1
Prospectus Supplement filed pursuant to Rule 424(b)(5)
Registration Statement Nos. 333-50417 and 33-99646
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 29, 1998)
LOGO
- --------------------------------------------------------------------------------
9,000,000 SHARES
COMMON STOCK
- --------------------------------------------------------------------------------
All of the 9,000,000 shares of Common Stock, par value $0.01 per share (the
"Common Stock"), are being sold by Intuit Inc. ("Intuit" or the "Company"). The
Common Stock is listed on the Nasdaq National Market under the symbol "INTU." On
May 21, 1998, the last reported sale price of the Common Stock on the Nasdaq
National Market was $47.50 per share. See "Price Range of Common Stock."
FOR INFORMATION CONCERNING CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE "RISK FACTORS" COMMENCING ON PAGE S-12 OF THIS
PROSPECTUS SUPPLEMENT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
Per Share $47.375 $1.70 $45.675
Total(3) $426,375,000 $15,300,000 $411,075,000
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses estimated at $800,000, payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 1,350,000 shares of Common Stock solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discount and Proceeds to Company will be
$490,331,250, $17,595,000 and $472,736,250, respectively. See
"Underwriting."
The shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by them, and subject to the
approval of certain legal matters by counsel and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. Delivery of the shares of Common Stock is
expected to be made in New York, New York on or about May 28, 1998.
Joint Lead Managers and Joint Bookrunners
DEUTSCHE MORGAN GRENFELL MORGAN STANLEY DEAN WITTER
------------------------
BANCAMERICA ROBERTSON STEPHENS
BT ALEX. BROWN
WILLIAM BLAIR & COMPANY
HAMBRECHT & QUIST
NATIONSBANC MONTGOMERY SECURITIES LLC
The date of this Prospectus Supplement is May 21, 1998
2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Securities and
Exchange Commission (the "Commission") pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), are incorporated in the accompanying
Prospectus which is supplemented by the Prospectus Supplement: (a) the Company's
annual report on Form 10-K filed with the Commission for the fiscal year ended
July 31, 1997; (b) the Company's quarterly reports on Form 10-Q filed with the
Commission for the quarters ended October 31, 1997 and January 31, 1998 and the
Form 10-Q/A filed on May 18, 1998 with the Commission for the quarter ended
January 31, 1998; (c) the Company's definitive proxy statement dated December
12, 1997; (d) the Company's current report on Form 8-K filed with the Commission
on May 5, 1998 with respect to the Company's stockholder rights agreement; (e)
the Company's current report on Form 8-K filed with the Commission on May 18,
1998 with respect to certain management changes, the Company's release of its
earnings for its quarter ended April 30, 1998, the Company's proposed
acquisition of Lacerte Software Corporation and Lacerte Educational Services
Corporation (together, "Lacerte") and certain other matters; (f) the Company's
current report on Form 8-K/A filed with the Commission on May 19, 1998 to amend
the Form 8-K dated May 18, 1998 to include the Lacerte acquisition agreement;
(g) the description of the Company's Common Stock contained in the Company's
registration statement on Form 8-A filed with the Commission under the Exchange
Act, and any amendment or report filed for the purpose of updating such
description; and (h) the description of the Company's Preferred Stock Purchase
Rights contained in the Company's registration statement on Form 8-A filed with
the Commission under the Exchange Act, and any amendment or report filed for the
purpose of updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act following the date of the Prospectus and prior to the
termination of this Offering shall be deemed to be incorporated by reference in
the Prospectus and to be a part thereof from the date of filing of such
documents (all of such documents, and the documents enumerated above, being
hereafter referred to as "Incorporated Documents"). The information relating to
the Company contained in this Prospectus Supplement does not purport to be
comprehensive and should be read together with the information contained in the
Prospectus and the Incorporated Documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference in the Prospectus shall be deemed to be modified or
superseded for purposes of this Prospectus Supplement to the extent that a
statement contained in this Prospectus Supplement, or in any other document
subsequently filed with the Commission which also is or is deemed to be
incorporated by reference in the Prospectus, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus
Supplement.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus Supplement is delivered, upon written
or oral request of such person, a copy of any and all of the Incorporated
Documents (not including exhibits to the information that is incorporated by
reference unless such exhibits are specifically incorporated by reference into
the information that this Prospectus Supplement incorporates). Requests should
be directed to Investor Relations, Intuit Inc., 2535 Garcia Avenue, P.O. Box
7850, Mountain View, California 94039-7850 (telephone number (650) 944-2713).
------------------------
FORWARD-LOOKING STATEMENTS
This Prospectus Supplement contains forward-looking statements that involve
risks and uncertainties. Forward-looking statements within this Prospectus
Supplement are identified by words such as "believes," "anticipates," "expects,"
"intends," "will," and "may" and other similar expressions. In addition, any
statements which refer to expectations, projections or other characterizations
of future events or circumstances are forward-looking statements.
Forward-looking statements in this Prospectus Supplement include but are not
limited to: (i) references to the expected benefits and effects of the proposed
acquisition of Lacerte by the Company, including statements regarding strategic
benefits of the proposed acquisition, Lacerte's profitability and contribution
to the Company's profitability, the effect of the proposed acquisition on the
Company's competitiveness in the market for professional tax software and the
timing and amount of expenses to be incurred by the Company as a result of the
proposed acquisition; (ii) the Company's strategy and growth expectations with
respect to the Internet and the Company's Internet-based business; (iii) the
expected launch dates of the Company's future products and services, including
QuickBooks(R) 6.0 and the services being developed in connection with the
proposed development venture with Bank of America National Trust and Savings
Association ("Bank of America"), Tele-Communications, Inc. ("TCI") and At Home
Corporation ("@Home"); and (iv) most of the information under "Risk Factors."
The forward-looking statements included in this Prospectus Supplement by
reference are subject to a number of risks that could cause actual results to
differ materially from the Company's expectations. Details about these risks are
included under "Risk Factors."
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DISCUSSION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
S-2
3
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial data appearing elsewhere in this Prospectus
Supplement, including the information under the caption "Risk Factors," and the
accompanying Prospectus and in documents incorporated by reference therein.
Unless otherwise indicated, the information contained in this Prospectus
Supplement does not give effect to the exercise of the Underwriters'
over-allotment option.
THE COMPANY
Intuit is a leading provider of accounting, tax and consumer finance
software and services for individuals and small businesses. The Company's
mission is to revolutionize the way individuals and small businesses manage
their finances. To achieve this goal, the Company provides a range of desktop
software products, Internet-based products and services, and financial supplies.
Intuit offers its products and services in three primary areas: (i) small
business accounting software, financial supplies and related services; (ii)
personal, professional and small business tax preparation software and services;
and (iii) consumer finance software and services. The Company's products include
QuickBooks(R), the most popular small business accounting software; TurboTax(R),
the best-selling personal tax preparation software; and Quicken(R), the leading
personal financial software. The Company's award-winning Quicken.com website
offers a comprehensive selection of personal finance news, information and
tools.
The Company is currently focusing its strategic efforts in three
directions. First, it is expanding its small business offerings, including the
planned introduction in the fourth quarter of fiscal 1998 of QuickBooks 6.0, a
multi-user version of QuickBooks. Second, it is adding online connectivity to
its tax and personal finance desktop software. These first two strategic
directions are extensions of the businesses that have historically represented
the majority of the Company's revenue. The Company's third strategic effort is
to develop a "community" of new Internet-based resources and businesses in order
to establish the Company as a premiere provider of personal and business
financial information and services on the Internet.
As part of its Internet strategy, the Company has begun: (i) to integrate
online, Web-based resources into its desktop software products such as direct
links to Quicken.com from Quicken; (ii) to put desktop software functionality
onto the Internet such as Web-based interactive tax preparation services; (iii)
to invest in new, entirely Web-based businesses such as websites that feature
personal insurance and home mortgage services; and (iv) to increase its presence
on the Internet by establishing strategic relationships with leading Internet
media companies such as Excite, Inc. ("Excite"), Internet-based financial
networks such as CNNfn and online service providers such as America Online, Inc.
("AOL"). Intuit believes that the dramatic growth of the Internet will give the
Company significant opportunities to grow its core businesses over the next
several years, although its Internet-based revenue is currently less than 5% of
total revenue. See "Risk Factors -- Risks Relating to Internet Businesses."
RECENT EVENTS
Third Quarter Results. Consistent with expected seasonal patterns, Intuit
reported net revenue of $142.0 million for the quarter ended April 30, 1998,
compared to $136.3 million in the quarter ended April 30, 1997. The Company's
operating loss in the quarter ended April 30, 1998 was $7.3 million, compared to
an operating loss of $1.8 million in the quarter ended April 30, 1997. Net loss
for the quarter ended April 30, 1998 was $2.2 million, or $0.05 per share,
compared to net income of $488,000, or $0.01 per share, in the quarter ended
April 30, 1997, on a diluted basis. The Company incurred acquisition related
charges from previous acquisitions of $4.0 million and a charge of $16.2 million
related to an agreement with AOL during the quarter ended April 30, 1998 and, in
the quarter ended April 30, 1997, the Company had revenue of $18.5 million and
S-3
4
expenses of $16.7 million associated with Parsons Technology, a now-divested
business, and incurred acquisition related charges of $10.9 million. Excluding
these items, the Company's income from operations for the quarter ended April
30, 1998 would have been $15.9 million and its revenue and income from
operations for the quarter ended April 30, 1997 would have been $117.8 million
and $10.1 million, respectively. Its net income would have been $0.20 per share
for the quarter ended April 30, 1998 compared to $0.14 per share for the quarter
ended April 30, 1997, on a diluted basis. See "Recent Events -- Fiscal 1998
Third Quarter Results."
Pending Acquisition of Lacerte. On May 18, 1998, the Company entered into
an Asset Purchase Agreement (the "Asset Purchase Agreement") with Lacerte
Software Corporation and Lacerte Educational Services Corporation (together,
"Lacerte") under which it agreed to purchase substantially all of Lacerte's
assets in exchange for $400 million in cash and to assume substantially all of
Lacerte's liabilities (the "Pending Acquisition"). Lacerte is a leading
developer and marketer of tax preparation software and services for tax
professionals. Its products are used primarily by tax professionals to prepare
federal and state income tax returns for individuals and small businesses, as
well as estate, trust and gift tax returns. The Company expects the Pending
Acquisition to strengthen its presence in the professional income tax compliance
market by enhancing and extending its professional tax preparation software and
service offerings, which currently consist primarily of the Company's
ProSeries(R) products. The Company also believes that the Pending Acquisition
will contribute to the Company's recurring revenue base, since users of
Lacerte's product offerings, like users of Company's tax products, must purchase
annual updates that reflect tax law and form changes.
The consummation of the Pending Acquisition is subject to certain
conditions, including receipt of regulatory approvals, but is not subject to
completion of this Offering. While Intuit expects to consummate the Pending
Acquisition in the summer of 1998, no assurances can be given as to when, or
whether, the Pending Acquisition will be completed. See "Risk Factors -- Risks
of Pending Acquisition." The Company intends to use the net proceeds of this
Offering to fund the cash purchase price of the Pending Acquisition. However, if
the Pending Acquisition is not consummated, the Company intends to use such
proceeds for working capital and other general corporate purposes, including
possible future acquisitions. Thus, the Company's management would have broad
discretion as to the allocation of the net proceeds from this Offering. See
"Recent Events -- Pending Acquisition of Lacerte" and "Use of Proceeds."
THE OFFERING
Common Stock offered by the Company..... 9,000,000 shares
Common Stock to be outstanding after the
Offering.............................. 57,679,009 shares(1)
Use of proceeds......................... To fund the purchase price of the
Pending Acquisition and, if any
proceeds remain thereafter or if
such Pending Acquisition is not
consummated, for working capital
and general corporate purposes,
including possible future
acquisitions. See "Use of
Proceeds."
Nasdaq National Market symbol........... INTU
- ---------------
(1) Based on shares outstanding as of April 30, 1998. Does not include an
aggregate of 8,052,779 shares of Common Stock issuable upon exercise of
options outstanding as of April 30, 1998 under the Company's 1993 Equity
Incentive Plan and 1996 Directors Stock Option Plan (together, the "Plans"),
325,344 shares of Common Stock issuable upon exercise of options outstanding
as of that date under several discontinued plans (the "Discontinued Plans")
and an additional 3,283,074 shares reserved for future issuance as of that
date under the Plans and the Company's Employee Stock Purchase Plan. See
"Description of Capital Stock" and Note 8 of Notes to the Consolidated
Financial Statements of the Company included in its Form 10-K for the year
ended July 31, 1997 incorporated by reference in the Prospectus accompanying
this Prospectus Supplement.
S-4
5
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS
YEAR ENDED JULY 31, ENDED JANUARY 31,
------------------------------ -------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
(UNAUDITED)
COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Net revenue................................................. $419,160 $538,608 $598,925 $368,484 $333,471
Income (loss) from continuing operations.................... (44,296) (14,355) (2,932) 16,396 29,085
Net income (loss)........................................... (44,296) (20,699) 68,308 87,636 29,085
Basic net income (loss) per share(1)........................ (1.07) (0.46) 1.47 1.90 0.61
Diluted net income (loss) per share(1)...................... (1.07) (0.46) 1.44 1.85 0.59
Shares used in computing basic net income (loss) per
share(1)................................................... 41,411 45,149 46,424 46,220 47,322
Shares used in computing diluted net income (loss) per
share(1)................................................... 41,411 45,149 47,448 47,484 48,929
YEAR ENDED MARCH 31,
----------------------------- SIX MONTHS ENDED
1996 1997 1998 MARCH 31, 1998
------- ------- ------- ----------------
(UNAUDITED)
LACERTE COMBINED STATEMENTS OF OPERATIONS DATA(2):
Revenue..................................................... $62,081 $68,129 $75,586 $64,208
Income from operations...................................... 19,752 23,388 28,871 36,983
Net income.................................................. 19,806 23,440 29,425 37,243
SIX MONTHS ENDED
YEAR ENDED JULY 31, 1997 JANUARY 31, 1998
------------------------ ----------------
(UNAUDITED)
PRO FORMA CONDENSED COMBINING STATEMENTS OF OPERATIONS
DATA(3):
Net revenue................................................. $668,399 $397,679
Income (loss) from continuing operations.................... (61,181) 14,684
Net income.................................................. 10,059 14,684
Basic net income per share(1)............................... 0.18 0.26
Diluted net income per share(1)............................. 0.18 0.25
Shares used in computing basic net income (loss) per
share(1)................................................... 55,424 56,322
Shares used in computing diluted net income (loss) per
share(1)................................................... 56,448 57,929
JANUARY 31, 1998
------------------------------------------
PRO FORMA
ACTUAL AS ADJUSTED(4) AS ADJUSTED(5)
-------- -------------- --------------
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $248,711 $ 658,986 $ 265,607
Working capital............................................. 452,384 862,659 471,095
Total assets................................................ 977,081 1,387,356 1,384,699
Long-term obligations....................................... 31,253 31,253 31,253
Total stockholders' equity.................................. 561,442 971,717 959,131
- ---------------
(1) Basic net income per share has been computed using the weighted average
number of common shares outstanding. Diluted net income per share has been
computed using the weighted average number of common shares outstanding and
potentially dilutive securities issuable upon exercise of stock options. As
discussed in Note 8 of Notes to Consolidated Financial Statements of the
Company included in its Form 10-K for the year ended July 31, 1997
incorporated by reference in the Prospectus accompanying this Prospectus
Supplement, share and per share data for the Company for fiscal 1995 have
been adjusted retroactively to give effect to Intuit's two-for-one stock
split in August 1995.
(2) Lacerte elected to be treated as an "S" corporation under the federal income
tax laws and therefore was not subject to federal income tax. The unaudited
financial information included for the six months ended March 31, 1998 is
incomplete as it was prepared solely for purposes of preparing pro forma
condensed combining statements of operations data and does not include all
of the information required by Regulation S-X for full quarterly financial
statements, such as footnotes.
(3) The pro forma condensed combining statements of operations data gives effect
to the issuance of the 9,000,000 shares of Common Stock offered by the
Company hereby and the acquisition of Lacerte by the Company as if such
issuance and acquisition had occurred as of the beginning of each period
presented by combining certain statements of operations data of (i) the
Company for the year ended July 31, 1997 and Lacerte for the twelve month
period from October 1, 1996 through September 30, 1997 and (ii) the Company
for the six months ended January 31, 1998 and Lacerte for the six months
ended March 31, 1998. The pro forma condensed combining statements of
operations data gives effect to certain adjustments, including those related
to amortization of intangibles based on the preliminary purchase price
allocation and pro forma provisions for federal income tax, but does not
reflect any potential cost savings which may be obtained following the
Pending Acquisition. The pro forma adjustments and assumptions are based on
estimates, evaluations and other data currently available. In particular,
such adjustments include information based upon the Company's preliminary
allocation of the purchase price for the Pending Acquisition, which is
subject to adjustment, which could be material in amount, based upon the
Company's further analysis. The pro forma condensed combining statements of
operations data is provided for illustrative purposes only and is not
necessarily indicative of the combined results of operations that would have
been reported had the Pending Acquisition occurred as of the beginning of
each period presented, nor does it represent a forecast of the combined
results of operations for any future period. See "Pro Forma Condensed
Combining Financial Information" and the pro forma information included in
the Company's Form 8-K dated May 18, 1998 which is incorporated by reference
in the Prospectus accompanying this Prospectus Supplement.
(4) The amounts set forth under the heading "As Adjusted" reflect the net
proceeds from the sale of the 9,000,000 shares of Common Stock offered by
the Company and after deducting the underwriting discount and estimated
offering expenses payable by the Company. Such amounts do not reflect the
pro forma effects of the Pending Acquisition. See "Use of Proceeds" and
"Capitalization."
(5) The amounts set forth under the heading "Pro Forma As Adjusted" give effect
to the acquisition of Lacerte by the Company as if such acquisition had
occurred as of January 31, 1998 by combining balance sheet data of the
Company as of January 31, 1998 and of Lacerte as of March 31, 1998 and are
adjusted to reflect the receipt of the net proceeds from the sale of the
9,000,000 shares of Common Stock offered by the Company and after deducting
the underwriting discount and estimated offering expenses payable by the
Company and the application of such net proceeds to fund the cash purchase
price for the Pending Acquisition.
S-5
6
THE COMPANY
Intuit is a leading provider of accounting, tax and consumer finance
software and services for individuals and small businesses. The Company's
mission is to revolutionize the way individuals and small businesses manage
their finances. To achieve this goal, the Company provides a range of desktop
software products, Internet-based products and services, and financial supplies.
Intuit offers its products and services in three primary areas: (i) small
business accounting software, financial supplies and related services; (ii)
personal, professional and small business tax preparation software and services;
and (iii) consumer finance software and services. The Company's products include
QuickBooks, the most popular small business accounting software; TurboTax, the
best-selling personal tax preparation software; and Quicken, the leading
personal financial software. The Company's award-winning Quicken.com website
offers a comprehensive selection of personal finance news, information and
tools.
The Company is currently focusing its strategic efforts in three
directions. First, it is expanding its small business offerings, including the
planned introduction in the fourth quarter of fiscal 1998 of QuickBooks 6.0, a
multi-user version of QuickBooks. Second, it is adding online connectivity to
its tax and personal finance desktop software. These two strategic directions
are extensions of the businesses that have historically represented the majority
of the Company's revenue. The Company's third strategic effort is to establish a
"community" of new Internet-based resources and businesses in order to establish
the Company as a premiere provider of personal and business financial
information and services on the Internet.
As part of its Internet strategy, the Company has begun: (i) to integrate
online, Web-based resources into its desktop software products such as direct
links to Quicken.com from Quicken; (ii) to put desktop software functionality
onto the Internet such as Web-based interactive tax preparation services; (iii)
to invest in new, entirely Web-based businesses such as websites that feature
personal insurance and home mortgage services; and (iv) to increase its presence
on the Internet by establishing strategic relationships with leading Internet
media companies such as Excite, Internet-based financial networks such as CNNfn
and online services providers such as AOL. Intuit believes that the dramatic
growth of the Internet will give the Company significant opportunities to grow
its business over the next several years, although the Company's Internet-based
revenue is currently less than 5% of total revenue. See "Risk Factors -- Risks
Relating to Internet Businesses."
Intuit offers its products and services in the following areas:
Small Business Accounting Software, Financial Supplies and Related
Services. Intuit's QuickBooks product brings extensive bookkeeping capabilities
to small business users in an easy-to-use design that does not require customers
to be familiar with debit/credit accounting. QuickBooks Pro(R) is an enhanced
version of QuickBooks that addresses the needs of small businesses in the U.S.
that are project, job or time-based. The Company also offers a range of
financial supplies designed for use with its small business and consumer finance
desktop software products, including paper checks, invoice forms, envelopes,
deposit slips and return address stamps. In the third quarter of 1998, the
Company launched its new small business website, Quicken.com Small Business,
which addresses the specific needs of small businesses. This website currently
offers Business CashFinder, an Internet-based solution for small business
financing, to help small businesses to obtain loans and to assist financial
institutions in reaching small business customers.
Personal, Professional and Small Business Tax Preparation Software and
Services. Intuit's TurboTax and MacInTax(R) products are designed for individual
consumers who prepare their own tax returns. The Company's ProSeries products
are designed for tax professionals who prepare tax returns for their individual
and business clients. For small business owners that prepare their own business
tax returns, the Company offers TurboTax for Business and MacInTax for Business.
Intuit's tax products are designed to be easy to use even for inexperienced
computer users, but
S-6
7
they are sophisticated enough for more complicated tax returns. Users of
Intuit's personal and professional tax preparation software can file their
federal (and some state) tax returns electronically. In February 1998, the
Company announced its TurboTax Online website, which is a Web-based interactive
tax preparation service that makes use of Internet browsers to help taxpayers
prepare and file their income tax returns through a series of questions and
answers.
Consumer Finance Software and Services. Since fiscal 1997, the Internet has
had a profound impact on Intuit's consumer finance business. The Company has
expanded its focus to include Internet-based products and services -- including
Internet-based features in the Company's desktop software. The Company's Quicken
desktop software products help users organize, understand and manage their
personal finances by providing easy methods for recording and categorizing
various types of financial transactions. Quicken products include Internet
navigation software, as well as online banking and bill payment functionality.
The Company recently announced an exclusive agreement with MECA Software, L.L.C.
("MECA") under which MECA will develop and market customized versions of Quicken
for individual financial institutions for distribution to their customers in the
U.S and Canada. See "Recent Events -- Strategic Relationships." The Company's
Quicken.com website is designed to enable people to make better financial
decisions and perform financial tasks more easily by giving them useful tools,
software applications, resources and objective information about a variety of
personal finance topics in one location. The Company does not currently charge
customers a fee to access Quicken.com, but receives revenue from companies that
advertise and sell their products or services on Quicken.com. The Company also
receives fees relating to some of the specific services that are available
through Quicken.com, such as Quicken InsureMarket(R) and QuickenMortgage(SM).
Quicken desktop software customers with Internet access can access Quicken.com
directly from within Quicken.
The Company expects to expand these product and service offerings by
capitalizing on the growth of the Internet. As more households are connecting to
the Internet, the market for online financial services, such as banking and
downloading of financial account information, is increasing. To address these
opportunities, Intuit has begun to create "marketspaces" on the Internet, such
as its Quicken InsureMarket and QuickenMortgage websites, where financial
services firms can offer complex financial products, such as personal insurance
and home mortgages, to online consumers and businesses in a cost-effective
manner. The Company generates revenue from these "marketspaces" from advertising
and transaction fees. The Company is also focusing on leveraging the "community"
nature of online services to help consumers share ideas and information and give
them greater confidence in making financial decisions. Intuit's objective is to
establish the Company as a premiere provider of personal and business financial
information and services on the Internet.
