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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

     
[X]   Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended January 31, 2004 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.

(Exact name of registrant as specified in its charter)
     
Delaware   77-0034661
 
(State of incorporation)   (IRS employer identification no.)

2535 Garcia Avenue, Mountain View, CA 94043

(Address of principal executive offices)

(650) 944-6000

(Registrant’s telephone number, including area code)

Indicate by a check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.
Yes   [X]   No   [  ]

Indicate 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 196,862,515 shares of Common Stock, $0.01 par value, as of February 27, 2004

 

INTUIT INC.
FORM 10-Q
INDEX

           
      Page
      Number
     
       
       
      3  
      4  
      5  
      6  
    23  
    40  
    41  
       
    42  
    43  
    44  
      46  
 EXHIBIT 10.01
 EXHIBIT 10.02
 EXHIBIT 10.03
 EXHIBIT 10.04
 EXHIBIT 10.05
 EXHIBIT 10.06
 EXHIBIT 10.07
 EXHIBIT 10.08
 EXHIBIT 10.09
 EXHIBIT 10.10
 EXHIBIT 10.11
 EXHIBIT 31.01
 EXHIBIT 31.02
 EXHIBIT 32.01
 EXHIBIT 32.02

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.

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Table of Contents

PART I

ITEM 1
FINANCIAL STATEMENTS

INTUIT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

                         
            July 31,   January 31,
            2003   2004
(In thousands; unaudited)  
 
ASSETS
                
Current assets:
                
 
Cash and cash equivalents
   $ 170,043     $ 87,831  
 
Short-term investments
     1,036,758       891,081  
 
Payroll customer deposits
     306,007       281,448  
 
Accounts receivable, net
     88,156       283,959  
 
Deferred income taxes
     34,824       34,824  
 
Prepaid expenses and other current assets
     33,082       61,554  
 
 
    
     
 
   
Total current assets
     1,668,870       1,640,697  
Property and equipment, net
     188,253       196,913  
Goodwill, net
     591,091       690,766  
Purchased intangible assets, net
     125,445       124,865  
Long-term deferred income taxes
     183,061       183,061  
Loans to executive officers and other employees
     19,690       18,206  
Other assets
     13,857       18,630  
 
 
    
     
 
Total assets
   $ 2,790,267     $ 2,873,138  
 
 
    
     
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current liabilities:
                
 
Accounts payable
   $ 56,786     $ 104,448  
 
Accrued compensation and related liabilities
     118,678       105,401  
 
Payroll service obligations
     306,007       281,448  
 
Deferred revenue
     178,840       203,686  
 
Income taxes payable
     76,725       103,523  
 
Other current liabilities
     59,129       145,653  
 
 
    
     
 
   
Total current liabilities
     796,165       944,159  
 
 
    
     
 
Long-term obligations
     29,265       18,864  
 
 
    
     
 
Commitments and contingencies
                
Stockholders’ equity:
                
 
Preferred stock
     —       —  
 
Common stock and additional paid-in capital
     1,921,554       1,944,273  
 
Treasury shares, at cost
     (672,326 )     (795,505 )
 
Deferred compensation
     (25,850 )     (21,988 )
 
Accumulated other comprehensive income (loss)
     (789 )     (2,616 )
 
Retained earnings
     742,248       785,951  
 
 
    
     
 
   
Total stockholders’ equity
     1,964,837       1,910,115  
 
 
    
     
 
Total liabilities and stockholders’ equity
   $ 2,790,267     $ 2,873,138  
 
 
    
     
 

See accompanying notes.

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Table of Contents

INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                     
        Three Months Ended   Six Months Ended
        January 31,   January 31,
        2003   2004   2003   2004
(In thousands, except per share amounts; unaudited)  
 
 
 
Net revenue:
                                
 
Product
   $ 457,240     $ 509,012     $ 599,143     $ 669,197  
 
Service
     83,238       109,556       138,842       175,823  
 
Other
     17,598       17,721       32,963       33,797  
 
 
    
     
     
     
 
   
Total net revenue
     558,076       636,289       770,948       878,817  
 
 
    
     
     
     
 
Costs and expenses:
                                
 
Cost of revenue:
                                
   
Cost of product revenue
     71,062       65,895       99,774       97,913  
   
Cost of service revenue
     39,557       42,472       76,169       78,308  
   
Cost of other revenue
     5,164       6,889       9,754       13,673  
   
Amortization of purchased software
     3,518       3,324       6,495       6,613  
 
Customer service and technical support
     55,591       63,215       95,221       104,206  
 
Selling and marketing
     97,796       107,640       172,617       199,589  
 
Research and development
     66,080       73,333       130,207       144,664  
 
General and administrative
     38,405       48,131       78,021       91,826  
 
Charge for purchased research and development
     1,070       —       8,859       —  
 
Acquisition-related charges
     9,154       6,780       18,609       12,829  
 
 
    
     
     
     
 
   
Total costs and expenses
     387,397       417,679       695,726       749,621  
 
 
    
     
     
     
 
