 million in the second quarter of VFSC. He exercised his options immediately priorfiscal 2001.
In addition, Intuit and InsWeb entered into a distribution agreement under which
InsWeb became the exclusive consumer insurance aggregator for Intuit's
Quicken.com and QuickenInsurance Web sites and certain Quicken consumer desktop
products. In exchange, Intuit is sharing associated revenues, which are subject
to certain minimums, over the closing of Intuit's acquisition of VFSC. He received $5.7 million from Intuit
for his VFSC shares, net5-year term of the aggregate exercise price for his option ($1.4
million) and withholding taxes ($3.1 million).
Other shareholders of VFSC included venture capital funds managed by Kleiner
Perkins Caufield & Byers, of which L. John Doerr, a director of Intuit, is a
general partner. These funds received approximately $2.4 million from Intuit for
their VFSC shares. The aggregate original purchase price for the shares held by
the Kleiner Perkins Caufield & Byers funds was $1.2 million.
-13-
14
5.distribution agreement.
6. BORROWINGS
We have two mortgage lines of credit. Advances under thecredit, which balances are reflected in escrow
liabilities. The first line of credit
are based on a formula computation, with interest due monthly. Advances are due
on demand and are collateralized by residential first and second mortgages.
Advances may be drawn for working capital and sub-prime, high loan-to-value and
conventional prime mortgage loans. The maximum outstanding balance permitted
under this line is $125 million. Interest rates are variable and are based on
the federal funds rate and prime rate, depending on the type of advance. The
interest rates in effect at July 31, 2000 and October 31, 2000 were 7.69% and
7.76%, respectively. The weighted average interest rates for the three months
ended October 31, 1999 and October 31, 2000 were 6.39% and 7.76%, respectively.
Our second line of credit currently provides for up to $50 million
principal amount of demand loans secured by mortgage loans and other assets. As
of April 30, 2001 our outstanding balance was $3.7 million. Interest rates on
loans vary depending on the type of underlying loan, and the loans are subject
to sub-limits, advance rates and warehouse terms that vary depending on the type
of underlying loan. The interest rates in effect at July 31, 2000 and October 31, 2000April 30,
2001 were 7.89% and 7.84%5.96%, respectively, while the weighted average interest
rates for the threenine months ended October 31, 1999April 30, 2000 and October 31, 20002001 were 6.43%7.18% and 7.73%7.07%,
respectively. We are required to maintain a minimum tangible net worth and to
satisfy other financial covenants, as outlined in the line of credit agreements.
We were in compliance with the requirements as of July 31, 2000 and October 31, 2000.
Drafts payable represent funds advancedApril 30,
2001.
Our second line of credit advances may be drawn for mortgages originated that have not
yet been drawn againstworking capital and
sub-prime, high loan-to-value and conventional prime mortgage loans. Advances
are due on demand and are collateralized by residential first and second
mortgages. Advances are based on a formula computation, with interest due
monthly. The maximum outstanding balance permitted under this line is $20
million. During the linessecond and third quarters of fiscal 2001 we had a zero
balance outstanding for the line of credit.
6.-12-
13
7. OTHER ACCRUEDCURRENT LIABILITIES
Other accruedcurrent liabilities consisted of the following:
JULY 31, OCTOBER 31,APRIL 30,
(In thousands) 2000 20002001
-------- -----------------
(In thousands) (unaudited)Accrued compensation .............................. $ 49,303 $ 66,327
Short-term notes payable .......................... $ 34,286 $ 34,376
Accrued Compensation and related liabilities ...... 49,303 52,12937,884
Future payments due for CRI acquisition ........... 44,916 45,690
Payroll tax obligations ........................... 177,002 190,922
Rebates ...........................................47,373
Rebates............................................ 21,552 16,10434,485
Reserve for returns and exchanges ................. 60,979 68,654
Other accruals .................................... 96,301 139,480accruals..................................... 35,322 68,845
-------- --------
$423,360 $446,493$246,358 $323,568
======== ========
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15
7.8. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
Intuit has adoptedThe following information is provided in accordance with Statement of Financial
Accounting No. 131, "Disclosures about Segments of an Enterprise and Related
Information,"Information" ("SFAS 131"). SFAS 131 establishes standards for the way in which
public companies disclose certain information about operating segments in the
Company'scompany's financial reports.
Consistent with SFAS 131, we have determined our operating segments based on
factors such as how our operations are managed and how results are viewed by
management. Since Internet-based revenues and expenses cut
across all of our business divisions, we do not report results of our
Internet-based businesses as a separate business segment in our financial
statements. Instead, each of our business divisions reports Internet-based
revenues and expenses that are specific to its operations and are included in
its results. The accounting
policies of the operating segments are the same as those described in the
summary of significant accounting policies. Intuit does not track assets by operating segments. Consequently,
we do not disclose assets by operating segments. The following unaudited results
for the three month periods October
31, 1999nine months ended April 30, 2000 and 20002001 are broken out by our
operating segments:
THREENINE MONTHS ENDED SMALL CONSUMER GLOBAL
OCTOBER 31, 1999APRIL 30, 2000 BUSINESS TAX FINANCE BUSINESS
(In thousands; unaudited)thousands) DIVISION DIVISION DIVISION DIVISION OTHER(1) CONSOLIDATED
-------- -------- --------- --------- --------- ----------------- --------- ------------
Net revenue ............................................................................ $307,606 $365,473 $ 80,119 $ 11,120 $ 68,048 $ 17,641183,921 $74,566 $ -- $ 176,928931,566
Segment operating income (loss) ................ 17,516 (34,400) 5,441 (2,165).................... 50,099 150,099 (18,818) 5,108 -- (13,608)
Common expenses ................................186,488
Acquisition costs .................................. -- -- -- -- (33,314) (33,314)(130,058) (130,058)
Reorganization costs ............................... -- -- -- -- (3,500) (3,500)
Common expenses .................................... -- -- -- -- (1,077) (1,077)
-------- -------- --------- --------- --------- ---------------- --------- ---------
Sub-total operating income (loss) .............. 17,516 (34,400) 5,441 (2,165) (33,314) (46,922)
Realized net losses on marketable securities ... -- -- -- -- (17,309) (17,309)
Acquisition costs .............................. -- -- -- -- (40,835) (40,835)
Reorganization costs ........................... -- -- -- -- (3,500) (3,500).................. 50,099 150,099 (18,818) 5,108 (134,635) 51,853
Interest income (expense) and other items ................ -- -- -- -- 8,476 8,47629,981 29,981
Realized net gain (loss) on marketable securities .. -- -- -- -- 402,096 402,096
Gain on divestiture ................................ -- -- -- -- -- --
-------- -------- --------- --------- --------- ---------------- --------- ---------
Net income (loss) before tax .......................................... $ 17,51650,099 $150,099 $ (34,400)(18,818) $ 5,4415,108 $ (2,165)297,442 $ (86,482) $(100,090)483,930
======== ======== ========= ========= ========= ================ ========= =========
THREENINE MONTHS ENDED SMALL CONSUMER GLOBAL
OCTOBER 31, 1999APRIL 30, 2001 BUSINESS TAX FINANCE BUSINESS
(In thousands; unaudited)thousands) DIVISION DIVISION DIVISION DIVISION OTHER(1)OTHER CONSOLIDATED
--------- --------- --------- ----------------- -------- -------- -------- --------- ------------
Net revenue ............................................................................ $357,305 $437,177 $195,265 $80,545 $ 93,731-- $ 12,372 $ 63,522 $ 17,901 $ (4) $ 187,5221,070,292
Segment operating income (loss) ................ (183) 5,371 (45,503) (4,106).................... 58,013 208,439 2,638 4,106 -- (44,421)
Common expenses ................................273,196
Acquisition costs .................................. -- -- -- -- (4,108) (4,108)
--------- --------- --------- --------- --------- ---------
Sub-total operating income (loss) .............. (183) 5,371 (45,503) (4,106) (4,108) (48,529)
Realized net losses on marketable securities ... -- -- -- -- (3,868) (3,868)
Acquisition costs .............................. -- -- -- -- (42,666) (42,666)(216,786) (216,786)
Reorganization costs .......................................................... -- -- -- -- -- --
Common expenses .................................... -- -- -- -- (15,132) (15,132)
-------- -------- -------- ------- --------- -----------
Sub-total operating income (loss) .................. 58,013 208,439 2,638 4,106 (231,918) 41,278
Interest income (expense) and other items ................ -- -- -- -- 16,118 16,11847,736 47,736
Realized net gain (loss) on marketable securities .. -- -- -- -- (87,307) (87,307)
Gain on divestiture ................................ -- -- -- -- 1,639 1,639
-------- -------- -------- ------- --------- --------- --------- --------- --------- --------------------
Net income (loss) before tax .......................................... $ (183) 5,371 (45,503) (4,106)58,013 $208,439 $ (34,524)2,638 $ (78,945)4,106 $(269,850) $ 3,346
======== ======== ======== ======= ========= ========= ========= ========= ========= ====================
- -----------
(1) "Other" includes acquisition and other common costs not allocated to
specific segments. Certain types of expenses that were considered commonCommon expenses in fiscal 2000 are being allocatedhave been reclassified to specific business
segments during fiscal 2001, which resulted in significantly lower
common expenses forconform to the
three months ended October 31, 2000.
-15-current presentation format.
-13-
16
8.14
9. NOTES PAYABLE AND COMMITMENTS
In March 2000,2001, our Japanese subsidiary, Intuit KK, entered into arefinanced its one-year loan
agreement with a Japanese banksbank for approximately $35.1 million which was used to
refinance the three year loan that was entered into in March 1997 to finance our
acquisition of Nihon Micom.$30.3 million. The loan is
denominated in Japanese yen and is therefore subject to foreign currency
fluctuations when translated to U.S. dollars for reporting purposes. The
interest rate is variable based on the Tokyo inter-bank offered rate or the
short-term prime rate offered in Japan. At October 31, 2000,April 30, 2001, the rate was
approximately 1.07%0.72%. The fair value of the loan approximates cost as the
interest rate on the borrowings is adjusted periodically to reflect market rates
(which are currently significantly lower in Japan than in the United States). We
are obligated to pay interest only on the loan untilthrough March 2001.