During the next few years, Intuit's primary goals for its Internet-based
businesses will be to increase customer traffic, establish additional strategic
relationships and achieve participation by a broad range of financial
institutions in the financial products and services that Intuit offers. In June
1997, the Company entered into an agreement with Excite to jointly develop,
promote and distribute a new online financial channel called Excite Business and
Investing by Quicken.com, which debuted in October 1997. Intuit is the exclusive
provider and aggregator of personal financial content for all of Excite's
Internet services. In December 1997, the Company announced a five-year agreement
with CNNfn, a financial news website, to create a co-branded personal finance
channel. The channel, which launched in December 1997, includes business news
and financial information. In February 1998, the Company announced a three-year
agreement with AOL under which Intuit is the exclusive provider, subject to
certain limited exceptions, of tax preparation and filing, multi-carrier life
and auto insurance, and multi-lender mortgage services on both the AOL service
and AOL.com, and the primary source of financial content for the Personal
Finance Web Channel of AOL.com. In addition, in March 1998, the Company
announced an agreement in principle with Bank of America, TCI and @Home to form
a venture to develop a system designed
S-7
8
to deliver financial services to consumers over their television sets. See
"Recent Events -- Strategic Relationships." Intuit expects that each of these
relationships will help it increase the customer base for its Internet-based
products and services and will eventually generate increasing revenue for Intuit
from a combination of advertising and transaction fees. The Company also had an
agreement with Yahoo!, Inc. for the 1997 tax year under which Intuit provided
tax information and content, as well as TurboTax Online, on the Yahoo! Finance
Tax Center.
The Company has both retail and direct sales organizations to market its
desktop software products. The Company sells its products through traditional
retail outlets, computer superstores, office and warehouse clubs, general mass
merchandisers and distributors. The only retailer or distributor that accounted
for more than 10% of the Company's net revenue during the past three fiscal
years and the first nine months of fiscal 1998 was Ingram Micro Inc. (12% in
fiscal 1995, 13% in fiscal 1996, 14% in fiscal 1997 and 19% in the first nine
months of fiscal 1998). OEM relationships with hardware and software
manufacturers have been an important element of the Company's retail sales
strategy over the last several years. Although OEM sales generate little revenue
(due to low pricing for OEMs) and reduce operating margins in the short term,
they have been strategically important because they have been a good source of
new customers, with the potential for future sales of more profitable products
and services. A significant portion of the Company's revenues also comes from
direct sales. The Company uses direct sales campaigns to increase its direct
sales revenues and to stimulate retail demand and increase consumer awareness of
its products. Customers can order and receive products electronically through
the Quicken Store, which is accessible through Quicken.com and other Intuit
websites. Electronic ordering and delivery are convenient for customers and less
expensive for Intuit.
Intuit began operations in March 1983, was incorporated in California in
March 1984 and reincorporated in Delaware in March 1993. Its principal executive
offices are located at 2535 Garcia Avenue, Mountain View, California, 94043, and
its telephone number is (650) 944-6000. References to "Intuit" or the "Company"
in this Prospectus Supplement mean the current Delaware corporation (Intuit
Inc.) and its California predecessor, as well as all of its consolidated
subsidiaries.
------------------------
Intuit, the Intuit logo, Quicken, QuickBooks, QuickBooks Pro, TurboTax,
MacInTax, InsureMarket and ProSeries, among others, are registered trademarks
and/or registered service marks of Intuit Inc. or one of its subsidiaries in the
United States and other countries. Quicken.com, QuickenMortgage and Business
CashFinder, among others, are trademarks and/or service marks of Intuit Inc. or
one of its subsidiaries in the United States and other countries. This
Prospectus Supplement also includes trademarks and trade names of other
companies.
RECENT EVENTS
FISCAL 1998 THIRD QUARTER RESULTS. Consistent with expected seasonal
patterns, Intuit reported net revenue of $142.0 million for the quarter ended
April 30, 1998, compared to $136.3 million in the quarter ended April 30, 1997.
The Company's operating loss in the quarter ended April 30, 1998 was $7.3
million, compared to an operating loss of $1.8 million in the quarter ended
April 30, 1997. Net loss for the quarter ended April 30, 1998 was $2.2 million,
or $0.05 per share, compared to net income of $488,000, or $0.01 per share, in
the quarter ended April 30, 1997, on a diluted basis. The Company incurred
acquisition related charges from previous acquisitions of $4.0 million and a
charge of $16.2 million related to an agreement with AOL during the quarter
ended April 30, 1998 and, in the quarter ended April 30, 1997, the Company had
revenue of $18.5 million and expenses of $16.7 million associated with Parsons
Technology, a now-divested business, and incurred acquisition related charges of
$10.9 million. Excluding these items, the Company's income from operations for
the quarter ended April 30, 1998 would have been $15.9 million and its revenue
and income from operations for the quarter ended April 30, 1997 would have been
$117.8 million and $10.1 million, respectively. Its net
S-8
9
income would have been $0.20 per share for the quarter ended April 30, 1998
compared to $0.14 per share for the quarter ended April 30, 1997, on a diluted
basis.
Intuit's financial results reflect the highly seasonal nature of its tax
and Quicken products. Historically, revenue is highest in the quarter ended
January 31. The Company experiences significantly lower revenue levels in the
quarters ended April 30, July 31 and October 31, while operating expenses to
develop and manage its products and services continue during these periods. See
"Risk Factors -- Seasonality; Quarterly Fluctuations in Revenue and Operating
Results." Although Intuit's financial results are subject to seasonality,
Intuit's quarterly revenue pattern within any given year may vary from year to
year due to non-seasonal factors such as the timing of product introductions.
Therefore, annual results may provide a more meaningful comparison of operating
results than quarter-over-quarter comparisons. In particular, there is no
seasonal pattern for the Company's QuickBooks product launches. For example, the
third quarter of fiscal 1997 benefited materially from the launch of QuickBooks
5.0 in the second quarter of fiscal 1997, while the third quarter of fiscal 1998
received no such benefit. QuickBooks 6.0 is anticipated to launch at the end of
the fourth quarter of fiscal 1998. On the other hand, revenue for the third
quarter of fiscal 1998 benefited materially from the timing shift of certain tax
revenues from the second quarter into the third quarter due in part to the
deferred accounting recognition of electronic filing service revenue. See "Risk
Factors -- Seasonality; Quarterly Fluctuations in Revenue and Operating Results"
and "-- Product Development."
During the quarter ended April 30, 1998, the Company also provided a
short-term unsecured loan in the amount of $50 million to Excite. See "Risk
Factors -- Risks Associated with Investments in Checkfree Corporation and Excite
Inc."
PENDING ACQUISITION OF LACERTE. On May 18, 1998, the Company entered into
an Asset Purchase Agreement with Lacerte under which it agreed to purchase
substantially all of Lacerte's assets in exchange for $400 million in cash and
to assume substantially all of Lacerte's liabilities. The consummation of the
Pending Acquisition is subject to certain conditions, including receipt of
regulatory approvals, but is not subject to completion of this Offering. While
Intuit expects to consummate the Pending Acquisition in the summer of 1998, no
assurances can be given as to when, or whether, the Pending Acquisition will be
completed. See "Risk Factors -- Risks of Pending Acquisition." The Company
intends to use the net proceeds of this Offering to fund the cash purchase price
for the Pending Acquisition. However, if the Pending Acquisition is not
consummated, the Company intends to use such proceeds for working capital and
general corporate purposes, including possible future acquisitions. Thus, the
Company's management would have broad discretion as to the allocation of the net
proceeds from this Offering. See "Use of Proceeds."
Lacerte is a leading developer and marketer of tax preparation software and
services for tax professionals. Its products are used primarily by tax
professionals to prepare federal and state income tax returns for individuals
and small businesses, as well as estate, trust and gift tax returns. Lacerte's
products provide an efficient user interface, but are also designed to support
complex returns and analysis. Customers can elect to license each of Lacerte's
programs for a single fee for unlimited annual use or to use them on a
"pay-per-return" or "remote entry processing" basis. Lacerte currently provides
DOS and Windows 95 versions of its products. Lacerte also provides electronic
filing services and offers seminars and self-study tutorials in a variety of
areas related to tax preparation and software usage. In its fiscal year ended
March 31, 1998, Lacerte licensed use of its products to over 30,000 customers,
primarily accounting and tax firms.
In its fiscal years ended March 31, 1997 and 1998, Lacerte had revenue of
$68.1 million and $75.6 million, respectively, and income from operations of
$23.4 million and $28.9 million, respectively. See "Selected Financial Data of
Lacerte."
The Company believes that the Pending Acquisition has the potential to
provide it with a number of strategic benefits. The Company believes that the
Pending Acquisition will contribute
S-9
10
to the Company's recurring revenue base since users of Lacerte's product
offerings, like users of the Company's tax products, must purchase annual
updates that reflect tax law and form changes. Substantially all of Lacerte's
customers renew their licenses each year. Lacerte has been a highly profitable
company, and to the extent that Lacerte's profitability can be sustained
following consummation of the Pending Acquisition, it could make a significant
contribution to the Company's earnings.
The Company believes that the acquisition of Lacerte could also enable the
Company to compete more effectively with other large providers of tax
preparation software. As the complexity of professional tax products increases,
the annual cost of producing and supporting these products also increases. The
Company believes that it is critical to expand its customer base in order to
maintain competitive prices. In addition, the Company expects the Pending
Acquisition to strengthen its presence in the professional income tax compliance
market by enhancing and extending its professional tax preparation software and
service offerings, which currently consist primarily of the Company's ProSeries
products. The Intuit ProSeries product line and Lacerte's product line can
provide complementary solutions for different practitioner preferences. Intuit's
ProSeries product line enhances ease of use by permitting data entry directly
into familiar government forms and displaying calculations on-screen. In
contrast, the Lacerte product line is designed to enhance the preparer's
productivity by presenting highly customized input sheets that reduce the time
required to complete data entry. The Company believes that having two different
products will enable it to better meet the needs of prospective customers in the
professional tax compliance market.
The Pending Acquisition, which will be accounted for under the purchase
method of accounting, is expected to result in a write-off of approximately $20
million representing in process research and development in the quarter in which
the acquisition is consummated. In addition, the Company expects to capitalize
certain intangible assets in the amount of approximately $390 million, which it
expects to amortize over periods of three to five years. However, these purchase
price allocations are preliminary and subject to adjustment, which could be
material in amount, based upon the Company's further analysis. For federal
income tax purposes, the Company expects to amortize the cost of the acquisition
over fifteen years and receive tax deductions in the amount of such
amortization.
MANAGEMENT CHANGES. On May 12, 1998, the Company announced that its Board
of Directors plans to elect William V. Campbell as Chairman of the Board and
William H. Harris, Jr. as President and Chief Executive Officer of the Company
at the next Board regular meeting scheduled for July 28, 1998. Intuit founder
Scott D. Cook will become chairman of the Executive Committee of the Board and
continue to work full-time with the Company. Mr. Cook currently serves as
Chairman of the Board, Mr. Campbell currently serves as President and Chief
Executive Officer and Mr. Harris currently serves as Executive Vice President.
These changes will be effective August 1, 1998. In addition, the Board elected
Mr. Harris as a director of the Company, effective May 12, 1998.
STRATEGIC RELATIONSHIPS. On February 17, 1998, the Company announced a
three-year agreement with AOL. Under the terms of the agreement, subject to
certain limited exceptions, Intuit is to be the exclusive provider of tax
preparation and filing, multi-carrier life and auto insurance and multi-lender
mortgage services on both the AOL service and AOL.com, which is AOL's default
site for Internet access by AOL members. In addition, on AOL.com, Intuit is to
be the primary source of financial content for the Personal Finance Web Channel.
Under the terms of the agreement, Intuit guarantees payments to AOL totaling $30
million over three years, of which approximately $16 million was paid upon
signing. The remainder of the guaranteed payments will be expensed over the
expected term of the agreement. AOL will also be eligible for additional revenue
sharing payments once Intuit has recouped certain advances and other amounts.
The Company recorded a charge to sales and marketing expenses of $16.2 million
in the third quarter of fiscal 1998 in connection with the AOL agreement.
S-10
11
On March 24, 1998, the Company announced an agreement in principle with
Bank of America, TCI and @Home to form a venture to develop a system designed to
deliver financial services to consumers over their television sets. Bank of
America is one of the nation's largest bank holding companies, TCI is a leading
cable and telecommunications company and @Home is a leader in high speed
Internet services via the cable television infrastructure. The venture is
designed to enable cable customers to use their televisions and upcoming "next
generation" set-top devices to access many of the comprehensive financial
planning and management tools currently available only to desktop software and
Internet users. The venture is expected to provide financial services from a
variety of financial institutions and other content providers utilizing Intuit
technology. These services are currently expected to be available, via set-top
devices, to customers of TCI Communications, Inc., the cable operating unit of
TCI, beginning in 1999. @Home has agreed in principle to integrate the venture's
interactive financial services into its high speed Internet service. The
establishment of this venture is subject to the negotiation and execution of
definitive agreements and all appropriate regulatory approvals, and therefore
there can be no assurance that the venture will be established until such
agreements and approvals are in place.
On March 30, 1998, the Company announced an exclusive agreement with MECA
under which MECA will develop and market customized versions of the Company's
Quicken personal financial management software with unique branding and other
features for individual financial institutions for distribution to their
customers in the U.S. and Canada. Intuit will work with MECA to deliver custom
versions to a broad range of financial institutions, including banks, brokerages
and insurance companies. MECA, which is jointly owned by Bank of America,
NationsBanc, U.S Bancorp, Fleet Financial Group, Royal Bank of Canada, Citibank
and New England Financial, is a leader in the design, development and execution
of customized software and service solutions for the electronic delivery of
financial services products and services.
JOINT VENTURE. In May 1998, the Company formed a joint venture company to
focus on development of certain Web-oriented finance products. The joint venture
company has received $23 million through the sale of equity interests to private
investors and obtained conditional commitments to receive up to an additional
$23 million in capital contributions from these investors. Affiliates of Morgan
Stanley & Co. Incorporated are the principal investors in this joint venture
company, and venture capital funds managed by Kleiner Perkins Caufield & Byers,
of which L. John Doerr, a director of the Company, is a general partner, have
agreed to invest up to $1 million in the joint venture company. In exchange for
its equity interest in the joint venture company, the Company has granted the
joint venture company licenses to certain technology and intellectual property
rights related to certain Web-oriented finance products and has agreed not to
compete in certain areas of server-based personal finance for a period of ten
years. The Company will manage the development of the new products and the
commercialization efforts of the joint venture company and has been granted the
option to purchase the equity interests of the investors in the joint venture
company during a period of time beginning two years after the formation of the
joint venture company at a price to be determined by a formula. The cost of
exercising the option to purchase the investors' equity interests would be
substantial and would result in the acquisition of certain intangible assets
that would be amortized over the expected useful life of the new company's
technology. The development of Web-oriented finance products is subject to
significant technological risks, and there can be no assurance that the
development will be successful or that the Company's purchase option will be
exercised.
S-11
12
RISK FACTORS
This offering involves a high degree of risk. In addition to the other
information set forth in this Prospectus Supplement, the accompanying Prospectus
and the documents incorporated therein by reference, the following risk factors
should be considered carefully in evaluating the Company and its business before
purchasing any of the shares of Common Stock offered by this Prospectus
Supplement and the accompanying Prospectus. This Prospectus Supplement and the
documents incorporated in the Prospectus by reference contain certain
forward-looking statements that involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations and intentions. The
cautionary statements made in this Prospectus Supplement and the documents
incorporated by reference in the Prospectus should be read as being applicable
to all related forward-looking statements wherever they appear in this
Prospectus Supplement or the documents incorporated by reference in the
Prospectus. The Company's actual results could differ materially from those
discussed in this Prospectus Supplement or the documents incorporated by
reference in the Prospectus. Factors that could cause or contribute to such
differences include those discussed below, as well as those discussed elsewhere
in this Prospectus Supplement and the documents incorporated by reference in the
Prospectus.
RISKS OF PENDING ACQUISITION. The Company has entered into an Asset
Purchase Agreement with Lacerte to acquire substantially all of Lacerte's assets
in exchange for $400 million in cash and the assumption of substantially all of
Lacerte's liabilities, but this transaction has not yet been consummated.
Consummation of the Pending Acquisition is subject to certain conditions,
including expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). No
assurance can be given as to when, or whether, the Pending Acquisition will be
completed. The Asset Purchase Agreement entitles either party to terminate the
agreement if the Pending Acquisition has not been completed by the 120th day
after Lacerte files its notification under the HSR Act (which is expected to
occur on or about May 22, 1998), subject to extension of up to an additional 60
days under certain circumstances. If the Pending Acquisition is not completed by
the applicable date, the Company would be obligated to pay Lacerte up to $20
million, unless the Company had terminated the Asset Purchase Agreement as a
result of a material breach by Lacerte or as a result of a material inaccuracy
in Lacerte's representations and warranties. In addition, the Company is
entitled to terminate the Asset Purchase Agreement at any time prior to closing,
upon payment to Lacerte of $10 million if such termination occurs within 60 days
of Lacerte's initial filing under the HSR Act or $20 million if the termination
occurs after the initial 60 day period.
The Company intends to use the net proceeds from this Offering to fund the
cash purchase price of the Pending Acquisition. However, consummation of the
Pending Acquisition is not conditioned on completion of this Offering. If this
Offering is not completed, the Company may elect to complete the Pending
Acquisition using other cash resources or to terminate the Pending Acquisition
and pay the applicable termination fee to Lacerte. If this Offering is completed
but the Pending Acquisition is not consummated, the Company intends to use the
proceeds of this Offering for working capital and other general corporate
purposes, including possible future acquisitions. Thus, the Company's management
would have broad discretion as to the allocation of the net proceeds from this
Offering. See "Use of Proceeds."
The Pending Acquisition and Lacerte's business are subject to a number of
risks that could adversely affect the Company's ability to achieve the
anticipated benefits of the Pending Acquisition. The Company currently intends
that Lacerte will remain as a separate entity and that its personnel and its
sales and marketing, research and development, customer support and
administrative organizations will not be combined with those of the Company.
This could create operating inefficiencies, could make it more difficult to
retain key personnel and could cause difficulties in communicating with, and
sharing information between, the Company's and Lacerte's operations, including
with respect to the preparation of combined financial statements. These
challenges may
S-12
13
be exacerbated by the fact that Lacerte's operations and personnel are located
in Texas, where the Company does not currently have any material operations. The
need to focus management's attention on establishing relationships with, and
procedures for communicating with, Lacerte may reduce the ability of the Company
to successfully pursue other opportunities for a period of time. The departure
of key Lacerte employees or significant numbers of Lacerte employees could have
a material adverse effect on the Company. The Company may face difficulties in
retaining Lacerte's customers and customers' uncertainties as to the Company's
plans and ability to support both Lacerte's products and its existing ProSeries
software after the acquisition could adversely affect the Company's ability to
retain these customers, which would have a material adverse effect on the
Company. Lacerte is beginning a significant transition of its product line to a
planned 32-bit version, and this transition will require significant development
efforts. There can be no assurance that Lacerte will successfully develop this
version of its products, or that this new version of its products will perform
as expected. Departures of engineering personnel following the acquisition, or
other uncertainties caused by the acquisition, could adversely affect the
ability of Lacerte to develop this product. In the event that the Company and
Lacerte in the future determine to integrate their operations, such integration
could also present a number of risks and result in the diversion of management's
attention.
Under the terms of the Asset Purchase Agreement, the Company is assuming
substantially all of the liabilities related to Lacerte's business with the
exception of certain tax liabilities. If unanticipated liabilities are
discovered after the consummation of the Pending Acquisition, the Company will
likely bear the obligation to satisfy those liabilities, which could have a
material adverse effect on the Company's operating results. The Pending
Acquisition will also result in a substantial write-off related to in process
research and development at the time of closing the acquisition and substantial
ongoing amortization expenses, which will have a negative impact on the
Company's future operating results. See "-- Risks Related to Acquisitions,"
"Recent Events -- Pending Acquisition of Lacerte" and "Unaudited Pro Forma
Condensed Combining Financial Information."
SEASONALITY; QUARTERLY FLUCTUATIONS IN REVENUE AND OPERATING
RESULTS. Intuit's business is highly seasonal. Sales of tax products are heavily
concentrated from November through March. Sales of consumer finance products are
typically strongest during the year-end holiday buying season, and therefore
major consumer finance product launches usually occur in the fall to take
advantage of this consumer buying pattern. These seasonal patterns mean that
revenue is usually strongest during the quarter ending January 31. The Company
experiences lower revenues for the quarters ending April 30, July 31 and October
31 while operating expenses to develop and manage its products and services
continue during these periods, which can result in significant operating losses.
The seasonality of Intuit's revenue patterns is likely to be exacerbated by the
Pending Acquisition. See "Selected Financial Data of Lacerte."
Operating results can also fluctuate from quarter to quarter for other
reasons, such as changes in product launch dates, product price cuts and
non-recurring events such as acquisitions. In addition, products are generally
shipped as orders are received, and, consequently, quarterly sales and operating
results depend primarily on the volume and timing of bookings received during
the quarter, which are difficult to forecast. Also, a significant portion of the
Company's operating expenses are relatively fixed, and planned expenditures are
based on sales forecasts. If net sales do not meet expectations in any given
quarter, the Company's operating results or financial condition may be adversely
affected. Because of these factors, the Company believes that consecutive
quarter comparisons of operating results, as well as year-over-year quarterly
comparisons, may not be meaningful and do not necessarily indicate future
performance. In particular, there is no seasonal pattern for the Company's
QuickBooks product launches. For example, the third quarter of fiscal 1997
benefited materially from the launch of QuickBooks 5.0 in the second quarter of
fiscal 1997, while the third quarter of fiscal 1998 received no such benefit.
QuickBooks 6.0, a multi-user version of QuickBooks, is anticipated to launch at
the end of the fourth quarter of
S-13
14
fiscal 1998. To the extent such launch is delayed, the Company's operating
results for the fourth quarter of fiscal 1998 and for fiscal 1998 as a whole
would be materially adversely affected. See "-- Product Development."
COMPETITION. Although the Company is a leading provider of products and
services in its principal business areas, it faces intense competition from many
companies in all of its business areas, both domestically and internationally.
Some of the Company's major competitors in each business area are identified
below. Intuit believes the most important competitive factors for desktop
software are product features, ease of use, quality and reliability, brand name
recognition, timing of product launches compared to competitors, price, access
to distribution channels and quality of technical support services. In
Internet-based products and services, the most critical factors for competitive
success are speed in getting new products and services to market, the ability to
distribute them effectively, the ability to generate significant website
traffic, brand name recognition, product features and ease of use. Strategic
relationships with leading Internet media companies, Internet-based networks and
online service providers are also important for generating and distributing a
wide variety of Web-based content to a large audience.
Customer demands change rapidly, and the Company has to respond quickly
with new products and accelerated product release schedules to remain
competitive. This is particularly true in the Company's Internet-based
businesses, where product and service launches happen continuously. Although the
Company believes that its current products and services are generally well-
accepted by customers, the Company cannot be certain that competing companies
will not introduce significantly improved and/or lower-priced products and
services in the future, which could have a material adverse impact on the
Company's revenue and profitability. In addition, new personal computer hardware
platforms or other technological changes may provide new entrants with
opportunities to make substantial inroads into the markets in which the Company
competes.