Income from continuing operations
     170,679       218,610       75,222       129,196  
Interest and other income
     7,770       7,170       16,556       14,660  
Gains on marketable securities and other investments, net
     2,827       90       3,080       237  
 
 
    
     
     
     
 
Income from continuing operations before income taxes
     181,276       225,870       94,858       144,093  
Income tax provision
     55,905       76,804       29,936       48,992  
 
 
    
     
     
     
 
Net income from continuing operations
     125,371       149,066       64,922       95,101  
Discontinued operations, net of income taxes:
                                
 
Gain on disposal of Quicken Loans discontinued operations
     —       —       5,556       —  
 
Net income from Intuit KK discontinued operations
     3,059       —       3,267       —  
 
 
    
     
     
     
 
Net income from discontinued operations
     3,059       —       8,823       —  
 
 
    
     
     
     
 
Net income
   $ 128,430     $ 149,066     $ 73,745     $ 95,101  
 
 
    
     
     
     
 
Basic net income per share from continuing operations
   $ 0.61     $ 0.75     $ 0.32     $ 0.48  
Basic net income per share from discontinued operations
     0.01       —       0.04       —  
 
 
    
     
     
     
 
Basic net income per share
   $ 0.62     $ 0.75     $ 0.36     $ 0.48  
 
 
    
     
     
     
 
Shares used in basic per share amounts
     205,682       197,665       206,823       198,206  
 
 
    
     
     
     
 
Diluted net income per share from continuing operations
   $ 0.59     $ 0.73     $ 0.31     $ 0.47  
Diluted net income per share from discontinued operations
     0.01       —       0.04       —  
 
 
    
     
     
     
 
Diluted net income per share
   $ 0.60     $ 0.73     $ 0.35     $ 0.47  
 
 
    
     
     
     
 
Shares used in diluted per share amounts
     212,455       203,430       213,445       203,796  
 
 
    
     
     
     
 

See accompanying notes.

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Table of Contents

INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                         
            Six Months Ended
            January 31,
            2003   2004
(In thousands; unaudited)  
 
Cash flows from operating activities:
                
 
Net income from continuing operations
   $ 64,922     $ 95,101  
 
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
                
   
Acquisition-related charges
     18,609       12,829  
   
Amortization of purchased software
     6,495       6,613  
   
Amortization of other purchased intangible assets
     —       2,921  
   
Charge for purchased research and development
     8,859       —  
   
Amortization of deferred compensation not related to acquisitions
     1,267       3,118  
   
Depreciation
     36,119       38,588  
   
Loss on disposal of property and equipment
     2,321       2,008  
   
Gain on foreign exchange transactions
     (2,060 )     (4,107 )
   
Net gains from marketable securities and other investments
     (3,080 )     (237 )
   
Deferred income taxes
     2,633       —  
   
Tax benefit from employee stock options
     30,379       22,964  
 
 
    
     
 
       
Subtotal
     166,464       179,798  
 
 
    
     
 
   
Changes in operating assets and liabilities:
                
     
Payroll customer deposits
     40,451       24,559  
     
Accounts receivable
     (187,982 )     (193,273 )
     
Income taxes receivable
     2,187       —  
     
Prepaid expenses and other current assets
     10,745       (24,948 )
     
Accounts payable
     35,557       45,449  
     
Accrued compensation and related liabilities
     4,172       (13,467 )
     
Payroll service obligations
     (40,423 )     (24,559 )
     
Deferred revenue
     16,686       24,581  
     
Income taxes payable
     23,096       26,706  
     
Other current liabilities
     94,131       83,761  
 
 
    
     
 
     
Total changes in operating assets and liabilities
     (1,380 )     (51,191 )
 
 
    
     
 
     
Net cash provided by operating activities
     165,084       128,607  
 
 
    
     
 
Cash flows from investing activities:
                
 
Purchases of short-term investments
     (653,284 )     (1,080,002 )
 
Liquidation and maturity of short-term investments
     748,743       1,225,543  
 
Proceeds from the sale of marketable securities
     16,371       —  
 
Purchases of property and equipment
     (54,970 )     (47,662 )
 
Change in other assets
     (2,324 )     (3,015 )
 
Acquisitions of businesses, net of cash acquired
     (185,227 )     (120,810 )
 
 
    
     
 
     
Net cash used in investing activities
     (130,691 )     (25,946 )
 
 
    
     
 
Cash flows from financing activities:
                
 
Change in long-term obligations
     (1,944 )     (10,557 )
 
Net proceeds from issuance of common stock
     90,593       86,556  
 
Purchase of treasury stock
     (423,210 )     (261,127 )
 
 
    
     
 
     
Net cash used in financing activities
     (334,561 )     (185,128 )
 
 
    
     
 
Net cash provided by discontinued operations
     264,539       —  
Effect of exchange rates on cash and cash equivalents
     796       255  
 
 
    
     
 
Net decrease in cash and cash equivalents
     (34,833 )     (82,212 )
Cash and cash equivalents at beginning of period
     408,948       170,043  
 
 
    
     
 
Cash and cash equivalents at end of period
   $ 374,115     $ 87,831  
 
 
    
     
 

See accompanying notes.

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