UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
[X]
Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended January 31, 2003 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____ to _____.
Commission File Number 0-21180
INTUIT INC.
| Delaware | 77-0034661 | |
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|
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| (State of incorporation) | (IRS employer identification no.) |
Indicate by a check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by a check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Approximately 205,703,236 shares of Common Stock, $0.01 par value, as of January 31, 2003
INTUIT INC.
| FORM 10-Q | ||||
| INDEX | ||||
| Page | ||||
| Number | ||||
| PART I | FINANCIAL INFORMATION | |||
| ITEM 1: | Financial Statements | |||
Condensed Consolidated Balance Sheets as of July 31, 2002 and
January 31, 2003
|
3 | |||
Condensed Consolidated Statements of Operations for the three and six months
ended January 31, 2002 and 2003
|
4 | |||
Condensed Consolidated Statements of Cash Flows for the six months
ended January 31, 2002 and 2003
|
5 | |||
| Notes to Condensed Consolidated Financial Statements | 6 | |||
| ITEM 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24 | ||
| ITEM 3: | Quantitative and Qualitative Disclosures about Market Risk | 42 | ||
| ITEM 4: | Controls and Procedures | 43 | ||
| PART II | OTHER INFORMATION | |||
| ITEM 1: | Legal Proceedings | 44 | ||
| ITEM 2: | Changes in Securities and Use of Proceeds | 45 | ||
| ITEM 4: | Submission of Matters to a Vote of Security Holders | 46 | ||
| ITEM 5: | Other Matters | 48 | ||
| ITEM 6: | Exhibits and Reports on Form 8-K | 49 | ||
| Signatures | 50 | |||
| Certifications from Chief Executive Officer and Chief Financial Officer | 51 |
Intuit, the Intuit logo, QuickBooks, Quicken, TurboTax, ProSeries, Lacerte, QuickBase, FundWare and Track-it!, 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. Intuit Master Builder, MRI and Intuit Eclipse, among others, are trademarks and/or service marks of Intuit Inc., or one of its subsidiaries, in the United States and other countries. Other parties’ marks are the property of their respective owners and should be treated as such.
-2-
| July 31, | January 31, | |||||||||||
| (In thousands; unaudited) | 2002 | 2003 | ||||||||||
ASSETS
|
||||||||||||
Current
assets: |
||||||||||||
Cash and cash equivalents |
$ | 414,748 | $ | 379,915 | ||||||||
Short-term investments |
815,342 | 718,437 | ||||||||||
Marketable securities |
16,791 | 18,548 | ||||||||||
Customer deposits |
300,409 | 259,958 | ||||||||||
Accounts receivable, net |
51,999 | 244,437 | ||||||||||
Deferred income taxes |
67,799 | 61,270 | ||||||||||
Income taxes receivable |
2,187 | — | ||||||||||
Prepaid expenses and other current assets |
49,581 | 39,520 | ||||||||||
Amounts due from discontinued operations entities |
241,616 | 5,978 | ||||||||||
Total current assets |
1,960,472 | 1,728,063 | ||||||||||
Property and equipment, net |
179,122 | 195,990 | ||||||||||
Goodwill, net |
428,948 | 583,907 | ||||||||||
Purchased intangibles, net |
125,474 | 124,289 | ||||||||||
Long-term deferred income taxes |
176,553 | 172,835 | ||||||||||
Loans to executive officers and other employees |
21,270 | 19,968 | ||||||||||
Other assets |
31,854 | 11,512 | ||||||||||
Net long-term assets of discontinued operations |
4,312 | 4,066 | ||||||||||
Total assets |
$ | 2,928,005 | $ | 2,840,630 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||||||
Current liabilities: |
||||||||||||
Accounts payable |
$ | 71,069 | $ | 107,189 | ||||||||
Accrued compensation and related liabilities |
87,426 | 91,598 | ||||||||||
Payroll service obligations |
300,381 | 259,958 | ||||||||||
Deferred revenue |
147,120 | 170,500 | ||||||||||
Income taxes payable |
— | 17,169 | ||||||||||
Short-term note payable |
2,277 | 2,717 | ||||||||||
Other current liabilities |
81,795 | 176,855 | ||||||||||
Net current liabilities of discontinued operations |
7,688 | 4,220 | ||||||||||
Total current liabilities |
697,756 | 830,206 | ||||||||||
Long-term obligations |
14,610 | 12,766 | ||||||||||
Commitments and contingencies
|
||||||||||||
Stockholders’ equity: |
||||||||||||
Preferred stock |
— | — | ||||||||||
Common stock and additional paid-in capital |
1,846,707 | 1,877,296 | ||||||||||
Treasury shares, at cost |
(126,107 | ) | (393,007 | ) | ||||||||
Deferred compensation |
(12,628 | ) | (9,263 | ) | ||||||||
Accumulated other comprehensive income (loss) |
(3,675 | ) | 3,603 | |||||||||
Retained earnings |
511,342 | 519,029 | ||||||||||
Total stockholders’ equity |
2,215,639 | 1,997,658 | ||||||||||
Total liabilities and stockholders’ equity |
$ | 2,928,005 | $ | 2,840,630 | ||||||||
See accompanying notes.
