e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
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þ |
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Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended October 31, 2008
OR
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o |
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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)
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Delaware
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77-0034661 |
(State of incorporation)
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(IRS employer identification no.) |
2700 Coast Avenue, Mountain View, CA 94043
(Address of principal executive offices)
(650) 944-6000
(Registrants telephone number, including area code)
Indicate by 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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date. 320,060,903 shares of Common Stock, $0.01 par value, were
outstanding at November 25, 2008.
INTUIT INC.
FORM 10-Q
INDEX
Intuit, the Intuit logo, QuickBooks, TurboTax, Lacerte, ProSeries, Digital Insight and Quicken,
among others, are registered trademarks and/or registered service marks of Intuit Inc., or one of
its subsidiaries, in the United States and other countries. Other parties marks are the property
of their respective owners.
2
PART I
ITEM 1
FINANCIAL STATEMENTS
INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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Three Months Ended |
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October 31, |
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October 31, |
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(In thousands, except per share amounts; unaudited) |
|
2008 |
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|
2007 |
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|
Net revenue: |
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|
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|
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Product |
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$ |
220,553 |
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$ |
218,620 |
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Service and other |
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260,826 |
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|
226,318 |
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Total net revenue |
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481,379 |
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444,938 |
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Costs and expenses: |
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Cost of revenue: |
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Cost of product revenue |
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33,400 |
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33,747 |
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Cost of service and other revenue |
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111,708 |
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97,454 |
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Amortization of purchased intangible assets |
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15,213 |
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12,814 |
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Selling and marketing |
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186,186 |
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169,659 |
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Research and development |
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136,217 |
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149,336 |
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General and administrative |
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65,097 |
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77,115 |
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Acquisition-related charges |
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9,588 |
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8,012 |
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Total costs and expenses |
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557,409 |
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548,137 |
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Operating loss from continuing operations |
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(76,030 |
) |
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(103,199 |
) |
Interest expense |
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(11,731 |
) |
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(14,049 |
) |
Interest and other income (expense) |
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|
(1,868 |
) |
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17,191 |
|
Gains on marketable equity securities and other
investments, net |
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577 |
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|
713 |
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Gain on sale of outsourced payroll assets |
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23,951 |
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Loss from continuing operations before
income taxes |
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(89,052 |
) |
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(75,393 |
) |
Income tax benefit |
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(37,117 |
) |
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(28,328 |
) |
Minority interest expense, net of tax |
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209 |
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506 |
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Net loss from continuing operations |
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(52,144 |
) |
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(47,571 |
) |
Net income from discontinued operations |
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26,767 |
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Net loss |
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$ |
(52,144 |
) |
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$ |
(20,804 |
) |
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Basic and diluted net loss per share from
continuing operations |
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$ |
(0.16 |
) |
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$ |
(0.14 |
) |
Basic and diluted net income per share from
discontinued operations |
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0.08 |
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Basic and diluted net loss per share |
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$ |
(0.16 |
) |
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$ |
(0.06 |
) |
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Shares used in basic and diluted per share calculations |
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323,269 |
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337,584 |
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See accompanying notes.
3
INTUIT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
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October 31, |
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July 31, |
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(In thousands; unaudited) |
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2008 |
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2008 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
169,557 |
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$ |
413,340 |
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Investments |
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289,031 |
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414,493 |
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Accounts receivable, net |
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142,980 |
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127,230 |
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Income taxes receivable |
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157,966 |
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60,564 |
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Deferred income taxes |
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90,534 |
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101,730 |
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Prepaid expenses and other current assets |
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58,242 |
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45,457 |
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Current assets before funds held for customers |
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908,310 |
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1,162,814 |
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Funds held for customers |
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327,526 |
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610,748 |
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Total current assets |
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1,235,836 |
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1,773,562 |
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Long-term investments |
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288,354 |
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288,310 |
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Property and equipment, net |
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533,427 |
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507,499 |
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Goodwill |
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1,693,666 |
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1,698,087 |
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Purchased intangible assets, net |
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248,354 |
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273,087 |
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Long-term deferred income taxes |
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27,648 |
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52,491 |
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Other assets |
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78,465 |
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73,548 |
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Total assets |
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$ |
4,105,750 |
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$ |
4,666,584 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
131,238 |
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$ |
115,198 |
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Accrued compensation and related liabilities |
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116,481 |
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229,819 |
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Deferred revenue |
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339,857 |
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359,936 |
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Income taxes payable |
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|
174 |
|
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|
16,211 |
|
Other current liabilities |
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112,462 |
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135,326 |
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Current liabilities before customer fund deposits |
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700,212 |
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856,490 |
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Customer fund deposits |
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327,526 |
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610,748 |
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Total current liabilities |
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1,027,738 |
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1,467,238 |
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Long-term debt |
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998,042 |
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997,996 |
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Other long-term obligations |
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125,763 |
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121,489 |
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Total liabilities |
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2,151,543 |
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2,586,723 |
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Commitments and contingencies |
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Minority interest |
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7,182 |
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6,907 |
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Stockholders equity: |
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Preferred stock |
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Common stock and additional paid-in capital |
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2,428,548 |
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2,407,749 |
|
Treasury stock, at cost |
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|
(2,852,851 |
) |
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|
(2,786,499 |
) |
Accumulated other comprehensive income |
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|
1,155 |
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|
7,722 |
|
Retained earnings |
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|
2,370,173 |
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|
2,443,982 |
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|
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Total stockholders equity |
|
|
1,947,025 |
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|
2,072,954 |
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|
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Total liabilities and stockholders equity |
|
$ |
4,105,750 |
|
|
$ |
4,666,584 |
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|
See accompanying notes.
4
INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
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Accumulated |
|
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|
|
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|
|
|
|
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Additional |
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Other |
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|
Total |
|
|
|
Common Stock |
|
|
Paid-In |
|
|
Treasury |
|
|
Comprehensive |
|
|
Retained |
|
|
Stockholders |
|
(Dollars in thousands; unaudited) |
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Stock |
|
|
Income |
|
|
Earnings |
|
|
Equity |
|
|
|
|
|
Balance at July 31, 2008 |
|
|
322,599,830 |
|
|
$ |
3,226 |
|
|
$ |
2,404,523 |
|
|
$ |
(2,786,499 |
) |
|
$ |
7,722 |
|
|
$ |
2,443,982 |
|
|
$ |
2,072,954 |
|
Components of comprehensive net loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(52,144 |
) |
|
|
(52,144 |
) |
Other comprehensive loss, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,567 |
) |
|
|
|
|
|
|
(6,567 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58,711 |
) |
Issuance of common stock under
employee stock plans |
|
|
3,863,894 |
|
|
|
39 |
|
|
|
|
|
|
|
83,066 |
|
|
|
|
|
|
|
(5,932 |
) |
|
|
77,173 |
|
Restricted stock units released, net of
taxes |
|
|
723,363 |
|
|
|
7 |
|
|
|
(13,857 |
) |
|
|
15,726 |
|
|
|
|
|
|
|
(15,733 |
) |
|
|
(13,857 |
) |
Issuance of restricted stock units pursuant
to Management Stock Purchase Plan |
|
|
|
|
|
|
|
|
|
|
2,295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,295 |
|
Stock repurchases under stock
repurchase programs |
|
|
(6,021,307 |
) |
|
|
(60 |
) |
|
|
|
|
|
|
(165,144 |
) |
|
|
|
|
|
|
|
|
|
|
(165,204 |
) |
Tax benefit from employee stock
option transactions |
|
|
|
|
|
|
|
|
|
|
10,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,622 |
|
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
21,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,753 |
|
|
|
Balance at October 31, 2008 |
|
|
321,165,780 |
|
|
$ |
3,212 |
|
|
$ |
2,425,336 |
|
|
$ |
(2,852,851 |
) |
|
$ |
1,155 |
|
|
$ |
2,370,173 |
|
|
$ |
1,947,025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Total |
|
|
|
Common Stock |
|
|
Paid-In |
|
|
Treasury |
|
|
Comprehensive |
|
|
Retained |
|
|
Stockholders |
|
(Dollars in thousands; unaudited) |
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Stock |
|
|
Income |
|
|
Earnings |
|
|
Equity |
|
|
|
|
|
Balance at July 31, 2007 |
|
|
339,157,302 |
|
|
$ |
3,391 |
|
|
$ |
2,247,755 |
|
|
$ |
(2,207,114 |
) |
|
$ |
6,096 |
|
|
$ |
1,984,885 |
|
|
$ |
2,035,013 |
|
Components of comprehensive net loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,804 |
) |
|
|
(20,804 |
) |
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,615 |
|
|
|
|
|
|
|
2,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,189 |
) |
Issuance of common stock under
employee stock plans |
|
|
2,597,186 |
|
|
|
26 |
|
|
|
|
|
|
|
56,124 |
|
|
|
|
|
|
|
(4,815 |
) |
|
|
51,335 |
|
Restricted stock units released, net of
taxes |
|
|
8,157 |
|
|
|
|
|
|
|
(136 |
) |
|
|
177 |
|
|
|
|
|
|
|
(177 |
) |
|
|
(136 |
) |
Issuance of restricted stock units pursuant
to Management Stock Purchase Plan |
|
|
|
|
|
|
|
|
|
|
2,284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,284 |
|
Stock repurchases under stock
repurchase programs |
|
|
(8,118,939 |
) |
|
|
(81 |
) |
|
|
|
|
|
|
(249,917 |
) |
|
|
|
|
|
|
|
|
|
|
(249,998 |
) |
Tax benefit from employee stock
option transactions |
|
|
|
|
|
|
|
|
|
|
11,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,800 |
|
Share-based compensation (1) |
|
|
|
|
|
|
|
|
|
|
26,701 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,701 |
|
|
|
Balance at October 31, 2007 |
|
|
333,643,706 |
|
|
$ |
3,336 |
|
|
$ |
2,288,404 |
|
|
$ |
(2,400,730 |
) |
|
$ |
8,711 |
|
|
$ |
1,959,089 |
|
|
$ |
1,858,810 |
|
|
|
|
|
|
(1) |
|
Includes $26,655 for continuing operations and $46 for Intuit Distribution Management Solutions discontinued operations. |
See accompanying notes.