Some of the Company's competitors have significantly greater financial,
technical and marketing resources and broader product lines than Intuit. In
particular, Microsoft currently competes with the Company in a number of product
and service areas, and may begin to compete in other areas such as tax
preparation software in the future. Actions taken by Intuit's competitors, such
as cutting prices, increasing advertising (especially advertising targeted at
Intuit's customers) and releasing new products before the Company does, can have
a negative impact on revenue and profitability, and can hinder the Company's
ability to keep existing customers and acquire new customers. In particular, if
price competition significantly increases, the Company could be forced to reduce
the prices of its products, which would impact profitability. Prolonged price
competition would have a material adverse effect on the Company's operating
results and financial condition.
Intuit's major competitors in small business accounting software are
currently Peachtree Software (a division of ADP) and The Sage Group PLC (based
in the United Kingdom). Peachtree offers a multi-user accounting software
product that will compete with the new multi-user version of QuickBooks that the
Company plans to release in late fiscal 1998. Sage is currently the Company's
major competitor in Europe. In addition, Microsoft recently announced that it
will offer versions of Microsoft Money targeted to the small business market in
Europe, so the Company expects that Microsoft will begin to be a major
competitor in this market in Europe once its products are released.
Intuit's financial supplies business competes with a number of business
forms companies, such as Deluxe Business Systems, New England Business Services
and Moore Business Forms. The Company is also seeing increased competition from
the direct mail check printers that now offer computer checks, as well from
banks. In addition, online bill payment services from a variety of companies
offer a competitive alternative to printed checks. Significant competitive
factors for the supplies business include ordering convenience, distribution
channels, product quality, speed of delivery and price. The Company is
experiencing increased pricing pressures from printers of "generic" checks and
forms, which could negatively affect revenue and profitability for its supplies
business.
S-14
15
In the personal tax area, the Company's major competitor is currently Block
Financial Corporation, the makers of TaxCut software. During fiscal 1997, TaxCut
was priced very aggressively, and was released a little earlier than Intuit's
personal tax products. As a result, even though fiscal 1997 total sales of
TurboTax grew significantly, the growth rate was lower than the growth rate of
industry-wide retail sales of personal tax software. During fiscal 1998, the
Company released its personal tax products several weeks earlier than in fiscal
1997, which enabled the Company to compete more successfully with TaxCut during
fiscal 1998. If Microsoft, either alone or in conjunction with a third party,
were to offer an online and/or personal tax desktop product, competition for
such tax preparation software could increase significantly. The professional tax
preparation software industry is highly competitive. Competitors in the United
States include RIA/Creative Solutions ("RIA"), Commerce Clearing House ("CCH"),
Lacerte and TAASC. Certain of such competitors, including RIA and CCH, have
substantially greater resources than the Company. The Company's competitors in
international tax include The Learning Company in Canada, Lexware and Viso in
Germany and TaxCalc in the United Kingdom.
In desktop consumer finance software, Microsoft is currently Intuit's
primary competition in both domestic and international markets. Quicken competes
directly with Microsoft Money, which is aggressively promoted with free product
offers through various distribution channels, and with advertising targeted at
Quicken users. These competitive pressures, as well as other factors, have
negatively affected Quicken revenue and profitability, as the Company has
lowered prices and research and development expenses in order to remain
competitive and has concentrated on OEM distribution in order to build its
installed base of users.
There are many competitors for Intuit's consumer finance and other products
and services, and the Company expects that competition will increase as it
expands its offerings, and as more companies expand their businesses onto the
Internet. There are relatively low barriers to entry for Internet-based
businesses, so the Company faces competition from new and relatively small
companies as well as established software companies. The Company also faces
competition from financial institutions that are developing their own financial
software and websites. The Company's Web-based investment-related services and
the Quicken.com website compete with online financial publishers and the
financial areas on numerous online services such as AOL and Yahoo!, as well as
financially-oriented websites such as MSN Investor. In addition, in connection
with a product development joint venture established by the Company and certain
private investors, the Company has agreed with the joint venture not to compete
in certain areas of Web-based personal finance for a period of ten years. See
"-- Risks Relating to Internet Businesses" and "Recent Events -- Joint Venture."
PRODUCT DEVELOPMENT. The Company believes that its future success will
depend in large part on its ability to enhance existing products and services
and to develop and introduce new products and services on a timely basis. The
markets in which the Company competes, particularly in the Internet area, are
characterized by rapidly changing customer demands, continuous technological
changes and improvements, shifting industry standards and frequent new product
introductions by other companies. Changes in any of these areas can quickly
render existing products obsolete, so the Company's success depends on its
ability to respond rapidly to these changes with new products and services, as
well as improvements to existing products and services. Failure to develop and
introduce new products and services that satisfy customer demands in a timely
manner, due to resource constraints or technological or other reasons, could
have a material adverse effect on the Company's operating results and financial
condition. In addition, only a small percentage of new software products achieve
any degree of sustained market acceptance.
During fiscal 1998, the Company announced that it was developing a
multi-user version of QuickBooks. The Company currently expects that the product
will be available by the end of fiscal 1998. However, if the launch date is
delayed (which is possible given the uncertainties of complex software
development), the delay would have a substantial negative impact on revenue and
net income for the fourth quarter of fiscal 1998 and for fiscal 1998 as a whole.
Providing technical
S-15
16
support for this new product will present challenges as the Company does not
have experience supporting multi-user products, and all new software products
have a risk of "bugs." See "-- Product Quality." Higher technical support costs
could also negatively affect operating results.
The development of tax preparation software presents a unique challenge
because of the demanding annual development cycle required to incorporate tax
law changes each year. The Company cannot predict how complex the tax law
changes will be each year, or when tax forms will be available from the IRS and
state tax agencies. However, since the tax return preparation season is brief,
it is imperative that the Company release final product versions for any tax
year as early as possible. Late release of these products in any year could
cause the Company's current and prospective customers to choose a competitive
product for that year's tax return preparation season, making it more difficult
for the Company to sell its products to those customers in future tax return
preparation seasons. If for any reason the Company failed to release its tax
products in time for use during the then current tax year, it would lose
substantially all of its revenues for that fiscal year, and the Company's
ability to market tax preparation software successfully in the future would be
greatly impaired. In addition, the Company guarantees to its professional
customers that its state tax products will be released by specified dates. Late
release of such products could result in a significant loss of revenues in that
fiscal year as a result of the guarantee and the loss of future business. The
rigid development timetable for tax products also increases the risk of errors
in those products. See "--Product Quality."
During fiscal 1998, Intuit expanded the use of its internally-developed
electronic filing service. Although the electronic filing service performed well
during the tax season just completed, as the Company's electronic filing program
expands in the future, so will the risks involved. For example, if the Company
has technical problems that prevent customers from filing their returns,
particularly right before the April 15 filing deadline, the Company could face
serious financial and public relations consequences.
As Intuit expands its Internet-based businesses, it expects that customers
will be concerned about privacy and security of the personal information they
provide when using products and services. The Company currently incorporates
extensive security measures into its products and services, and it is developing
a comprehensive customer privacy policy. However, a major breach of customer
privacy or security, even by another company, could have a negative effect on
Intuit.
PRODUCT QUALITY. New software products often contain undetected errors or
"bugs" that can adversely affect the performance of the product or damage a
user's data. These problems can be expensive to fix, particularly if the Company
needs to do a major maintenance release or pay refunds to customers. Poor
product quality can cause the Company to lose revenue, customers and market
share or incur higher technical support costs. Any major product bugs could have
a material negative effect on the Company's financial performance. For example,
during fiscal 1995 the Company notified its customers that several of its tax
products for the 1994 tax year had defects, and the Company released revised
versions of the software at no charge. These defects resulted in negative
publicity, customer dissatisfaction and a $1.3 million expense in the second
quarter of fiscal 1995. Less serious defects were discovered during fiscal 1996
and, although the defects did not have a serious impact on customer
satisfaction, the Company incurred expenses of approximately $1.2 million to
correct the problem. There can be no assurance that errors or omissions will not
be found in new products or releases after commencement of commercial shipments,
resulting in substantial costs, negative publicity, customer dissatisfaction,
loss of market share or failure to achieve any significant degree of market
acceptance. Any such occurrence could have a material adverse effect on the
Company's business, operating results and financial condition.
In addition, errors in Intuit's products can also potentially result in
other types of liability to customers. For example, the Company guarantees the
accuracy of the tax calculations performed by its federal personal tax products
and has agreed to reimburse any penalties paid by a consumer
S-16
17
customer to the Internal Revenue Service solely as a result of miscalculation on
a form prepared using the Company's personal tax products. If these products
contain a calculation error affecting a significant number of consumer
customers' returns, the Company could be subject to liability claims and be
required to make substantial payments, and its operating results and financial
condition could be materially adversely affected.
PRODUCT RETURNS. Like most other software companies, the Company has a
generous return policy for its distributors and retailers, although it
encourages them to make returns promptly. The Company has an unconditional
return policy for direct customers. The Company establishes reserves for product
returns in its financial statements, based on estimated future returns of
products, taking into account promotional activities, the timing of new product
introductions, distributor and retailer inventories of its products and other
factors. In the past, returns have not generally exceeded the reserves the
Company has established for them. However, if in the future retail sell-through
of a major product falls significantly below expectations, or if competitors'
promotional or other activities result in increased product returns, returns
could exceed the reserves established for them and could have a negative effect
on the Company's financial performance. In addition, the rate of product returns
could increase as other changes in Intuit's distribution channels occur or
existing products become obsolete.
During the tax return preparation season, Intuit generally ships
significantly more tax products to its distributors and retailers than it
expects them to sell during the tax season, in order to reduce the risk that
distributors or retailers will run out of products during the short tax season.
As a result, Intuit has historically accepted significant returns of its tax
products each year, principally from April to September, and expects to continue
to do so in the future.
DEPENDENCE ON DISTRIBUTION CHANNELS. The Company markets its desktop
software in North America through traditional retail software outlets, computer
superstores, office and warehouse clubs, general mass merchandisers and
distributors. The only retailer or distributor that accounted for more than 10%
of the Company's net revenue during the past three fiscal years and the first
nine months of fiscal 1998 was Ingram Micro Inc. (12% in fiscal 1995, 13% in
fiscal 1996, 14% in fiscal 1997 and 19% for the first nine months of fiscal
1998).
There are increasing numbers of companies competing for access to the
distribution channels used by the Company, and Intuit's arrangements with its
distributors and retailers may be terminated by either party at any time without
cause. Distributors and retailers generally carry competing products. Retailers
of Intuit's products typically have a limited amount of shelf space and
promotional resources, for which there is intense competition. There can be no
assurance that distributors and retailers will continue to purchase Intuit's
products or provide Intuit's products with adequate levels of shelf space and
promotional support. Any termination or significant disruption of Intuit's
relationship with any of its major distributors or retailers, or a significant
reduction in sales volume attributable to any of Intuit's principal resellers,
could materially adversely affect the Company's results of operations and
financial condition. Also, the bankruptcy, deterioration in financial condition
or other business difficulties of a distributor or retailer could render
Intuit's accounts receivable from such entity uncollectible, which could result
in a large write-off having an adverse effect on the Company's operating results
and financial condition.
During the past few years, there has been increasing consolidation among
retailers. This trend has created a number of large retailers with significant
bargaining power, which makes it more difficult for the Company to negotiate
financially favorable terms. The Company expects this consolidation trend to
continue during the remainder of fiscal 1998 and beyond.
An element of the Company's retail sales efforts that has been important
over the last several years is its original equipment manufacturer, or "OEM,"
relationships with hardware and software manufacturers. The Company sells its
software to OEMs to be combined with their products, which are then sold to
consumers. Although these OEM relationships have been a good source of new
customers for Intuit, the sale prices the Company receives for OEM sales are
much lower than
S-17
18
retail or direct sale prices. If competitive pressures or other factors cause
the Company to further increase the percentage of its products that are sold
through OEMs, the Company's revenue and operating margins could be adversely
affected.
RISKS RELATED TO ACQUISITIONS. Since the beginning of fiscal 1995, Intuit
has acquired several businesses, including Parsons Technology, Inc. in September
1994 (which Intuit sold in August 1997); Personal News, Inc. in June 1995;
Milkyway, K.K. in January 1996; Interactive Insurance Services Corp. in June
1996; GALT Technologies, Inc. in September 1996; Somma France SARL in February
1997; and Nihon Micom Co. Ltd. in March 1997. Although Intuit believes these
transactions were in the best interests of Intuit and its stockholders, there
are significant risks associated with these transactions. The acquisitions have
expanded Intuit's size, product lines, personnel and geographic locations.
Intuit's ability to integrate and organize these new businesses has required
improvements in its operational, financial and management information systems
and further improvements will be necessary. Although Intuit has taken steps to
improve its internal processes to address issues presented by its growth through
acquisitions, it has in the past experienced significant operational
difficulties in its order entry and shipping systems and in providing technical
support to customers. Intuit is likely to face the same challenges to the extent
that the Pending Acquisition is consummated. See "-- Risks of Pending
Acquisition." There is no assurance that similar problems will not occur with
other acquisitions in the future or that they will not have a material adverse
effect on Intuit's results of operations.
The above-described acquisitions have also resulted in significant
amortization expenses, including amortization of purchased software (reflected
in cost of goods sold) and amortization of goodwill and purchased intangibles
(reflected in operating expenses), as well as charges for purchased research and
development. These expenses have had a negative impact on the Company's
operating results, resulting in a reduction in net income of $48.7 million in
fiscal 1996, $34.6 million in fiscal 1997 and $3.7 million in the first nine
months of fiscal 1998. Amortization expense related to completed acquisitions
will continue to have a negative impact on operating results in future periods.
The Pending Acquisition, which will be accounted for under the purchase method
of accounting, is expected to result in a write-off of approximately $20 million
representing in process research and development in the quarter in which the
acquisition is consummated. In addition, the Company expects to capitalize
certain intangibles in the amount of approximately $390 million, which it
expects to amortize over periods of three to five years. However, such
expectations are based upon a preliminary allocation of the purchase price for
the Pending Acquisition, which is subject to adjustment, which could be material
in amount, based upon the Company's further analysis. See "-- Risks of Pending
Acquisition" and "Recent Events -- Pending Acquisition of Lacerte." If Intuit
completes additional acquisitions in the future, there could be an incremental
negative impact on operating results from future amortization relating to such
acquisitions.
RISKS RELATING TO INTERNET BUSINESSES. Since fiscal 1996, one of the
Company's strategic business efforts has been to establish a "community" of new
Internet-based resources and businesses in order to establish the Company as a
premiere provider of personal and business financial information and services on
the Web, and during the past two years it has invested significant resources to
lay some of the groundwork for establishing these new businesses. The Company
believes that the dramatic growth of the Internet and the Web will give it
significant opportunities to grow its business over the next several years, but
fiscal 1998 year-to-date Internet-based revenue is less than 5% of total
revenue. The Company expects its Internet-based businesses to grow in absolute
dollars, but it cannot predict if or when they will generate significant revenue
or profits. The Company faces many risks and challenges in this area, including
the following:
The Internet represents a new business model for Intuit, where revenues are
expected to come from advertising and marketing service fees instead of software
product sales. In order to generate significant revenue from these sources, at a
minimum the Company needs to dramatically
S-18
19
increase consumer traffic to its websites. This may require establishing
additional strategic relationships, such as the Company's relationships with
Excite, AOL and CNNfn. The Company may not be able to establish these additional
relationships, especially given the relatively limited number of leading
Internet companies. To the extent that competitors of the Company establish
relationships with such companies, particularly exclusive relationships, the
Company's ability to expand its Internet businesses could be adversely affected.
Even if the Company is successful in establishing these relationships with
leading Internet companies, they may not bring significant increased traffic to
its websites. The Company also needs to quickly and successfully build new
skills as a website content provider and publisher, which are somewhat different
from its traditional desktop software development and programming skills. In
particular, development cycles for Web-based products and services are
essentially continuous while desktop software products generally have much
longer and more predictable development cycles. In addition, customers may
refuse to transact business over the Internet due to privacy or security
concerns. A major breach of customer privacy or security, even by another
company, could have a significant negative effect on Intuit. The Company cannot
be certain that consumers' use of the Internet, particularly for commercial
transactions, will continue to increase as rapidly as it has during the past few
years. To the extent that the use of the Internet for transacting business does
not grow as a result of privacy or security concerns, or otherwise, the
Company's Internet-based businesses would be adversely affected.
In addition, the Company believes that sales and marketing and research and
development expenses related to Internet-based products and services will
continue to increase as a percentage of net revenue for the remainder of fiscal
1998 and into fiscal 1999. This could have an adverse effect on the Company's
operating results, particularly if revenue from these services does not meet
expectations.
A component of the Company's connectivity strategy has been its decision to
move from a proprietary electronic communications link between its software and
financial institutions, to an Internet-based link, and its collaboration with
several other parties (including Microsoft and Checkfree) to merge its efforts
in a jointly developed standard called Open Financial Exchange(TM) ("OFX").
While the Company believes that OFX is the right strategic approach for Intuit,
the Company faces risks and challenges in implementing it. OFX is a new,
unproven technology. Financial institutions may not accept and implement OFX as
rapidly as the Company would like, or they may adopt alternative connectivity
standards that may or may not support interoperability with OFX. To some degree,
expansion of the Company's small business and personal finance product
initiatives is dependent upon industry adoption of OFX as a connectivity
standard. There can be no assurance that financial institutions or others will
adopt and implement the OFX protocol, and their failure to do so would
unfavorably inhibit the Company's ability to expand the connectivity of its
product offerings to other environments or applications in the future. In
October 1997, the Company announced a joint development effort with Integrion
Financial Network (a consortium of retail banks that developed the Gold Standard
connectivity specification) to develop technology that will allow users of
Intuit software to connect to financial institutions that support the Integrion
platform. Although the Company currently expects that connectivity to the
Integrion platform will be available in Quicken products beginning in fiscal
1999, there can be no assurance that these joint development efforts will be
successful or be completed in a timely manner.
The Company faces intense competition in its Internet-based businesses.
There are very low barriers to entry, and the market is extremely fragmented,
making it difficult for any one company to acquire a "critical mass" of
customers. Many of Intuit's competitors can afford large investments in this
business. The Company may be unable to adapt its operational infrastructure to
support its Internet-based businesses and the complex operational requirements
of its strategic relationships. The operational requirements for online
businesses are very different from the requirements of Intuit's desktop software
business.
S-19
20
Because the Company's products and services are available over the Internet
in multiple states and foreign countries, such jurisdictions may claim that the
Company is required to qualify to do business as a foreign corporation, and to
pay sales tax, in each such state or foreign country. The failure of the Company
to qualify to do business and to pay sales tax in a jurisdiction where it is
required to do so could subject the Company to liabilities and penalties.
Further, to the extent that states or foreign countries were generally
successful in imposing sales tax on Internet commerce, the growth of the use of
the Internet could slow substantially, which could have an adverse effect on the
growth of the Company's Internet-based businesses.
YEAR 2000 RISKS AND LITIGATION. Intuit is in the process of evaluating its
internal computer systems, as well as the software products it sells, to
determine whether modifications will be required to prevent problems related to
the Year 2000. Based on preliminary assessments, the Company believes that costs
required to achieve Year 2000 compliance (including costs incurred to date) will
not be material. However, actual costs may increase depending on the outcome of
its continuing evaluations. In addition, the products and services of certain
other companies with whom the Company has strategic relationships may not be
Year 2000 compliant, which could create issues with respect to the use of the
Company's products and services through these strategic partners.
Class action lawsuits were filed in California on April 29, 1998 and in New
York on May 14, 1998 entitled Issokson v. Intuit Inc. and Roccochilelli v.
Intuit Inc., respectively, alleging Year 2000 issues with the online banking
functionality in Quicken for Windows versions 5 and 6 and for Quicken for
Macintosh versions 6 and 7. The Company does not believe the lawsuits have merit
and intends to defend them vigorously. Intuit has been working with financial
institutions to provide solutions to its current online banking customers and is
planning to make such solutions available before the customers experience any
Year 2000 problems.
RISKS ASSOCIATED WITH INVESTMENTS IN CHECKFREE CORPORATION AND EXCITE
INC. As of April 30, 1998, Intuit held 10.6 million shares of Checkfree
Corporation common stock (representing approximately 19% of Checkfree's
outstanding common stock) and 2.9 million shares of Excite common stock
(representing approximately 13% of Excite's outstanding common stock). Although
the Company had significant unrealized gains on these holdings as of April 30,
1998 (reported as a separate component of stockholders' equity), there can be no
assurance that the value of these shares will not decline in the future. The
Company's ability to dispose of both the Checkfree and Excite stock is
restricted by volume trading limitations and other contractual arrangements,
which increases the Company's exposure to the risk of owning these securities.
If these or other future investments become impaired (more than a temporary
decline in value), or if they are sold at a substantial loss, the decline in
value or loss would be reflected as other expense and there could be a material
adverse impact on net income.
In addition, on April 30, 1998, the Company provided a short-term unsecured
loan (due within less than one year) in the amount of $50 million to Excite and
may provide additional financing to Excite in the future. The loan is on a
parity with all other indebtedness of Excite but is subordinated to Excite's
current $6 million credit facility. To the extent that Excite is unable to, or
fails to, satisfy its obligations with respect to this indebtedness, the
Company's operating results and financial condition would be adversely affected.
CUSTOMER SERVICE AND TECHNICAL SUPPORT. The Company provides customer
service and technical support for its products primarily by telephone, fax and
electronic mail, and it currently operates major domestic telephone support
centers in Tucson, Arizona and Fredericksburg, Virginia, and a telephone sales
and service center in Mountain View, California. The Company currently has a
full-time customer service and technical support staff of about 1,000 employees
but during periods of peak call volumes (such as during the tax return filing
season, or shortly after a major product launch), it hires many seasonal
employees and outsources some of the work.
S-20
21
Despite its efforts to adequately staff and equip its customer service and
support operations, during peak periods, the Company occasionally cannot respond
promptly to all customer calls. The Company may also have an unusually high
volume of calls, and be unable to respond promptly, if large numbers of
customers' order shipments are delayed or if the Company's products have bugs.
For example, in fiscal 1995 the Company had some operational problems with its
direct order entry system that resulted in a high volume of calls, customer
dissatisfaction, lost business and negative publicity. During fiscal 1996,
customers had difficulties connecting to Intuit's online banking and bill
payment services, and the Company incurred unexpected expenses for operational
improvements. The new multi-user QuickBooks product may also result in
significantly higher customer service and technical support expenses since
customers are likely to need considerably more assistance with this more complex
product. If the Company experiences customer service and support problems in the
future they could adversely affect customer relationships and financial
performance.
In June 1997, the Company decided to close a major technical support
facility in Rio Rancho, New Mexico and consolidate its operations with its
Tucson, Arizona call center. The Company also restructured its European
technical support operations during fiscal 1997. The Company's technical support
and other restructuring activities during fiscal 1997 resulted in a
restructuring charge of $10.4 million. Although the Company expects that these
changes will allow it to reduce customer service and technical support as a
percentage of revenue, it cannot be certain that they will.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. The Company's international
revenues come primarily from Japan (small business products) and Germany, Canada
and the United Kingdom (small business, consumer finance and personal tax
products). The Company also operates in smaller European, Asian and Latin
American markets. Developing products for foreign markets is more time-consuming
and costly than developing products for the U.S. market. Delays or other
problems in product launches may be more likely because of these factors, and
they can impact the Company's financial performance. For example, the Company's
German subsidiary experienced delays in two critical product launches in fiscal
1996 that resulted in excess inventory levels in the distribution channel, and a
delay in releasing the German QuickBooks product during fiscal 1998, which
contributed to lower revenues in the first two quarters of fiscal 1998 compared
to fiscal 1997. Economic conditions in international markets can also negatively
affect Intuit's business. The economic situation in Japan has had a negative
impact on international revenue and profits during fiscal 1998, and the general
weakness in European consumer software markets impacted fiscal 1996 results. The
Company's international revenue and expenses are currently denominated in a
variety of foreign currencies and the Company does not currently engage in any
hedging activities. Although the impact of currency fluctuations has not been
significant in the past, this could change in the future, and it could have a
negative impact on the Company's operating results and financial condition.