-3-
| Three Months Ended | Six Months Ended | ||||||||||||||||||
| January 31, | January 31, | ||||||||||||||||||
| (In thousands, except per share data; unaudited) | 2002 | 2003 | 2002 | 2003 | |||||||||||||||
Net revenue: |
|||||||||||||||||||
Products |
$ | 413,096 | $ | 465,130 | $ | 524,169 | $ | 607,033 | |||||||||||
Services |
45,029 | 75,348 | 76,950 | 130,952 | |||||||||||||||
Other |
17,783 | 17,598 | 33,107 | 32,963 | |||||||||||||||
Total net revenue |
475,908 | 558,076 | 634,226 | 770,948 | |||||||||||||||
Costs and expenses: |
|||||||||||||||||||
Cost of revenue: |
|||||||||||||||||||
Cost of products |
71,636 | 71,062 | 102,277 | 99,774 | |||||||||||||||
Cost of services |
28,454 | 39,557 | 52,658 | 76,169 | |||||||||||||||
Cost of other revenue |
6,160 | 5,164 | 11,320 | 9,754 | |||||||||||||||
Amortization of purchased software |
7,171 | 3,518 | 8,877 | 6,495 | |||||||||||||||
Customer service and technical support |
50,289 | 55,591 | 85,985 | 95,221 | |||||||||||||||
Selling and marketing |
74,720 | 97,796 | 131,012 | 172,617 | |||||||||||||||
Research and development |
51,402 | 66,080 | 98,822 | 130,207 | |||||||||||||||
General and administrative |
28,761 | 38,405 | 54,987 | 78,021 | |||||||||||||||
Charge for purchased research and development |
— | 1,070 | — | 8,859 | |||||||||||||||
Acquisition-related charges |
62,008 | 9,154 | 102,999 | 18,609 | |||||||||||||||
Loss on impairment of long-lived asset |
— | — | 27,000 | — | |||||||||||||||
Total costs and expenses |
380,601 | 387,397 | 675,937 | 695,726 | |||||||||||||||
Income (loss) from continuing operations |
95,307 | 170,679 | (41,711 | ) | 75,222 | ||||||||||||||
Interest and other income |
7,635 | 7,770 | 17,463 | 16,556 | |||||||||||||||
Gains (losses) on marketable securities and other
investments, net |
1,632 | 2,827 | (10,622 | ) | 3,080 | ||||||||||||||
Income (loss) from continuing operations before income taxes |
104,574 | 181,276 | (34,870 | ) | 94,858 | ||||||||||||||
Income tax provision (benefit) |
4,678 | 55,905 | (31,460 | ) | 29,936 | ||||||||||||||
Net income from continuing operations |
99,896 | 125,371 | (3,410 | ) | 64,922 | ||||||||||||||
Discontinued operations, net of income taxes (Note 6): |
|||||||||||||||||||
Net income from Quicken Loans discontinued operations |
16,740 | — | 26,469 | — | |||||||||||||||
Gain on disposal of Quicken Loans discontinued operations |
— | — | — | 5,556 | |||||||||||||||
Net income from Intuit KK discontinued operations |
3,232 | 3,059 | 4,382 | 3,267 | |||||||||||||||
Net income from discontinued operations |
19,972 | 3,059 | 30,851 | 8,823 | |||||||||||||||
Net income |
$ | 119,868 | $ | 128,430 | $ | 27,441 | $ | 73,745 | |||||||||||
Basic net income per share from continuing operations |
$ | 0.47 | $ | 0.61 | $ | (0.02 | ) | $ | 0.32 | ||||||||||
Basic net income per share from discontinued operations |
0.09 | 0.01 | 0.15 | 0.04 | |||||||||||||||
Basic net income per share |
$ | 0.56 | $ | 0.62 | $ | 0.13 | $ | 0.36 | |||||||||||
Shares used in basic per share amounts |
212,520 | 205,682 | 211,780 | 206,823 | |||||||||||||||
Diluted net income per share from continuing operations |
$ | 0.46 | $ | 0.59 | $ | (0.01 | ) | $ | 0.31 | ||||||||||
Diluted net income per share from discontinued operations |
0.09 | 0.01 | 0.14 | 0.04 | |||||||||||||||
Diluted net income per share |
$ | 0.55 | $ | 0.60 | $ | 0.13 | $ | 0.35 | |||||||||||
Shares used in diluted net income per share amounts |
219,355 | 212,455 | 217,914 | 213,445 | |||||||||||||||
See accompanying notes.