5
INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
October 31, |
|
|
October 31, |
|
(In thousands; unaudited) |
|
2008 |
|
|
2007 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss (1) |
|
$ |
(52,144 |
) |
|
$ |
(20,804 |
) |
Adjustments to reconcile net loss to net cash used
in operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
33,585 |
|
|
|
26,222 |
|
Amortization of intangible assets |
|
|
27,157 |
|
|
|
22,648 |
|
Share-based compensation |
|
|
21,753 |
|
|
|
26,701 |
|
Pre-tax gain on sale of outsourced payroll assets |
|
|
|
|
|
|
(23,951 |
) |
Pre-tax gain on sale of IDMS (1) |
|
|
|
|
|
|
(45,667 |
) |
Deferred income taxes |
|
|
45,007 |
|
|
|
7,247 |
|
Tax benefit from share-based compensation plans |
|
|
10,622 |
|
|
|
11,800 |
|
Excess tax benefit from share-based compensation plans |
|
|
(6,127 |
) |
|
|
(8,255 |
) |
Other |
|
|
5,133 |
|
|
|
(372 |
) |
|
|
|
|
|
|
|
Subtotal |
|
|
84,986 |
|
|
|
(4,431 |
) |
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(16,724 |
) |
|
|
(10,471 |
) |
Prepaid expenses, income taxes receivable and other assets |
|
|
(120,910 |
) |
|
|
(34,686 |
) |
Accounts payable |
|
|
21,575 |
|
|
|
35,998 |
|
Accrued compensation and related liabilities |
|
|
(112,619 |
) |
|
|
(92,676 |
) |
Deferred revenue |
|
|
(17,781 |
) |
|
|
(15,697 |
) |
Income taxes payable |
|
|
(14,162 |
) |
|
|
(26,193 |
) |
Other liabilities |
|
|
(24,046 |
) |
|
|
(13,207 |
) |
|
|
|
|
|
|
|
Total changes in operating assets and liabilities |
|
|
(284,667 |
) |
|
|
(156,932 |
) |
|
|
|
|
|
|
|
Net cash used in operating activities (1) |
|
|
(199,681 |
) |
|
|
(161,363 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of available-for-sale debt securities |
|
|
(36,072 |
) |
|
|
(289,490 |
) |
Sales of available-for-sale debt securities |
|
|
147,906 |
|
|
|
349,506 |
|
Maturities of available-for-sale debt securities |
|
|
10,795 |
|
|
|
131,000 |
|
Net change in funds held for payroll customers money
market funds and other cash equivalents |
|
|
283,222 |
|
|
|
39,095 |
|
Purchases of property and equipment |
|
|
(67,210 |
) |
|
|
(65,275 |
) |
Net change in payroll customer fund deposits |
|
|
(283,222 |
) |
|
|
(39,095 |
) |
Cash received from acquirer of outsourced payroll assets |
|
|
|
|
|
|
20,022 |
|
Proceeds from divestiture of businesses |
|
|
|
|
|
|
97,147 |
|
Other |
|
|
2,278 |
|
|
|
(9,315 |
) |
|
|
|
|
|
|
|
Net cash provided by investing activities |
|
|
57,697 |
|
|
|
233,595 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Net proceeds from issuance of common stock and release of
restricted stock units under employee stock plans |
|
|
63,316 |
|
|
|
51,199 |
|
Purchase of treasury stock |
|
|
(165,204 |
) |
|
|
(249,998 |
) |
Excess tax benefit from share-based compensation plans |
|
|
6,127 |
|
|
|
8,255 |
|
Issuance of restricted stock units pursuant to
Management Stock Purchase Plan |
|
|
2,295 |
|
|
|
2,284 |
|
Other |
|
|
(763 |
) |
|
|
1,106 |
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(94,229 |
) |
|
|
(187,154 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rates on cash and cash equivalents |
|
|
(7,570 |
) |
|
|
5,789 |
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
(243,783 |
) |
|
|
(109,133 |
) |
Cash and cash equivalents at beginning of period |
|
|
413,340 |
|
|
|
255,201 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
169,557 |
|
|
$ |
146,068 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Because the operating cash flows of our Intuit Distribution Management Solutions (IDMS)
discontinued operations were not material for any period presented, we have not segregated them
from continuing operations on these statements of cash flows. We have presented the effect of
the gain on disposal of IDMS on the statement of cash flows for the three months ended October
31, 2007. See Note 4 to the financial statements. |
See accompanying notes.
6
INTUIT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Description of Business and Summary of Significant Accounting Policies
Description of Business
Intuit Inc. provides business and financial management solutions for small and medium sized
businesses, financial institutions, consumers, and accounting professionals. Our flagship products
and services, including QuickBooks, Quicken and TurboTax, simplify small business management and
payroll processing, personal finance, and tax preparation and filing. Lacerte and ProSeries are
Intuits tax preparation offerings for professional accountants. Our financial institutions
division, anchored by Digital Insight, provides outsourced online banking services to banks and
credit unions. Founded in 1983 and headquartered in Mountain View, California, we sell our products
and services primarily in the United States.
Basis of Presentation
These condensed consolidated financial statements include the financial statements of Intuit and
its wholly owned subsidiaries. We have eliminated all significant intercompany balances and
transactions in consolidation. In December 2007 we acquired Homestead Technologies Inc. for total
consideration of approximately $170 million and in February 2008 we acquired Electronic Clearing
House, Inc. for a total purchase price of approximately $131 million. Accordingly, we have included
the results of operations for these two companies in our consolidated results of operations from
the respective dates of acquisition. The condensed consolidated financial statements also include
the financial position, results of operations and cash flows of Superior Bankcard Services, LLC
(SBS), an entity that acquires merchant accounts for our Innovative Merchant Solutions business. We
are allocated 51% of the earnings and losses of this entity and 100% of the losses in excess of the
minority interest capital balances. We therefore eliminate the portion of the SBS financial results
that pertain to the minority interests on a separate line in our statements of operations and on
our balance sheets.
As discussed in Note 4, in August 2007 we sold our Intuit Distribution Management Solutions (IDMS)
business. In accordance with accounting rules, we have reclassified our financial statements for
all periods prior to the sale to reflect IDMS as a discontinued operation. Unless otherwise noted,
discussions in these notes pertain to our continuing operations.
We have reclassified certain amounts previously reported in our financial statements to conform to
the current presentation, including amounts related to discontinued operations and reportable
segments.
We have included all normal recurring adjustments and the adjustments for discontinued operations
that we considered necessary to give a fair presentation of our operating results for the periods
presented. These condensed consolidated financial statements and accompanying notes should be read
together with the audited consolidated financial statements included in our Annual Report on Form
10-K for the fiscal year ended July 31, 2008. Results for the three months ended October 31, 2008
do not necessarily indicate the results we expect for the fiscal year ending July 31, 2009 or any
other future period.
Seasonality
Our QuickBooks, Consumer Tax and Accounting Professionals businesses are highly seasonal. Some of
our other offerings are also seasonal, but to a lesser extent. Revenue from our QuickBooks software
products tends to be highest during our second and third fiscal quarters, although the timing of
new product releases or changes in our offerings can materially shift revenue between quarters.
Sales of income tax preparation products and services are heavily concentrated in the period from
November through April. These seasonal patterns mean that our total net revenue is usually highest
during our second quarter ending January 31 and third quarter ending April 30. We typically report
losses in our first quarter ending October 31 and fourth quarter ending July 31, when revenue from
our tax businesses is minimal while operating expenses continue at relatively consistent levels.
7
Computation of Net Income (Loss) Per Share
We compute basic net income or loss per share using the weighted average number of common shares
outstanding during the period. We compute diluted net income per share using the weighted average
number of common shares and dilutive potential common shares outstanding during the period.