Other risks in the Company's international operations could also have a negative
impact on its business, including unexpected changes in regulatory requirements,
tariffs and other trade barriers; longer accounts receivable payment cycles and
collection difficulties; the burden of complying with a wide variety of foreign
laws (including financial reporting and record-keeping requirements); possible
adverse tax consequences including repatriation of earnings; and potentially
less protection for its intellectual property rights under foreign laws.
In response to disappointing results in Europe during the past several
quarters, the Company has accelerated the process of refocusing its product
development efforts toward small business products in selected larger markets.
As a result, the Company will be devoting fewer resources to consumer finance
and tax products, and to smaller geographic markets. This shift in strategy is
likely to negatively impact international operating results for the remainder of
the fiscal year.
DEPENDENCE ON KEY PERSONNEL. The Company believes that its future success
and growth will depend on its ability to attract and retain qualified employees
in all areas of its business. The Company has employment agreements with a few
of its executive officers, but the agreements do not assure the Company of
continued services. The Company does not maintain any key person
S-21
22
life insurance policies. The Company does not have any employment agreements
with non-executive employees. Although the Company believes it offers
competitive compensation and a good working environment, it faces intense
competition for qualified employees, particularly persons with technical and
marketing expertise. Like many of its competitors, Intuit has had difficulties
during the past few years hiring and retaining employees. At certain times
during the past few years, employee morale and retention have been hindered by
declines in the Company's stock price and the value of employee stock options.
To address this problem, the Company has in the past "repriced" certain stock
options, including during fiscal 1997.
LIMITED PROTECTION OF PROPRIETARY TECHNOLOGY. The Company relies on a
combination of copyright, patent, trademark and trade secret laws, and employee
and third-party nondisclosure agreements, to protect its software products and
other proprietary technology. The Company does not have any copy-protection
mechanisms in its software because it does not believe they are practical or
effective. Current U.S. laws that prohibit copying give the Company only limited
practical protection from software "pirates," and the laws of many other
countries provide almost no protection for its intellectual property. Policing
unauthorized use of the Company's products is difficult, expensive and
time-consuming and the Company expects that software piracy will be a persistent
problem for its desktop software products. In addition, the unique technology of
the Internet may tend to increase, and provide new methods for, illegal copying
of the technology used in the Company's Internet-based products and services.
Furthermore, there can be no assurance that Intuit's competitors will not
independently develop technologies that are substantially equivalent or superior
to Intuit's technologies.
The Company does not necessarily own all of the software and other
technologies used in its products and services, but it has all licenses that it
believes are necessary for using that technology. The Company does not believe
that it products, trademarks and other proprietary rights infringe anyone else's
proprietary rights. However, other parties occasionally claim that features or
content of certain of the Company's products, or its use of certain trademarks,
may infringe their property rights. Past claims have not resulted in any
material litigation, settlement or licensing expenses in the past, but future
claims could. There can be no assurance that third parties will not assert
infringement claims against Intuit in the future or that any such assertion will
not result in costly litigation or require Intuit to obtain a license to
intellectual property rights of third parties. There can be no assurance that
such licenses will be available on reasonable terms, or at all.
RISKS RELATED TO REGULATED BUSINESSES. Some of the Company's products and
services are regulated businesses under federal or state laws. The Company
offers these regulated products and services through separate subsidiary
corporations. These subsidiaries must comply with a variety of regulations that
do not apply to most software companies. Establishing and maintaining regulated
subsidiaries requires significant financial, legal and management resources. If
the subsidiaries fail to comply with applicable regulations, they could face
liability to customers and/or penalties and sanctions by government regulators.
The Company's Quicken Investment Services, Inc. subsidiary (or "QISI") is
registered as an investment adviser in many states and is subject to certain
federal laws as well. QISI is responsible for Quicken Financial Planner, Quicken
Retirement Planner on Quicken.com and some investment-related features in the
Company's Quicken products. Investment adviser regulations restrict QISI's
business practices in several areas, including advertising and distribution
arrangements. The business activities of Interactive Insurance Services ("IIS"),
which operates the Quicken InsureMarket website, are subject to state insurance
regulations. IIS (or one of its officers) currently has an insurance license in
each state where the Company believes licensing is necessary. State insurance
laws regulate various aspects of the business operations of IIS and
participating insurance carriers, including advertising, record-keeping and
compensation. The Company's QuickenMortgage and Quicken Business Cash Finder
loan services launched during fiscal 1998 are offered by a subsidiary called
Intuit Lender Services, Inc. (or "ILSI"). The Company is continuing the process
of registering and licensing ILSI as a mortgage or loan broker in all states
where
S-22
23
registration or licensing is required, and it is not be able to accept online
loan applications through QuickenMortgage or Quicken Business CashFinder in
those states where registration or licensing is required and the process has not
been completed.
The Company's fall 1997 Quicken products allow customers of participating
brokerages to trade securities through their broker's website. Quicken
InsureMarket may expand its site to include other insurance products that are
considered "securities" under federal and state laws. The Company believes it
has structured these services in a way that does not subject Intuit to direct
government regulation. However, it is possible that these services, or other
services the Company may offer in the future, may be regulated under federal
and/or state securities broker-dealer laws or other regulations. The Company
continually analyzes new business opportunities, and any new businesses that it
pursues may require additional expenditures and investments in regulatory
compliance.
Various Intuit products contain powerful encryption technology. Government
regulations currently prohibit this technology from being exported outside of
the United States and Canada. Some agencies of the federal government are
seeking to relax export laws, but others are seeking to tighten export
restrictions on software containing encryption technology. These regulations may
affect international sales of the Company's desktop software as well as its
ability to provide the level of security customers are seeking in Internet-based
products and services on a worldwide basis.
DEPENDENCE ON THIRD-PARTY SUPPLIER. Intuit's financial supplies business
(which represented approximately 15% of the Company's net revenues in fiscal
1997) has only one source for its checks, which account for approximately
three-quarters of supplies revenue. In September 1995, the Company entered into
an exclusive five-year contract with John H. Harland Co. to print all of its
check products. The Company believes its relationship with Harland is good.
However, if for any reason Harland cannot provide checks on a timely basis, it
could have a material negative impact on sales of supplies and on Intuit as a
whole. The Company has no other material single-source suppliers.
VOLATILITY OF STOCK PRICE. The market price of Intuit's Common Stock has
been volatile. See "Price Range of Common Stock." The factors described above
under "-- Seasonality; Quarterly Fluctuations in Revenue and Operating Results"
that contribute to fluctuations in Intuit's quarterly revenues, operating income
and net income, announcements of technical innovations, new commercial products,
company or product acquisitions or the development of strategic relationships by
Intuit or its competitors, changes in earnings estimates by analysts and market
conditions in the computer hardware and computer software industries may have a
significant impact on the market price of the Company's Common Stock. In
addition, the stock market has experienced volatility that has particularly
affected the market prices of equity securities of many high technology
companies and that often has been unrelated to the operating performance of such
companies. These market fluctuations may adversely affect the market price of
the Company's Common Stock in the future.
CERTAIN ANTI-TAKEOVER PROVISIONS. Shares of preferred stock may be issued
in the future by the Company without further stockholder approval and upon such
terms and conditions, and having such rights, privileges and preferences, as the
Board of Directors of the Company may determine. The rights of the holders of
Intuit's Common Stock will be subject to, and may be adversely affected by, the
rights of the holders of any preferred stock that may be issued in the future.
The issuance of preferred stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring, a majority of the outstanding voting
stock of Intuit. The Company does not have any present plans to issue any shares
of preferred stock. However, on April 29, 1998, the Board of Directors adopted a
stockholder rights plan and declared a dividend to all stockholders of record on
May 11, 1998 of
S-23
24
rights to purchase shares of preferred stock under certain conditions and
amended the Bylaws of the Company to eliminate the right of stockholders holding
ten percent of the Company's outstanding Common Stock to call a special meeting
of stockholders. See "Description of Capital Stock -- Rights Plan." In addition,
Section 203 of the Delaware General Corporation Law restricts certain business
combinations with any "interested stockholder" as defined by such statute. These
provisions and the Company's stockholder rights plan are designed to encourage
potential acquirers to negotiate with the Company's Board of Directors and give
the Board sufficient opportunity to consider various alternatives to maximize
stockholder value. These provisions and the stockholder rights plan and the
amendment to the Bylaws are also intended to discourage certain tactics that may
be used in proxy fights. However, these provisions and the stockholder rights
plan could discourage potential acquisition proposals and could delay or prevent
a change in control of the Company and, as a consequence, they also may
adversely affect the market price of the Company's Common Stock. Such provisions
also may have the effect of preventing changes in the management of the Company.
See "Description of Capital Stock."
S-24
25
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 9,000,000 shares of
Common Stock offered by the Company hereby are estimated to be $410.3 million
($471.9 million if the Underwriters' over-allotment option is exercised in full)
after deducting the underwriting discount and estimated offering expenses. The
Company expects to use the net proceeds from this offering to fund the $400
million cash purchase price of the Pending Acquisition. The Company expects to
use any remaining proceeds for working capital and other general corporate
purposes. The consummation of the Pending Acquisition is subject to numerous
risks and uncertainties. If the Pending Acquisition does not occur, the Company
intends to use such proceeds for working capital and general corporate purposes.
Thus, the Company's management would have broad discretion as to the allocation
of the net proceeds from this Offering. See "Risk Factors -- Risks of Pending
Acquisition." In such event, a portion of the proceeds could be used to acquire
or invest in other complementary businesses or products or to obtain the right
to use other complementary technologies. Currently, however, the Company does
not have any understandings, commitments or agreements with respect to any
material acquisitions, other than the Pending Acquisition. Pending use of the
net proceeds for the above purposes, the Company intends to invest such funds in
short-term, interest-bearing, investment-grade securities.
PRICE RANGE OF COMMON STOCK
Intuit's Common Stock began trading over the counter in March 1993 at the
time of its initial public offering. It is quoted on the Nasdaq National Market
under the symbol "INTU." The following table shows the range of high and low
closing sales prices reported on the Nasdaq National Market for the periods
indicated. Prices reflect inter-dealer prices without retail markup, markdown or
commissions. The unpredictability of the Company's quarter-to-quarter results
may have a significant impact on its stock price. See "Risk
Factors -- Volatility of Stock Price." Share prices in the first quarter of
fiscal 1996 have been adjusted retroactively to give effect to Intuit's
two-for-one stock split in August 1995.
HIGH LOW
------ ------
FISCAL 1996
First quarter............................................. $72.00 $40.63
Second quarter............................................ 87.00 53.25
Third quarter............................................. 67.63 43.00
Fourth quarter............................................ 55.50 33.50
FISCAL 1997
First quarter............................................. $40.50 $26.00
Second quarter............................................ 39.75 26.88
Third quarter............................................. 28.63 21.50
Fourth quarter............................................ 28.50 22.13
FISCAL 1998
First quarter............................................. $35.75 $23.88
Second quarter............................................ 41.25 27.31
Third quarter............................................. 53.38 39.13
Fourth quarter (through May 21, 1998)..................... 54.00 45.00
On May 21, 1998, the closing sales price reported on the Nasdaq National
Market for the Company's Common Stock was $47.50 per share. As of April 30,
1998, the Company had approximately 825 record holders of its Common Stock.
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Stock. The
Company currently anticipates that it will retain all future earnings for use in
its business, so it does not anticipate paying any cash dividends in the
foreseeable future.
S-25
26
CAPITALIZATION
The following table sets forth as of January 31, 1998 (i) the unaudited
capitalization of the Company on an actual basis, (ii) the unaudited
capitalization of the Company as adjusted to give effect to the sale of the
9,000,000 shares of Common Stock offered by the Company hereby after deducting
the underwriting discount and estimated offering expenses, and (iii) the pro
forma unaudited capitalization of the Company after giving effect to the Pending
Acquisition and as adjusted for the Offering as set forth in (ii) above. See
"Use of Proceeds." This table should be read in conjunction with the other
financial information, financial statements and notes thereto included elsewhere
in this Prospectus Supplement, included in the accompanying Prospectus and
incorporated by reference therein.
JANUARY 31, 1998
-----------------------------------------
AS PRO FORMA
ACTUAL ADJUSTED(1) AS ADJUSTED(2)
--------- ----------- ---------------
(IN THOUSANDS)
Long-term obligations............................ $ 31,253 $ 31,253 $ 31,253
Stockholders' equity:
Preferred stock, $0.01 par value
Authorized -- 3,000,000 shares
Issued and outstanding -- none.............. -- -- --
Common stock, $0.01 par value
Authorized -- 250,000,000 shares
Issued and outstanding -- 47,833,000 shares
actual, 56,833,000 shares as adjusted and
pro forma as adjusted(3).................... 478 568 568
Additional paid-in capital..................... 577,542 987,727 987,727
Net unrealized gain on marketable securities... 117,929 117,929 117,929
Cumulative translation adjustment.............. (361) (361) (361)
Accumulated deficit............................ (134,146) (134,146) (146,732)
--------- ---------- --------
Total stockholders' equity.................. 561,442 971,717 959,131
--------- ---------- --------
Total capitalization................... $ 592,695 $1,002,970 $990,384
========= ========== ========
- ---------------
(1) Does not reflect the pro forma effects of the Pending Acquisition.
(2) Gives effect to the acquisition of Lacerte by the Company as if such
acquisition had occurred as of January 31, 1998 by combining balance sheet
data of the Company as of January 31, 1998 and of Lacerte as of March 31,
1998 and are adjusted to reflect the receipt of the net proceeds from the
Offering calculated based upon the assumptions described in (ii) above and
the application of such net proceeds to fund the cash purchase price for the
Pending Acquisition.
(3) Does not include an aggregate of 8,442,459 shares of Common Stock issuable
upon exercise of options outstanding as of January 31, 1998 under the
Company's Plans, 420,995 shares of Common Stock issuable upon exercise of
options outstanding as of that date under the Discontinued Plans and an
additional 3,645,232 shares of Common Stock reserved for future issuance as
of that date under the Plans and the Company's Employee Stock Purchase Plan.
S-26
27
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
The following selected consolidated financial data of the Company should be
read in conjunction with the Consolidated Financial Statements and Notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" incorporated by reference in the Prospectus accompanying this
Prospectus Supplement from the Company's Form 10-K for the year ended July 31,
1997. The consolidated statements of operations data for the years ended July
31, 1995, 1996 and 1997 and the balance sheet data as of July 31, 1996 and 1997
are derived from financial statements of the Company that have been audited by
Ernst & Young LLP, independent auditors, and are incorporated by reference in
the Prospectus accompanying this Prospectus Supplement. The consolidated balance
sheet data as of July 31, 1995 is derived from financial statements of the
Company that have been audited by Ernst & Young LLP, and that are not
incorporated by reference in the Prospectus accompanying this Prospectus
Supplement. The consolidated statements of operations data for the six months
ended January 31, 1997 and 1998 and the consolidated balance sheet data as of
January 31, 1998 are derived from unaudited financial statements that are
incorporated by reference in the Prospectus accompanying this Prospectus
Supplement. The unaudited financial statements have been prepared on
substantially the same basis as the audited financial statements and, in the
opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results of
operations for such periods. Historical results are not necessarily indicative
of the results to be expected in the future, and results of interim periods are
not necessarily indicative of results for the entire year.
SIX MONTHS ENDED
YEARS ENDED JULY 31, JANUARY 31,
------------------------------ -------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Net revenue................................................. $419,160 $538,608 $598,925 $368,484 $333,471
Costs and expenses:
Costs of goods sold:
Product................................................. 110,322 136,470 137,281 85,666 67,875
Amortization of purchased software and other............ 11,369 1,399 1,489 154 1,353
Customer service and technical support.................... 75,113 106,872 119,762 68,071 65,432
Selling and marketing..................................... 109,382 142,319 162,047 90,636 78,939
Research and development.................................. 57,332 75,558 93,018 45,391 52,778
General and administrative................................ 26,437 33,153 37,460 22,624 18,207
Charge for purchased research and development............. 52,471 8,043 11,009 4,929 --
Other acquisition costs, including amortization of
goodwill and purchased intangibles...................... 41,775 40,570 26,543 16,494 8,861
Restructuring costs....................................... -- -- 10,356 -- --
-------- -------- -------- -------- --------
Total costs and expenses............................ 484,201 544,384 598,965 333,965 293,445
-------- -------- -------- -------- --------
Income (loss) from operations....................... (65,041) (5,776) (40) 34,519 40,026
Microsoft merger termination fee, net....................... 41,293 -- -- -- --
Interest and other income and expense, net.................. 3,748 7,646 9,849 3,806 4,271
Gain on disposal of business................................ -- -- -- -- 4,321
-------- -------- -------- -------- --------
Income (loss) from continuing operations before income
taxes..................................................... (20,000) 1,870 9,809 38,325 48,618
Provision for income taxes.................................. 24,296 16,225 12,741 21,929 19,533
-------- -------- -------- -------- --------
Income (loss) from continuing operations.................... (44,296) (14,355) (2,932) 16,396 29,085
Loss from operations of discontinued operations, net of
income tax benefit of $3,725,000.......................... -- (6,344) -- -- --
Gain from sale of discontinued operations, net of income tax
provision of $52,617,000.................................. -- -- 71,240 71,240 --
-------- -------- -------- -------- --------
Net income (loss)........................................... $(44,296) $(20,699) $ 68,308 $ 87,636 $ 29,085
======== ======== ======== ======== ========
Basic net income (loss) per share from continuing
operations................................................ $ (1.07) $ (0.32) $ (0.06) $ 0.36 $ 0.61
Basic loss per share from discontinued operations........... -- (0.14) -- -- --
Basic income per share from sale of discontinued
operations................................................ -- -- 1.53 1.54 --
-------- -------- -------- -------- --------
Basic net income (loss) per share(1)........................ $ (1.07) $ (0.46) $ 1.47 $ 1.90 $ 0.61
======== ======== ======== ======== ========
Diluted net income (loss) per share(1)...................... $ (1.07) $ (0.46) $ 1.44 $ 1.85 $ 0.59
======== ======== ======== ======== ========
Shares used in computing basic net income (loss) per
share(1).................................................. 41,411 45,149 46,424 46,220 47,322
Shares used in computing diluted net income (loss) per
share(1).................................................. 41,411 45,149 47,448 47,484 48,929
JULY 31,
-------------------------------- JANUARY 31,
1995 1996 1997 1998
-------- -------- -------- --------------
(IN THOUSANDS) (IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $197,775 $198,018 $205,099 $248,711
Working capital............................................. 164,281 169,724 243,195 452,384
Total assets................................................ 398,605 418,020 663,676 977,081
Long-term obligations....................................... 8,770 5,583 36,444 31,253
Total stockholders' equity.................................. 280,399 299,235 415,061 561,442
- ---------------
(1) Basic net income (loss) per share has been computed using the weighted
average number of common shares outstanding. Diluted net income (loss) per
share has been computed using the weighted average number of common shares
outstanding and dilutive common equivalent shares issuable upon exercise of
stock options. As discussed in Note 8 of the Notes to Consolidated Financial
Statements of the Company included in the Company's Form 10-K for the year
ended July 31, 1997 incorporated by reference in the Prospectus accompanying
this Prospectus Supplement, all share and per share data for the Company for
fiscal 1995 have been adjusted retroactively to give effect to Intuit's
two-for-one stock split in August 1995.
S-27
28
QUARTERLY RESULTS OF OPERATIONS OF THE COMPANY
The following table presents certain unaudited quarterly statement of
operations data for the Company for the seven quarters ended April 30, 1998. In
the opinion of management, this information has been prepared on the same basis
as the audited consolidated financial statements incorporated by reference in
the Prospectus accompanying this Prospectus Supplement and includes all
necessary adjustments (consisting only of normal recurring adjustments) that the
Company considers necessary to present fairly such information. The table should
be read in conjunction with the audited Consolidated Financial Statements and
Notes thereto of the Company incorporated by reference in the Prospectus
accompanying this Prospectus Supplement from the Company's Form 10-K for the
year ended July 31, 1997. The Company's quarterly results have in the past been
subject to fluctuations and, as a result, the operating results for any quarter
are not necessarily indicative of results for any future period.
QUARTERS ENDED
----------------------------------------------------------------------------
OCT. 31, JAN. 31, APRIL 30, JULY 31, OCT. 31, JAN. 31, APRIL 30,
1996 1997 1997 1997 1997 1998 1998(1)
-------- -------- --------- -------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net Revenue............................ $102,506 $265,978 $136,326 $ 94,115 $ 95,958 $237,513 $141,996
Costs and Expenses:
Cost of goods sold:
Product............................ 27,045 58,621 28,917 22,698 22,396 45,479 29,331
Amortization of purchased software
and other........................ 40 114 526 809 703 650 588
Customer service and technical
support............................ 27,512 40,559 27,040 24,651 27,921 37,511 26,389
Selling and marketing................ 37,401 53,235 40,196 31,215 31,949 46,990 55,067
Research and development............. 22,461 22,930 22,393 25,234 26,144 26,634 25,381
General and administrative........... 11,906 10,718 8,737 6,099 8,509 9,698 9,180
Charge for purchased research and
development........................ 4,929 -- 6,080 -- -- -- --
Other acquisition costs, including
amortization of goodwill and
purchased intangibles.............. 10,302 6,192 4,284 5,765 3,941 4,920 3,369
Restructuring costs.................. -- -- -- 10,356 -- -- --
-------- -------- -------- -------- -------- -------- --------
Total costs and expenses........... 141,596 192,369 138,173 126,827 121,563 171,882 149,305
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations...... (39,090) 73,609 (1,847) (32,712) (25,605) 65,631 (7,309)
Interest and other income and expense,
net.................................. 2,048 1,758 2,806 3,237 2,030 2,241 3,104
Gain on disposal of business........... -- -- -- -- 4,321 -- --
-------- -------- -------- -------- -------- -------- --------
Income (loss) from continuing
operations before income taxes....... (37,042) 75,367 959 (29,475) (19,254) 67,872 (4,205)
Income tax provision (benefit)......... (8,738) 30,667 471 (9,659) (6,495) 26,028 (1,999)
-------- -------- -------- -------- -------- -------- --------
Income (loss) from continuing
operations after tax................. (28,304) 44,700 488 (19,816) (12,759) 41,844 (2,206)
Gain on sale of discontinued
operations, net of tax............... -- 71,240 -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)...................... $(28,304) $115,940 $ 488 $(19,816) $(12,759) $ 41,844 $ (2,206)
======== ======== ======== ======== ======== ======== ========
Basic income (loss) per share from
continuing operations................ (0.61) 0.96 0.01 (0.42) (0.27) 0.88 (0.05)
Basic income per share from sale of
discontinued operations.............. -- 1.54 -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Basic net income (loss) per share...... $ (0.61) $ 2.50 $ 0.01 $ (0.42) $ (0.27) $ 0.88 $ (0.05)
======== ======== ======== ======== ======== ======== ========
Shares used in computing basic per
share amounts........................ 46,049 46,391 46,526 46,730 47,085 47,560 48,209
======== ======== ======== ======== ======== ======== ========
Diluted income (loss) per share from
continuing operations................ (0.61) 0.94 0.01 (0.42) (0.27) 0.85 (0.05)
Diluted income per share from sale of
discontinued operations.............. -- 1.50 -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Diluted net income (loss) per share.... $ (0.61) $ 2.44 $ 0.01 $ (0.42) $ (0.27) $ 0.85 $ (0.05)
======== ======== ======== ======== ======== ======== ========
Shares used in computing diluted per
share amounts........................ 46,049 47,631 47,252 46,730 47,085 49,438 48,209
======== ======== ======== ======== ======== ======== ========
- ---------------
(1) The financial information included for the quarter ended April 30, 1998 was
made publicly available by the Company on May 18, 1998 and included in a
Form 8-K filed on that date but is incomplete as the Company has not yet
prepared full quarterly financial statements (including footnotes) or filed
a Form 10-Q with the Commission with respect to such quarterly results.