9.2002.
10. INCOME TAXES
Intuit computes the provision (benefit) for income taxes by applying the estimated annual
effective tax rate to recurring operations and other taxable items. Our
effective tax rate differs from the federal statutory rate primarily because of
tax credits, tax exempt interest income, state taxes, non deductible acquisition
costs and certain foreign losses.
10.11. LITIGATION
On March 3, 2000, a class action lawsuit, Bruce v. Intuit Inc., was filed in the
United States District Court, Central District of California, Eastern Division.
Two virtually identical lawsuits were later filed: Rubin v. Intuit Inc., was
filed on March 8, 2000 in the United States District Court, Southern District of
New York and Newby v. Intuit Inc. was filed on April 27, 2000, in the United
States District Court, Central District of California, Eastern Division. The
Bruce and Newby lawsuits were consolidated into one lawsuit, - In re Intuit
Privacy Litigation, filed on July 28, 2000 in the United States District Court
of California, Eastern Division. Following Intuit's successful motion to dismiss
several of the claims, an amended complaint was filed on May 2, 2001. A similar
lawsuit, Almanza v. Intuit Inc. was filed on March 22, 2000 in the Superior
Court of State of California, San BernadinoBernardino County, Rancho Cucamonga Division.
The AlmanzaAn amended complaint was amendedfiled on October 26, 2000. These purported class
actions allege violations of various federal and California statutes and common
law claims for invasion of privacy based upon the alleged intentional disclosure
to third parties of personal and private customer information entered at
Intuit's Quicken.com website. The complaints seek injunctive relief, orders to
disgorge profits related to the alleged acts, and statutory and other damages.
Intuit believes these lawsuits are without merit and intends to defend the
litigation vigorously.
Intuit is subject to other legal proceedings, as well as demands, claims and
threatened litigation, that arise in the normal course of our business. We
currently believe that the ultimate amount of liability, if any, for any pending
claims of any type (either alone or combined) will not materially affect our
financial position, results of operations or liquidity. However, the ultimate
outcome of any litigation is uncertain, and either unfavorable or favorable
outcomes could have a material negative impact. Regardless of outcome,
litigation can have an adverse impact on Intuit because of defense costs,
diversion of management resources and other factors.
11.12. SUBSEQUENT EVENTS
Sale of Quicken Bill Manager
On NovemberMay 15, 20002001, we entered into an agreementsold the technology assets of our Quicken Bill Manager
business to acquire allPrinceton eCom Corporation. In exchange for these assets, Intuit is
entitled to receive, at Princeton eCom's election to be made by February 2002,
either shares of Princeton eCom common stock equal to approximately 20% of
Princeton eCom's fully diluted shares or cash payments in four annual
installments, beginning in February 2002, with each cash installment to equal
25% of the outstanding stockvalue, measured at the time of EmployeeMatters, Inc. for approximately $41.4 million inthe payment, of the Princeton eCom
shares that Intuit would have received if Princeton had elected to pay with
shares of its stock.
In addition, we expectIntuit and Princeton eCom entered into several multi-year business
agreements related to extend bridge loans to EmployeeMatters
in an aggregate amount of approximately $8.0 million up through the closing,bill payment and to assume liabilities of approximately $4.0 million in connection with the
transaction. EmployeeMatters, which is based in Stamford, Connecticut, provides
human resource management, benefits and payroll services via the Internet. The
acquisition, which is subject to various conditions, including customary
regulatory and other approvals, is expected to be completedpresentment. Under these agreements,
Intuit will offer Web-based Quicken Bill Manager-branded service processed by
the end of the
second quarter of fiscal 2001Princeton eCom and will be treatedreceive a share in revenues derived from the services.
Intuit will also receive certain payments if Princeton eCom licenses the
Web-based user interface technology to third parties. Intuit will utilize
Princeton eCom as a provider of bill payment and presentment services for
Intuit's Quicken desktop bill management services. Princeton eCom was also
granted a license to use the "Powered by Quicken Bill Manager" mark on third
party sites.
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Share Repurchase Program
On May 22, 2001, we announced that our board of directors has authorized a
three-year stock repurchase program for the purchase for accounting
purposes.
-16-
17
On November 25, 2000, we entered into an Asset Purchase Agreement pursuantup to which we have agreed to sell selected assets of our QuickenInsurance business to
InsWeb Corp. in exchange for approximately $14$500 million of
common stock. The program authorizes us to repurchase shares of common stock on
the open market from time to time, depending on general market conditions and
the trading price of InsWeb
(representing a 16.6% equity interest on a post-closing basis). In addition, weour common stock. The company's cash and cash equivalents
will enter into a distribution agreement under which InsWeb will becomefund the exclusive consumer insurance aggregator for our Quicken.com and QuickenInsurance
Web sites and certain consumer desktop products. In exchange, we will share in
associated revenues, which are subject to certain minimums over the 5-year term
of the distribution agreement. The transactions are expected to close in the
first calendar quarter of 2001, subject to various conditions, including
regulatory clearances and customary closing conditions.
-17-repurchases.
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ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
CAUTIONS ABOUT FORWARD LOOKING STATEMENTS
Throughout this Form 10-Q, you will find "forward-looking" statements, or
statements about events or circumstances that have not yet occurred. In some
cases, you can identify these statements by forward-looking words such as "may,"
"might," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential" or "continue," and other similar terms.
These forward-looking statements may include, among other things, projectionsthe potential for
our emerging businesses and our payroll business, the anticipated future growth
of our future financial performance, our anticipatedmortgage revenue, predictions about QuickBooks new user growth and
anticipatedupgrade rates for existing customers, expected trends in our businesses.operating income and
expenses and capital needs. These statements are only predictions, based on our
current expectations about future events. Although we believe the expectations reflected
in the forward-looking statements are reasonable, weWe cannot guarantee future results,
performance or achievements or guarantee that predictions or current
expectations will be accurate. In addition, we will not necessarily update these
statements if circumstances change in the future. These forward-looking
statements involve risks and uncertainties, and our actual results, performance
or achievements could differ materially from those expressed or implied by the
forward-looking statements. The important factors that could cause our results
to differ are discussed under "Risks That Could Affect Future Results," at the
end of this Item 2. This Item 2 should also be read in conjunction with the
Consolidated Financial Statements and related Notes in Part I, Item 1 of this
Form 10-Q, and our fiscal 2000 Form 10-K.10K.
OVERVIEW
Intuit's mission is to revolutionize how people manage their financial lives and
small businesses manage their businesses. We strive to offer innovative products
and services that drive fundamental changes inwill revolutionize how individuals and small businesses manage
their activities -- changes so profound that our customers
can't imagine going back to the "old way" of doing things.activities. We offer a variety of small business, tax preparation and
personal finance software products and related products and services that
enable people and small businesses to
revolutionize how they manage their activities. Our products and services
include Quicken(R), QuickBooks(R), Quicken TurboTax(R), ProSeries(R) and
Lacerte(R) desktop software products, as well as an expanding array of Internet-based
products and services, including QuickBooks Deluxe Payroll service,
QuickBooks Internet Gateway services, our Site Builder website tool,QuickBase(R), Quicken TurboTax for the Web, Quicken.com(SM) and Quicken
Loans Loans.(SM).
Our business is highly seasonal. Sales of tax products are heavily concentrated
from November through March. Sales of small business and consumer finance and small business
products are typically strongest during the year-end holiday buying season and
the beginning of the calendar year, and therefore our major product launches
usually occur in the fall or early winter to take advantage of these customer
buying patterns. These seasonal patterns mean that revenue is usually highest
during the quarters ending January 31 and April 30. We experience lower revenues
for the quarters ending July 31 and October 31, while our operating expenses to
develop and managesupport products and services continue at relatively consistent
levels during these periods. This can result in significant operating losses in
the July 31 and October 31 quarters. Operating results can also fluctuate for
other reasons, such as changes in product release dates, non-recurring events
such as acquisitions, dispositions, gains and losses from marketable securities,
and product price cuts in quarters that have relatively high fixed expenses.
Acquisitions and dispositions in particular can have a significant impact on the
comparability of both our quarterly and annual results, and acquisition-related
expenses continue to have had a negative impact on our earnings.
While desktop software and related products and services provide mosta majority of
our revenue, our Internet-based revenue is continuing to grow rapidly. For the three
months ended October 31, 2000, Internet-based revenue increased approximately
42% compared to the prior year quarter and accounted for approximately 27% of
total revenue in the current quarter, compared to approximately 20% in the prior
year quarter.grow. We use the term
Internet-based revenue to include revenue from both Internet-enabled products
and services as well as revenue generated by electronic ordering and/or delivery
of traditional desktop software products and financial supplies. Since
Internet-based revenues cut across all of our business divisions, we do not
report results of our Internet-based revenues separately in our financial
statements. Instead, each of our business divisions reports Internet-based
revenues that are specific to its operations and are included in its results.
-18--16-
1917
We believe our Internet-basedinternal emerging businesses and our other emerging businesseswill provide an opportunity to
increase revenue in fiscal 2001 and beyond. We have made significant progress in
several of our Internetthese businesses overin the past
three years.past. During fiscal 2000, our web-based tax
preparation and electronic filing services achieved profitability. During both
the second and third quarter of fiscal 2001, the profitability of our Quicken
Loans and payroll businesses improved significantly from the prior year. During
the second quarter of fiscal 2001, we introduced QuickBooks Internet Gateway were profitable. However,for the Web, which
provides basic accounting functionality on the web, and QuickBase, a web-based
tool that lets customers create, manage and share data from a browser. In
February 2001, we announced the Intuit Developer Network, a program that gives
software developers access to application programming interfaces (APIs) for
various Intuit small business products, so that they can develop software
applications that will be available to Intuit's small business customers.
Despite this progress, investors should be aware that somemost of our other emerging
businesses are still in their initial stages and are not yet generating either
profits or significant revenue. We also anticipate increased spending in an effort to
capitalize on new business opportunities. During fiscalYear over year, as of April 30, 2001
we expect to doublehave doubled our investments in our internally developed emerging businesses.
We expect to continue increasing our investment in emerging businesses which will contribute to increased research and
development expenses as well as increased selling and marketing expenses.during
the remainder of fiscal 2001. See "Risks That Could Affect Future Results."