Dilutive potential common shares consist of the shares issuable upon the exercise of stock options
and upon the vesting of restricted stock units (RSUs) under the treasury stock method.
We include stock options with combined exercise prices and unrecognized compensation expense that
are less than the average market price for our common stock, and RSUs with unrecognized
compensation expense that is less than the average market price for our common stock, in the
calculation of diluted net income per share. We exclude stock options with combined exercise prices
and unrecognized compensation expense that are greater than the average market price for our common
stock, and RSUs with unrecognized compensation expense that is greater than the average market
price for our common stock, from the calculation of diluted net income per share because their
effect is anti-dilutive. Under the treasury stock method, the amount that must be paid to exercise
stock options, the amount of compensation expense for future service that we have not yet
recognized for stock options and RSUs, and the amount of tax benefits that will be recorded in
additional paid-in capital when the awards become deductible are assumed to be used to repurchase
shares.
In loss
periods, basic net loss per share and diluted net loss per share are identical since the effect of
potential common shares is anti-dilutive and therefore excluded.
8
The following table presents the composition of shares used in the computation of basic and diluted
net loss per share for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
October 31, |
|
|
October 31, |
|
(In thousands, except per share amounts) |
|
2008 |
|
|
2007 |
|
|
Numerator: |
|
|
|
|
|
|
|
|
Net loss from continuing operations |
|
$ |
(52,144 |
) |
|
$ |
(47,571 |
) |
Net income from discontinued operations |
|
|
|
|
|
|
26,767 |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(52,144 |
) |
|
$ |
(20,804 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
Shares used in basic and diluted per share amounts: |
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
323,269 |
|
|
|
337,584 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share: |
|
|
|
|
|
|
|
|
Basic and diluted net loss per share
from continuing operations |
|
$ |
(0.16 |
) |
|
$ |
(0.14 |
) |
Basic and diluted net income per share
from discontinued operations |
|
|
|
|
|
|
0.08 |
|
|
|
|
|
|
|
|
Basic and diluted net loss per share |
|
$ |
(0.16 |
) |
|
$ |
(0.06 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average stock options and
restricted stock units excluded from
calculation due to anti-dilutive effect: |
|
|
|
|
|
|
|
|
Stock options that would have been included
in the computation of dilutive common
equivalent shares outstanding if net income
had been reported in the period |
|
|
24,935 |
|
|
|
35,544 |
|
Restricted stock units that would have been
included in the computation of dilutive
common equivalent shares outstanding if
net income had been reported in the period |
|
|
6,856 |
|
|
|
4,778 |
|
Stock options with combined exercise prices
and unrecognized compensation expense that
were greater than the average market price for
the common stock during the period |
|
|
22,966 |
|
|
|
17,957 |
|
|
|
|
|
|
|
|
|
|
|
54,757 |
|
|
|
58,279 |
|
|
|
|
|
|
|
|
Significant Customers
No customer accounted for 10% or more of total net revenue in the three months ended October 31,
2008 or 2007. No customer accounted for 10% or more of total accounts receivable at October 31,
2008 or July 31, 2008.
Recent Accounting Pronouncements
SFAS 157, Fair Value Measurements"
In September 2006 the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 157, Fair Value Measurements. SFAS 157 provides enhanced guidance
for using fair value to measure assets and liabilities. The standard also responds to investors
requests for expanded information about the extent to which companies measure assets and
liabilities at fair value, the information used to measure fair value and the effect of fair value
measurements on earnings. SFAS 157 applies whenever other standards require or permit assets or
liabilities to be measured at fair value. This standard does not expand the use of fair value in
any
9
new circumstances. SFAS 157 is effective for fiscal years beginning after November 15, 2007. In
February 2008 the FASB issued FASB Staff Position (FSP) 157-2, Effective Date of FASB Statement
No. 157, which partially defers the effective date of SFAS 157 for one year for non-financial
assets and liabilities, except for items that are recognized or disclosed at fair value in an
entitys financial statements on a recurring basis (at least annually). In October 2008 the FASB
issued FSP 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset
Is Not Active, which clarifies the application of SFAS 157 in an inactive market and illustrates
how an entity would determine fair value when the market for a financial asset is not active. On
August 1, 2008 we adopted the provisions of SFAS 157 related to financial assets and financial
liabilities and to non-financial assets and non-financial liabilities that we recognize or disclose
at fair value on a recurring basis. We also adopted FSP 157-3 on that date. See Note 8. In
accordance with FSP 157-2, we have delayed the implementation of the provisions of SFAS 157 related
to the fair value of goodwill, other intangible assets and non-financial long-lived assets until
our fiscal year beginning August 1, 2009. We are in the process of evaluating these portions of the
standard and therefore have not yet determined the impact that their adoption will have on our
financial position, results of operations or cash flows.
SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities
In February 2007 the FASB issued SFAS 159, The Fair Value Option for Financial Assets and
Financial Liabilities. SFAS 159 provides companies with an option to report selected financial
assets and liabilities at fair value. The standards objective is to reduce both complexity in
accounting for financial instruments and the volatility in earnings caused by measuring related
assets and liabilities differently. The standard requires companies to provide additional
information that will help investors and other users of financial statements to more easily
understand the effect of the companys choice to use fair value on its earnings. It also requires
companies to display the fair value of those assets and liabilities for which the company has
chosen to use fair value on the face of the balance sheet. The new standard does not eliminate
disclosure requirements included in other accounting standards, including requirements for
disclosures about fair value measurements included in SFAS 157, Fair Value Measurements, and SFAS
107, Disclosures about Fair Value of Financial Instruments. SFAS 159 is effective for fiscal
years beginning after November 15, 2007. On August 1, 2008 we adopted SFAS 159 but did not elect
the fair value option for any additional financial assets or liabilities that we held at that date.
SFAS 141 (revised 2007), Business Combinations
In December 2007 the FASB issued SFAS 141 (revised 2007), Business Combinations. SFAS 141R will
significantly change the accounting for business combinations in a number of areas, including the
measurement of assets and liabilities acquired and the treatment of contingent consideration,
contingencies, acquisition costs, in-process research and development and restructuring costs. In
addition, under SFAS 141R, changes in deferred tax asset valuation allowances and acquired income
tax uncertainties in a business combination after the measurement period will affect the income tax
provision. SFAS 141R is effective for business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning after December 15, 2008, which
means that it will be effective for our fiscal year beginning August 1, 2009. Early adoption is
prohibited. We are in the process of evaluating this standard and therefore have not yet determined
the impact that the adoption of SFAS 141R will have on our financial position, results of
operations or cash flows.
SFAS 160, Noncontrolling Interests in Consolidated Financial Statements
In December 2007 the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial
Statements, which establishes accounting and reporting standards for the noncontrolling (minority)
interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for
business arrangements entered into in fiscal years beginning on or after December 15, 2008, which
means that it will be effective for our fiscal year beginning August 1, 2009. Early adoption is
prohibited. We are in the process of evaluating this standard and therefore have not yet determined
the impact that the adoption of SFAS 160 will have on our financial position, results of operations
or cash flows.
FSP SFAS 142-3, Determination of the Useful Life of Intangible Assets
In April 2008 the FASB issued FSP SFAS 142-3, Determination of the Useful
Life of Intangible Assets. FSP SFAS 142-3 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of a recognized
intangible asset under SFAS 142, Goodwill and Other Intangible Assets. This new staff position is
intended to improve the consistency between the useful life of a recognized intangible asset under
SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under
SFAS 141(R), Business Combinations. FSP SFAS 142-3 is effective for fiscal years
10
beginning after December 15, 2008, which means that it will be effective for our fiscal year
beginning August 1, 2009. We are in the process of evaluating this staff position and therefore
have not yet determined the impact that adoption of FSP SFAS 142-3 will have on our financial
position, results of operations or cash flows.
2. Cash and Cash Equivalents, Investments and Funds Held for Customers
We consider highly liquid investments with maturities of three months or less at the date of
purchase to be cash equivalents. Cash equivalents consist primarily of AAA-rated money market funds
in all periods presented. Investments consist of available-for-sale investment-grade debt
securities that we carry at fair value. Funds held for customers consist of cash and AAA-rated
money market funds. Long-term investments consist primarily of municipal auction rate securities
that we carry at fair value. Due to a decrease in liquidity in the global credit markets, we
estimate the fair values of these municipal auction rate securities based on a discounted cash flow
model that we prepare and inputs from third parties. See Note 8 for more information. Except for
direct obligations of the United States government, securities issued by agencies of the United
States government, and money market funds, we diversify our investments by limiting our holdings
with any individual issuer.