S-28
29
SELECTED FINANCIAL DATA OF LACERTE
The following selected financial data of Lacerte should be read in
conjunction with the Combined Financial Statements and Notes thereto of Lacerte
incorporated by reference in the Prospectus accompanying this Prospectus
Supplement from the Company's Form 8-K dated May 18, 1998. The Lacerte
statements of operations data for the years ended March 31, 1996, 1997 and 1998
and the balance sheet data as of March 31, 1997 and 1998 are derived from the
financial statements of Lacerte that have been audited by Price Waterhouse LLP,
independent accountants, and are incorporated by reference in the Prospectus
accompanying this Prospectus Supplement from the Company's Form 8-K filed May
18, 1998. The statements of operations data for the six months ended March 31,
1998 are derived from unaudited financial information. The unaudited financial
information has been prepared on substantially the same basis as the audited
financial statements and, in the opinion of Lacerte's management, include all
adjustments consisting only of normal recurring adjustments, necessary for a
fair presentation of the results of operations for such periods. Historical
results are not necessarily indicative of the results to be expected in the
future, and results of interim periods are not necessarily indicative of results
for the entire year.
SIX MONTHS
YEARS ENDED MARCH 31, ENDED
--------------------------- MARCH 31,
1996 1997 1998 1998
------- ------- ------- ----------
(IN THOUSANDS)
(UNAUDITED)
COMBINED STATEMENTS OF OPERATIONS DATA(1):
Revenue................................................... $62,081 $68,129 $75,586 $64,208
------- ------- ------- -------
Operating expenses:
Costs of revenue........................................ 4,245 4,369 4,480 3,185
Software support........................................ 5,716 6,359 5,681 3,523
Research and development................................ 12,314 14,042 15,471 8,925
Selling and marketing................................... 4,522 4,687 4,557 2,442
General and administrative.............................. 15,532 15,284 16,526 9,150
------- ------- ------- -------
Total operating expenses......................... 42,329 44,741 46,715 27,225
------- ------- ------- -------
Income from operations.................................... 19,752 23,388 28,871 36,983
Other income, net......................................... 663 516 713 331
------- ------- ------- -------
Income before state income taxes.......................... 20,415 23,904 29,584 37,314
State tax provision....................................... 609 464 159 71
------- ------- ------- -------
Net income................................................ $19,806 $23,440 $29,425 $37,243
======= ======= ======= =======
MARCH 31,
------------------
1997 1998
------- -------
(IN THOUSANDS)
COMBINED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 4,810 $ 6,621
Working capital............................................. 6,825 10,722
Total assets................................................ 20,266 22,821
Long-term obligations....................................... -- --
Total stockholders' equity.................................. 11,753 15,178
- ------------------------
(1) Lacerte elected to be treated as an "S" corporation under the federal
income tax laws and therefore was not subject to federal income tax. The
unaudited financial information of Lacerte included for the six months
ended March 31, 1998 is incomplete as it was prepared solely for purposes
of preparing pro forma condensed combining statements of operations data
and does not include all of the information required by Regulation S-X for
full quarterly financial statements, such as footnotes.
Lacerte is a leading developer and marketer of tax preparation software and
services for tax professionals. Its products are used primarily by tax
professionals to prepare federal and state income tax returns for individuals
and businesses, as well as estate, trust and gift tax returns. Lacerte also
provides electronic filing services and offers seminars and self-study tutorials
in a variety of areas related to tax preparation and software usage. In its
fiscal year ended March 31,
S-29
30
1998, Lacerte licensed use of its products to over 30,000 customers, primarily
accounting and tax firms.
Lacerte's revenue increased from $62.1 million in fiscal 1996 to $68.1
million in fiscal 1997 and to $75.6 million in fiscal 1998, primarily as a
result of increases in unit sales. Lacerte's business has provided it with a
relatively stable source of recurring revenue, since users of Lacerte's products
must purchase annual updates that reflect tax law and form changes. Although
prices for Lacerte's products remained relatively stable from fiscal 1996
through fiscal 1998, Lacerte has recently announced modest increases in prices
of many of its products. Lacerte's revenue includes both fees from the license
of its products for unlimited annual use and fees for "remote entry processing"
where the user is charged a fee for each tax return processed. Revenue from
licenses for unlimited annual use is generally recognized at the time of
shipment of the product, although a substantial number of customers pay the
license fee in advance. Remote entry processing revenues are recognized on
electronic delivery to the customer of an encryption key that allows the
customer to prepare a return. Lacerte's revenues are highly seasonal, as sales
of its products are concentrated in the fiscal quarter ended March 31.
Lacerte's operating expenses remained relatively stable from fiscal 1996
through fiscal 1998. Income from operations increased from $19.8 million, or
31.8% of revenue, in fiscal 1996 to $23.4 million, or 34.3% of revenue, in
fiscal 1997 and $28.9 million, or 38.2% of revenue, in fiscal 1998. A portion of
Lacerte's general and administrative expenses consist of compensation paid to
Lacerte's principal shareholders, who will not remain as employees following the
closing of the Pending Acquisition. Intuit anticipates that increases in other
operating expenses of Lacerte following the acquisition will partially offset
the reduction in compensation expense. Lacerte was not subject to federal income
tax as a result of its election to be treated as an "S" corporation under the
federal income tax laws.
S-30
31
UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION
The following pro forma condensed combining financial information is set
forth herein to give effect to the net proceeds to the Company from the sale of
9,000,000 shares of Common Stock being offered by the Company after deducting
the underwriting discount and estimated offering expenses and the acquisition of
Lacerte by the Company as if such Offering and acquisition had occurred as of
the beginning of each period presented by combining the statements of operations
data of (i) the Company for the year ended July 31, 1997 and Lacerte for the
twelve month period from October 1, 1996 through September 30, 1997 and (ii) the
Company for the six months ended January 31, 1998 and Lacerte for the six months
ended March 31, 1998, respectively. The pro forma condensed combining balance
sheet data gives effect to the issuance of the 9,000,000 shares by the Company
in the Offering and the acquisition of Lacerte by the Company as if such
issuance and acquisition had occurred on January 31, 1998. The pro forma
combined consolidated financial information does not reflect any potential cost
savings which may be obtained following the Pending Acquisition. The pro forma
adjustments and assumptions are based on estimates, evaluations and other data
currently available. In particular, such adjustments include information based
upon the Company's preliminary allocation of the purchase price for the Pending
Acquisition, which is subject to adjustment, which could be material in amount,
based upon the Company's further analysis. The pro forma condensed combining
statements of operations is provided for illustrative purposes only and is not
necessarily indicative of the combined results of operations that would have
been reported had the Pending Acquisition occurred on August 1, 1996, nor does
it represent a forecast of the combined future results of operations for any
future period. All information contained herein should be read in conjunction
with the Consolidated Financial Statements and the Notes thereto of the Company
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in the Company's Form 10-K for the year ended July 31,
1997, the Financial Statements and Notes thereto of Lacerte included in the
Company's Form 8-K dated May 18, 1998 and the Notes to the unaudited pro forma
condensed combining financial information.
S-31
32
INTUIT LACERTE
FOR THE SIX FOR THE SIX
MONTHS MONTHS
ENDED ENDED PRO FORMA
JANUARY 31, MARCH 31, -------------------------
UNAUDITED PRO FORMA CONDENSED 1998 1998 ADJUSTMENTS COMBINED
COMBINING INCOME STATEMENT DATA: ----------- ----------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATE)
Net revenue............................ $333,471 $ 64,208 $ -- $397,679
Costs and expenses:
Cost of goods sold:
Product........................... 67,875 3,185 -- 71,060
Amortization of purchased software
and other....................... 1,353 -- -- 1,353
Customer service and technical
support........................... 65,432 3,523 -- 68,955
Selling and marketing................ 78,939 2,442 -- 81,381
Research and development............. 52,778 8,925 -- 61,703
General and administrative........... 18,207 9,150 -- 27,357
Other acquisition costs, including
amortization of goodwill and
purchased intangibles............. 8,861 -- 61,316(e) 70,177
-------- -------- -------- --------
Total costs and expenses........ 293,445 27,225 61,316 381,986
-------- -------- -------- --------
Income (loss) from
operations................... 40,026 36,983 (61,316) 15,693
Interest and other income and expense,
net.................................. 4,271 331 -- 4,602
Gain on disposal of business........... 4,321 -- -- 4,321
-------- -------- -------- --------
Net income (loss) before income taxes.. 48,618 37,314 (61,316) 24,616
Provision for (benefit from) income
taxes................................ 19,533 71 (9,672)(f) 9,932
-------- -------- -------- --------
Net income (loss)...................... $ 29,085 $ 37,243 $(51,644) $ 14,684
======== ======== ======== ========
Basic net income per share............. $ 0.61 $ 0.26
======== ========
Shares used in computing basic net
income per share..................... 47,322 9,000(a) 56,322
======== ======== ========
Diluted net income per share........... $ 0.59 $ 0.25
======== ========
Shares used in computing diluted net
income per share..................... 48,929 9,000(a) 57,929
======== ======== ========
See accompanying notes.
S-32
33
INTUIT LACERTE
FOR THE YEAR FOR THE YEAR PRO FORMA
ENDED ENDED -------------------------
UNAUDITED PRO FORMA CONDENSED JUL. 31, 1997 SEPT. 30, 1997 ADJUSTMENTS COMBINED
COMBINING INCOME STATEMENT DATA: ------------- -------------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net revenue........................ $598,925 $ 69,474 $ -- $668,399
Costs and expenses:
Cost of goods sold:
Product....................... 137,281 4,417 -- 141,698
Amortization of purchased
software and other.......... 1,489 -- -- 1,489
Customer service and technical
support....................... 119,762 5,768 -- 125,530
Selling and marketing............ 162,047 4,499 -- 166,546
Research and development......... 93,018 14,091 -- 107,109
General and administrative....... 37,460 15,620 -- 53,080
Charge for purchased research and
development................... 11,009 -- -- 11,009
Other acquisition costs,
including amortization of
goodwill and purchased
intangibles................... 26,543 -- 122,632(e) 149,175
Restructuring costs.............. 10,356 -- -- 10,356
-------- -------- -------- --------
Total costs and
expenses............... 598,965 44,395 122,632 765,992
-------- -------- -------- --------
Income (loss) from
operations............. (40) 25,079 (122,632) (97,593)
Interest and other income and
expense, net..................... 9,849 471 -- 10,320
-------- -------- -------- --------
Income (loss) from continuing
operations before income taxes... 9,809 25,550 (122,632) (87,273)
Provision for (benefit from) income
taxes............................ 12,741 322 (39,155)(f) (26,092)
-------- -------- -------- --------
Income (loss) from continuing
operations....................... (2,932) 25,228 (83,477) (61,181)
Gain from sale of discontinued
operations, net of income tax
provision of $52,617,000......... 71,240 -- -- 71,240
-------- -------- -------- --------
Net income (loss).................. $ 68,308 $ 25,228 $(83,477) $ 10,059
======== ======== ======== ========
Basic loss per share from
continuing operations............ $ (0.06) $ (1.10)
Basic income per share from sale of
discontinued operations.......... 1.53 1.28
-------- --------
Basic net income per share......... $ 1.47 $ 0.18
======== ========
Shares used in computing basic net
loss per share................... 46,424 9,000(a) 55,424
======== ======== ========
Diluted loss per share from
continuing operations............ $ (0.06) $ (1.08)
Diluted income per share from sale
of discontinued operations....... 1.50 1.26
-------- --------
Diluted net income per share....... $ 1.44 $ 0.18
======== ========
Shares used in computing net income
(loss) per share................. 47,448 9,000(a) 56,448
======== ======== ========
See accompanying notes.
S-33
34
INTUIT LACERTE PRO FORMA
JANUARY 31, MARCH 31, ---------------------------
UNAUDITED PRO FORMA CONDENSED 1998 1998 ADJUSTMENTS COMBINED
COMBINING BALANCE SHEET DATA: ----------- --------- ----------- ----------
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents....... $105,532 $ 6,621 $ 410,275(a)
(400,000)(b) $ 122,428
Short-term investments.......... 143,179 -- -- 143,179
Marketable securities........... 394,049 -- -- 394,049
Accounts receivable, net........ 170,277 8,513 -- 178,790
Notes
receivable -- shareholders... -- 3,068 -- 3,068
Inventories..................... 4,811 -- -- 4,811
Prepaid expenses................ 18,622 163 -- 18,785
-------- -------- --------- ----------
Total current assets.... 836,470 18,365 10,275 865,110
Property and equipment, net....... 70,574 2,966 -- 73,540
Intangibles from Lacerte
Acquisition..................... -- -- 394,822(b)
(20,300)(c) 374,522
Purchased intangibles, net........ 13,676 1,104 -- 14,780
Goodwill, net..................... 19,190 -- 19,190
Investments....................... 2,000 -- -- 2,000
Restricted investments............ 32,493 -- -- 32,493
Other assets...................... 2,678 386 -- 3,064
-------- -------- --------- ----------
Total assets............ $977,081 $ 22,821 $ 384,797 $1,384,699
======== ======== ========= ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable................ $ 59,535 $ 771 $ -- $ 60,306
Accrued compensation and related
liabilities.................. 20,595 1,703 -- 22,298
Deferred revenue................ 38,602 1,002 -- 39,604
Income taxes payable............ 16,940 -- (7,714)(c) 9,226
Deferred income taxes........... 92,147 -- -- 92,147
Other accrued liabilities....... 156,267 4,167 10,000(b) 170,434
-------- -------- --------- ----------
Total current
liabilities........... 384,086 7,643 2,286 394,015
Deferred income taxes............. 300 -- -- 300
Long-term notes payable........... 31,253 -- -- 31,253
Commitments and contingencies
Stockholders' equity:
Preferred stock................. -- -- -- --
Common stock.................... 478 -- 90(a) 568
Additional paid-in capital........ 577,542 12 410,185(a)
(12)(d) 987,727
Net unrealized gain on marketable
securities...................... 117,929 -- -- 117,929
Cumulative translation adjustment
and other....................... (361) -- -- (361)
Retained earnings (accumulated
deficit)........................ (134,146) 15,166 (15,166)(d)
7,714(c)
(20,300)(c) (146,732)
-------- -------- --------- ----------
Total stockholders'
equity................ 561,442 15,178 382,511 959,131
-------- -------- --------- ----------
Total liabilities and
stockholders'
equity................ $977,081 $ 22,821 $ 384,797 $1,384,699
======== ======== ========= ==========
See accompanying notes.
S-34
35
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
Note 1. The unaudited pro forma condensed combining balance sheet of Intuit
and Lacerte has been prepared as if the Pending Acquisition, which is being
accounted for as a purchase, was completed as of January 31, 1998. Based on an
aggregate purchase price of $400 million, plus $10 million of direct and
indirect acquisition costs, and approximately $8 million in liabilities assumed,
a total of $418 million was allocated to the Lacerte March 31, 1998 balance
sheet. Actual balance sheets of Intuit and Lacerte will be combined at the
effective date of the Pending Acquisition.
The preliminary allocation of the purchase price among the identifiable
tangible and intangible assets was based on a preliminary appraisal of the fair
market value of those assets. Such preliminary purchase price allocation is
subject to adjustment based upon the Company's further analysis, which
adjustment could be material in amount. Specifically, purchased research and
development was identified and valued through interviews concerning each Lacerte
developmental project. Expected future cash flows of each developmental project
were discounted to present value taking into account risks associated with the
inherent difficulties and uncertainties in completing the project, and thereby
achieving technological feasibility, and risks related to the viability of and
potential changes in future target markets.
The above preliminary analysis and valuation resulted in a value of
approximately $20 million for purchased research and development which has not
yet reached technological feasibility and does not have alternative future uses.
Therefore, in accordance with generally accepted accounting principles, this
amount has been written off as a pro forma adjustment.
Using the same methodology, other intangibles were identified and
preliminarily valued. Expected future cash flows associated with these
intangibles were discounted to present value taking into account risks related
to the characteristics of each item. The amounts preliminarily identified as
intangible assets as well as goodwill arising from the transaction are expected
to be amortized over estimated useful lives ranging from three to five years.
Note 2. The Intuit statement of operations for the year ended July 31, 1997
has been combined with the Lacerte statement of income for the year ended
September 30, 1997. Additionally, the Intuit statement of operations for the six
month period ended January 31, 1998 has been combined with Lacerte's statement
of income for the six month period ended March 31, 1998. This method of
combining the two companies is for the presentation of unaudited pro forma
condensed combining financial statements only. Actual statements of operations
of Intuit and Lacerte will be combined from the effective date of the Pending
Acquisition with no retroactive restatement. The unaudited pro forma condensed
combining financial statements, including the notes thereto, should be read in
conjunction with the historical consolidated financial statements of Intuit and
the combined financial statements of Lacerte for the indicated periods.
Note 3. The unaudited pro forma condensed combining statements of
operations for Intuit and Lacerte have been prepared as if the Pending
Acquisition was completed as of the beginning of each period presented. The
unaudited pro forma combined net loss per share is based on the weighted average
number of common shares of Intuit Common Stock outstanding during the period,
adjusted to give effect to 9,000,000 shares of the Company's Common Stock to be
issued pursuant to the Company's public offering, the proceeds of which are to
be used to fund the purchase price for the Pending Acquisition.
Note 4. Lacerte has elected under the Internal Revenue Code to be an "S"
corporation. In lieu of federal corporate income taxes, the stockholders of an
"S" corporation are taxed on their proportionate shares of the Company's taxable
income. Therefore, no provision or liability for federal income taxes has been
included in Lacerte's financial statements, as the tax effects of the Company's
activities accrue to the individual stockholders. The unaudited pro forma
condensed
S-35
36
combining statements of operations include pro forma adjustments to adjust
Lacerte's earnings as if they were subject to the corporate tax treatment of a
"C" corporation.
Note 5. The unaudited pro forma condensed combining statements of
operations for Intuit and Lacerte do not include the approximate $20 million
charge for acquired in-process research and development arising from the Pending
Acquisition, as it is a material nonrecurring charge. This charge will be
included in the actual consolidated statements of operations of Intuit in the
fiscal quarter in which the Pending Acquisition closes.
Note 6. The following pro forma adjustments are reflected in the unaudited
pro forma condensed combining financial information and are required to allocate
the preliminary purchase price and acquisition costs to the net assets to be
acquired from Lacerte based on their fair value, as determined by a preliminary
appraisal, and to reflect the write-off of purchased research and development
identified in the purchase price allocation:
(a) Reflects $410,275,000 of net proceeds to the Company from the sale of
9,000,000 shares of Common Stock at a public offering price of $47.375 per share
after deducting the underwriting discount and estimated offering expenses.
(b) Reflects the allocation of the purchase price, based on fair market
values, to the historical balance sheet.
(c) Reflects the write-off of purchased research and development identified
in the purchase price allocation and the related pro forma tax effects. The pro
forma statements of operations exclude the write-off of purchased research and
development due to its non-recurring nature.
(d) Reflects the elimination of Lacerte's equity accounts.
(e) Reflects the amortization of intangibles associated with the purchase
of Lacerte as if the acquisition was completed as of the beginning of each
period presented. Amortization is over the estimated useful lives of the assets
acquired (generally between three and five years).
(f) Reflects the effect of treating Lacerte as an "S" corporation versus a
"C" corporation for federal and state tax purposes.
S-36
37
DESCRIPTION OF CAPITAL STOCK
Under Intuit's Certificate of Incorporation, Intuit is currently authorized
to issue up to 250,000,000 shares of Common Stock and 3,000,000 shares of
Preferred Stock (less 200,000 shares designated as Series B Junior Participating
Preferred Stock, par value $0.01 per share (the "Series B Preferred Shares")
reserved for issuance pursuant to the stockholder rights plan adopted by the
Board on April 29, 1998). As of April 30, 1998, there were 48,679,009 shares of
Common Stock outstanding beneficially held by approximately 825 stockholders of
record.
COMMON STOCK
Subject to preferences that may be applicable to any Preferred Stock
outstanding at the time, the holders of outstanding shares of Common Stock are
entitled to receive dividends out of assets legally available therefor at such
times and in such amounts as the Board of Directors may from time to time
determine. Each stockholder is entitled to one vote for each share of Common
Stock held by him or her on all matters submitted to a vote of stockholders.
Cumulative voting for the election of directors is not provided for in the
Company's Certificate of Incorporation, which means that the holders of a
majority of the shares voted can elect all of the directors then standing for
election. The Common Stock is not entitled to preemptive rights and is not
subject to conversion or redemption. Upon liquidation, dissolution or winding-up
of the Company, the assets legally available for distribution to stockholders
are distributable ratably among the holders of the Common Stock and any
participating Preferred Stock outstanding at that time after payment of
liquidation preferences, if any, on the outstanding Preferred Stock and payment
of other claims of creditors. Each outstanding share of Common Stock is, and any
shares of Common Stock offered hereby will be, fully paid and nonassessable.
PREFERRED STOCK
Under the Company's Certificate of Incorporation, the Company's Board of
Directors may direct the issuance of up to 3,000,000 shares of Preferred Stock
(less 200,000 shares designated as Series B Preferred Shares reserved for
issuance pursuant to the stockholder rights plan) in one or more series and with
rights, preferences, privileges and restrictions, including dividend rights,
voting rights, conversion rights, terms of redemption and liquidation
preferences, that may be fixed or designated by the Board of Directors pursuant
to a certificate of designation without any further vote or action by Intuit's
stockholders. The Board of Directors may authorize and issue Preferred Stock
with voting or conversion rights that could adversely affect the voting power or
other rights of the holders of Common Stock, because the terms of the Preferred
Stock that might be issued could conceivably prohibit the Company's consummation
of any merger, reorganization, sale of substantially all its assets, liquidation
or other extraordinary corporate transaction without approval of the outstanding
shares of Preferred Stock. Thus, the issuance of Preferred Stock may have the
effect of delaying, deferring or preventing a change in control of Intuit.
The Series B Preferred Shares purchasable upon exercise of the Rights
issued in connection with the Rights Agreement (as such terms are defined below)
will not be redeemable. Each Series B Preferred Share will be entitled to a
quarterly dividend payment of 1,000 times the dividend declared per Common
Share. In the event of liquidation, each Series B Preferred Share will be
entitled to a $10.00 preference, and thereafter the holders of the Series B
Preferred Shares will be entitled to an aggregate payment of 1,000 times the
aggregate payment made per Common Share. Each Series B Preferred Share will have
1,000 votes, voting together with the Common Shares. Finally, in the event of
any merger, consolidation or other transaction in which Common Shares are
exchanged, each Series B Preferred Share will be entitled to receive 1,000 times
the amount received per Common Share. These rights are protected by customary
antidilution provisions.
S-37
38
Because of the nature of the Series B Preferred Shares' dividend,
liquidation and voting rights, the value of the one one-thousandth interest in a
Series B Preferred Share purchasable upon exercise of each Right should
approximate the value of one Common Share.