-4-
| Six Months Ended | ||||||||||||
| January 31, | ||||||||||||
| (In thousands; unaudited) | 2002 | 2003 | ||||||||||
Cash flows from operating activities: |
||||||||||||
Net income (loss) from continuing operations |
$ | (3,410 | ) | $ | 64,922 | |||||||
| Adjustments to reconcile net income (loss) from continuing operations to net cash used in operating activities: | ||||||||||||
Acquisition-related charges |
102,999 | 18,609 | ||||||||||
Amortization of purchased software |
8,877 | 6,495 | ||||||||||
Amortization of deferred compensation |
1,379 | 1,267 | ||||||||||
Charge for purchased research and development |
— | 8,859 | ||||||||||
Depreciation |
29,593 | 36,119 | ||||||||||
Net (gains) losses from marketable securities and other investments |
10,622 | (3,080 | ) | |||||||||
Loss on impairment of long-lived asset |
27,000 | — | ||||||||||
Loss on disposal of property and equipment |
1,678 | 2,321 | ||||||||||
Deferred income tax benefit |
200 | 2,633 | ||||||||||
Tax benefit from employee stock options |
23,697 | 30,379 | ||||||||||
Subtotal |
202,635 | 168,524 | ||||||||||
Changes in operating assets and liabilities: |
||||||||||||
Customer deposits |
(12,470 | ) | 40,451 | |||||||||
Accounts receivable |
(229,891 | ) | (187,982 | ) | ||||||||
Income taxes receivable |
— | 2,187 | ||||||||||
Prepaid expenses and other current assets |
3,235 | 10,745 | ||||||||||
Accounts payable |
30,510 | 35,557 | ||||||||||
Accrued compensation and related liabilities |
1,255 | 4,172 | ||||||||||
Payroll service obligations |
12,657 | (40,423 | ) | |||||||||
Deferred revenue |
21,350 | 16,686 | ||||||||||
Income taxes payable |
(40,705 | ) | 23,096 | |||||||||
Other current liabilities |
88,497 | 93,591 | ||||||||||
Total changes in operating assets and liabilities |
(125,562 | ) | (1,920 | ) | ||||||||
Net cash provided by operating activities |
77,073 | 166,604 | ||||||||||
Cash flows from investing activities: |
||||||||||||
Change in other assets |
1,616 | (2,324 | ) | |||||||||
Purchases of property and equipment |
(26,369 | ) | (54,970 | ) | ||||||||
Proceeds from the sale of marketable securities |
5,094 | 16,371 | ||||||||||
Purchases of short-term investments |
(844,471 | ) | (653,284 | ) | ||||||||
Liquidation and maturity of short-term investments |
960,169 | 748,743 | ||||||||||
Acquisitions of businesses, net of cash acquired |
(7,532 | ) | (185,227 | ) | ||||||||
Net cash provided by (used in) investing activities |
88,507 | (130,691 | ) | |||||||||
Cash flows from financing activities: |
||||||||||||
Change in notes payable |
(330 | ) | (1,404 | ) | ||||||||
Net proceeds from issuance of common stock |
57,612 | 90,593 | ||||||||||
Purchase of treasury stock |
(74,268 | ) | (423,210 | ) | ||||||||
Net cash used in financing activities |
(16,986 | ) | (334,021 | ) | ||||||||
Net cash provided by (used in) discontinued operations |
||||||||||||