The following table summarizes our cash and cash equivalents, investments and funds held for
customers by balance sheet classification at the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2008 |
|
|
July 31, 2008 |
|
(In thousands) |
|
Cost |
|
|
Fair Value |
|
|
Cost |
|
|
Fair Value |
|
Classification on balance sheets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
169,557 |
|
|
$ |
169,557 |
|
|
$ |
413,340 |
|
|
$ |
413,340 |
|
Investments |
|
|
288,304 |
|
|
|
289,031 |
|
|
|
412,075 |
|
|
|
414,493 |
|
Funds held for customers |
|
|
327,526 |
|
|
|
327,526 |
|
|
|
610,748 |
|
|
|
610,748 |
|
Long-term investments |
|
|
288,354 |
|
|
|
288,354 |
|
|
|
288,310 |
|
|
|
288,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents, investments
and funds held for customers |
|
$ |
1,073,741 |
|
|
$ |
1,074,468 |
|
|
$ |
1,724,473 |
|
|
$ |
1,726,891 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes our cash and cash equivalents, investments and funds held for
customers by investment category at the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2008 |
|
|
July 31, 2008 |
|
(In thousands) |
|
Cost |
|
|
Fair Value |
|
|
Cost |
|
|
Fair Value |
|
Type of issue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents |
|
$ |
497,083 |
|
|
$ |
497,083 |
|
|
$ |
1,024,088 |
|
|
$ |
1,024,088 |
|
Available-for-sale debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds |
|
|
248,974 |
|
|
|
249,915 |
|
|
|
330,436 |
|
|
|
332,534 |
|
Municipal auction rate securities |
|
|
285,050 |
|
|
|
285,050 |
|
|
|
285,325 |
|
|
|
285,325 |
|
U.S. agency securities |
|
|
25,999 |
|
|
|
26,030 |
|
|
|
74,476 |
|
|
|
74,796 |
|
Corporate notes |
|
|
13,331 |
|
|
|
13,086 |
|
|
|
7,163 |
|
|
|
7,163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale debt securities |
|
|
573,354 |
|
|
|
574,081 |
|
|
|
697,400 |
|
|
|
699,818 |
|
Other long-term investments |
|
|
3,304 |
|
|
|
3,304 |
|
|
|
2,985 |
|
|
|
2,985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents, investments
and funds held for customers |
|
$ |
1,073,741 |
|
|
$ |
1,074,468 |
|
|
$ |
1,724,473 |
|
|
$ |
1,726,891 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
We accumulate unrealized gains and losses on our available-for-sale debt securities, net of tax, in
accumulated other comprehensive income in the stockholders equity section of our balance sheets.
Gross unrealized gains and losses on our available-for-sale debt securities were as follows at the
dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
October 31,
2008 |
|
|
July 31,
2008 |
|
Gross unrealized gains |
|
|
|
|
|
|
|
|
|
$ |
1,117 |
|
|
$ |
2,482 |
|
Gross unrealized losses |
|
|
|
|
|
|
|
|
|
|
(390 |
) |
|
|
(64 |
) |
Net unrealized gain |
|
|
|
|
|
|
|
|
|
$ |
727 |
|
|
$ |
2,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We include realized gains and losses on our available-for-sale debt securities in interest and
other income in our statements of operations. Gross realized gains and losses on our
available-for-sale debt securities for the three months ended October 31, 2008 and 2007 were not
significant. |
|
See Note 8 for a discussion of the fair value of our municipal auction rate securities, which we
classify as long-term investments on our balance sheets. The gross unrealized losses related to
$97.1 million in short-term available-for-sale debt securities that were in a continuous unrealized
loss position for less than 12 months at October 31, 2008 were not significant. At that date we
held no securities that were in a continuous unrealized loss position for longer than 12 months. We
periodically review our investment portfolios to determine if any investment is
other-than-temporarily impaired due to changes in credit risk or other potential valuation
concerns. We believe that the investments we held at October 31, 2008 were not
other-than-temporarily impaired. While certain available-for-sale debt securities have fair values
that are below cost, we believe that if the securities were held to maturity it is probable that
principal and interest would be collected in accordance with contractual terms. We believe that the
unrealized losses at October 31, 2008 are due to changes in interest rates and not due to increased
credit risk. |
|
The following table summarizes our available-for-sale debt securities classified by the stated
maturity date of the security at the dates indicated. |
|
|
|
October 31, 2008 |
|
|
July 31, 2008 |
|
(In thousands) |
|
Cost |
|
|
Fair Value |
|
|
Cost |
|
|
Fair Value |
|
Due within one year |
|
$ |
142,485 |
|
|
$ |
143,417 |
|
|
$ |
108,753 |
|
|
$ |
109,562 |
|
Due within two years |
|
|
113,387 |
|
|
|
113,125 |
|
|
|
207,157 |
|
|
|
208,144 |
|
Due within three years |
|
|
5,333 |
|
|
|
5,325 |
|
|
|
10,379 |
|
|
|
10,402 |
|
Due after three years |
|
|
312,149 |
|
|
|
312,214 |
|
|
|
371,111 |
|
|
|
371,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale debt securities |
|
$ |
573,354 |
|
|
$ |
574,081 |
|
|
$ |
697,400 |
|
|
$ |
699,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3. Comprehensive Net Income (Loss)
SFAS 130, Reporting Comprehensive Income, establishes standards for reporting and displaying
comprehensive net income (loss) and its components in stockholders equity. SFAS 130 requires that
the components of other comprehensive income (loss), such as changes in the fair value of
available-for-sale debt securities and foreign currency translation adjustments, be added to our
net income (loss) to arrive at comprehensive net income (loss). Other comprehensive income (loss)
items have no impact on our net income (loss) as presented in our statements of operations.
12
The components of accumulated other comprehensive income, net of income taxes, were as shown in the
following table for the periods indicated. The realized gain on derivative instruments relates to
two interest rate swaps that we entered into in December 2006 and settled in March 2007 in
connection with the senior notes described in Note 7. We are amortizing the realized gain to
interest expense over the term of the related notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
Realized |
|
|
|
|
|
|
|
|
|
Gain (Loss) |
|
|
Gain on |
|
|
Foreign |
|
|
|
|
|
|
on |
|
|
Derivative |
|
|
Currency |
|
|
|
|
(In thousands) |
|
Investments |
|
|
Instruments |
|
|
Translation |
|
|
Total |
|
|
Balance at July 31, 2008 |
|
$ |
1,457 |
|
|
$ |
392 |
|
|
$ |
5,873 |
|
|
$ |
7,722 |
|
Unrealized loss, net of income tax
benefit of $693 |
|
|
(1,050 |
) |
|
|
|
|
|
|
|
|
|
|
(1,050 |
) |
Reclassification adjustment for realized
loss included in net loss, net of
income tax provision of $21 |
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
31 |
|
Amortization of realized gain on derivative
instruments, net of income tax benefit of $7 |
|
|
|
|
|
|
(11 |
) |
|
|
|
|
|
|
(11 |
) |
Translation adjustment, net of income
tax benefit of $3,654 |
|
|
|
|
|
|
|
|
|
|
(5,537 |
) |
|
|
(5,537 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
|
(1,019 |
) |
|
|
(11 |
) |
|
|
(5,537 |
) |
|
|
(6,567 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at October 31, 2008 |
|
$ |
438 |
|
|
$ |
381 |
|
|
$ |
336 |
|
|
$ |
1,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 31, 2007 |
|
$ |
(105 |
) |
|
$ |
433 |
|
|
$ |
5,768 |
|
|
$ |
6,096 |
|
Unrealized gain, net of income tax
provision of $312 |
|
|
474 |
|
|
|
|
|
|
|
|
|
|
|
474 |
|
Reclassification adjustment for realized
gain included in net loss, net of
income tax benefit of $1 |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
(1 |
) |
Amortization of realized gain on derivative
instruments, net of income tax benefit of $7 |
|
|
|
|
|
|
(10 |
) |
|
|
|
|
|
|
(10 |
) |
Translation adjustment, net of income
tax provision of $1,421 |
|
|
|
|
|
|
|
|
|
|
2,152 |
|
|
|
2,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
473 |
|
|
|
(10 |
) |
|
|
2,152 |
|
|
|
2,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at October 31, 2007 |
|
$ |
368 |
|
|
$ |
423 |
|
|
$ |
7,920 |
|
|
$ |
8,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive net loss was as follows for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
October 31, |
|
|
October 31, |
|
(In thousands) |
|
2008 |
|
|
2007 |
|
|
Net loss |
|
$ |
(52,144 |
) |
|
$ |
(20,804 |
) |
Other comprehensive (loss) income |
|
|
(6,567 |
) |
|
|
2,615 |
|
|
|
|
|
|
|
|
Comprehensive net loss, net of income taxes |
|
$ |
(58,711 |
) |
|
$ |
(18,189 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) provision netted against
other comprehensive (loss) income |
|
$ |
(4,333 |
) |
|
$ |
1,725 |
|
|
|
|
|
|
|
|
|
13
4. Dispositions and Discontinued Operations
Intuit Distribution Management Solutions Discontinued Operations
In August 2007 we sold our Intuit Distribution Management Solutions (IDMS) business for
approximately $100 million in cash and recorded a net gain on disposal of $27.5 million. IDMS was
part of our Other Businesses segment.