RIGHTS PLAN
On April 29, 1998, the Company's Board of Directors entered into a Rights
Agreement (the "Rights Agreement") with American Stock Transfer and Trust
Company, as Rights Agent (the "Rights Agent"), and, in connection therewith,
declared a dividend of one Series B Preferred Share purchase right (a "Right")
for each outstanding share of common stock, par value $0.01 per share (the
"Common Shares"), of the Company. The dividend is payable to stockholders of
record on May 11, 1998 (the "Record Date"). In addition, one Right will be
issued with each Common Share that becomes outstanding (i) between the Record
Date and the earliest of the Distribution Date, the Redemption Date and the
Final Expiration Date (as such terms are defined in the Rights Agreement) or
(ii) following the Distribution Date and prior to the Redemption Date or Final
Expiration Date, pursuant to the exercise of stock options or under any employee
plan or arrangement or upon the exercise, conversion or exchange of other
securities of the Company, which options or securities were outstanding prior to
the Distribution Date. Each Right entitles the registered holder to purchase
from the Company one one-thousandth of a Series B Preferred Share of the
Company, at a price of $250.00 per one one-thousandth of a Series B Preferred
Share (the "Purchase Price"), subject to adjustment. The description and terms
of the Rights are set forth in the Rights Agreement.
Until the earlier to occur of (i) 10 days following a public announcement
or disclosure that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 20% (the "Designated
Percentage") or more of the outstanding Common Shares (the date of such
announcement or disclosure being the "Shares Acquisition Date") or (ii) 10
business days (or, provided that a majority of the members of the Board of
Directors then in office are Continuing Directors (as defined below), such later
date as may be determined by action of the Board of Directors) following the
announcement of an intention to make a tender offer or exchange offer the
consummation of which would result in a person or group becoming an Acquiring
Person (the earlier of such dates being called the "Distribution Date"), the
Rights will be evidenced, with respect to any of the Common Share certificates
outstanding as of the Record Date, by such Common Share certificates with a copy
of a Summary of Rights attached thereto. No person shall become an Acquiring
Person if the Board of Directors of the Company determines in good faith that a
person who would otherwise be an Acquiring Person has become such inadvertently,
and such person as promptly as practicable takes such actions as may be
necessary so that such person would no longer be considered an Acquiring Person.
From and after a Shares Acquisition Date, a "Continuing Director" is a member of
the Board of Directors who was a member prior to the Shares Acquisition Date or,
so long as the Continuing Directors constitute a majority of the number of
directors then in office, whose election or nomination for election was approved
or recommended by a majority of the Continuing Directors.
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with the Common Shares. Until the Distribution
Date (or earlier redemption or expiration of the Rights), new Common Share
certificates issued after the Record Date, upon transfer or new issuance of
Common Shares, will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption or expiration of
the Rights), the surrender for transfer of any certificates for Common Shares
outstanding as of the Record Date, even without such notation or a copy of this
Summary of Rights being attached thereto, will also constitute the transfer of
the Rights associated with the Common Shares represented by such certificate. As
soon as practicable following the Distribution Date, separate certificates
evidencing the Rights ("Right Certificates") will be mailed to holders of record
of the
S-38
39
Common Shares as of the close of business on the Distribution Date and such
separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on May 1, 2008 (the "Final Expiration Date"), unless the Final Expiration
Date is extended or unless the Rights are earlier redeemed or exchanged by the
Company, in each case, as described below.
The Purchase Price payable, and the number of Series B Preferred Shares or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Series B
Preferred Shares, (ii) upon the grant to holders of the Series B Preferred
Shares of certain rights or warrants to subscribe for or purchase Series B
Preferred Shares at a price, or securities convertible into Series B Preferred
Shares with a conversion price, less than the then current market price of the
Series B Preferred Shares or (iii) upon the distribution to holders of the
Series B Preferred Shares of evidences of indebtedness or assets (excluding
regular periodic cash dividends paid out of earnings or retained earnings or
dividends payable in Series B Preferred Shares) or of subscription rights or
warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-thousandths of a
Series B Preferred Share issuable upon exercise of each Right are also subject
to adjustment in the event of a stock dividend on the Common Shares payable in
Common Shares or subdivisions, consolidations or combinations of the Common
Shares occurring, in any such case, prior to the Distribution Date.
In the event that any person becomes an Acquiring Person, unless the event
causing the Designated Percentage threshold to be crossed and the Person to
thereby become an Acquiring Person is a merger, acquisition or other business
combination described in the next paragraph or is an acquisition of Common
Shares pursuant to a tender offer or an exchange offer for all outstanding
Common Shares at a price and on terms determined by at least a majority of the
Board of Directors (provided that a majority of the members of the Board of
Directors then in office must be Continuing Directors) and a majority of the
members of the Board of Directors who are not officers of the Company and who
are not representatives, nominees, affiliates or associates of an Acquiring
Person, after receiving advice from one or more investment banking firms, to be
(a) at a price which is fair to stockholders (taking into account all factors
which such members of the Board deem relevant including, without limitation,
prices which could reasonably be achieved if the Company or its assets were sold
on an orderly basis designed to realize maximum value) and (b) otherwise in the
best interests of the Company and its stockholders, each holder of a Right,
other than Rights beneficially owned by the Acquiring Person (which will
thereafter be void), will thereafter have the right to receive upon exercise
that number of Common Shares having a market value of two times the exercise
price of the Right on the terms and conditions set forth in the Rights
Agreement. If the Company does not have authorized but unissued Common Shares
sufficient to satisfy such obligation to issue Common Shares, the Company is
obligated to deliver upon payment of the exercise price of a Right an amount of
cash or other securities equivalent in value to the Common Shares issuable upon
exercise of a Right.
In the event that, after the Distribution Date, the Company merges into or
engages in certain other business combination transactions with an Acquiring
Person, or 50% or more of its consolidated assets or earning power are sold to
an Acquiring Person, each holder of a Right, other than Rights beneficially
owned by an Acquiring Person, will thereafter have the right to receive, upon
the exercise thereof at the then current exercise price of the Right, that
number of shares of common stock of the acquiring company which at the time of
such transaction will have a market value of two times the exercise price of the
Right.
At any time after any person becomes an Acquiring Person and prior to the
acquisition by such person or group of 50% or more of the outstanding Common
Shares, the Board of Directors of the
S-39
40
Company may exchange the Rights (other than Rights owned by such person or group
which have become void), in whole or in part, at an exchange ratio of one Common
Share, or one one-thousandth of a Series B Preferred Share (or of a share of a
class or series of the Company's preferred stock having equivalent rights,
preferences and privileges), per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Series B Preferred Shares will be issued
(other than fractions which are integral multiples of one one-thousandth of a
Series B Preferred Share, which may, at the election of the Company, be
evidenced by depository receipts) and in lieu thereof, an adjustment in cash
will be made based on the market price of the Series B Preferred Shares on the
last trading day prior to the date of exercise.
At any time prior to the earlier of (i) the close of business on the tenth
day following the Shares Acquisition Date and (ii) the expiration date of the
Rights, the Board of Directors of the Company may redeem, by a resolution of the
Board of Directors (which resolution shall, if adopted following the Shares
Acquisition Date, be effective only if a majority of the Board of Directors then
in office shall be Continuing Directors), the Rights in whole, but not in part,
at a price of $0.001 per Right (the "Redemption Price"). The redemption of the
Rights may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish. After
the period for redemption of the Rights has expired, the Board may not amend the
Rights Agreement to extend the period for redemption of the Rights. Immediately
upon any redemption of the Rights, the right to exercise the Rights will
terminate and the only right of the holders of Rights will be to receive the
Redemption Price. Additionally, the Rights shall not be exercisable for Common
Shares upon a person becoming an Acquiring Person, until the Company's right to
redeem the Rights has terminated.
The terms of the Rights may be amended by a resolution of the Board of
Directors (which resolution shall, if adopted following the Shares Acquisition
Date, be effective only if a majority of the Board of Directors then in office
shall be Continuing Directors), without the consent of the holders of the
Rights, except that from and after such time as the period for redemption of the
Rights has expired, no such amendment may adversely affect the interests of the
holders of the Rights (other than an Acquiring Person).
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
May 5, 1998. A copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
The Rights approved by the Board are designed to protect and maximize the
value of the outstanding equity interests in the Company in the event of an
unsolicited attempt by an acquiror to take over the Company, in a manner or on
terms not approved by the Board of Directors. Takeover attempts frequently
include coercive tactics to deprive the Company's Board of Directors and its
stockholders of any real opportunity to determine the destiny of the Company.
The Rights have been declared by the Board in order to deter such tactics,
including a gradual accumulation of shares in the open market of a 20% or
greater position to be followed by a merger or a partial or two-tier tender
offer that does not treat all stockholders equally. These tactics unfairly
pressure stockholders, squeeze them out of their investment without giving them
any real choice and deprive them of the full value of their shares. The Rights
are not intended to prevent a takeover of the Company and will not do so.
Because the Rights may be redeemed by the Company, they should not interfere
with any merger or business combination approved by the Board of Directors.
S-40
41
Issuance of the Rights does not in any way weaken the financial strength of
the Company or interfere with its business plans. The issuance of the Rights
themselves has no dilutive effect, will not affect reported earnings per share,
should not be taxable to the Company or to its stockholders and will not change
the way in which the Company's shares are presently traded. The Company's Board
of Directors believes that the Rights represent a sound and reasonable means of
addressing the complex issues of corporate policy created by the current
takeover environment. However, the Rights may have the effect of rendering more
difficult or discouraging an acquisition of the Company deemed undesirable by
the Board of Directors. The Rights may cause substantial dilution to a person or
group that attempts to acquire the Company on terms or in a manner not approved
by the Company's Board of Directors, except pursuant to an offer conditioned
upon the negation, purchase or redemption of the Rights.
DELAWARE'S ANTI-TAKEOVER LAW
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "Anti-Takeover Law") regulating corporate
takeovers. The Anti-Takeover Law prevents certain Delaware corporations,
including those whose securities are listed on the Nasdaq National Market, from
engaging, under certain circumstances, in a "business combination" (which
includes a merger or sale of more than 10% of the corporation's assets) with any
"interested stockholder" (a stockholder who acquired 15% or more of the
corporation's outstanding voting stock without the prior approval of the
corporation's board of directors) for three years following the date that such
stockholder became an "interested stockholder." A Delaware corporation may "opt
out" of the Anti-Takeover Law with an express provision in its original
certificate of incorporation or an express provision in its certificate of
incorporation or bylaws resulting from a stockholders' amendment approved by at
least a majority of the outstanding voting shares. The Company has not "opted
out" of the provisions of the Anti-Takeover Law.
TRANSFER AGENT AND REGISTRAR AND LISTING
The Transfer Agent and Registrar for the Company's Common Stock is American
Stock Transfer & Trust Company. The Company's Common Stock is listed on the
Nasdaq National Market under the trading symbol INTU.
S-41
42
UNDERWRITING
The Underwriters named below have severally agreed, subject to the terms
and conditions contained in the Underwriting Agreement, to purchase from the
Company the respective number of shares of Common Stock indicated below opposite
their respective names. The Underwriters are committed to purchase all of the
shares, if they purchase any.
NUMBER OF
UNDERWRITER SHARES
----------- ----------
Deutsche Morgan Grenfell Inc. .............................. 3,600,000
Morgan Stanley & Co. Incorporated ...................... 3,510,000
BancAmerica Robertson Stephens.............................. 378,000
BT Alex. Brown ............................................. 378,000
William Blair & Company, L.L.C. ............................ 378,000
Hambrecht & Quist LLC ...................................... 378,000
NationsBanc Montgomery Securities LLC ...................... 378,000
----------
Total............................................. 9,000,000
==========
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions.
The Underwriters have advised the Company that the Underwriters propose
initially to offer the Common Stock to the public on the terms set forth on the
cover page of this Prospectus Supplement. The Underwriters may allow to selected
dealers (who may include the Underwriters) a concession of not more than $1.00
per share. The selected dealers may reallow a concession of not more than $0.10
to certain other dealers. After the public offering, the price and concessions
and re-allowances to dealers and other selling terms may be changed by the
Underwriters. The Common Stock is offered subject to receipt and acceptance by
the Underwriters, and to certain other conditions, including the right to reject
orders in whole or in part. The Underwriters do not intend to sell any of the
shares of Common Stock offered hereby to accounts over which they exercise
discretionary authority.
The Company has granted an option to the Underwriters to purchase up to a
maximum of 1,350,000 additional shares of Common Stock to cover over-allotments,
if any, at the public offering price, less the underwriting discount set forth
on the cover page of this Prospectus Supplement. Such option may be exercised at
any time until 30 days after the date of the Underwriting Agreement. To the
extent the Underwriters exercise this option, each of the Underwriters will be
committed, subject to certain conditions, to purchase such additional shares in
approximately the same proportion as set forth in the above table. The
Underwriters may purchase such shares only to cover over-allotments made in
connection with the Offering.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities including civil liabilities
under the Securities Act of 1933, as amended, or will contribute to payments the
Underwriters may be required to make in respect thereof.
In connection with this Offering, each of the Company's directors and
executive officers have agreed not to offer, sell or otherwise dispose of any
shares of Common Stock for a period of 90 days after the date of this Prospectus
Supplement, without the prior written consent of Deutsche Morgan Grenfell Inc.
and Morgan Stanley & Co. Incorporated. The Company has agreed in the
Underwriting Agreement that it will not, directly or indirectly, without the
prior written consent of Deutsche Morgan Grenfell Inc. and Morgan Stanley & Co.
Incorporated, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of any shares of Common Stock or
S-42
43
any securities convertible into or exchangeable for Common Stock, for a period
of 90 days after the effective date of this Offering, except under certain
circumstances.
Certain persons participating in this Offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids. A stabilizing bid means the placing of
any bid or effecting of any purchase for the purpose of pegging, fixing or
maintaining the price of the Common Stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position crated in connection with
this Offering. A penalty bid means an arrangement that permits the Underwriter
to reclaim a selling concession from a syndicate member in connection with this
Offering when shares of Common Stock sold by the syndicate member are purchased
in syndicate covering transactions. Such transactions may be effected on the
Nasdaq National Market, in the over-the-counter market or otherwise. Such
stabilizing, if commenced, may be discontinued at any time.
Affiliates of Morgan Stanley & Co. Incorporated are the principal investors
in the Company's joint venture entity established to develop certain
Web-oriented finance products. See "Recent Developments -- Joint Venture."
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Fenwick & West LLP, Palo Alto,
California. Certain legal matters in connection with this offering will be
passed upon for the Underwriters by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California.
EXPERTS
The consolidated financial statements and schedule of Intuit Inc. appearing
in Intuit Inc.'s Annual Report (Form 10-K) for the year ended July 31, 1997,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference. Such
consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The combined financial statements of Lacerte Software Corporation and
Lacerte Educational Services Corporation incorporated in this Prospectus
Supplement by reference to the audited historical financial statements as of
March 31, 1997 and 1998 and for each of the three years in the period ended
March 31, 1998 included as Exhibit 99.02 to Intuit Inc.'s Form 8-K dated May 18,
1998 have been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants, given upon the authority of said firm as experts
in auditing and accounting.
S-43
44
(THIS PAGE INTENTIONALLY LEFT BLANK.)
45
PROSPECTUS
$500,000,000
INTUIT INC.
COMMON STOCK, PREFERRED STOCK AND DEBT SECURITIES
------------------------
Intuit Inc., a Delaware corporation ("Intuit" or the "Company") may from
time to time offer up to $500,000,000 in the aggregate of (a) shares of common
stock, $0.01 par value per share, of Intuit ("Common Stock"), (b) shares of
preferred stock, $0.01 par value per share, of Intuit ("Preferred Stock"), in
one or more series, and (c) debt securities of Intuit ("Debt Securities"),
consisting of debentures, notes and/or other secured or unsecured evidences of
indebtedness in one or more series, or (d) any combination of the foregoing,
either individually or as units consisting of one or more of the foregoing, each
at prices and on terms to be determined at the time of sale. The Common Stock,
Preferred Stock and Debt Securities are collectively referred to herein as the
"Securities." The Securities offered pursuant to this Prospectus may be issued
in one or more series of issuances and the aggregate offering price of the
Securities will not exceed $500,000,000 (or its equivalent (based on the
applicable exchange rate at the time of the sale) in one or more foreign
currencies, currency units or composite currencies as shall be designated by the
Company).
Intuit may sell the Securities to or through underwriters, dealers or agents
or directly to purchasers or through a combination of such methods. See "Plan of
Distribution." Intuit reserves the sole right to accept and, together with its
agents from time to time, to reject in whole or in part any proposed purchase of
Securities to be made directly or through agents. The accompanying Prospectus
Supplement ("Prospectus Supplement") sets forth the names of any underwriters,
dealers or agents involved in the sale of the Securities in respect of which
this Prospectus is being delivered, and any applicable fee, commission or
discount arrangement.
All specific terms of the offering and sale of Securities, including the
initial public offering price, aggregate amount, listing on any securities
exchange or quotation system, specific risk factors and the identity of the
agents, dealers, or underwriters, if any, to be utilized in connection with the
sale of the Securities, as well as information, as applicable, about certain
United States federal income tax considerations relating to the Securities being
sold, will be set forth in a Prospectus Supplement.
With respect to the Preferred Stock, the related Prospectus Supplement will
set forth the specific designation, rights, preferences, privileges and
restrictions thereof, including without limitation dividend rate or rates (or
method of ascertaining the same), dividend payment dates and dates from which
dividends shall accrue, voting rights, liquidation preferences, any conversion
or exchange rights, any redemption or sinking fund provisions and any other
special terms.
With respect to the Debt Securities, the related Prospectus Supplement will
set forth the title, rights and restrictions thereof, including without
limitation whether they are senior or subordinated, secured or unsecured
obligations, the currencies or currency units in which they are denominated, the
aggregate principal amount, the maturity, premium, if any, interest rate (which
may be fixed, floating or adjustable) and time and method of calculating payment
of interest, if any, the place or places where principal of (and premium, if
any) and interest, if any, on such Debt Securities will be payable, any
conversion, exchange, redemption or sinking fund provisions and any other
special terms. If so specified in the applicable Prospectus Supplement, Debt
Securities or a series may be issued in whole or in part in the form of one or
more temporary or permanent global securities.
Unless otherwise specified in a Prospectus Supplement, the Senior Debt
Securities, when issued, will be unsecured and will rank equally with all other
unsecured and unsubordinated indebtedness of the Company. The Subordinated Debt
Securities, when issued, will be subordinated in right of payment to all Senior
Indebtedness (as defined) of the Company, including any outstanding Senior Debt
Securities. See "Description of Debt Securities -- Subordination of Subordinated
Debt Securities".
With respect to the Common Stock, the related Prospectus Supplement will set
forth the number of shares offered for sale by the Company and the initial
public offering price or method of determining the initial public offering
price. The Company's Common Stock is listed on the Nasdaq National Market under
the symbol "INTU". Any Common Stock sold pursuant to a Prospectus Supplement
will be quoted on such market.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
------------------------
THE OFFERING OF THE SECURITIES INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 3 HEREOF.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS APRIL 29, 1998.
46
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE SUCH DATE.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission located at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices at Seven World Trade Center, 13th Floor, New
York, New York 10048; and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can also be
obtained from the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a World Wide Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of the World Wide Web
site is http://www.sec.gov. The Company's Common Stock is quoted for trading on
the Nasdaq National Market and, accordingly, reports, proxy statements and other
information concerning the Company may be inspected at the offices of the Nasdaq
Stock Market at 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Securities offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company,
reference is made to the Registration Statement and the exhibits and schedules
filed therewith. Statements contained in this Prospectus as to the contents of
any contract or any other document referred to are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. A copy of the Registration
Statement may be inspected, without charge, at the offices of the Commission in
Washington, D.C. and copies of all or any part of the Registration Statement may
be obtained from the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, upon the
payment of the fees prescribed by the Commission.
2
47
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated herein
by reference:
(a) The Company's annual report on Form 10-K filed with the Commission
for the fiscal year ended July 31, 1997.
(b) The Company's quarterly reports on Form 10-Q for the quarters
ended October 31, 1997 and January 31, 1998.
(c) The Company's definitive proxy statement dated December 12, 1997.
(d) The description of the Company's Common Stock contained in the
Company's registration statement on Form 8-A filed with the Commission
under the Exchange Act, and any amendment or report filed for the purpose
of updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act following the date of this Prospectus and prior to
the termination of the offering contemplated hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents (all of such documents, and the documents
enumerated above, being hereinafter referred to as "Incorporated Documents").
The information relating to the Company contained in this Prospectus does not
purport to be comprehensive and should be read together with the information
contained in the Incorporated Documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of the Registration Statement or this Prospectus to the extent that
a statement contained herein, in a Prospectus Supplement or in any other
document subsequently filed with the Commission which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of the Registration Statement or this
Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the Incorporated Documents (not
including exhibits to the information that is incorporated by reference unless
such exhibits are specifically incorporated by reference into the information
that this Prospectus incorporates). Requests should be directed to Investor
Relations, Intuit Inc., 2535 Garcia Avenue, Mountain View, California 94043
(telephone number (650) 944-2713).
THE COMPANY
Intuit develops, markets and supports personal finance, small business
accounting, tax preparation and other consumer software products, and related
electronic services and supplies that enable individuals, professionals and
small businesses to automate commonly performed financial tasks and better
organize, understand, manage and plan their financial lives. Intuit commenced
operations in March 1983 and was incorporated in California in March 1984. In
March 1993, the Company was reincorporated in Delaware. The Company's principal
executive offices are located at 2535 Garcia Avenue, Mountain View, California
94043. Its telephone number is (650) 944-6000. Unless otherwise indicated
herein, the "Company" and "Intuit" refer to Intuit Inc., and its direct and
indirect subsidiaries.
RISK FACTORS
Prior to making an investment decision with respect to the Securities
offered hereby, prospective investors should carefully consider the specific
factors set forth under the caption "Risk Factors" in the applicable Prospectus
Supplement pertaining thereto, together with all of the other information
appearing herein or therein or incorporated by reference herein, in light of
their particular investment objectives and financial circumstances.
3
48
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, the net
proceeds from the sale of Securities offered hereby will be used for general
corporate purposes. The Company expects from time to time to evaluate the
acquisition of products, businesses and technologies for which a portion of the
net proceeds may be used. Currently, however, the Company does not have any
understandings, commitments or agreements with respect to any material
acquisitions for which a portion of the net proceeds may be used.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company and its consolidated subsidiaries for the periods indicated. The
ratio of earnings to fixed charges has been computed by dividing earnings, which
consist of income before income taxes plus fixed charges by fixed charges which
consist of interest expense incurred plus the portion of the Company's rental
expense deemed to be a reasonable approximation of the interest factor under
operating leases.
YEAR TEN MONTHS SIX MONTHS
ENDED ENDED YEARS ENDED JULY 31, ENDED
SEPTEMBER 30, JULY 31, --------------------- JANUARY 31,
1993 1994 1995 1996 1997 1998
- ------------- ----------- ----- ----- ----- ------------
14.99 (1) (2) (3) 2.82 17.59
- ---------------
(1) Earnings were inadequate to cover fixed charges by $181.49 million.
(2) Earnings were inadequate to cover fixed charges by $20.00 million.
(3) Earnings were inadequate to cover fixed charges by $1.87 million.
GENERAL DESCRIPTION OF SECURITIES
Intuit may offer under this Prospectus shares of Common Stock, shares of
Preferred Stock, Debt Securities or any combination of the foregoing, either
individually or as units consisting of one or more Securities. The aggregate
offering price of Securities offered by Intuit under this Prospectus will not
exceed $500,000,000. If Securities are offered as units, the terms of the units
will be set forth in a Prospectus Supplement. Certain of the Securities to be
offered hereby involve a high degree of risk. Such risks will be set forth in
the Prospectus Supplement relating to such Security.