RESULTS OF OPERATIONS
SetThe following tables set forth below are certaindata from our consolidated statements of
operations data for the three monthsquarter and year-to-date ended October 31, 1999April 30, 2000 and 2000.2001.
Results for all periods include activity for Rock Financial Corporation and
Title Source, Inc. (collectively, "Rock"), which were acquired in December 1999.
As the acquisition of Rock was accounted for as a pooling of interests, all
prior periods have been restated to reflect the combined results of Rock and
Intuit. See Note 1 of the financial statements.
NET REVENUE 3 Mos. Ended % 3 Mos. Ended %
10/31/99 Revenue 10/31/00 Revenue % Change
-------- ------- -------- ------- ---------
(Dollars in millions; unaudited)
Small Business Division .............. $ 80.1 45% $ 93.7 50% 17 %
Tax .................................. 11.1 6% 12.4 7% 12 %
Consumer Finance ..................... 68.1 39% 63.5 34% (7)%
Global Business Division ............. 17.6 10% 17.9 9% 2 %
Total net revenue ................ $176.9 100% $187.5 100% 6 %
The following revenue discussion is categorized by our business divisions, which
is how we examine results internally. Our domestic supplies business is
considered a part of our Small Business Division, while the international
supplies business is considered part of our Global Business Division.divisions. The
table abovebelow shows each business division's percentage of our net revenue for the
three
monthsquarter and year-to-date ended October 31, 1999April 30, 2000 and 2000.2001. See Note 78 of the
financial statements for additional information about our business segments.
Q3 % Q3 % % YTD % YTD % %
(Dollars in millions; CHANGE CHANGE
Unaudited) FY00 REVENUE FY01 REVENUE Q3 FY00 REVENUE FY01 REVENUE YTD
------ ------- ------ ------- ------ ------ ------- -------- ------- ------
Small Business Division ..... $ 90.7 28% $103.5 24% 14% $307.6 33% $ 357.3 33% 16%
Tax Division ................ 168.6 51% 232.5 55% 38% 365.5 39% 437.2 41% 20%
Consumer Finance Division ... 43.2 13% 65.3 15% 51% 183.9 20% 195.2 18% 6%
Global Business Division .... 26.6 8% 23.9 6% (10)% 74.6 8% 80.6 8% 8%
Total net revenue........ $329.1 100% $425.2 100% 29% $931.6 100% $1,070.3 100% 15%
Small Business Division.
Small Business Division revenue is derived primarily from QuickBooks desktop
products, financial supplies, payroll services, the QuickBooks Support Network
("QBSN"), and QuickBooks Internet Gateway services.
Overall, revenueservices ("QBIG").
Revenue for the division was up 17%Small Business Division increased by 14% and 16% for the three monthsquarter and
year to date ended October
31, 2000April 30, 2001 compared to the same periodperiods in the prior
year. Payroll servicesOur QuickBooks business (including QuickBooks desktop products, QBSN and
QBIG) experienced revenue growth of 49% in5% and 9% for the three monthsquarter and year to date
ended October 31, 2000April 30, 2001, compared to the same period a year ago. This growth was
dueprimarily attributable to greater unit salesincreased QBIG revenue as well as higher average
selling prices for our QuickBooks desktop products. These factors were partially
offset by 12% and 18% declines in unit sales for our QuickBooks desktop products
for the quarter and year to date ended April 30, 2001. These results primarily
reflect a year-over-year decline in the rate at which existing QuickBooks
customers upgraded to a newer QuickBooks product, as well as lower acquisition
rate of new users compared to the prior year. Year 2000 concerns skewed both the
normal seasonal patterns and traditional annual upgrade patterns in fiscal 2000.
Almost 50 percent of our customers upgraded last year due to Year 2000 concerns.
QuickBooks revenue results also reflect slower economic growth in the U.S. and
other major markets for our QuickBooks products, which has resulted in slower
new customer acquisition.
Payroll services experienced revenue growth of 56% and 54% for the quarter and
year to date, compared to the same periods a year ago. Significant price
increases contributed to this growth for both our Basic Payroll Service and our
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online Deluxe Payroll Service. Both services also experienced solid growth in
their customer base. While we believe our payroll business, and the Deluxe
Payroll Service in particular, will provide us with a significant opportunity to
generate recurring revenue in the future, we face a number of ongoing challenges
and risks, including operational issues in activating online payroll customers. See
"Risks That Could Affect Future Results."
The QuickBooks Internet Gateway, which
was launched in January 2000, also contributed to the overall revenue growth for
the Small BusinessTax Division for the first quarter of fiscal year 2001. We
believe it will contribute to increasing revenue and profitability in fiscal
2001 and beyond, but the business remains subject to a number of risks and
uncertainties, including customer and vendor participation and satisfaction
levels. See "Risks That Could Affect Future Results." In addition, financial
supplies experienced revenue growth of 9% for the three months ended October 31,
2000 compared to the same period in the prior year.
The increase in Small Business Division revenue was partially offset by the
expected decline in QuickBooks revenue of 15% for the first quarter of fiscal
2001 compared to the first quarter of fiscal 2000. The decline was primarily the
result of lower unit sales compared to the prior year quarter, when we
experienced exceptionally strong demand as customers purchased upgrades due to
Year 2000 concerns.
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On November 15, 2000 we entered into an agreement to acquire all of the
outstanding common and Series A preferred stock of EmployeeMatters, Inc.
EmployeeMatters, which is based in Stamford, Connecticut, provides human
resource management, benefits and payroll services via the Internet. See Note 11
of the financial statements.
Tax Division.
Tax Division revenue is derived primarily from Quicken TurboTax federal and state consumer desktop
tax preparation products, ProSeries and Lacerte professional tax
preparation products, electronic tax filing services andsoftware, Quicken TurboTax for the Web online tax preparation
services, ProSeries and Lacerte professional tax preparation products and
electronic tax filing services.
Due to the seasonal nature of our tax business, the first quarter typically
generates only nominal revenue from tax products in comparison to the second and
third quarters of the fiscal year. Overall, the Tax Division revenue for the three month period ended October 31, 2000quarter and year to date increased by 12%38%
and 20%, respectively compared to the same periodperiods last year. The development and launchincrease in
revenue was due to a combination of our consumer tax products for the 2000 tax year
was completed on schedule, and products reached retail shelves in early
December. However, there are still ongoing risks associated with our tax
business, including intense competition that could result in lowerhigher average selling prices and/or a decline into reflect
product enhancements (such as the Automated Tax Return feature) and increased
unit sales of our share of sales in the retail channel.
While we have undertaken product developmentdesktop and marketing efforts intended to
address competitive pressures, we will not be able to report revenues and
operating results for the entire tax season until late in the fiscal year.
In connection with our web-based tax preparation products. Our web-based
preparation and electronic filing services we
also faceexperienced strong growth during the
challengecurrent tax season. Year to date through April 30, 2001, web tax preparation
revenue grew 130% from the prior year, driven by price increases and a 73%
increase in federal tax unit volume. We experienced an increase in the number of
maintaining service levels during peak volume service
times. Although service reliabilitycustomers who take advantage of our free electronic tax preparation and responsiveness were very good during
fiscal 2000, we experienced brief interruptions in our electronic filing
services during February and April 1999. The exact levelthrough Quicken Tax Freedom Project, which accounted for approximately 50% of
demand fortotal Quicken TurboTax for the Web federal units.
Our professional tax products experienced revenue growth of 17% and electronic filing10% for the
currentquarter and year to date, respectively compared to the same periods a year ago.
This growth in revenue was the result of higher average selling prices of our
ProSeries and Lacerte unlimited-use products, as well as pay-per return unit
growth.
Although we are encouraged by the year to date results for our tax year is very
difficultproducts,
revenues for the full tax season are still subject to predict,consumer product returns
from our retail distribution channels. While we expect our reserves for returned
products will be adequate to cover retailers' returns of unsold products during
the next two quarters, higher than expected returns could have a negative impact
on revenue for the full season.
In April 2001, we completed our acquisition of Tax and we could experience adverseAccounting Software Corp.
("TAASC"), which offered a fully integrated suite of software tools for
accounting and tax professionals. TAASC will become part of our professional tax
division. See Note 4 of the financial and public
relations consequences if these services are unavailable due to technical
difficulties or other reasons.statements.
Consumer Finance Division.Division
Consumer Finance Division revenue comes primarily from Quicken desktop products,
Quicken Loans, advertising, sponsorship and placement fees from Quicken.com and
Quicken, and online transactions
and QuickenInsurance.
Overall,transactions.
Revenue for the Consumer Finance Division revenue was down 7%increased by 51% and 6% for the
three months
ended October 31, 2000,quarter and year to date, respectively compared to the same quarterperiods a year ago.
RevenueThe Consumer Finance Division benefited from revenue growth experienced by our
Quicken Loans mortgage business of 209% and 68% for the quarter and year to date
respectively, compared to the same periods a year ago. Mortgage revenue
increases reflect both an increase in volume of loans sold, as well as increase
in margins earned on loan fees and gains on the sale of loans. Mortgage revenue
growth is primarily attributable to process efficiencies and infrastructure
improvements that we have made that allow us to capitalize on the mortgage rate
environment. While we expect continued growth in our mortgage business, we do
not expect revenue and profit growth rates experienced by our mortgage business
year to date during fiscal 2001 to be sustainable long-term. We face continuing
challenges, including mortgage rate fluctuations. See "Risks That Could Affect
Future Results."
For the quarter our Quicken product line revenue was roughly flat compared to
the same period a year ago. Year to date our Quicken products experienced an expecteda
decline in revenues of 11% for the three months
ended October 31, 2000,12%, compared to the prior year. Our year quarter. Ourto date
comparative results were negatively impacted by strong consumer demand during
the three
months ended October 31, 1999prior year periods as a result of aggressive retail promotions and a significant number of customers
upgrading due to Year 2000 concerns. In addition, Quicken.com advertising and
sponsorship revenue declined due to reduced advertising spending by potential
purchasers of Internet advertising. Our Quicken product line faces many
challenges in the personal financial software category, including continued
competition from Microsoft's Money product and from other web-based personal
finance tracking and management tools that are becoming increasingly available
at no cost to consumers.