In accordance with the provisions of SFAS 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, we determined that IDMS became a discontinued operation in the fourth quarter
of fiscal 2007. We have therefore segregated the net assets and operating results of IDMS from
continuing operations on our balance sheets and in our statements of operations for all periods
prior to the sale. Revenue and net loss from IDMS discontinued operations were $1.9 million and
$0.7 million for the three months ended October 31, 2007. Because IDMS operating cash flows were
not material for any period presented, we have not segregated them from continuing operations on
our statements of cash flows. We have presented the effect of the gain on disposal of IDMS on our
statement of cash flows for the three months ended October 31, 2007.
Sale of Outsourced Payroll Assets
In March 2007 we sold certain assets related to our Complete Payroll and Premier Payroll Service
businesses to Automatic Data Processing, Inc. (ADP) for a price of up to approximately $135 million
in cash. The final purchase price was contingent upon the number of customers that transitioned to
ADP pursuant to the purchase agreement over a period of approximately one year from the date of
sale. In the three months ended October 31, 2007 we recorded a pre-tax gain of $24.0 million on our
statement of operations for customers who transitioned to ADP during that period. We received a
total purchase price of $93.6 million and recorded a total pre-tax gain of $83.2 million from the
inception of this transaction through its completion in the third quarter of fiscal 2008.
In accordance with the provisions of SFAS 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, we did not account for this transaction as a discontinued operation because the
operations and cash flows of the assets could not be clearly distinguished, operationally or for
financial reporting purposes, from the rest of our outsourced payroll business. The assets were
part of our Payroll and Payments segment.
5. Industry Segment and Geographic Information
SFAS 131, Disclosures about Segments of an Enterprise and Related Information, establishes
standards for the way in which public companies disclose certain information about operating
segments in their financial reports. Consistent with SFAS 131, we have defined six reportable
segments, described below, based on factors such as how we manage our operations and how our chief
operating decision maker views results. We define the chief operating decision maker as our chief
executive officer and our chief financial officer. Our chief operating decision maker organizes and
manages our business primarily on the basis of product and service offerings. We have aggregated
two operating segments to form our Payroll and Payments reportable segment.
QuickBooks product revenue is derived primarily from QuickBooks desktop software products and
financial supplies such as paper checks, envelopes, invoices, business cards and business
stationery. QuickBooks service and other revenue is derived primarily from QuickBooks Online,
QuickBooks support plans, Web site design and hosting services for small businesses, and royalties
from small business online services.
Payroll and Payments product revenue is derived primarily from QuickBooks Payroll, a family of
products sold on a subscription basis offering payroll tax tables, federal and state payroll tax
forms, and electronic tax payment and filing to small businesses that prepare their own payrolls.
Payroll and Payments service and other revenue is derived from small business payroll services as
well as from merchant services provided by our Innovative Merchant Solutions business that include
credit and debit card processing, electronic check conversion and automated clearing house
services. Service and other revenue for this segment also includes interest earned on funds held
for payroll customers.
Consumer Tax product revenue is derived primarily from TurboTax federal and state consumer and
small business desktop tax return preparation software. Consumer Tax service and other revenue is
derived primarily from TurboTax Online tax return preparation services and electronic filing
services.
14
Accounting Professionals product revenue is derived primarily from Lacerte and ProSeries
professional tax preparation software products and from QuickBooks Premier Accountant Edition and
ProAdvisor Program for professional accountants. Accounting Professionals service and other revenue
is derived primarily from electronic filing services, bank product transmission services and
training services.
Financial Institutions service and other revenue is derived primarily from outsourced online
banking software products that are hosted in our data centers and delivered as on-demand service
offerings to banks and credit unions by our Digital Insight business.
Our Other Businesses segment consists primarily of Quicken, Intuit Real Estate Solutions (IRES),
and our business in Canada. Quicken product revenue is derived primarily from Quicken desktop
software products. Quicken service and other revenue is derived primarily from Quicken Online and
fees from consumer online transactions. IRES product revenue is derived primarily from property
management software licenses. Service and other revenue in our IRES business consists primarily of
revenue from support plans, hosting services and professional services. In Canada, product revenue
is derived primarily from localized versions of QuickBooks and Quicken as well as consumer desktop
tax return preparation software and professional tax preparation products. Service and other
revenue in Canada consists primarily of revenue from payroll services and QuickBooks support plans.
Our QuickBooks, Payroll and Payments, Consumer Tax, Accounting Professionals and Financial
Institutions segments operate primarily in the United States. All of our segments sell primarily to
customers located in the United States. International total net revenue was less than 5% of
consolidated total net revenue for all periods presented.
We include costs such as corporate selling and marketing, product development, and general and
administrative expenses and share-based compensation expenses that are not allocated to specific
segments in a category we call Corporate. The Corporate category also includes amortization of
purchased intangible assets, acquisition-related charges, interest expense, interest and other
income, and realized net gains or losses on marketable equity securities and other investments.
The accounting policies of our reportable segments are the same as those described in the summary
of significant accounting policies in Note 1 to the financial statements in our Annual Report on
Form 10-K for the fiscal year ended July 31, 2008. Except for goodwill and purchased intangible
assets, we do not generally track assets by reportable segment and, consequently, we do not
disclose total assets by reportable segment.
15
The following tables show our financial results by reportable segment for the three months ended
October 31, 2008 and 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payroll |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and |
|
Consumer |
|
Accounting |
|
Financial |
|
Other |
|
|
|
|
(In thousands) |
|
QuickBooks |
|
Payments |
|
Tax |
|
Professionals |
|
Institutions |
|
Businesses |
|
Corporate |
|
Consolidated |
|
|
|
Three Months Ended
October 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenue |
|
$ |
105,419 |
|
|
$ |
58,321 |
|
|
$ |
4,170 |
|
|
$ |
19,113 |
|
|
$ |
136 |
|
|
$ |
33,394 |
|
|
$ |
|
|
|
$ |
220,553 |
|
Service and other revenue |
|
|
46,503 |
|
|
|
93,737 |
|
|
|
10,084 |
|
|
|
2,252 |
|
|
|
74,535 |
|
|
|
33,715 |
|
|
|
|
|
|
|
260,826 |
|
|
|
|
Total net revenue |
|
|
151,922 |
|
|
|
152,058 |
|
|
|
14,254 |
|
|
|
21,365 |
|
|
|
74,671 |
|
|
|
67,109 |
|
|
|
|
|
|
|
481,379 |
|
|
|
|
Segment operating
income (loss) |
|
|
29,310 |
|
|
|
61,529 |
|
|
|
(31,649 |
) |
|
|
(17,107 |
) |
|
|
14,925 |
|
|
|
9,233 |
|
|
|
|
|
|
|
66,241 |
|
Common expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(117,470 |
) |
|
|
(117,470 |
) |
|
|
|
Subtotal |
|
|
29,310 |
|
|
|
61,529 |
|
|
|
(31,649 |
) |
|
|
(17,107 |
) |
|
|
14,925 |
|
|
|
9,233 |
|
|
|
(117,470 |
) |
|
|
(51,229 |
) |
Amortization of purchased
intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,213 |
) |
|
|
(15,213 |
) |
Acquisition-related charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,588 |
) |
|
|
(9,588 |
) |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,731 |
) |
|
|
(11,731 |
) |
Interest and other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,868 |
) |
|
|
(1,868 |
) |
Gain on marketable equity
securities and other
investments, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
577 |
|
|
|
577 |
|
|
|
|
Income (loss) from
continuing operations
before income taxes |
|
$ |
29,310 |
|
|
$ |
61,529 |
|
|
$ |
(31,649 |
) |
|
$ |
(17,107 |
) |
|
$ |
14,925 |
|
|
$ |
9,233 |
|
|
$ |
(155,293 |
) |
|
$ |
(89,052 |
) |
|
|
|
|
|
|
|
|
|
|
|
Payroll |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and |
|
Consumer |
|
Professional |
|
Financial |
|
Other |
|
|
|
|
(In thousands) |
|
QuickBooks |
|
Payments |
|
Tax |
|
Tax |
|
Institutions |
|
Businesses |
|
Corporate |
|
Consolidated |
|
|
|
Three Months Ended
October 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenue |
|
$ |
113,294 |
|
|
$ |
53,534 |
|
|
$ |
2,838 |
|
|
$ |
16,735 |
|
|
$ |
86 |
|
|
$ |
32,133 |
|
|
$ |
|
|
|
$ |
218,620 |
|
Service and other revenue |
|
|
29,623 |
|
|
|
77,802 |
|
|
|
10,479 |
|
|
|
1,647 |
|
|
|
72,080 |
|
|
|
34,687 |
|
|
|
|
|
|
|
226,318 |
|
|
|
|
Total net revenue |
|
|
142,917 |
|
|
|
131,336 |
|
|
|
13,317 |
|
|
|
18,382 |
|
|
|
72,166 |
|
|
|
66,820 |
|
|
|
|
|
|
|
444,938 |
|
|
|
|
Segment operating
income (loss) |
|
|
36,574 |
|
|
|
57,108 |
|
|
|
(33,701 |
) |
|
|
(20,559 |
) |
|
|
12,411 |
|
|
|
10,544 |
|
|
|
|
|
|
|
62,377 |
|
Common expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(144,750 |
) |
|
|
(144,750 |
) |
|
|
|
Subtotal |
|
|
36,574 |
|
|
|
57,108 |
|
|
|
(33,701 |
) |
|
|
(20,559 |
) |
|
|
12,411 |
|
|
|
10,544 |
|
|
|
(144,750 |
) |
|
|
(82,373 |
) |
Amortization of purchased
intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,814 |
) |
|
|
(12,814 |
) |
Acquisition-related charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,012 |
) |
|
|
(8,012 |
) |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,049 |
) |
|
|
(14,049 |
) |
Interest and other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,191 |
|
|
|
17,191 |
|
Gain on marketable equity
securities and other
investments, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
713 |
|
|
|
713 |
|
Gain on sale of outsourced
payroll assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,951 |
|
|
|
23,951 |
|
|
|
|
Income (loss) from
continuing operations
before income taxes |
|
$ |
36,574 |
|
|
$ |
57,108 |
|
|
$ |
(33,701 |
) |
|
$ |
(20,559 |
) |
|
$ |
12,411 |
|
|
$ |
10,544 |
|
|
$ |
(137,770 |
) |
|
$ |
(75,393 |
) |
|
|
|
|
16
6. Current Liabilities
Unsecured Revolving Credit Facility
On March 22, 2007 we entered into an agreement with certain institutional lenders for a $500
million unsecured revolving credit facility that will expire on March 22, 2012. Advances under the
credit facility will accrue interest at rates that are equal to, at our election, either Citibanks
base rate or the London InterBank Offered Rate (LIBOR) plus a margin that ranges from 0.18% to
0.575% based on our senior debt credit ratings. The applicable interest rate will be increased by
0.05% for any period in which the total principal amount of advances and letters of credit under
the credit facility exceeds $250 million. The agreement includes covenants that require us to
maintain a ratio of total debt to annual earnings before interest, taxes, depreciation and
amortization (EBITDA) of not greater than 3.25 to 1.00 and a ratio of annual EBITDA to interest
payable of not less than 3.00 to 1.00. We were in compliance with these covenants at October 31,
2008. We may use amounts borrowed under this credit facility for general corporate purposes or for
future acquisitions or expansion of our business. To date we have not borrowed under this credit
facility.