DESCRIPTION OF THE COMMON STOCK
Under Intuit's Certificate of Incorporation, Intuit is currently authorized
to issue up to 250,000,000 shares of Common Stock. As of March 31, 1998, there
were 48,285,913 shares of Common Stock outstanding held by approximately 842
stockholders of record.
Subject to preferences that may be applicable to any Preferred Stock
outstanding at the time, the holders of outstanding shares of Common Stock are
entitled to receive dividends out of assets legally available therefor at such
times and in such amounts as the Board of Directors may from time to time
determine. Each stockholder is entitled to one vote for each share of Common
Stock held by him or her on all matters submitted to a vote of stockholders.
Cumulative voting for the election of directors is not provided for in the
Company's Certificate of Incorporation, which means that the holders of a
majority of the shares voted can elect all of the directors then standing for
election. The Common Stock is not entitled to preemptive rights and is not
subject to conversion or redemption. Upon liquidation, dissolution or winding-up
of the Company, the assets legally available for distribution to stockholders
are distributable ratably among the holders of the Common Stock and any
participating Preferred Stock outstanding at that time after payment of
liquidation preferences, if any, on any outstanding Preferred Stock and payment
of other claims of
4
49
creditors. Each outstanding share of Common Stock is, and any shares of Common
Stock offered hereby will be, fully paid and nonassessable.
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "Anti-Takeover Law") regulating corporate
takeovers. The Anti-Takeover Law prevents certain Delaware corporations,
including those whose securities are listed on the Nasdaq National Market, from
engaging, under certain circumstances, in a "business combination" (which
includes a merger or sale of more than 10% of the corporation's assets) with any
"interested stockholder" (a stockholder who acquired 15% or more of the
corporation's outstanding voting stock without the prior approval of the
corporation's board of directors) for three years following the date that such
stockholder became an "interested stockholder."
A Delaware corporation may "opt out" of the Anti-Takeover Law with an
express provision in its original certificate of incorporation or an express
provision in its certificate of incorporation or bylaws resulting from a
stockholders' amendment approved by at least a majority of the outstanding
voting shares. The Company has not "opted out" of the provisions of the Anti-
Takeover Law.
The Transfer Agent and Registrar for the Company's Common Stock is American
Stock Transfer & Trust Company. The Company's Common Stock is listed on the
Nasdaq National Market under the trading symbol INTU.
DESCRIPTION OF THE PREFERRED STOCK
Under the Company's Certificate of Incorporation, the Company's Board of
Directors may direct the issuance of up to 3,000,000 shares of Preferred Stock
in one or more series and with rights, preferences, privileges and restrictions,
including dividend rights, voting rights, conversion rights, terms of redemption
and liquidation preferences, that may be fixed or designated by the Board of
Directors pursuant to a certificate of designation without any further vote or
action by Intuit's stockholders. The issuance of Preferred Stock may have the
effect of delaying, deferring or preventing a change in control of Intuit.
Preferred Stock, upon issuance against full payment of the purchase price
therefor, will be fully paid and nonassessable. The specific terms of a
particular series of Preferred Stock will be described in the Prospectus
Supplement relating to that series. The description of Preferred Stock set forth
below and the description of the terms of a particular series of Preferred Stock
set forth in the related Prospectus Supplement do not purport to be complete and
are qualified in their entirety by reference to the certificate of designation
relating to that series. The related Prospectus Supplement will contain a
description of certain United States Federal income tax consequences relating to
the purchase and ownership of the series of Preferred Stock described in such
Prospectus Supplement.
The rights, preferences, privileges and restrictions of the Preferred Stock
of each series will be fixed by the certificate of designation relating to such
series. A Prospectus Supplement, relating to each series, will specify the terms
of the Preferred Stock as follows:
(a) The maximum number of shares to constitute the series and the
distinctive designation thereof;
(b) The annual dividend rate, if any, on shares of the series, whether
such rate is fixed or variable or both, the date or dates from which
dividends will begin to accrue or accumulate and whether dividends will be
cumulative;
(c) The price at and the terms and conditions on which the shares of
the series may be redeemed, if at all (including redemption at the option
of the Company or at the option of the holders thereof), including the time
during which shares of the series may be redeemed and any accumulated
dividends thereon or premiums that the holders of shares of the series
shall be entitled to receive upon the redemption thereof;
5
50
(d) The liquidation preference, if any, and any accumulated dividends
thereon, that the holders of shares of the series shall be entitled to
receive upon the liquidation, dissolution or winding up of the affairs of
the Company;
(e) Whether or not the shares of the series will be subject to
operation of a retirement or sinking fund, and, if so, the extent and
manner in which any such fund shall be applied to the purchase or
redemption of the shares of the series for retirement or for other
corporate purposes, and the terms and provisions relating to the operation
of such fund;
(f) The terms and conditions, if any, on which the shares of the
series shall be convertible into, or exchangeable for, shares of any other
class or classes of capital stock of the Company or any series of any other
class or classes, or of any other series of the same class, or any other
securities or assets, including the price or prices or the rate or rates of
conversion or exchange and the method, if any, of adjusting the same;
(g) The voting rights, if any, of the shares of the series; and
(h) Any or all other preferences and relative, participating,
operational or other special rights, privileges or qualifications,
limitations or restrictions thereof.
DESCRIPTION OF THE DEBT SECURITIES
The Senior Debt Securities are to be issued under an Indenture (the "Senior
Indenture"), between the Company, as issuer, and the Trustee thereunder, as
Trustee (the "Trustee"). The Subordinated Debt Securities are to be issued under
a separate Indenture (the "Subordinated Indenture"), also between the Company,
as issuer, and Chase Manhattan Bank and Trust Company, National Association, as
Trustee. The Senior Indenture and Subordinated Indenture are sometimes referred
to collectively as the "Indentures". A copy of the form of each Indenture is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. The Debt Securities may be issued from time to time in one or more series.
The particular terms of each series, or of Debt Securities forming a part of a
series, which are offered by a Prospectus Supplement will be described in such
Prospectus Supplement.
The following summaries of certain provisions of the Indentures do not
purport to be complete and are subject, and are qualified in their entirety by
reference, to all the provisions of the Indentures, including the definitions
therein of certain terms, and, with respect to any particular Debt Securities,
to the description of the terms thereof included in the Prospectus Supplement
relating thereto. Wherever particular Sections or defined terms of the
Indentures are referred to herein or in a Prospectus Supplement, such Sections
or defined terms are incorporated by reference herein or therein, as the case
may be. Section and Article references used herein are references to the
Indentures.
GENERAL
The Indentures will provide that the Debt Securities may be issued in
separate series thereunder from time to time without limitation as to aggregate
principal amount. The Company may specify a maximum aggregate principal amount
for the Debt Securities of any series. (Section 301) The Debt Securities are to
have such terms and provisions which are not inconsistent with the Indentures,
including as to maturity, principal and interest, as the Company may determine.
Unless otherwise specified in the applicable Prospectus Supplement, the Senior
Debt Securities when issued will be unsecured and unsubordinated obligations of
the Company and will rank on a parity with all other unsecured and
unsubordinated indebtedness of the Company. The Subordinated Debt Securities
when issued will be subordinated in right of payment to the prior payment in
full of all Senior Indebtedness of the Company, including any outstanding Senior
Debt Securities, as described under "Subordination of Subordinated Debt
Securities" and in the applicable Prospectus Supplement.
6
51
The Indentures do not limit the amount of other debt that may be issued by
the Company and do not contain financial or similar restrictive covenants. The
Indentures do not contain any provision intended to provide protection to
holders of Debt Securities against a sudden or dramatic decline in credit
quality of the Company that could, for example, result from a takeover,
recapitalization, special dividend or other restructuring.
The applicable Prospectus Supplement will set forth whether the Debt
Securities offered shall be Senior Debt Securities or Subordinated Debt
Securities and the price or prices at which the Debt Securities to be offered
will be issued and will describe the following terms of such Debt Securities:
(1) the title of such Debt Securities; (2) any limit on the aggregate principal
amount of such Debt Securities or the series of which they are a part; (3) the
Person to whom any interest on a Debt Security of the series shall be payable,
if other than the Person in whose name that Debt Security (or one or more
predecessor Debt Securities) is registered at the close of business on the
Regular Record Date for such interest; (4) the date or dates on which the
principal of any of such Debt Securities will be payable; (5) the rate or rates
at which any of such Debt Securities will bear interest, if any, the date or
dates from which any such interest will accrue, the Interest Payment Dates on
which any such interest will be payable and the Regular Record Date for any such
interest payable on any Interest Payment Date; (6) the place or places where the
principal of and any premium and interest on any of such Debt Securities will be
payable; (7) the period or periods within which, the price or prices at which,
and the terms and conditions on which any of such Debt Securities may be
redeemed, in whole or in part, at the option of the Company; (8) the obligation,
if any, of the Company to redeem or purchase any of such Debt Securities
pursuant to any sinking fund or analogous provision or at the option of the
Holder thereof, and the period or periods within which, the price or prices at
which, and the terms and conditions on which any of such Debt Securities will be
redeemed or purchased, in whole or in part, pursuant to any such obligation; (9)
the denominations in which any of such Debt Securities will be issuable, if
other than denominations of $1,000 and any integral multiple thereof; (10) if
the amount of principal of or any premium or interest on any of such Debt
Securities may be determined with reference to an index or pursuant to a
formula, the manner in which such amounts will be determined; (11) if other than
the currency of the United States of America, the currency, currencies or
currency units in which the principal of or any premium or interest on any of
such Debt Securities will be payable (and the manner in which the equivalent of
the principal amount thereof in the currency of the United States of America is
to be determined for any purpose, including for the purpose of determining the
principal amount deemed to be Outstanding at any time); (12) if the principal of
or any premium or interest on any of such Debt Securities is to be payable, at
the election of the Company or the Holder thereof, in one or more currencies or
currency units other than those in which such Debt Securities are stated to be
payable, the currency, currencies or currency units in which payment of any such
amount as to which such election is made will be payable, the periods within
which and the terms and conditions upon which such election is to be made and
the amount so payable (or the manner in which such amount is to be determined);
(13) if other than the entire principal amount thereof, the portion of the
principal amount of any of such Debt Securities which will be payable upon
declaration of acceleration of the Maturity thereof; (14) if the principal
amount payable at the Stated Maturity of any of such Debt Securities will not be
determinable as of any one or more dates prior to the Stated Maturity, the
amount which will be deemed to be such principal amount as of any such date for
any purpose, including the principal amount thereof which will be due and
payable upon any Maturity other than the Stated Maturity or which will be deemed
to be Outstanding as of any such date (or, in any such case, the manner in which
such deemed principal amount is to be determined); (15) if applicable, that such
Debt Securities, in whole or any specified part, are defeasible pursuant to the
provisions of the Indentures described under "Defeasance and Covenant
Defeasance-Defeasance and Discharge" or "Defeasance and Covenant
Defeasance-Defeasance of Certain Covenants," or under both such captions; (16)
if applicable, the terms of any right to convert Debt Securities into, or
exchange Debt Securities for, shares of Common Stock of the Company or other
securities or property; (17) whether any of
7
52
such Debt Securities will be issuable in whole or in part in the form of one or
more Global Securities and, if so, the respective Depositaries for such Global
Securities, the form of any legend or legends to be borne by any such Global
Security in addition to or in lieu of the legends referred to under "Form,
Exchange and Transfer" or "Global Securities" and, if different from those
described under such captions, any circumstances under which any such Global
Security may be exchanged in whole or in part for Securities registered, and any
transfer of such Global Security in whole or in part may be registered, in the
names of Persons other than the Depositary for such Global Security or its
nominee; (18) whether the subordination provisions summarized below or different
subordination provisions, including a different definition of "Senior
Indebtedness" or "Designated Senior Indebtedness," will apply to any such Debt
Securities that are Subordinated Debt Securities; (19) any addition to or change
in the Events of Default applicable to any of such Debt Securities and any
change in the right of the Trustee or the Holders to declare the principal
amount of any of such Debt Securities due and payable; (20) any addition to or
change in the covenants in the Indentures applicable to any of such Debt
Securities; and (21) any other terms of such Debt Securities not inconsistent
with the provisions of the relevant Indenture. (Section 301)
Debt Securities, including Original Issue Discount Securities, may be sold
at a substantial discount below their stated principal amount. Certain special
United States federal income tax considerations (if any) applicable to Debt
Securities sold at an original issue discount will be described in the
applicable Prospectus Supplement. "Original Issue Discount Security" means any
Debt Security that provides for an amount less than the principal amount thereof
to be due and payable upon the declaration of acceleration of the maturity
thereof in accordance with the terms of the applicable indenture. The applicable
Prospectus Supplement relating to any series of Debt Securities that are
Original Issue Discount Securities will describe the particular provisions
relating to acceleration of the maturity of a portion of the principal amount of
such series of Original Issue Discount Securities upon the occurrence of an
Event of Default (as defined below) and the continuation thereof. In addition,
certain special United States federal income tax or other considerations (if
any) applicable to any Debt Securities which are denominated in a currency or
currency unit other than United States dollars will be described in the
applicable Prospectus Supplement.
CONVERSION AND EXCHANGE RIGHTS
The terms on which Debt Securities of any series are convertible into or
exchangeable for Common Stock or other securities or property will be set forth
in the Prospectus Supplement relating thereto. Such terms shall include
provisions as to whether conversion or exchange is mandatory or at the option of
the Holder and may include provisions pursuant to which the number of shares of
Common Stock or other securities or property to be received by the Holders of
Debt Securities upon conversion or exchange would be calculated according to the
market price of Common Stock or other securities or property as of a time stated
in the applicable Prospectus Supplement. (Article Fourteen)
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the Prospectus Supplement, the following
provisions will apply to the Subordinated Debt Securities.
The indebtedness evidenced by the Subordinated Debt Securities will, to the
extent provided in the Subordinated Indenture, be subordinate in right of
payment to the prior payment in full of all Senior Indebtedness (as defined),
including any outstanding Senior Debt Securities. Upon any distribution of
assets of the Company to creditors upon any dissolution or winding-up or
liquidation or reorganization of the Company (whether voluntary or involuntary)
or in bankruptcy, insolvency, receivership or similar proceedings, all amounts
due or to become due upon all Senior Indebtedness shall first be paid in full
(or duly provided for) in cash before any payment is made on account of the
principal of, premium, if any, or interest on the Subordinated Debt Securities
(except
8
53
payments made from monies previously deposited with the Trustee under certain
circumstances). In the event of the acceleration of the Subordinated Debt
Securities because of an Event of Default, no payment or distribution shall be
made in respect of the principal of, premium, if any, or interest on the
Subordinated Debt Securities until all Senior Indebtedness has been paid in full
in cash or such acceleration is rescinded in accordance with the terms of the
Indenture. If the payment of Subordinated Debt Securities is accelerated because
of an Event of Default, the Company is required under the Subordinated Indenture
to promptly notify holders of Senior Indebtedness of the acceleration. (Section
1502)
The Company also may not make any payment upon or in respect of the
Subordinated Debt Securities if (i) a default in the payment of the principal
of, premium, if any, interest, rent or other obligations (including a default
under any repurchase or redemption obligation) in respect of Designated Senior
Indebtedness occurs and is continuing beyond any applicable period of grace or
(ii) any other default occurs and is continuing with respect to Designated
Senior Indebtedness (as defined) that permits holders of the Designated Senior
Indebtedness as to which such default relates to accelerate its maturity and the
Trustee receives a notice of such default (a "Payment Blockage Notice") from the
Company, a holder of such Designated Senior Indebtedness or other person
permitted to give such notice under the Subordinated Indenture. The Company may
and shall resume payments on the Subordinated Debt Securities (a) in the case of
a payment default, upon the date on which such default is cured or waived or
ceases to exist and (b) in the case of a nonpayment default, the earlier of the
date on which such nonpayment default is cured or waived or ceases to exist or
179 days after the date on which the applicable Payment Blockage Notice is
received. No new period of payment blockage may be commenced pursuant to a
Payment Blockage Notice unless and until 365 days have elapsed since the initial
effectiveness of the immediately prior Payment Blockage Notice. No nonpayment
default that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee (unless such default was waived, cured or
otherwise ceased to exist and thereafter subsequently reoccurred) shall be, or
be made, the basis for a subsequent Payment Blockage Notice. (Section 1504)
By reason of the subordination provisions described above, in the event of
the Company's bankruptcy, dissolution or reorganization, holders of Senior
Indebtedness may receive more, ratably, and Holders of the Subordinated Debt
Securities may receive less, ratably, than the other creditors of the Company.
Such subordination will not prevent the occurrence of any Event of Default under
the Subordinated Indenture.
The term "Senior Indebtedness" means the principal of, premium, if any,
interest (including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) and rent payable on or
in connection with, and all fees, costs, expenses and other amounts accrued or
due on or in connection with, Indebtedness (as defined) of the Company, whether
outstanding on the date of the Subordinated Indenture or thereafter created,
incurred, assumed, guaranteed or in effect guaranteed by the Company (including
all deferrals, renewals, extensions or refundings of, or amendments,
modifications or supplements to, the foregoing), unless in the case of any
particular Indebtedness the instrument creating or evidencing the same or the
assumption or guarantee thereof expressly provides that such Indebtedness shall
not be senior in right of payment to the Subordinated Debt Securities or
expressly provides that such Indebtedness is "pari passu" or "junior" to the
Subordinated Debt Securities. Notwithstanding the foregoing, the term Senior
Indebtedness shall not include (a) any Indebtedness of the Company to any
subsidiary of the Company, a majority of the voting stock of which is owned,
directly or indirectly, by the Company and (b) any Indebtedness that is not
secured.
The term "Indebtedness" means, with respect to any Person (as defined in
the Subordinated Indenture), and without duplication, (a) all indebtedness,
obligations and other liabilities (contingent or otherwise) of such Person for
borrowed money (including obligations of such Person in respect of overdrafts,
foreign exchange contracts, currency exchange agreements, interest rate
9
54
protection agreements, and any loans or advances from banks, whether or not
evidenced by notes or similar instruments) or evidenced by credit or loan
agreements, bonds, debentures, notes or similar instruments (whether or not the
recourse of the lender is to the whole of the assets of such Person or to only a
portion thereof) (other than any trade accounts payable or other accrued current
expense incurred in the ordinary course of business in connection with the
obtaining of materials or services), (b) all reimbursement obligations and other
liabilities (contingent or otherwise) of such Person with respect to letters of
credit, bank guarantees or bankers' acceptances, (c) all obligations and
liabilities (contingent or otherwise) (i) in respect of leases of such Person
required, in conformity with generally accepted accounting principles, to be
accounted for as capitalized lease obligations on the balance sheet of such
Person, (ii) as lessee under other leases for real property (and related assets
leased together therewith), whether or not capitalized, entered into or leased
after the date of the Subordinated Indenture for financing purposes (as
determined by the Company) or (iii) under any lease or related document
(including a purchase agreement) in connection with the lease of real property
which provides that such Person is contractually obligated to purchase or cause
a third party to purchase the leased property and thereby guarantee a minimum
residual value of leased property to the lessor and the obligations of such
Person under such lease or related document to purchase or to cause a third
party to purchase such leased property, (d) all obligations of such Person
(contingent or otherwise) with respect to an interest rate, currency or other
swap, cap, floor or collar agreement, hedge agreement, forward contract, or
other similar instrument or agreement or foreign currency hedge, exchange,
purchase or similar instrument or agreement, (e) all direct or indirect
guaranties, agreements to be jointly liable or similar agreements by such Person
in respect of, and obligations or liabilities (contingent or otherwise) of such
Person to purchase or otherwise acquire or otherwise assure a creditor against
loss in respect of, indebtedness, obligations or liabilities of another Person
of the kind described in clauses (a) through (d), (f) any indebtedness or other
obligations described in clauses (a) through (d) secured by any mortgage,
pledge, lien or other encumbrance existing on property which is owned or held by
such Person, regardless of whether the indebtedness or other obligation secured
thereby shall have been assumed by such Person and (g) any and all deferrals,
renewals, extensions and refundings of, or amendments, modifications or
supplements to, any indebtedness, obligation or liability of the kind described
in clauses (a) through (f).
The term "Designated Senior Indebtedness" means the Company's obligations
under any particular Senior Indebtedness in which the instrument creating or
evidencing the same or the assumption or guarantee thereof (or related
agreements or documents to which the Company is a party) expressly provides that
such Senior Indebtedness shall be "Designated Senior Indebtedness' for purposes
of the Subordinated Debenture (provided that such instrument, agreement or other
document may place limitations and conditions on the right of such Senior
Indebtedness to exercise the rights of Designated Senior Indebtedness).
The applicable Prospectus Supplement may further describe the provisions,
if any, applicable to the subordination of Subordinated Debt Securities of a
particular series offered thereby.
The Subordinated Debt Securities will be obligations exclusively of the
Company. Since the operations of the Company are partially conducted through its
subsidiaries, the cash flow and the consequent ability to service debt,
including the Subordinated Debt Securities, of the Company will be partially
dependent upon the earnings of any such subsidiaries and the distribution of
those earnings, or upon loans or other payments of funds by those subsidiaries,
to the Company. Such subsidiaries are separate and distinct legal entities and
have no obligation, contingent or otherwise, to pay any amounts due pursuant to
the Subordinated Debt Securities or to make any funds available therefor,
whether by dividends, distributions, loans or other payments. In addition, the
payment of dividends or distributions and the making of loans and advances to
the Company by any such subsidiaries could be subject to statutory or
contractual restrictions, could be contingent upon the earnings of those
subsidiaries and are subject to various business considerations.
10
55
Any right of the Company to receive any assets of any of its subsidiaries
upon their liquidation or reorganization (and the consequent right of the
Holders of the Subordinated Debt Securities to participate in those assets) will
be effectively subordinated to the claims of the subsidiary's creditors
(including trade creditors), except to the extent that the Company is itself
recognized as a creditor of such subsidiary, in which case the claims of the
Company would still be subordinate to any security interest in the assets of
such subsidiary and any indebtedness of such subsidiary senior to that held by
the Company.
The Subordinated Indenture does not limit or prohibit the incurrence of
additional Senior Indebtedness, which may include indebtedness that is senior to
the Subordinated Debt Securities, but subordinate to other obligations of the
Company. The Senior Debt Securities, when issued, will constitute Senior
Indebtedness.
FORM, EXCHANGE AND TRANSFER
The Debt Securities of each series will be issuable only in fully
registered form, without coupons, and, unless otherwise specified in the
applicable Prospectus Supplement, only in denominations of $1,000 and integral
multiples thereof. (Section 302)
At the option of the Holder, subject to the terms of the Indentures and the
limitations applicable to Global Securities, Debt Securities of each series will
be exchangeable for other Debt Securities of the same series of any authorized
denomination and of a like tenor and aggregate principal amount. (Section 305)
Subject to the terms of the Indentures and the limitations applicable to
Global Securities, Debt Securities may be presented for exchange as provided
above or for registration of transfer (duly endorsed or with the form of
transfer endorsed thereon duly executed) at the office of the Security Registrar
or at the office of any transfer agent designated by the Company for such
purpose. No service charge will be imposed for any registration of transfer or
exchange of Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. Such transfer or exchange will be effected upon the Security
Registrar or such transfer agent, as the case may be, being satisfied with the
documents of title and identity of the person making the request. The Company
has appointed the Trustee as Security Registrar. Any transfer agent (in addition
to the Security Registrar) initially designated by the Company for any Debt
Securities will be named in the applicable Prospectus Supplement. (Section 305)
The Company may at any time designate additional transfer agents or rescind the
designation of any transfer agent or approve a change in the office through
which any transfer agent acts, except that the Company will be required to
maintain a transfer agent in each Place of Payment for the Debt Securities of
each series. (Section 1002)
If the Debt Securities of any series (or of any series and specified tenor)
are to be redeemed in part, the Company will not be required to (i) issue,
register the transfer of or exchange any Debt Security of that series (or of
that series and specified tenor, as the case may be) during a period beginning
at the opening of business 15 days before the day of mailing of a notice of
redemption of any such Debt Security that may be selected for redemption and
ending at the close of business on the day of such mailing or (ii) register the
transfer of or exchange any Debt Security so selected for redemption, in whole
or in part, except the unredeemed portion of any such Debt Security being
redeemed in part. (Section 305)
GLOBAL SECURITIES
Some or all of the Debt Securities of any series may be represented, in
whole or in part, by one or more global securities which will have an aggregate
principal amount equal to that of the Debt Securities represented thereby (a
"Global Security"). Each Global Security will be registered in the name of a
depositary (the "Depositary") or a nominee thereof identified in the applicable
Prospectus Supplement, will be deposited with such Depositary or nominee or a
custodian therefor
11
56
and will bear a legend regarding the restrictions on exchanges and registration
of transfer thereof referred to below and any such other matters as may be
provided for pursuant to the Indentures.