The Consumer Finance Division benefited from 7% revenue growth from-18-
19
On May 15, 2001, we completed the sale of our Quicken Loans mortgage business. Online mortgage revenue was up 53% over the prior year,
which more than offset the revenue declines that resulted from discontinuing our
loan referral business model and the closing and consolidation of 22 branch
offices. The percentage of our mortgage revenue generated and processed online
and/or through our call center increased from 37% for all of fiscal 2000 to 54%
in the first quarter of fiscal 2001. While we expect the total mortgageBill Manager business to
continue to grow for the full fiscal year, we face continuing challenges in
our mortgage business, including interest rate fluctuations. See "Risks That
Could Affect Future Results."
On November 25, 2000, we entered into an Asset Purchase Agreement pursuant to
which we have agreed to sell selected assets of our QuickenInsurance business to
InsWeb Corp. in exchange for common stock of InsWeb (representing a 16.6% equity
interest on a post-closing basis). In addition, we will enter into a
distribution agreement under which InsWeb will become the exclusive consumer
insurance aggregator for our Quicken.com and QuickenInsurance Web sites and
certain consumer desktop products.Princeton eCom Corporation. See Note 1112 of the financial statements.
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21statements for details
about this transaction. We do not expect this transaction to have a material
impact on revenue for the remainder of fiscal 2001, though it may have a
slight positive impact on operating income.
Global Business Division.Division
Global Business Division revenues come primarily from Yayoi and QuickBooks small business products in
Japan, QuickBooks, Quicken and QuickTaxtax products in Canada, QuickBooks, Quicken and
consumer tax products in Europe, and QuickBooks and Quicken products in
Southeast Asia.
Overall, the Global Business Division revenues increased 2%revenue declined 10% for the three month
periodquarter ended
October 31, 2000April 30, 2001 and increased 8% year to date compared to the same periodperiods last
year. We
experienced an increase in revenue from Canada, dueThe decline for the quarter is primarily to higher
QuickBooks sales. This was partially offset by a decline in revenue from Europe, due to our shift from direct participationrelatively higher revenue
in the market to a licensing
arrangement. Revenue from Japan remained roughly flat for thesecond quarter compared to the third quarter because of Canada's early
launch of the localized version of QuickBooks 2001. In addition, year to date we
experienced a 68% year-over-year decline in QuickBooks retail sales in Japan for
the quarter due to prior year quarter.promotion activities that were discontinued in
fiscal 2001.
The year-to date increase in revenues can be attributed to overall growth in
Canada's professional tax revenue as a result of an acquisition we made earlier
in the current fiscal year, and an increase in Europe revenue due to an earlier
release of QuickBooks compared to last year. Partially offsetting the increases,
we experienced an adverse foreign exchange rate impact year to date.
COST OF GOODS SOLD 3 Mos. EndedREVENUE Q3 % 3 Mos. EndedQ3 % 10/31/99 Revenue 10/31/00 Revenue % Change
--------YTD % YTD % %
(Dollars in millions; CHANGE CHANGE
Unaudited) FY00 REVENUE FY01 REVENUE Q3 FY00 REVENUE FY01 REVENUE YTD
----- ------- ------------- ------- -------------- ------ ------- ------ ------- ------
(Dollars in millions; unaudited)
Product .............................. $56.5 32% $66.9 36%and services........... $75.5 23% $77.5 18% 3% $225.1 24% $248.2 23% 10%
Amortization of purchased
software & other ..................... 2.4other............. 2.1 1% 3.0 2% 25%4.4 1% 110% 7.0 1% 11.2 1% 60%
Total of cost of goods sold ......... $58.9 33% $69.9 37%revenue... $77.6 24% $81.9 19% 6% $232.1 25% $259.4 24% 12%
There are two components of our cost of goods sold.revenue. The larger component is the
direct cost of manufacturing and shipping products and offering services, which
includes data center costs relating to delivering Internet-based products and
services. The second component is the amortization of purchased software, which
is the cost of depreciating products or services obtained through acquisitions
over their useful lives.
Total cost of goods soldrevenue as a percentage of revenue increaseddeclined to 37%19% and 24% for the
three month periodquarter and year to date ended October 31, 2000,April 30, 2001, compared to 33%24% and 25% for the
same periodperiods in the prior year. This increase isThese declines are primarily attributable to
growth ofimproved inventory management with lower excess and obsolete inventory expenses
for all our service
businesses, such as payroll processing and QuickBooks Support Network, as they
typically have higherproduct lines. We expect cost of goods sold than our packaged software products.
Duringrevenue for fiscal 2001 to be
roughly flat compared to the three months ended October 31, 2000 our payroll services experiencedprior year as a significant increase in costpercentage of goods sold, due to growth in our online
payroll business. The increase from the first quarter of fiscal 2000 is also
attributable to infrastructure investments relating to new and existing online
businesses, as well as certain operating expenses of QuickenLoans being
reclassified this year from selling and marketing expenses to cost of goods
sold.revenue.
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OPERATING EXPENSES 3 Mos. EndedQ3 % 3 Mos. EndedQ3 % 10/31/99 Revenue 10/31/00 Revenue % Change
------------YTD % YTD % %
(Dollars in FY00 REVENUE FY01 REVENUE CHANGE FY00 REVENUE FY01 REVENUE CHANGE
millions; Unaudited) Q3 YTD
------ ------- ------------------ ------- -------------- ------ ------- ------ ------- ------
(Dollars in millions; unaudited)
Customer service and
technical support ..................... $ 34.331.6 10% $ 37.5 9% 19% $ 32.4 17% (6)%$113.6 12% $116.1 11% 2%
Selling and marketing ............................ 69.9 40% 61.1 33% (13)........ 60.2 18% 68.5 16% 14% 216.2 23% 215.2 20% (1)%
Research and development ......................... 41.7 24% 47.9 26%..... 40.8 12% 52.7 12% 29% 126.5 14% 155.2 15% 23%
General and administrative ....................... 21.5 12% 27.8 15% 29%... 20.0 6% 23.9 6% 20% 64.8 7% 77.6 7% 20%
Charge for purchased
research and development .... 1.3 1%development.... -- -- N/A
Other acquisition costs, including amortization
of goodwill and purchased intangibles ............ 36.4 21% 38.5 21% 6%0.2 -- -- 1.3 -- 0.2 -- (85)%
Acquisition related deferred compensation ........ 0.7 -- 1.1 1% 57%costs..... 38.4 12% 122.6 29% 219% 121.7 13% 205.3 19% 69%
Reorganization costs ............................. 3.5 2%costs.......... -- -- N/A
Totals ....................................... $209.3 118% $208.8 111% -- -- -- 3.5 -- -- -- (100)%
Total operating expenses.. $191.0 58% $305.4 72% 60% $647.6 70% $769.6 72% 19%
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Customer Service and Technical Support.
Customer service and technical support expenses were 17%9% and 11% of revenue for
the three monthsquarter and year to date ended October 31, 2000April 30, 2001, compared to 19%10% and 12% for
the same periodperiods of the prior year. This improvement reflects the continued
efficiency gains in providing customer service and technical support less
expensively through websites and other electronic means, and from the expansion
of the QuickBooks Support Network and our other fee-for-support programs.
Selling and Marketing.
Selling and marketing expenses were 33%16% and 20% of revenue for the three monthsquarter and
year to date ended October 31, 2000April 30, 2001, compared to 40%18% and 23% for the same periodperiods
of the prior year. The decline in selling and marketing costs as a percentage of
revenue for both the three
month periodquarter and year to date is partly attributable to a
delay or reductionreclassification of certain Quicken Loans expenses from sales and marketing
expenses to cost of revenue in customer
acquisition programs (particularly for QuickenLoans and Deluxe Payroll), based
on the customer demand generated by the strength of our brands.fiscal 2001. In addition, in the first quarter lastprior year we
incurred higher than normal selling and marketing expenses to notify customers
of Year 2000 issues and solutions. Also
contributing to the decline was a reclassification of certain QuickenLoans
expenses fromThe year-over-year declines also reflect
relatively higher sales and marketing expenses to costin the first half of goods sold in fiscal 2001.
In addition, during the prior year quarter we experienced increased sales and
marketing expenses as a result of2000
due to aggressive marketing programs relating to the expansion of our
Internet-based businesses and the extremely competitive consumer tax season.season with
the entrance and subsequent exit of Microsoft's TaxSaver product, as well as
relatively lower marketing expenditures during fiscal 2001 year to date for
Quicken Loans and QuickBooks Deluxe Payroll Service, as those services have
begun to more fully leverage the value of the Intuit brands.
Research and Development.
Research and development expenses were 26%12% and 15% of revenue for the three monthsquarter
and year to date ended October 31, 2000April 30, 2001, compared to 24% of revenue12% and 14% for the same
periodperiods of the prior year. This increase is primarily attributable to continued investments in the
development of our emerging businesses, including QuickBooks Internet Gateway,
Site Solutions, our online QuickBooks Deluxe Payroll Service and web-based bill
presentment and payment. During the remainder of fiscal 2001, weWe expect to continue significant investments in
research and development, particularly for our emerging service businesses. If such expenses exceed our current expectations, they
may have an adverse effect on operating results. See "Risks That Could Affect
Future Results."
General and Administrative.
General and administrative expenses were 15%6% and 7% of revenue for the three monthsquarter
and year to date ended October 31,April 30, 2000 compared to 12% for the same period of the prior year.
The increase as a percentage of revenue was primarily due to a $5 million
increase in bad debt reserves to reflect the deteriorating financial condition
of many Internet commerce companies with whom we do business.and 2001, respectively. For our entire
fiscal year 2001, we expect general and administrative expenses to remain
roughly flat as a percentage of revenue compared to fiscal 2000.
Charge for Purchased Research and Development.
For the three monthsquarter ended October 31, 1999,April 30, 2001, we recorded a charge for purchased
research and development of $0.2 million as a result of our acquisition of Tax
and Accounting Software Corporation. During the first quarter of fiscal 2000, we
recorded charges of $1.3 million for purchased research and development as a
result of our Boston Light and Hutchison acquisitions. See Note 4 of the
financial statements. In connection with these acquisitions, and with the
assistance of third party appraisers, we determined the value of in-process
projects under development for which technological feasibility had not been
established. The total value of these projects at the time of the acquisitions
was determined to be approximately $1.3 million. The value of the projects was determined by estimating the costs to
develop the in-process technology into commercially feasible products,
estimating the net cash flows we believed would result from the products and
discounting these net cash flows back to their present value.