Other Current Liabilities
Other current liabilities were as follows at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
October 31, |
|
|
July 31, |
|
(In thousands) |
|
2008 |
|
|
2008 |
|
|
Reserve for product returns |
|
$ |
28,394 |
|
|
$ |
27,910 |
|
Reserve for rebates |
|
|
11,632 |
|
|
|
13,408 |
|
Interest payable |
|
|
6,659 |
|
|
|
20,597 |
|
Executive deferred compensation plan |
|
|
36,679 |
|
|
|
38,234 |
|
Other |
|
|
29,098 |
|
|
|
35,177 |
|
|
|
|
|
|
|
|
Total other current liabilities |
|
$ |
112,462 |
|
|
$ |
135,326 |
|
|
|
|
|
|
|
|
The balances of several of our other current liabilities, particularly our reserves for product
returns and rebates, are affected by the seasonality of our business. See Note 1.
Restructuring Liability
In the fourth quarter of fiscal 2008 we announced a reorganization plan that has resulted in a
reduction of our workforce. We recorded a $23.3 million restructuring liability related to the
workforce reduction in the fourth quarter of fiscal 2008 that consisted of approximately $16.0
million for employee severance costs and approximately $7.3 million for facilities closure costs.
We paid $3.9 million of the facilities costs in cash during the three months ended July 31, 2008.
We will pay the remaining facilities costs in cash over the period ending August 2010. We paid
substantially all of the employee severance costs in cash during the three months ended October 31,
2008.
7. Long-Term Obligations
Senior Unsecured Notes
On March 12, 2007 we issued $500 million of 5.40% senior unsecured notes due on March 15, 2012 and
$500 million of 5.75% senior unsecured notes due on March 15, 2017 (together, the Notes), for a
total principal amount of $1 billion. The Notes are redeemable by Intuit at any time, subject to a
make-whole premium. We paid $27.9 million and $28.4 million in cash for interest on the Notes
during the three months ended October 31, 2008 and 2007. Based on the trading prices of the Notes
at October 31, 2008 and July 31, 2008 and the interest rates we could obtain for other borrowings
with similar terms at those dates, the estimated fair value of the Notes at those dates was
approximately $842.6 million and $964.7 million.
17
The following table summarizes our senior unsecured notes at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
October 31, |
|
|
July 31, |
|
(In thousands) |
|
2008 |
|
|
2008 |
|
|
Senior notes: |
|
|
|
|
|
|
|
|
5.40% fixed-rate notes, due 2012 |
|
$ |
500,000 |
|
|
$ |
500,000 |
|
5.75% fixed-rate notes, due 2017 |
|
|
500,000 |
|
|
|
500,000 |
|
|
|
|
|
|
|
|
Total senior notes |
|
|
1,000,000 |
|
|
|
1,000,000 |
|
Unamortized discount |
|
|
(1,958 |
) |
|
|
(2,004 |
) |
|
|
|
|
|
|
|
Total |
|
$ |
998,042 |
|
|
$ |
997,996 |
|
|
|
|
|
|
|
|
Other Long-Term Obligations
Other long-term obligations were as follows at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
October 31, |
|
|
July 31, |
|
(In thousands) |
|
2008 |
|
|
2008 |
|
|
Capital lease obligations: Monthly installments through
2011; interest rates of 4.50% to 6.75% |
|
$ |
1,357 |
|
|
$ |
1,562 |
|
Total deferred rent |
|
|
64,320 |
|
|
|
61,747 |
|
Long-term deferred revenue |
|
|
13,094 |
|
|
|
12,939 |
|
Long-term income tax liabilities |
|
|
51,597 |
|
|
|
47,857 |
|
Other |
|
|
5,319 |
|
|
|
6,446 |
|
|
|
|
|
|
|
|
Total long-term obligations |
|
|
135,687 |
|
|
|
130,551 |
|
Less current portion (included in other current liabilities) |
|
|
(9,924 |
) |
|
|
(9,062 |
) |
|
|
|
|
|
|
|
Long-term obligations due after one year |
|
$ |
125,763 |
|
|
$ |
121,489 |
|
|
|
|
|
|
|
|
Innovative Merchant Solutions Loan and Buyout Commitments
In April 2005 our wholly owned subsidiary, Innovative Merchant Solutions (IMS), became a member of
Superior Bankcard Services, LLC (SBS), a newly formed entity that acquires merchant accounts for
IMS. Our consolidated financial statements include the financial position, results of operations
and cash flows of SBS, after elimination of all significant intercompany balances and transactions,
including amounts outstanding under the credit agreement described below. See Note 1. In connection
with the formation of this entity IMS agreed to provide to SBS revolving loans in an amount of up
to $40.0 million under the terms of a credit agreement. The credit agreement expires in July 2013,
although certain events, such as a sale of SBS, can trigger earlier termination. Amounts
outstanding under this agreement at October 31, 2008 totaled $9.5 million at interest rates of 6.0%
to 7.0%. Amounts outstanding under this agreement at July 31, 2008 totaled $8.5 million at interest
rates of 6.0% to 8.5%. There are no scheduled repayments on the outstanding loan balance. All
unpaid principal amounts and the related accrued interest are due and payable in full at the loan
expiration date.
The operating agreement of SBS requires that, no later than July 2009, either IMS agree to purchase
the minority members interests in SBS at a price to be set by negotiation or arbitration, or IMS
and the minority members pursue a sale of their interests in SBS to a third party.
18
8. Fair Value Measurements
As discussed in Note 1, Recent Accounting Pronouncements, on August 1, 2008 we adopted SFAS 157,
Fair Value Measurements, for financial assets and financial liabilities and for non-financial
assets and non-financial liabilities that we recognize or disclose at fair value on a recurring
basis (at least annually). As of the date of adoption, these consisted of cash equivalents,
available-for-sale debt securities and long-term debt. On August 1, 2008 we also adopted FSP 157-3,
Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active.
This FSP clarifies the application of SFAS 157 in an inactive market and illustrates how an entity
would determine fair value when the market for a financial asset is not active. In accordance with
FSP 157-2, Effective Date of FASB Statement No. 157, we have not yet adopted the provisions of
SFAS 157 that relate to non-financial assets and non-financial liabilities that we do not recognize
or disclose at fair value on a recurring basis. These include reporting units measured at fair
value in a goodwill impairment test and non-financial assets acquired and liabilities assumed in a
business combination.