Notwithstanding any provision of the Indentures or any Debt Security
described herein, no Global Security may be exchanged in whole or in part for
Debt Securities registered, and no transfer of a Global Security in whole or in
part may be registered, in the name of any Person other than the Depositary for
such Global Security or any nominee of such Depositary unless (i) the Depositary
has notified the Company that it is unwilling or unable to continue as
Depositary for such Global Security or has ceased to be qualified to act as such
as required by the Indentures, (ii) there shall have occurred and be continuing
an Event of Default with respect to the Debt Securities represented by such
Global Security or (iii) there shall exist such circumstances, if any, in
addition to or in lieu of those described above as may be described in the
applicable Prospectus Supplement. All securities issued in exchange for a Global
Security or any portion thereof will be registered in such names as the
Depositary may direct. (Sections 204 and 305)
As long as the Depositary, or its nominee, is the registered Holder of a
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner and Holder of such Global Security and the Debt
Securities represented thereby for all purposes under the Debt Securities and
the Indentures. Except in the limited circumstances referred to above, owners of
beneficial interests in a Global Security will not be entitled to have such
Global Security or any Debt Securities represented thereby registered in their
names, will not receive or be entitled to receive physical delivery of
certificated Debt Securities in exchange therefor and will not be considered to
be the owners or Holders of such Global Security or any Debt Securities
represented thereby for any purpose under the Debt Securities or the Indentures.
All payments of principal of and any premium and interest on a Global Security
will be made to the Depositary or its nominee, as the case may be, as the Holder
thereof. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. These
laws may impair the ability to transfer beneficial interests in a Global
Security.
Ownership of beneficial interests in a Global Security will be limited to
institutions that have accounts with the Depositary or its nominee
("participants") and to persons that may hold beneficial interests through
participants. In connection with the issuance of any Global Security, the
Depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of Debt Securities represented by the Global
Security to the accounts of its participants. Ownership of beneficial interests
in a Global Security will be shown only on, and the transfer of those ownership
interests will be effected only through, records maintained by the Depositary
(with respect to participants' interests) or any such participant (with respect
to interests of persons held by such participants on their behalf).
Payments, transfers, exchanges and others matters relating to beneficial
interests in a Global Security may be subject to various policies and procedures
adopted by the Depositary from time to time. None of the Company, the Trustee or
any agent of the Company or the Trustee will have any responsibility or
liability for any aspect of the Depositary's or any participant's records
relating to, or for payments made on account of, beneficial interests in a
Global Security, or for maintaining, supervising or reviewing any records
relating to such beneficial interests.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of interest on a Debt Security on any Interest Payment Date will be made to the
Person in whose name such Debt Security (or one or more Predecessor Debt
Securities) is registered at the close of business on the Regular Record Date
for such interest. (Section 307)
Unless otherwise indicated in the applicable Prospectus Supplement,
principal of and any premium and interest on the Debt Securities of a particular
series will be payable at the office of such Paying Agent or Paying Agents as
the Company may designate for such purpose from time to
12
57
time, except that at the option of the Company payment of any interest may be
made by check mailed to the address of the Person entitled thereto as such
address appears in the Security Register. Unless otherwise indicated in the
applicable Prospectus Supplement, the Corporate Trust Office of the Trustee will
be designated as the Company's sole Paying Agent for payments with respect to
Debt Securities of each series. Any other Paying Agents initially designated by
the Company for the Debt Securities of a particular series will be named in the
applicable Prospectus Supplement. The Company may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts, except that
the Company will be required to maintain a Paying Agent in each Place of Payment
for the Debt Securities of a particular series. (Section 1002)
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or any premium or interest on any Debt Security which remain
unclaimed for a period ending the earlier of 10 business days prior to the date
such money would escheat to the State or at the end of two years after such
principal, premium or interest has become due and payable will be repaid to the
Company, and the Holder of such Debt Security thereafter may look only to the
Company for payment thereof. (Section 1003)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indentures will provide that the Company may not consolidate with or
merge into any other Person (in a transaction in which the Company is not the
surviving corporation), or convey, transfer or lease its properties and assets
substantially as an entirety to, any Person (a "Successor Person"),unless (i)
the Successor Person (if any) is a corporation, limited liability company,
partnership, trust or other entity organized and existing under the laws of the
United States, or any state thereof, and assumes the Company's obligations on
the Debt Securities and under the Indentures, (ii) immediately after giving
effect to the transaction, and treating any indebtedness which becomes an
obligation of the Company or any Subsidiary as a result of the transaction as
having been incurred by it at the time of the transaction, no Event of Default,
and no event which, after notice or lapse of time or both, would become an Event
of Default, shall have occurred and be continuing, and (iii) certain other
conditions are met. (Section 801)
EVENTS OF DEFAULT
Each of the following will constitute an Event of Default under each
Indenture with respect to Debt Securities of any series outstanding under such
Indenture (unless such event is specifically inapplicable to a particular series
as described in the Prospectus Supplement relating thereto): (a) failure to pay
principal of or any premium on any Debt Security of that series when due,
whether or not such payment is prohibited by the subordination provisions of the
Subordinated Indenture; (b) failure to pay any interest on any Debt Securities
of that series when due, continued for 30 days, whether or not such payment is
prohibited by the subordination provisions of the Subordinated Indenture; (c)
failure to deposit any sinking fund payment, when due, in respect of any Debt
Security of that series, whether or not such deposit is prohibited by the
subordination provisions of the Subordinated Indenture; (d) failure to perform
any other covenant of the Company in the Indenture (other than a covenant
included in the Indentures solely for the benefit of a series other than that
series), continued for 60 days after written notice has been given by the
Trustee, or the Holders of at least 25% in aggregate principal amount of the
Outstanding Securities of that series, as provided in the Indentures; (e)
certain events in bankruptcy, insolvency or reorganization with respect to the
Company; and (f) any other Event of Default specified in the applicable
Prospectus Supplement. (Section 501)
Each Indenture will provide that, if an Event of Default (other than an
Event of Default described in clause (e) above) with respect to the Debt
Securities of any series at the time Outstanding under such Indenture shall
occur and be continuing, either the Trustee or the Holders of at least 25% in
aggregate principal amount of the Outstanding Securities of that series by
notice
13
58
as provided in the Indenture may declare the principal amount of the Debt
Securities of that series (or, in the case of any Debt Security that is an
Original Issue Discount Security or the principal amount of which is not then
determinable, such portion of the principal amount of such Debt Security, or
such other amount in lieu of such principal amount, as may be specified in the
terms of such Debt Security) to be due and payable immediately. If an Event of
Default described in clause (e) above with respect to the Debt Securities of any
series at the time Outstanding shall occur, the principal amount of all the Debt
Securities of that series (or, in the case of any such Original Issue Discount
Security or other Debt Security, such specified amount) will automatically, and
without any action by the Trustee or any Holder, become immediately due and
payable. Any payment by the Company on the Subordinated Debt Securities
following any such acceleration will be subject to the subordination provisions
of Article Fifteen of the Subordinated Indenture. After any such acceleration,
but before a judgment or decree based on acceleration, the Holders of a majority
in aggregate principal amount of the Outstanding Securities of that series may,
under certain circumstances, rescind and annul such acceleration if all Events
of Default, other than the non-payment of accelerated principal (or other
specified amount), have been cured or waived as provided in the Indentures.
(Section 502) For information as to waiver of defaults, see "Modification and
Waiver."
Subject to the provisions of the Indentures relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indentures at the request or direction of any of the Holders, unless such
Holders shall have offered to the Trustee reasonable indemnity. (Section 603)
Subject to such provisions for the indemnification of the Trustee, the Holders
of a majority in aggregate principal amount of the Outstanding Securities of any
series will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee with respect to the Debt Securities of that
series. (Section 512)
No Holder of a Debt Security of any series will have any right to institute
any proceeding with respect to the Indentures, or for the appointment of a
receiver or a trustee, or for any other remedy thereunder, unless (i) such
Holder has previously given to the Trustee written notice of a continuing Event
of Default with respect to the Debt Securities of that series, (ii) the Holders
of at least 25% in aggregate principal amount of the Outstanding Securities of
that series have made a written request, and such Holder or Holders have offered
reasonable indemnity, to the Trustee to institute such proceeding as trustee and
(iii) the Trustee has failed to institute such proceeding, and has not received
from the Holders of a majority in aggregate principal amount of the Outstanding
Securities of that series a direction inconsistent with such request, within 60
days after such notice, request and offer. (Section 507) However, such
limitations do not apply to a suit instituted by a Holder of a Debt Security for
the enforcement of payment of the principal of or any premium or interest on
such Debt Security on or after the applicable due date specified in such Debt
Security. (Section 508)
Each Indenture will include a covenant requiring the Company to furnish to
the Trustee annually a statement by certain of its officers as to whether or not
the Company, to their knowledge, is in default in the performance or observance
of any of the terms, provisions and conditions of the Indenture and, if so,
specifying all such known defaults. (Section 1004)
MODIFICATION AND WAIVER
Modifications and amendments of the Indentures may be made by the Company
and the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of each series affected by such
modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each Outstanding Security
affected thereby, (a) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Debt Security, (b) reduce the
principal amount of, or
14
59
any premium or interest on, any Debt Security, (c) reduce the amount of
principal of an Original Issue Discount Security or any other Debt Security
payable upon acceleration of the Maturity thereof, (d) change the place or
currency of payment of principal of, or any premium or interest on, any Debt
Security, (e) impair the right to institute suit for the enforcement of any
payment on or with respect to any Debt Security, (f) in the case of Subordinated
Debt Securities, modify the subordination provisions in a manner materially
adverse to the Holders of the Subordinated Debt Securities, (g) in the case of
Debt Securities that are convertible or exchangeable into Securities or other
securities of the Company, adversely affect the right of Holders to convert or
exchange any of the Debt Securities other than as provided in or pursuant to the
Indentures, (h) reduce the percentage in principal amount of Outstanding
Securities of any series, the consent of whose Holders is required for
modification or amendment of the Indentures, (i) reduce the percentage in
principal amount of Outstanding Securities of any series necessary for waiver of
compliance with certain provisions of the Indentures or for waiver of certain
defaults or (j) modify such provisions with respect to modification and waiver.
(Section 902)
The Indentures will provide that the Holders of a majority in aggregate
principal amount of the Outstanding Securities of any series may waive, on
behalf of the Holders of all Debt Securities of such series, compliance by the
Company with certain restrictive provisions of the Indentures. (Sections 1010
and 1008 of the Senior Indenture and the Subordinated Indenture, respectively)
The Holders of not less than a majority in principal amount of the Outstanding
Securities of any series may, on behalf of all Holders of Debt Securities of
that Series, waive any past default under the Indenture with respect to Debt
Securities of that Series, except a default (a) in the payment of principal of
or premium or interest on any Debt Security of that series or (b) in respect of
a covenant or provision of the Indenture which cannot be amended without the
consent of the Holder of each Outstanding Security of such series affected.
(Section 513)
Each Indenture will provide that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given or taken any
direction, notice, consent, waiver or other action under the Indenture as of any
date, (i) the principal amount of an Original Issue Discount Security that will
be deemed to be Outstanding will be the amount of the principal thereof that
would be due and payable as of such date upon acceleration of the Maturity
thereof to such date, (ii) if, as of such date, the principal amount payable at
the Stated Maturity of a Debt Security is not determinable (for example, because
it is based on an index), the principal amount of such Debt Security deemed to
be Outstanding as of such date will be an amount determined in the manner
prescribed for such Debt Security and (iii) the principal amount of a Debt
Security denominated in one or more foreign currencies or currency units that
will be deemed to be Outstanding will be the U.S. dollar equivalent, determined
as of such date in the manner prescribed for such Debt Security, of the
principal amount of such Debt Security (or, in the case of a Debt Security
described in clause (i) or (ii) above, of the amount described in such clause).
Certain Debt Securities, including those for whose payment or redemption money
has been deposited or set aside in trust for the Holders and those that have
been fully defeased pursuant to Section 1302, will not be deemed to be
Outstanding. (Section 101)
Except in certain limited circumstances, the Company will be entitled to
set any day as a record date for the purpose of determining the Holders of
Outstanding Securities of any series entitled to give or take any direction,
notice, consent, waiver or other action under the Indentures, in the manner and
subject to the limitations provided in the Indentures. In certain limited
circumstances, the Trustee will be entitled to set a record date for action by
Holders. If a record date is set for any action to be taken by Holders of a
particular series, such action may be taken only by persons who are Holders of
Outstanding Securities of that series on the record date. To be effective, such
action must be taken by Holders of the requisite principal amount of such Debt
Securities within a specified period following the record date. For any
particular record date, this period will be 180 days or such other shorter
period as may be specified by the Company (or the Trustee, if it
15
60
set the record date), and may be shortened or lengthened (but not beyond 180
days) from time to time. (Section 104)
DEFEASANCE AND COVENANT DEFEASANCE
If and to the extent indicated in the applicable Prospectus Supplement, the
Company may elect, at its option at any time, to have the provisions of Section
1302, relating to defeasance and discharge of indebtedness, or Section 1303,
relating to defeasance of certain restrictive covenants in the Indentures,
applied to the Debt Securities of any series, or to any specified part of a
series. (Section 1301)
Defeasance and Discharge. The Indentures will provide that, upon the
Company's exercise of its option (if any) to have Section 1302 applied to any
series (or part thereof) of Debt Securities than with respect to any series of
Subordinated Debt Securities, the provisions of Article Fifteen of the
Subordinated Indenture relating to subordination will cease to be effective and,
with respect to any series (or part thereof) of Debt Securities, the Company
will be discharged from all its obligations with respect thereto (except for
certain obligations to exchange or register the transfer of Debt Securities, to
replace stolen, lost or mutilated Debt Securities, to maintain paying agencies,
to hold moneys for payment in trust and, if applicable, to effect conversion of
Debt Securities) upon the deposit in trust for the benefit of the Holders of
such Debt Securities of money or U.S. Government Obligations, or both, which,
through the payment of principal and interest in respect thereof in accordance
with their terms, will provide money in an amount sufficient to pay the
principal of and any premium and interest on such Debt Securities on the
respective Stated Maturities in accordance with the terms of the Indentures and
such Debt Securities. Such defeasance or discharge may occur only if, among
other things, the Company has delivered to the Trustee an Opinion of Counsel to
the effect that the Company has received from, or there has been published by,
the United States Internal Revenue Service a ruling, or there has been a change
in tax law, in either case to the effect that Holders of such Debt Securities
will not recognize gain or loss for federal income tax purposes as a result of
such deposit, defeasance and discharge and will be subject to federal income tax
on the same amount, in the same manner and at the same times as would have been
the case if such deposit, defeasance and discharge were not to occur. (Sections
1302 and 1304)
Defeasance of Certain Covenants. The Indentures will provide that, upon the
Company's exercise of its option (if any) to have Section 1303 applied to any
Debt Securities, the Company may omit to comply with certain restrictive
covenants, including any that may be described in the applicable Prospectus
Supplement, and the occurrence of certain Events of Default, which are described
above in clause (d) (with respect to such restrictive covenants) under "Events
of Default" and any that may be described in the applicable Prospectus
Supplement, will be deemed not to be or result in an Event of Default, in each
case with respect to such Debt Securities, and, in the case of the Subordinated
Indenture, the provisions of Article Fifteen relating to subordination will
cease to be effective with respect to any Subordinated Debt Securities. The
Company, in order to exercise such option, will be required to deposit, in trust
for the benefit of the Holders of such Debt Securities, money or U.S. Government
Obligations, or both, which, through the payment of principal and interest in
respect thereof in accordance with their terms, will provide money in an amount
sufficient to pay the principal of and any premium and interest on such Debt
Securities on the respective Stated Maturities in accordance with the terms of
the Indentures and such Debt Securities. The Company will also be required,
among other things, to deliver to the Trustee an Opinion of Counsel to the
effect that Holders of such Debt Securities will not recognize gain or loss for
federal income tax purposes as a result of such deposit and defeasance of
certain obligations and will be subject to federal income tax on the same
amount, in the same manner and at the same times as would have been the case if
such deposit and defeasance were not to occur. In the event the Company
exercised this option with respect to any Debt Securities and such Debt
Securities were declared due and payable because of the occurrence of any Event
of Default, the amount of
16
61
money and U.S. Government Obligations so deposited in trust would be sufficient
to pay amounts due on such Debt Securities at the time of their respective
Stated Maturities but may not be sufficient to pay amounts due on such Debt
Securities upon any acceleration resulting from such Event of Default. In such
case, the Company would remain liable for such payments. (Sections 1303 and
1304)
The Company may, at its option, satisfy and discharge each of the
Indentures (except for certain obligations of the Company and the Trustee,
including, among others the obligations to apply money held in trust) when (i)
either (a) all Debt Securities under such Indenture previously authenticated and
delivered (other than (1) Debt Securities that were destroyed, lost or stolen
and that have been replaced or paid and (2) Debt Securities for the payment of
which money has been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust) have
been delivered to the Trustee for cancellation or discharge from such trust)
have been delivered to the Trustee for cancellation or (b) all such Debt
Securities under such Indenture not theretofore delivered to the Trustee for
cancellation (1) have become due and payable, (2) will become due and payable at
their Stated Maturity within one year, or (3) are to be called for redemption
within one year under arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name and at the expense of the
Company, and the Company has deposited or caused to be deposited with the
Trustee as trust funds in trust for such purpose an amount sufficient to pay and
discharge the entire indebtedness on such Debt Securities under such Indenture
not previously delivered to the Trustee for cancellation, for principal and any
premium and interest to the date of such deposit (in the case of Debt Securities
under such Indenture which have become due and payable) or to the Stated
Maturity or redemption date as the case may be, (ii) the Company has paid or
caused to be paid all other sums payable under such Indenture by the Company,
and (iii) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel, each to the effect that all conditions precedent relating
to the satisfaction and discharge of such Indenture have been satisfied.
NOTICES
Notices to Holders of Debt Securities will be given by mail to the
addresses of such Holders as they may appear in the Security Register.(Sections
101 and 106)
TITLE
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name a Debt Security is registered as the absolute
owner thereof (whether or not such Debt Security may be overdue) for the purpose
of making payment and for all other purposes. (Section 308)
GOVERNING LAW
The Indentures and the Debt Securities will be governed by, and construed
in accordance with, the law of the State of New York. (Section 112)
REGARDING THE TRUSTEE
The Indentures contain certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize for its own account on certain property received in
respect of any such claim as security or otherwise. (Section 613) The Trustee is
permitted to engage in certain other transactions; however, if it acquires any
conflicting interest and there is a default under the Securities of any series
for which the Trustee serves as trustee, the Trustee must eliminate such
conflict or resign. (Section 608)
17
62
PLAN OF DISTRIBUTION
The Company may sell the Securities separately or together, (i) to one or
more underwriters or dealers for public offering and sale by them and (ii) to
investors directly or (iii) through agents. The distribution of the Securities
may be effected from time to time in one or more transactions at a fixed price
or prices (which may be changed from time to time), at market prices prevailing
at the times of sale, at prices related to such prevailing market prices or at
negotiated prices. Each Prospectus Supplement will describe the method of
distribution of the Securities offered thereby.
In connection with the sale of the Securities, underwriters, dealers or
agents may receive compensation from the Company or from purchasers of the
Securities for whom they may act as agents, in the form of discounts,
concessions or commissions. The underwriters, dealers or agents which
participate in the distribution of the Securities may be deemed to be
underwriters under the Securities Act and any discounts or commissions received
by them and any profit on the resale of the Securities received by them may be
deemed to be underwriting discounts and commissions thereunder. Any such
underwriter, dealer or agent will be identified and any such compensation
received from the Company will be described in the Prospectus Supplement. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
Under agreements that may be entered into with the Company, underwriters,
dealers and agents may be entitled to indemnification by the Company against
certain civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which the underwriters, dealers or agents
may be required to make in respect thereof.
The Company may grant underwriters who participate in the distribution of
Securities an option to purchase additional Securities to cover over-allotments,
if any.
All Debt Securities will be new issues of securities with no established
trading market. Any underwriters to whom Debt Securities are sold by the Company
for public offering and sale may make a market in such securities, but such
underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for any Debt Securities.
Certain of the underwriters or agents and their associates may be customers
of, engage in transactions with or perform services for the Company in the
ordinary course of business.
LEGAL MATTERS
The validity of the issuance of the Securities offered hereby will be
passed upon for the Company by Fenwick & West LLP, Palo Alto, California.
Certain legal matters relating to the Securities offered will be passed on for
any underwriters by the counsel for such underwriters named in the applicable
Prospectus Supplement.
EXPERTS
The consolidated financial statements and schedule of Intuit Inc. appearing
in Intuit Inc.'s Annual Report (Form 10-K) for the year ended July 31, 1997,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference. Such
consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
18
63
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE OFFERING
COVERED BY THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY JURISDICTION WHERE, OR
TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS OR IN THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Incorporation of Certain Documents by
Reference............................... S-2
Forward-Looking Statements................ S-2
Prospectus Supplement Summary............. S-3
The Company............................... S-6
Recent Events............................. S-8
Risk Factors.............................. S-12
Use of Proceeds........................... S-25
Price Range of Common Stock............... S-25
Dividend Policy........................... S-25
Capitalization............................ S-26
Selected Consolidated Financial Data of
the Company............................. S-27
Quarterly Results of Operations of the
Company................................. S-28
Selected Financial Data of Lacerte........ S-29
Unaudited Pro Forma Condensed Combining
Financial Information................... S-31
Description of Capital Stock.............. S-37
Underwriting.............................. S-42
Legal Matters............................. S-43
Experts................................... S-43
PROSPECTUS
Available Information..................... 2
Incorporation of Certain Documents by
Reference............................... 3
The Company............................... 3
Risk Factors.............................. 3
Use of Proceeds........................... 4
Ratio of Earnings to Fixed Charges........ 4
General Description of Securities......... 4
Description of the Common Stock........... 4
Description of the Preferred Stock........ 5
Description of the Debt Securities........ 6
Plan of Distribution...................... 18
Legal Matters............................. 18
Experts................................... 18
LOGO
9,000,000 SHARES
COMMON STOCK
JOINT LEAD MANAGERS AND JOINT BOOKRUNNERS
DEUTSCHE MORGAN GRENFELL
MORGAN STANLEY DEAN WITTER
------------------------
BANCAMERICA ROBERTSON STEPHENS
BT ALEX. BROWN
WILLIAM BLAIR & COMPANY
HAMBRECHT & QUIST
NATIONSBANC MONTGOMERY SECURITIES LLC
Prospectus Supplement
May 21, 1998