The products-20-
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Acquisition Related Costs.
Acquisition related to these charges were completed during
fiscal 2000. We did not incur any charges for purchased research and development
in the three months ended October 31, 2000.
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Other Acquisition Costs.
Other acquisition costs include the amortization of goodwill and purchased
intangible assets, as well as deferred compensation expenses arising from acquisitions. These costs increased to $42.7 million for the three months ended
October 31, 2000 compared to $40.8 million for the same period of the prior
year. The slight increase was primarily attributable to the amortization of
intangibles associated with our acquisition of Venture Finance Software Corp. in
August of 2000. Seeacquisitions, and
impairment charges. (See Note 4 of the financial statements.) These costs
increased to $122.6 million and $205.3 million for the quarter and year to date,
compared to $38.4 million and $121.7 million for the same periods a year ago.
The quarter and year to date increase was the primarily attributable to an
impairment charge of $77.0 million recorded in the third quarter of fiscal 2001
During our review for impairment in the third quarter, events and circumstances
indicated possible impairment of our long-lived assets consisting principally of
acquired intangible assets and goodwill. These indicators included deterioration
in the business climate for web-based companies and recent changes in our fiscal
2002 operating forecasts.
We measured the impairment loss related to long-lived assets based on the amount
by which the carrying amount of such assets exceeded their fair values. Our
measurement of fair value was based on an analysis of the future discounted cash
flows at the enterprise level. In performing this analysis, we used the best
information available in the circumstances including reasonable and supportable
assumptions and projections. The discounted cash flow analysis considered the
likelihood of possible outcomes and was based on our best estimate of projected
future cash flows, including terminal value cash flows expected to result from
the disposition of the assets at the end of their useful lives. The anticipated
proceeds from the pending disposition of a portion of Venture Finance Software
Corp. ("VFSC"), our Quicken Bill Manager business assisted management in the
determination of the fair value of the assets associated with VFSC as of April
30, 2001. Based on our analysis we recorded an impairment charge of $51 million
and $26 million associated with VFSC and SecureTax, respectively.
Amortization expense related to completed acquisitions will continue to have a
negative impact on our operating results in future periods. Assuming we do not
experience any further impairment of value of the intangible assets that would
require us to accelerate amortization, under the current accounting guidance,
amortization will be approximately $178.7$185.6 million, $176.4$180.5 million, $152.3$156.5
million and $73.0$75.9 million for the years ending July 31, 2001 through 2004,
respectively. See "Risks That Could Affect Future Results." If we complete
additional acquisitions (including the
pending acquisition of EmployeeMatters) or accelerate amortization in the future, there would be
an incremental negative impact on operating results. See also "Risks that Could
Affect Future Results" for a discussion of possible accounting changes related
to goodwill amortization.
Reorganization Costs.
Reorganization costs reflect the costs associated with our Quicken Loans
subsidiary (formerly Rock) closing numerous branch offices in Michigan in 1999,
as it began to transition its mortgage business from a traditional branch-based
business to an online and call center-based business. These costs totaled $3.5
million in the first quarter of fiscal 2000.
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NON-OPERATING INCOME AND EXPENSES
Interest and Other Income and Expense, NetNet.
For the three monthsquarter and year to date ended October 31, 2000,April 30, 2001, interest and other income
and expense, net, increased to $16.1$15.1 million and $47.7 million compared to $8.5$14.5
million and $30.0 million, for the same periodperiods a year ago, reflecting increasedago. The increases
reflect higher cash and short-term investment balances due primarily to proceeds
from recent sales of marketable securities.
Net Lossgain (loss) from Marketable Securities and other investmentsOther Investments.
For the three monthsquarter and year to date ended October 31, 2000,April 30, 2001, we recorded net losses
from marketable securities and other investments net of taxes, of $3.9$(11.5) million and $(87.3)
million, compared to lossesnet gains of $17.3$422.2 million and $402.1 million for the same
periodperiods a year ago. The losses incurred during the quarter and year to date
ended April 30, 2001, are due primarily to declines in the values of certain
equity investments held as trading securities below our cost, as well as charges
to reflect other than temporary declines in the values of certain private equity
investments. We consider our shares of Excite@Home, VeriSign and 724 Solutions
common stock as trading securities. See Note 1 of the financial statements. As a
result, unrealized gains and losses due to market fluctuations in these
securities are included in our net income. Recent volatilitydeclines in the market hashave
significantly reduced the value of our trading and available-for-sale
securities, and we expect this volatility to continue as long as we hold
these securities.for the foreseeable
future. If the market value of these trading securities declinescontinues to decline
significantly in the future, it would have a negative impact on our earnings.
Other than temporary decline of the values of our available-for-sale and private
equity investments could result in additional losses.
Income TaxesTaxes.
For the three monthsquarter and year to date ended October 31, 2000,April 30, 2001, we recorded an income tax
benefitprovision of $30.9$55.3 million and $38.6 million, on a pretax lossincome of $78.9$41.4
million and $3.3 million. This compares to an income tax benefitprovision of $34.2$200.2
million and $195.6 million, on a pretax lossincome of $100.1$497.2 million and $483.9
million, for the same period of the prior year.periods a year ago. At October 31, 2000,April 30, 2001, there was a
valuation allowance of $11.4 million for tax assets of our global subsidiaries
based on management's assessment that we may not receive the benefit of certain
loss carryforwards.carry forwards.
Cumulative Effect of Change in Accounting For Derivatives, Net
ForChange.
During the first quarter ended October 31, 2000,of fiscal 2001, we recorded a cumulative gain of $14.3
million, net of taxes, as a result of a change in accounting principle that
recognizedrequired us to recognize the cumulative effect of the increase in the fair value
of our S1 options as of August 1, 2000. See Note 1 of the financial statements.
Subsequent fluctuations in the fair value of these options will also be included
in our net income or net loss.
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LIQUIDITY AND CAPITAL RESOURCES
At October 31, 2000,April 30, 2001, our unrestricted cash and cash equivalents totaled $278.7$437.6
million, a $138.2$20.7 million decreaseincrease from July 31, 2000. We used $15.2Year to date, the
improvement in liquidity was the result of net cash provided by operating and
financing activities, which were partially offset by investing activities.
Our operations provided $234.8 million in cash foryear to date. Cash from operating
activities is driven by the seasonality of our operations duringbusiness, which typically results
in the three months ended
October 31, 2000. The primary componentsmajority of net revenues and cash used by operations were a net
loss of $33.8 million, an adjustment for a cumulative accounting gain of $23.9
millionreceipts occurring in the January and
a significant reduction in our income tax payables of $60.3 million.
These were offset byApril quarters, though operating expenses are incurred throughout the year. In
addition, adjustments made for non-cash expenses such as acquisition
chargesamortization of
$43.1goodwill and other purchased intangibles of $213.1 million, depreciation chargeswhich included a
$77.0 million impairment charge, and losses on marketable securities and other
investments, net, of $14.6$87.3 million, and a $32.0
million tax benefit from the exercise of employee stock options. We also
experienced an increase in deferred revenue of $13.6 million as a result of an
increasing number of Internet-related agreements under which we receive payments
from third parties priorcontributed to the time that we can recognize them as revenue.
Investing activities used $154.6 million in cash for the three months ended
October 31, 2000.provided by
operations. The primary use of cash year to date was an increase in mortgage
loans of $85.6 million due to increased activity in our mortgage business. In
addition, we also recorded non-cash adjustments for investinga pre-tax cumulative
accounting gain relating to a change in the method of accounting for derivatives
of $23.9 million and a net loss of $21.5 million, year to date.
Investing activities used $280.2 million in cash year to date. The primary use
of cash was the purchase offor business acquisitions, which included Venture Finance Software
Corp. ("VFSC") forin the first quarter (for $118 million. We also purchased
$42.4 million of net short-term investments, which was partially offset by
proceeds of $24.1in cash), and Tax and Accounting
Software Corp. in the third quarter (for $63 million from the salein cash). As part of our
marketable securities. As a
result of our continuedcontinuing internal
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investment in information systems and infrastructure for our Internet-based businesses,emerging business,
we purchased $58.0 million of property and equipment of $29.4
million during the quarter.year to date.
Financing activities provided $31.5$63.6 million for the three months ended October
31, 2000,year to date, primarily attributable
to proceeds from the exercise of employee stock options.
We currently hold investments in a number of publicly traded companies (see Note
1 of the financial statements). The volatility of the stock market and the
potential risk of fluctuating stock prices may have an impact on the proceeds
from future sales of these securities and therefore on our future liquidity. Due
to our reporting of the Excite@Home, VeriSign and 724 Solutions shares as
trading securities, future fluctuations in the carrying values of these stocks
will impact our operating results. If future declines in our other marketable
securities are deemed to be permanent,other than temporary, they will also impact our
operating results. Investors should note that many high technology companies,
including Excite@Home, VeriSign and 724 Solutions, have recently experienced
significant declines in their stock prices.
In connection with our acquisition of CRI,Computing Resources, Inc. in May 1999, we
are required to pay three annual installments of $25 million, the firstsecond of
which was paid in May 2000.2001. In the normal course of business, we enter into
leases for new or expanded facilities in both domestic and global locations. We
also evaluate, on an ongoing basis, the merits of acquiring technology or
businesses, or establishing strategic relationships with and investing in other
companies. Accordingly, it is possible that we may decide to use cash and cash
equivalents to fund such activities in the future.
We believe that our cash, cash equivalents and short-term investments will be
sufficient to meet anticipated seasonal working capital and capital expenditure
requirements for at least the next twelve months.
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RISKS THAT COULD AFFECT FUTURE RESULTS
The factors discussed below are cautionary statements that identify important
factors that could cause actual results to differ materially from those
anticipated in the forward-looking statements in this Form 10-Q. Our fiscal 2000
Form 10-K contains additional details about these risks, as well as other risks
that could affect future results.