SFAS 157 defines fair value as the price that would be received from the sale of an asset or paid
to transfer a liability (an exit price) in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants on the measurement date. SFAS
157 establishes a three-level hierarchy for disclosure that is based on the extent and level of
judgment used to estimate the fair value of assets and liabilities.
|
|
|
Level 1 uses unadjusted quoted prices that are available in active markets for identical
assets or liabilities. Our Level 1 assets consist of cash equivalents that are invested
primarily in AAA-rated money market funds. |
|
|
|
|
Level 2 uses inputs other than quoted prices included in Level 1 that are either
directly or indirectly observable through correlation with market data. These include
quoted prices for similar assets or liabilities in active markets; quoted prices for
identical or similar assets or liabilities in markets that are not active; and inputs to
valuation models or other pricing methodologies that do not require significant judgment
because the inputs used in the model, such as interest rates and volatility, can be
corroborated by readily observable market data. Our Level 2 assets consist of corporate
notes, U.S. agency securities and municipal bonds that we classify as available-for-sale
securities. Our Level 2 liabilities consist of long-term debt that is model priced by third
parties using observable inputs. |
|
|
|
|
Level 3 uses one or more significant inputs that are unobservable and supported by
little or no market activity, and that reflect the use of significant management judgment.
Level 3 assets and liabilities include those whose fair value measurements are determined
using pricing models, discounted cash flow methodologies or similar valuation techniques,
and significant management judgment or estimation. Our Level 3 assets consist of municipal
auction rate securities. |
The following table presents financial assets and financial liabilities that we measured at fair
value on a recurring basis at October 31, 2008. We have classified these assets and liabilities in
accordance with the fair value hierarchy set forth in SFAS 157. In instances where the inputs used
to measure the fair value of an asset or liability fall into more than one level of the fair value
hierarchy, we have classified them based on the lowest level input that is significant to the
determination of the fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active |
|
|
Significant |
|
|
|
|
|
|
Total |
|
|
|
Markets |
|
|
Other |
|
|
Significant |
|
|
Fair Value |
|
|
|
for Identical |
|
|
Observable |
|
|
Unobservable |
|
|
as of |
|
|
|
Instruments |
|
|
Inputs |
|
|
Inputs |
|
|
October 31, |
|
(In thousands) |
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
2008 |
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents (1) |
|
$ |
46,166 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
46,166 |
|
Corporate notes (2) |
|
|
|
|
|
|
13,086 |
|
|
|
|
|
|
|
13,086 |
|
U.S. agency securities (2) |
|
|
|
|
|
|
26,030 |
|
|
|
|
|
|
|
26,030 |
|
Municipal bonds (2) |
|
|
|
|
|
|
249,915 |
|
|
|
|
|
|
|
249,915 |
|
Municipal auction rate securities (3) |
|
|
|
|
|
|
|
|
|
|
285,050 |
|
|
|
285,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
46,166 |
|
|
$ |
289,031 |
|
|
$ |
285,050 |
|
|
$ |
620,247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt (4) |
|
$ |
|
|
|
$ |
842,620 |
|
|
$ |
|
|
|
$ |
842,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Included in cash and cash equivalents on our balance sheet at October 31, 2008. |
|
(2) |
|
Included in investments on our balance sheet at October 31, 2008. |
|
(3) |
|
Included in long-term investments on our balance sheet at October 31, 2008. |
|
(4) |
|
Carrying value on our balance sheet at October 31, 2008 was $998.0 million. See Note 7. |
19
The following table presents a reconciliation of financial assets that we measure at fair value on
a recurring basis using significant unobservable inputs (Level 3) for the three months ended
October 31, 2008.
|
|
|
|
|
|
|
Significant |
|
|
|
Unobservable |
|
|
|
Inputs |
|
(In thousands) |
|
(Level 3) |
|
|
Balance at July 31, 2008 |
|
$ |
285,325 |
|
Transfers in to Level 3 |
|
|
|
|
Total gains or losses (realized or unrealized) |
|
|
|
|
Settlements |
|
|
(275 |
) |
|
|
|
|
Balance at October 31, 2008 |
|
$ |
285,050 |
|
|
|
|
|
Financial assets whose fair values we measure using Level 3 inputs consisted of municipal auction
rate securities that we classified as long-term investments on our balance sheet at October 31,
2008. These securities are collateralized long-term debt instruments that are intended to provide
liquidity through a Dutch auction process that resets the applicable interest rate at
pre-determined intervals, typically every 35 days. Due to a decrease in liquidity in the global
credit markets, in February 2008 auctions began failing for the municipal auction rate securities
we held. Regularly scheduled auctions for these securities have generally continued to fail since
that time. When these auctions initially failed, higher interest rates for many of the securities
went into effect. Of the total auction rate securities we held at October 31, 2008, the underlying
assets of $220.7 million or 77% were student loans which are guaranteed by the U.S. Department of
Education and $240.9 million or 85% were rated AAA/Aaa by the major credit rating agencies.
We estimated the fair values of the municipal auction rate securities we held at October 31, 2008
based on a discounted cash flow model that we prepared and inputs from third parties. Key inputs to
our discounted cash flow model included the current contractual interest rates; forward projections
of the current contractual interest rates; the likely timing of principal repayments; the
probability of full repayment considering guarantees by the U.S. Department of Education of the
underlying student loans or insurance by other third parties; publicly available pricing data for
recently issued student loan backed securities that are not subject to auctions; and the impact of
the reduced liquidity for auction rate securities. Using our discounted cash flow model and inputs
from third parties we determined that the fair values of the municipal auction rate securities we
held at October 31, 2008 were substantially equal to their par values. As a result, we recorded no
decrease in the fair values of those securities for the three months then ended. Based on our
ability and intent to hold these auction rate securities until liquidity returns to the market or
they mature, we classified them as long-term investments on our balance sheet at October 31, 2008.
In August 2008 the broker-dealers for our municipal auction rate securities announced settlements
under which they may provide liquidity solutions, or purchase, the auction rate securities held by
their institutional clients. On November 4, 2008 we accepted an offer from UBS AG (UBS), one of the
broker-dealers for our municipal auction rate securities, that gives us the option to sell UBS a
total of $165.7 million in municipal auction rate securities at par value at any time during a
two-year period beginning June 30, 2010. The offer also gives UBS the discretion to buy any or all
of these securities from us at par value at any time. As discussed above, at October 31, 2008 we
carried these securities at par value on our balance sheet.
Based on our expected operating cash flows and our other sources of cash, we do not believe that
the reduction in liquidity of our municipal auction rate securities will have a material impact on
our overall ability to meet our liquidity needs.
20
9. Income Taxes
Effective Tax Rate
We compute our provision for or benefit from income taxes by applying the estimated annual
effective tax rate to income or loss from recurring operations and other taxable items. Our
effective tax benefit rate for the three months ended October 31, 2008 was approximately 42%.
Excluding net one-time benefits primarily related to the reinstatement of the federal research and
experimentation credit as described below, our effective tax benefit rate for that period was
approximately 35% and did not differ significantly from the federal statutory rate. State income
taxes were offset primarily by the benefit we received from federal and state research and
experimentation credits, the domestic production activities deduction, and tax exempt interest
income. Our effective tax benefit rate for the three months ended October 31, 2007 was
approximately 38%. Excluding net one-time benefits primarily related to executive stock
compensation, our effective tax benefit rate for that period was approximately 36%. This differed
from the federal statutory rate of 35% primarily due to state income taxes, which were partially
offset by the benefit we received from tax exempt interest income, federal and state research and
experimentation credits, and the domestic production activities deduction.
In October 2008 the Emergency Economic Stabilization Act of 2008 was signed into law. The Act
includes a reinstatement of the federal research and experimentation credit through December 31,
2009 that was retroactive to January 1, 2008. We recorded a discrete tax benefit of approximately
$6.9 million for the retroactive amount related to fiscal 2008 during the three months ended
October 31, 2008.
Unrecognized Tax Benefits and Other FASB Interpretation No. 48 Considerations
The total amount of our unrecognized tax benefits at July 31, 2008 was $44.8 million. Net of
related deferred tax assets, unrecognized tax benefits were $34.0 million at that date. If we were
to recognize these net benefits, our income tax expense would reflect a favorable net impact of
$18.8 million. The recognition of the balance of these net benefits would result in an increase to
stockholders equity of $5.5 million and a decrease to goodwill of $9.7 million. There were no
material changes to these amounts during the three months ended October 31, 2008. We believe it is
reasonably possible that we will recognize up to $25 million in unrecognized tax benefits within
the next twelve months as a result of potential tax agreements.
The accounting treatment related to the realization of pre-acquisition unrecognized tax benefits
will change when SFAS 141R becomes effective in the first quarter of fiscal 2010. While any
realization of these unrecognized tax benefits prior to the effective date of SFAS 141R will result
in a decrease to goodwill, any realization after the effective date will result in a reduction to
income tax expense. See Note 1.
We recognize interest and penalties related to unrecognized tax benefits within the provision for
income taxes. At July 31, 2008, we had accrued $4.9 million for the payment of interest and had no
accruals for the payment of penalties. The amount of interest and penalties recognized during the
three months ended October 31, 2008 was not significant.
10. Stockholders Equity
Stock Repurchase Programs
Intuits Board of Directors has authorized a series of common stock repurchase programs. Shares of
common stock repurchased under these programs become treasury shares. We repurchased 6.0 million
and 8.1 million shares for $165.2 million and $250.0 million under these programs during the three
months ended October 31, 2008 and 2007. At October 31, 2008, we had authorization from our Board of
Directors to expend up to an additional $434.8 million for stock repurchases through May 15, 2011.