If we do not continue to successfully refineOur revenue and update theearnings are highly seasonal, which causes significant quarterly
fluctuations in our revenue and net income. Several of our businesses are highly
seasonal - particularly our tax business, models for
our Internet--based products and services and other emergingbut also small business and operationally support these businesses, the businesses will not achieve
sustainableconsumer
finance to a lesser extent. This causes significant quarterly fluctuations in
our financial viability or broad customer acceptance. Our business
models for our Internet-based businessesresults. Revenue and other emerging businesses have more
complex and varied revenue streams than our traditional desktop software
businesses. For these businesses to become and remain economically viable, we
must continually refine their revenue models to reflect evolving economic
circumstances. These businesses also depend on a different operational
infrastructure than our desktop software businesses, and we must continually
develop, expand and modify internal systems and procedures to support these
businesses. In particular, our web-based tax preparation and electronic filing
services must continue to effectively handle extremely heavy customer demandearnings are usually strongest during the
peak tax season. If we are unablequarters ending January 31 and April 30. We experience lower revenues, and often
significant operating losses, in the July 31 and October 31 quarters.
Acquisition-related charges can cause significant fluctuation in our net income.
Our recent acquisitions have resulted in significant expenses, including
amortization of purchased software, goodwill and purchased intangibles, and
charges for in-process research and development. Acquisition-related expenses
were $80.9 million in fiscal 1998, $100.7 million in fiscal 1999, $168.1 million
in fiscal 2000 and $216.8 in the nine months ended April 30, 2001, including a
charge of $77 million in the third quarter of fiscal 2001 to meet customer expectations in a
cost-effective manner, it could result in lost customers, negative publicity,write down the
long-lived intangible assets related to two recent acquisitions (see Note 1 of
the financial statements). Additional acquisitions and increased operating costs, whichany additional
accelerated impairment of the value of purchased assets, could have a
significant negative impact on future operating results.
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Proposed Financial Accounting Standards Board guidelines relating to accounting
for goodwill could make our acquisition-related charges less predictable in any
given reporting period. On February 14, 2001, the FASB issued a limited revision
of its Exposure Draft, Business Combinations and Intangible Assets that
establishes a new standard for accounting for goodwill acquired in a business
combination. It would continue to require recognition of goodwill as an asset
but would not permit amortization of goodwill as currently required. Under the
proposed statement, goodwill would be separately tested for impairment using a
fair-value-based approach when an event occurs indicating the potential for
impairment. Any required goodwill impairment charges would be presented as a
separate line item within the operating section of the income statement. The
shift from an amortization approach to an impairment approach would apply to
previously recorded goodwill as well as goodwill arising from acquisitions
completed after the application of the new standard. If the standard is adopted
as described above, our goodwill amortization charges would cease. However, it
is possible that in the future, we would incur less frequent, but larger,
impairment charges related to the goodwill already recorded as well as goodwill
arising out of future acquisitions as we continue to expand our business.
Gains and losses related to marketable securities can cause significant
fluctuation in our net income. Our investment activities have had a significant
impact on our net income. We recorded pre-tax net gains from marketable
securities and other investments of $579.2 million in fiscal 1999 and $481.1
million in fiscal 2000 and a pre-tax net loss of $87.3 for the nine months ended
April 30, 2001. See Note 1 of the financial statements. Fiscal 2000 and 2001
decreases in the market successprices of these businesses.our trading securities have resulted in
significant reductions in our pre-tax income. Future price fluctuations in
trading securities, and any significant long-term declines in value of other
securities, could reduce our net income in future periods.
A general decline in economic conditions could lead to reduced demand for our
products and services. The market pressurerecent downturn in general economic conditions has
led to launch Internet-basedreduced demand for a variety of goods and services, including many
technology products, and we believe the economic decline has been partially
responsible for slower than expected growth in our Small Business Division. If
conditions continue to decline, or fail to improve, in geographic areas that are
significant to us, such as the United States, Canada and Japan, we could see a
significant decrease in the overall demand for our products and services quickly may
lead to lower product quality. The development process for Internet-based
products is more rapid, less predictable, and shorter than forthat
could harm our desktop
products. Getting Internet-based products and services launched quickly is
crucial to competitive success, but this time pressure may result in lower
product quality, dissatisfied customers and negative publicity, as well as
additional expenses to fix bugs.
We face intense competition for qualified employees, especially for our
Internet-based businesses. Like many of our competitors, we have had
difficulties during the past few years in hiring and retaining employees, and we
expect to face continuing challenges in recruiting and retention.operating results.
We face risks relating to customer privacy and security and increasing
regulation, which could hinder the growth of our businesses --- particularly our
Internet-based businesses. Despite our efforts to address customer concerns
about privacy and security, these issues still pose a significant risk, and we
have experienced lawsuits and negative publicity relating to privacy issues. For
example, during fiscal 2000 and fiscal 2001, there have been press articles
criticizing our privacy and security practices as they relate to the
connectivity of our desktop software to our web sites. We have faced lawsuits
and negative press alleging that we improperly shared information about
customers with third party "ad servers" for our web sites. A major breach of
customer privacy or security by Intuit, or even by another company, could have
serious consequences for our businesses --- particularly our Internet businesses -
including reduced customer interest and/or additional regulation by federal or
state agencies. For example, if a "hacker" were able to overcome the security
precautions we take to protect our customers' consumer tax preparation
information, it could have a material negative impact on our operating results
and our relationships with our customers. In addition, mandatory privacy and
security standards and protocols are still being developed by government
agencies, and we may incur significant expenses to comply with any requirements
that are ultimately adopted. For example, under the Gramm Leach Bliley Act
recently adopted by the federal government, by July 1, 2001 Intuit will be
required to provide written notice of its privacy practices to allmany of its
customers. We must give customers an opportunity to state their preferences
regarding Intuit's use of their non-public personal information, and we must
honor those preferences. If Internet use does not grow as a result of privacy or
security concerns, increasing regulation or for other reasons, the growth of our
Internet-based businesses would be hindered.
We face competitive pressures in all of our businesses, which can have a
negative impact on our revenue, profitability and market position. There are
formidable current and potential competitors in the private sector, and we also
face potential competition from publicly-funded government entities seeking to
competitively enter private markets in the United States for consumer electronic
financial services. Accordingly, we expect competition to remain intense during
the rest of fiscal 2001.
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Despite our efforts to adequately staff and equip our customer service and
technical support operations, we cannot always respond promptly to customer
requests for assistance. We occasionally experience customer service and support
problems, including longer than expected "hold" times when our staffing is
inadequate to handle higher than anticipated call volume, and a large number of
inquiries from customers checking on the status of product orders when the
timing of shipments fails to meet customer expectations. This can adversely
affect customer relationships and our financial performance. In order to improve
our customer service and technical support, we must continue to focus on
eliminating underlying causes of service and support calls (through product
improvements and better order fulfillment processes), and on more accurately
anticipating demand for customer service and technical support.
Actual product returns may exceed return reserves. We generally ship
significantly more desktop products to our distributors and retailers than we
expect them to sell, in order to reduce the risk that distributors or retailers
will run out of products. This is particularly true for our tax products, which
have a short selling season. Like most software companies, we have a liberal
product return policy and we have historically accepted significant product
returns. We establish reserves for product returns in our financial statements,
based on estimated future returns of products. We closely monitor levels of
product sales and inventory in the retail channel in an effort to maintain
reserves that are adequate to cover expected returns. In the past, returns have
not generally exceeded these reserves. However, if we do experience actual
returns that significantly exceed reserves, it would result in lower revenue.
If we cannot fullydo not continue to successfully refine and successfully implementupdate the business and
operating models for our announced QuickBooks Internet
Gateway ServicesInternet-based products and services and other emerging
service businesses, and continue to improve the operational support for these
businesses, the businesses will not achieve sustainable financial viability or
broad customer acceptance. Our business models for our Internet-based businesses
and other emerging service businesses have more complex and varied revenue
streams than our traditional desktop software businesses. For these businesses
to become and remain economically viable, we must continually refine their
business and operating models to reflect evolving economic circumstances. These
businesses also depend on a different operational infrastructure than our
desktop software businesses, and we must continually develop, expand and modify
internal systems and procedures to support these businesses. In particular, our
web-based tax preparation and electronic filing services must effectively handle
extremely heavy customer demand during the peak tax season. If we are unable to
meet customer expectations in a timely fashion,cost-effective manner, it could result in lost
customers, negative publicity, and increased operating costs, which could have a
significant negative impact on the financial and market success of these
businesses.
If we may beare unable to sustaincapitalize on new sources of revenue for our QuickBooks
business, the business will not be able to achieve sustained growth. Sales of
our QuickBooks desktop product for fiscal 2001 year to date are lower than
expected, due to lower upgrades sales to existing customers compared to fiscal
2000, as well as lower than expected sales to new customers. We cannot rely
solely on these servicessources of revenue to provide sustainable future growth for our
Small Business Division. We must generate revenue from broader markets and
customer segments as a successful business. Development of some of the announcedwell as from new products and services.
If we are unable to successfully restructure our QuickBooks Internet Gateway
services has not yet been completed. Intuit and business model, the third--party service providers of these services could face technological
difficulties, financial difficulties and other problems that could delay or
prevent implementation of the QuickBooks Internet Gateway Services, which in
turn could delay or prevent us from recognizing contractually committed revenues
to the extent that recognition of such revenue depends on implementation with
the customer.
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If our recently introduced QuickBooks Internet Gateway services dowill not achieve and maintain
acceptance by customers and the third-party vendors who provide these services,
and they will not generate long-term revenue growth or profitability. We must meet customer and vendor expectations in delivering our
QuickBooks Internet Gateway services. If we do not meet these expectations, we
may not be able to maintain the third party vendor relationships that are
necessary to allow us to provide services desired by customers. If we experience
significant failures in meeting expectations and maintaining important
relationships, our ability to expand our QuickBooks Internet Gateway services
will be jeopardized. Intuit is
refining its approach to selecting and working with QuickBooks Gateway vendors, andvendors.
Although we are in the process of endingseeing encouraging results for some services, such as merchant
account services, that are more closely integrated with QuickBooks, we have
ended relationships with between three to fivemost of our smaller alliance companies where the
business results are not meeting our expectations or theirs. To retainmaintain other
current relationships, we may be required to adapt them in ways that are less
attractive to us, financially or otherwise. In addition, QuickBooks Internet
Gateway Services are currently available only to customers using QuickBooks 2000
or QuickBooks 2001, so customer adoption of the newly announcedservices is somewhat dependent
on unit sales of newer QuickBooks 2001.products to new customers and to customers
upgrading from older versions of the product. Customer upgrade and new user
acquisition rates tofor QuickBooks 2000 were2001 have been lower than historical upgrade levels, which impacted the growth of the potential
customer base for these services.levels.
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In order to expandsuccessfully grow our customer base in the payroll services business, we must continue to
improve the efficiency and effectiveness of our payroll processing operations
and streamline customer activations for our Deluxe onlineand Premier payroll
processing service. The payroll processing business involves a number of
business risks if we make errors in providing accurate and timely payroll
information, cash deposits or tax return filings, including our incurringpotential liability
to customers, additional expense to correct product errors and loss of
customers. For our Internet-based services (the Deluxe service, as well as the
online Basic service), we must improve our operations to give customers more
reliable connectivity to our data center to transmit and receive payroll data
and tax tables. In order to expand the customer basebases for our Deluxe and Premier
payroll service,services, we must continue to focus on streamlining the service
activation process for new customers.
OurIt is unlikely that the revenue and profit growth rates experienced by our
mortgage business is subject to interestyear-to-date during fiscal 2001 will be sustainable long-term,
either on a year-over-year basis or on a sequential quarter basis. Mortgage rate
fluctuationsincreases, the impact of the economic climate on the housing market, business
operation risks and operational
risks thatother factors could result in furthersignificantly lower revenue
declines.and profit growth for our mortgage business. Increases in mortgage rates and
other interest rates have adversely affected our mortgage business during 2000,
contributing to a significant revenue decline from fiscal 1999 to fiscal 2000.
Conversely, declines in mortgage rates during fiscal 2001 have had a positive
impact on revenue. If mortgage interest rates continue to rise again, this may continue tocould negatively impact
the volume of applications and closed loans, and applications -- particularly our most interest-ratemortgage-rate
sensitive products such as conventional loans and refinancing loans.
FHA loans
and home purchase mortgages tend to be less mortgage-rate sensitive.
Fluctuations in non-mortgage interest rates also create risks with respect to the loans
on our balance sheet and impact our cost of funds to provide loans. In addition,
our ability to successfully streamline the online application, approval, and
closing process will have a significant impact on our ability to attract
customers to our mortgage service, and on our ability to continue increasing the
percentage of our mortgage revenue generated through the online channel compared
to branch offices. We must also maintain relationships with certain banks and
other third parties who we will rely on to provide access to capital, and later,
service the loans. If we are unable to do so,maintain key relationships, or if the
terms of key relationships change to be less favorable to Intuit, it could have
a negative impact on our mortgage business and on Intuit's financial results.
The closingOur ability to conduct business could be impacted by a variety of factors such
as electrical power interruptions, earthquakes, fires and other similar events.
Our business operations depend on the efficient and uninterrupted operation of a
large number computer and communications hardware and software systems. These
systems are vulnerable to damage or interruption from electrical power
interruptions, telecommunication failures, earthquakes, fires, floods, and other
similar events. Recently, electrical power in certain locations in California
has been interrupted for short periods of time in the form of "rolling
blackouts." We have principal facilities (including our primary data center)
located in California. To date, our business operations have not been materially
impacted by these outages. However, it is possible that rolling blackouts will
continue in the foreseeable future and our facilities could be significantly
affected in the future. We currently have short-term alternate sources of power
(in the form of backup batteries and generators) for all of our pending transactions with EmployeeMatterscritical
customer-facing operations in California, including our primary data center.
However, if rolling blackouts become more frequent and/or longer in duration, it
is possible that our alternative sources of power would be insufficient to allow
us to continue our operations without interruption. Other events such as
earthquakes, fires and InsWeb are
subjectfloods, could also impact our ability to continue our
business operations. For our Internet-based services, the system failures of
various conditions, including customary regulatorythird-party Internet service providers, online service providers and
other approvals.website operators could result in interruption in our services to our
customers. Any significant interruptions in our ability to conduct our business
operations could reduce our revenue and operating income. Our business
interruption insurance may not adequately compensate us for the impact of
interruptions to our business operations.
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ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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SHORT-TERM INVESTMENT PORTFOLIO
We do not hold derivative financial instruments in our short-term investment
portfolio. Our short-term investments consist of instruments that meet quality
standards consistent with our investment policy. This policy dictates that we
diversify our holdings and limit our short-term investments with any individual
issuer in a managed portfolio to a maximum of $5 million to any one issuer.million. Our policy also
dictates that all short-term investments mature in 3024 months or less.
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MARKETABLE SECURITIES
We also carried significant balances in marketable equity securities as of October 31, 2000.April 30,
2001. These securities are subject to considerable market risk due to their
volatility. Fluctuations in the carrying value of our shares of Excite@Home,
VeriSign and 724 Solutions will have an immediate impact on our earnings because
we report these shares as trading securities. See Note 1 of the financial
statement notes for more information regarding risks related to our investments
in marketable securities and the impact of our trading securities on our
reported net income.
INTEREST RATE RISK
Interest rate risk represents a component of market risk to us and represents
the possibility that changes in interest rates will cause unfavorable changes in
our net income and in the value of our interest rate sensitive assets,
liabilities and commitments, particularly those that relate to our mortgage
business. In a higher interest rate environment, borrower demand for mortgage
loans declines, adversely affecting our mortgage loan business. Interest rate
movements also affect the interest income earned on loans we hold for sale in
the secondary market, interest expense on our lines of credit, the value of our
mortgage loans and ultimately the gain or loss on the sale of those mortgage
loans. In addition, interest rate movements affect the interest income earned on
investments we hold in our short-term investment portfolio and the value of
those investments.
As part of our risk management programs, we enter into financial agreements and
purchase financial instruments in the normal course of business to manage our
exposure to interest rate risk with respect to our conventional loans and our
government-insured loans (together, "Prime Loans"), but not with respect to our
sub-prime loans or home equity lines of credit. We use these financial
agreements and financial instruments for the explicit purpose of managing
interest rate risks to protect the value of our mortgage loan portfolio, and not
for trading purposes.
We actively monitor and manage our exposure to interest rate risk on Prime
Loans, which is incurred in the normal course of business. The committed and
closed pipelines of Prime Loans, as well as the related forward commitments and
derivatives, are valued daily. We refer to the loans, pipeline, commitments and
derivatives together as the "Hedge Position." We evaluate the Hedge Position
against a spectrum of interest rate scenarios to determine expected net changes
in the fair values of the Hedge Position in relation to the changes in interest
rates. We evaluate our interest rate risk exposure daily using models that
estimate changes in the fair value of the Hedge Position and compare those
changes against the fair value of the underlying assets and commitments.
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The following table shows the maturity of our mortgage loans held for sale and
home equity lines of credit:
PRINCIPAL AMOUNTS BY EXPECTED MATURITY:
(in thousands, except interest rates; unaudited)Unaudited)
EXPECTED MATURITY DATE (1)DATE(1)
PERIOD ENDING OCTOBER 31,APRIL 30, FAIR VALUE
---------------------------------------------------- OCTOBER 31,---------------------------------------- APRIL 30,
2001 2002 2003 2004 2005 TOTAL 2000
---------- ---------- ---------- ---------- ---------- ---------- ----------2001
---- ---- ---- ---- ---- ----- ----
ASSETS:
Mortgage Loans ..................Loans................. $144,050 -- -- -- -- $144,050 $148,121
Average Interest Rate...... 7.82% 7.82%
LIABILITIES:
Lines of Credit................ $ 67,2693,705 -- -- -- -- $ 67,2693,705 $ 69,1993,800
Average Interest Rate .... 10.36% 10.36%
LIABILITIES:
Lines of Credit ................. $ 3,137 -- -- -- -- $ 3,137 $ 3,200
Average Interest Rate .... 7.80% 7.80%Rate...... 5.96% 5.96%
(1) In the ordinary course of our mortgage business, expected maturity is based
on the assumption that loans will be re-sold in the indicated period.
Based on the carrying values of our mortgage loans held for sale and lines of
credit that we held at October 31, 2000,April 30, 2001, we do not believe that short-term changes
in interest rates will have a material effect on the interest income we earn on
loans held for sale in the secondary market, interest expense on our lines of
credit or the value of mortgage loans. See Notes 1 and 56 of the financial
statement notes for more information regarding risks related to our mortgage
loans and lines of credit.
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28
IMPACT OF FOREIGN CURRENCY RATE CHANGES
While the Japanese yen strengthened during fiscal 2000, theMost local currencies of our otherinternational subsidiaries remained essentially stable.have slightly weakened
during the first nine months of fiscal 2001. Because we translate foreign
currencies into U.S dollars for reporting purposes, currency fluctuations can
have an impact, though generally immaterial, on our results. We believe that our
exposure to currency exchange fluctuation risk is insignificant primarily
because our global subsidiaries invoice customers and satisfy their financial
obligations almost exclusively in their local currencies. For the quarter ended
October 31, 2000, there was an immaterial currency exchange impact from our
intercompany transactions. Currency exchange risk
is also minimized since foreign debt is due almost exclusively in local foreign
currencies. As of October 31, 2000,April 30, 2001, we did not engage in foreign currency hedging
activities.
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PART II
ITEM 1
LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
On March 3, 2000, a class action lawsuit, Bruce v. Intuit Inc., was filed in the
United States District Court, Central District of California, Eastern Division.
Two virtually identical lawsuits were later filed: Rubin v. Intuit Inc., was
filed on March 8, 2000 in the United States District Court, Southern District of
New York and Newby v. Intuit Inc. was filed on April 27, 2000, in the United
States District Court, Central District of California, Eastern Division. The
Bruce and Newby lawsuits were consolidated into one lawsuit, In re Intuit
Privacy Litigation, filed on July 28, 2000 in the United States District Court
of California, Eastern Division. Following Intuit's successful motion to dismiss
several of the claims, an amended complaint was filed on May 2, 2001. A similar
lawsuit, Almanza v. Intuit Inc. was filed on March 22, 2000 in the Superior
Court of State of California, San BernadinoBernardino County, Rancho Cucamonga Division.
The AlmanzaAn amended complaint was amendedfiled on October 26, 2000. These purported class
actions allege violations of various federal and California statutes and common
law claims for invasion of privacy based upon the alleged intentional disclosure
to third parties of personal and private customer information entered at
Intuit's Quicken.com website. The complaints seek injunctive relief, orders to
disgorge profits related to the alleged acts, and statutory and other damages.
Intuit believes these lawsuits are without merit and intends to defend the
litigation vigorously.
Intuit is subject to other legal proceedings, as well as demands, claims and
threatened litigation, that arise in the normal course of our business. We
currently believe that the ultimate amount of liability, if any, for any pending
claims of any type (either alone or combined) will not materially affect our
financial position, results of operations or liquidity. However, the ultimate
outcome of any litigation is uncertain, and either unfavorable or favorable
outcomes could have a material negative impact. Regardless of outcome,
litigation can have an adverse impact on Intuit because of defense costs,
diversion of management resources and other factors.
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29
ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At Intuit's Annual Meeting of Stockholders on December 8, 2000, our stockholders
voted on the following proposals:
1. Proposal to elect directors:
For Withheld
----------- -----------
Stephen M. Bennett 189,361,684 3,485,812
Christopher W. Brody 189,298,874 3,547,822
William V. Campbell 189,362,661 3,684,835
Scott D. Cook 189,368,897 3,485,799
L. John Doerr 189,359,812 3,486,884
Donna L. Dubinsky 189,361,722 3,484,974
Michael R. Hallman 189,360,910 3,485,786
William H. Harris, Jr 189,327,037 3,519,659
2. Proposal to amend Intuit's 1993 Equity Incentive Plan to increase the
number of shares of common stock available for issuance thereunder by
9,700,000 shares:
For 110,611,523
Against 81,869,148
Abstain 366,083
Unvoted 202
3. Proposal to amend Intuit's 1996 Employee Stock Purchase Plan to increase
the number of shares of common stock available for issuance thereunder
by 400,000 shares and to change the duration of the offering periods
under the plan:
For 189,728,568
Against 2,745,732
Abstain 372,395
Unvoted 1
4. Proposal to amend Intuit's 1996 Directors Stock Option Plan to increase
the number of shares of common stock available for issuance thereunder
by 125,000 shares:
For 130,330,243
Against 62,886,434
Abstain 430,018
Unvoted 1
5. Proposal to ratify the selection of Ernst & Young LLP as Intuit's
independent auditors for fiscal 2001:
For 192,461,612
Against 139,554
Abstain 245,529
Unvoted 1
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30- --------------------------------------------------------------------------------
ITEM 5
OTHER MATTERS
- --------------------------------------------------------------------------------
CHANGES IN EXECUTIVE OFFICERS
As of December 13, 2000,June 12, 2001, Intuit's executive officers were as follows:
NAME AGE POSITION
- ---- --- --------
Stephen M. Bennett 4647 President, Chief Executive Officer and DirectorDirector; Acting Senior
Vice President, Small Business Division
William V. Campbell 60 Chairman of the Board of Directors
Scott D. Cook 48 Chairman of the Executive Committee of the Board of Directors
Thomas A. Allanson 43 Senior Vice President, Tax Division
Alan A. Gleicher 48 Senior Vice President, Global Business Division
Richard William Ihrie 51 Senior Vice President and Chief Technology David A. Kinser 49Officer
Greg J. Santora 50 Senior Vice President Service Delivery and Operations
Greg J. Santora 49 Senior Vice President, Finance and Corporate Services; Chief Financial Officer
Raymond G. Stern 39 Senior Vice President, Corporate Strategy and Marketing
Larry J. Wolfe 49 Senior Vice President, Tax Division
Dennis Adsit 42 Vice President, Process Excellence
Sonita Ahmed 44 Vice President, Finance &and Corporate Controller
Thomas A. Allanson 42 Vice President, Tax Strategy
Caroline F. Donahue 40 Vice President, Sales
Linda Fellows 52 Vice President, Investor Relations and Treasurer
Daniel B. Gilbert 38 Vice President, Quicken Loans
Larry King, Jr. 39 Vice President, Payroll Services Group
Elisabeth M. Lang 4344 Vice President, Corporate Public Relations &and Marketing Communication
Carol Novello 36 Vice President Financial Supplies Group
Daniel T. Nye 34 Vice President,- Marketing, Small Business Division
Enrico Roderick 4142 Vice President, Personal Finance Group
Catherine L. Valentine 48 Vice President, General Counsel and Corporate Secretary
Sherry Whiteley 41 Vice President, Human Resources
-30-Mr. Allanson joined Intuit in September 2000 as Vice President of Tax Strategy
and was promoted to Senior Vice President of the Tax Division in April 2001.
Prior to joining Intuit, he was with GE Capital Colonial Pacific Leasing (a
vendor financial services business) from May 1995 through August 2000, serving
as President from October 1998 to August 2000. He was Sales Effectiveness
Leader/GM from September 1997 to October 1998 and was Manager, Marketing
Equipment Business (an electrical distribution and control business) from May
1995 through September 1997. Mr. Allanson holds a Bachelor of Science degree in
mechanical engineering from Auburn University.
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3130
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ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
(a) THE FOLLOWING EXHIBITS ARE FILED AS PART OF THIS REPORT.
10.01(1) Intuit Inc. 1993 Equity Incentive Plan and related documents, as
amended through December 8, 2000
10.02(2) Intuit Inc. 1996 Employee Stock Purchase Plan, as amended through
December 8, 2000
10.03(3) Intuit Inc. 1996 Directors Stock Option Plan, and related documents,
as amended through December 8, 2000
10.04* Secured Balloon Payment Note Agreement between Intuit Inc. and
Stephen M. Bennett dated February 17, 2000
10.05*REPORT:
10.01 Amendment No. 1, dated January 17, 2001, to Employment Agreement between Intuit Inc. and
Stephen M. Bennett date January 21, 2000
10.02 Amendment No. 1, dated January 17, 2001, to Restricted Stock Purchase Agreement between
Intuit Inc. and Stephen M. Bennett with respect to 150,000 shares of Intuit Common Stock
10.03 Amendment No. 1, dated January 17, 2001, to Restricted Stock Purchase Agreement between
Intuit Inc. and Stephen M. Bennett with respect to 75,000 shares of Intuit Common Stock
10.04 Secured Full Recourse Promissory Note and Stock Pledge Agreement, dated March 30, 2001,
between Intuit Inc. and Stephen M. Bennett
10.05 Letter from Intuit to Stephen M. Bennett, dated April 6, 2001, confirming forgiveness of
certain loan interest
10.06 Separation Agreement between Daniel T. H. Nye and Intuit Inc. dated March 26, 2001
10.07 Amendment No. 1 dated May 29, 2001, to Secured Balloon Payment Bridge Loan Promissory
Note Agreement between Intuit
Inc. and Dennis Adsit dated September 27, 2000
10.06* Secured Balloon Payment Promissory Note Agreement between Intuit Inc. and Thomas A. Allanson
dated October 16, 2000
10.07* Secured Bridge Loan Promissory Note between Intuit Inc. and Richard
William Ihrie dated November 28, 2000
10.08* Secured Balloon Payment Promissory Note between Intuit Inc. and
Richard William Ihrie dated November 28, 2000
27.01* Financial Data Schedule (filed only in electronic format)
- ----------------
* Filed with this Form 10-Q
(1) Filed as an exhibit to Intuit's Form S-8 registration statement (file
no. 333-51694), filed with the Commission on December 12, 2000 and
incorporated by reference
(2) Filed as an exhibit to Intuit's Form S-8 registration statement (file
no. 333-51692), filed with the Commission on December 12, 2000 and
incorporated by reference
(3) Filed as an exhibit to Intuit's Form S-8 registration statement (file
no. 333-51698), filed with the Commission on December 12, 2000 and
incorporated by reference
- ----------------
(b) REPORTS ON FORM 8-K:
(1) On September 13, 2000,April 17, 2001, Intuit filed a report on Form 8-K to report under
Item 5 that it had entered into a Stock Saleacquired the assets of Tax and Purchase Agreement
under which it purchased all of the outstanding securities of Venture
FinanceAccounting Software
Corp. that were not already held by Intuit.Corporation.
(2) On November 21, 2000,May 24, 2001, Intuit filed a report on Form 8-K to report under Item
5 that on November 16, 2000, it entered into(a) the sale of its Quicken Bill Manager business to Princeton eCom
Corporation; (b) the authorization of a definitive agreement
to acquire EmployeeMatters, Inc.
(3) On November 22, 2000, Intuit filed a report on Form 8-K to report under
Item 5$500 million three-year stock
repurchase program; and (c) its financial results for the quarter ended
October 31, 2000.April 30, 2001. Intuit's balance sheet as of April 30, 2000 and 2001,
and statement of operations as of and for the three months and nine months ended
October 31, 1999April 30, 2000 and 20002001 were included in the Form 8-K.
(4) On November 27, 2000, Intuit filed a report on Form 8-K to report under
Item 5 that on November 27, 2000, it entered into a definitive agreement
with Isotope to sell certain assets of its QuickenInsurance business.
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32- --------------------------------------------------------------------------------
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTUIT INC.
(REGISTRANT)
Date: DecemberJune 13, 20002001 By: /s/ Greg J. Santora
---------------------------------------------------------------------------------------
Greg J. Santora
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
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33
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
10.04 Secured Balloon Payment Note Agreement between Intuit Inc. and
Stephen M. Bennett dated February 17, 2000
10.05 Secured Balloon Payment Promissory Note Agreement between Intuit
Inc. and Dennis Adsit dated September 27, 2000
10.06 Secured Balloon Payment Promissory Note between Intuit Inc. and
Thomas Allanson dated October 16, 2000
10.07 Secured Bridge Loan Promissory Note between Intuit Inc. and
Richard William Ihrie dated November 28, 2000
10.08 Secured Balloon Payment Promissory Note between Intuit Inc. and
Richard William Ihrie dated November 28, 2000
27.01 Financial Data Schedule (filed only in electronic format) period
ended October 31, 2000
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