Repurchased shares of our common stock are held as treasury shares until they are reissued or
retired. When we reissue treasury stock, if the proceeds from the sale are more than the average
price we paid to acquire the shares we record an increase in additional paid-in capital.
Conversely, if the proceeds from the sale are less than the average price we paid to acquire the
shares, we record a decrease in additional paid-in capital to the extent of increases previously
recorded for similar transactions and a decrease in retained earnings for any remaining amount.
21
Stock Option Activity
A summary of activity under all share-based compensation plans for the three months ended October
31, 2008 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding |
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
Shares |
|
|
|
|
|
|
Exercise |
|
|
|
Available |
|
|
Number |
|
|
Price |
|
|
|
for Grant |
|
|
of Shares |
|
|
Per Share |
|
Balance at July 31, 2008 |
|
|
7,975,824 |
|
|
|
50,205,973 |
|
|
$ |
24.70 |
|
Options granted |
|
|
(293,735 |
) |
|
|
293,735 |
|
|
|
28.22 |
|
Restricted stock units granted |
|
|
(3,172,459 |
) |
|
|
|
|
|
|
|
|
Restricted stock units purchased by
participants in the Management Stock
Purchase Plan |
|
|
(74,928 |
) |
|
|
|
|
|
|
|
|
Options exercised |
|
|
|
|
|
|
(3,578,890 |
) |
|
|
19.56 |
|
Options and shares canceled or expired
and returned to option pool, net of
options canceled from expired plans |
|
|
724,895 |
|
|
|
(775,560 |
) |
|
|
29.46 |
|
Restricted stock units canceled and
returned to option pool, net of
restricted stock units canceled
from expired plans |
|
|
279,595 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at October 31, 2008 |
|
|
5,439,192 |
|
|
|
46,145,258 |
|
|
$ |
25.05 |
|
|
|
|
|
|
|
|
|
|
|
|
At October 31, 2008, options to purchase 32,647,162 common shares were exercisable at a weighted
average exercise price of $23.62 per share.
Restricted Stock Unit Activity
A summary of restricted stock unit activity for the three months ended October 31, 2008 was as
follows:
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average |
|
|
|
Number |
|
|
Grant Date |
|
|
|
of Shares |
|
|
Fair Value |
|
Nonvested at July 31, 2008 |
|
|
4,997,333 |
|
|
$ |
29.29 |
|
Granted |
|
|
3,172,459 |
|
|
|
30.20 |
|
Vested |
|
|
(692,196 |
) |
|
|
30.87 |
|
Forfeited |
|
|
(280,351 |
) |
|
|
29.28 |
|
|
|
|
|
|
|
|
|
Nonvested at October 31, 2008 |
|
|
7,197,245 |
|
|
$ |
29.54 |
|
|
|
|
|
|
|
|
|
|
22
Share-Based Compensation Expense
The following table summarizes the total share-based compensation expense that we recorded for the
periods shown.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
October 31, |
|
|
October 31, |
|
(In thousands, except per share amounts) |
|
2008 |
|
|
2007 |
|
|
Cost of product revenue |
|
$ |
246 |
|
|
$ |
276 |
|
Cost of service and other revenue |
|
|
1,022 |
|
|
|
1,458 |
|
Selling and marketing |
|
|
8,080 |
|
|
|
7,698 |
|
Research and development |
|
|
6,381 |
|
|
|
7,881 |
|
General and administrative |
|
|
6,024 |
|
|
|
9,342 |
|
|
|
|
|
|
|
|
Increase in operating loss from
continuing operations and loss from
continuing operations before income taxes |
|
|
21,753 |
|
|
|
26,655 |
|
Income tax benefit |
|
|
(7,937 |
) |
|
|
(10,135 |
) |
|
|
|
|
|
|
|
Increase in net loss from continuing operations |
|
$ |
13,816 |
|
|
$ |
16,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in net loss per share from
continuing operations: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
0.04 |
|
|
$ |
0.05 |
|
|
|
|
|
|
|
|
At October 31, 2008, there was $254.6 million of total unrecognized compensation cost related to
non-vested share-based compensation arrangements granted under all equity compensation plans which
we expect to recognize as expense in the future. Total unrecognized compensation cost will be
adjusted for future changes in estimated forfeitures. We expect to recognize that cost over a
weighted average vesting period of 2.2 years.
11. Litigation
Intuit is subject to certain routine legal proceedings, as well as demands, claims and threatened
litigation, that arise in the normal course of our business, including assertions that we may be
infringing patents or other intellectual property rights of others. We currently believe that the
ultimate amount of liability, if any, for any pending claims of any type (either alone or combined)
will not materially affect our financial position, results of operations or cash flows. The
ultimate outcome of any litigation is uncertain and, regardless of outcome, litigation can have an
adverse impact on Intuit because of defense costs, negative publicity, diversion of management
resources and other factors. Our failure to obtain necessary license or other rights, or litigation
arising out of intellectual property claims, could adversely affect our business.
23
ITEM 2
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
includes the following sections:
|
|
|
Executive Overview that discusses at a high level our operating results and some of the
trends that affect our business. |
|
|
|
|
Significant changes since our most recent Annual Report on Form 10-K in the Critical
Accounting Policies and Estimates that we believe are important to understanding the
assumptions and judgments underlying our financial statements. |
|
|
|
|
Results of Operations that includes a more detailed discussion of our revenue and
expenses. |
|
|
|
|
Liquidity and Capital Resources which discusses key aspects of our statements of cash
flows, changes in our balance sheets and our financial commitments. |
You should note that this MD&A discussion contains forward-looking statements that involve risks
and uncertainties. Please see Item 1A in Part II of this Quarterly Report on Form 10-Q for
important information to consider when evaluating such statements.
You should read this MD&A in conjunction with the financial statements and related notes in Item 1
of this report and our Annual Report on Form 10-K for the fiscal year ended July 31, 2008. In
December 2007 we acquired Homestead Technologies Inc. for total consideration of approximately $170
million and in February 2008 we acquired Electronic Clearing House, Inc. for a total purchase price
of approximately $131 million. Accordingly, we have included the results of operations for these
two companies in our consolidated results of operations from their respective dates of acquisition.
We also sold our Intuit Distribution Management Solutions business in August 2007 for approximately
$100 million in cash and recorded a net gain on disposal of $27.5 million. We accounted for this
business as a discontinued operation and have accordingly reclassified our statements of operations
for all periods prior to the sale. Unless otherwise noted, the following discussion pertains only
to our continuing operations.
Executive Overview
This overview provides a high level discussion of our operating results and some of the trends that
affect our business. We believe that an understanding of these trends is important in order to
understand our financial results for the first quarter of fiscal 2009 as well as our future
prospects. This summary is not intended to be exhaustive, nor is it intended to be a substitute for
the detailed discussion and analysis provided elsewhere in this Quarterly Report on Form 10-Q.
About Intuit
Intuit is a leading provider of business and financial management solutions for small and medium
sized businesses, financial institutions, consumers and accounting professionals. We organize our
portfolio of businesses into four principal categories Small Business, Tax, Financial
Institutions and Other Businesses. These categories include six financial reporting segments.
Small Business: This category includes two segments QuickBooks, and Payroll and Payments.
|
|
|
Our QuickBooks segment includes QuickBooks financial and business management software
and services, technical support, financial supplies, and Web site design and hosting
services for small businesses. |
|
|
|
|
Our Payroll and Payments segment includes small business payroll products and services.
This segment also includes merchant services provided by our Innovative Merchant Solutions
business that include credit and debit card processing, electronic check conversion and
automated clearing house services. |
Tax: This category also includes two segments Consumer Tax and Accounting Professionals.
|
|
|
Our Consumer Tax segment includes TurboTax income tax preparation products and services
for consumers and small businesses. |
|
|
|
|
Our Accounting Professionals segment includes Lacerte and ProSeries professional tax
products and services. This segment also includes QuickBooks Premier Accountant Edition and
the QuickBooks ProAdvisor Program for accounting professionals. |
24
Financial Institutions: This segment consists primarily of outsourced online banking services for
banks and credit unions provided by our Digital Insight business.
Other Businesses: This segment includes Quicken personal finance products and services, Intuit
Real Estate Solutions, and our business in Canada.
Seasonality and Trends
Our QuickBooks, Consumer Tax and Accounting Professionals businesses are highly seasonal. Some of
our other offerings are also seasonal, but to a lesser extent. Revenue from our QuickBooks software
products tends to be highest during our second and third fiscal quarters, although the timing of
new product releases or changes in our offerings can materially shift revenue between quarters.
Sales of income tax preparation products and services are heavily concentrated in the period from
November through April. In our Consumer Tax business, a greater proportion of our revenue has been
occurring later in this seasonal period due in part to the growth in sales of TurboTax Online, for
which revenue is recognized upon printing or electronic filing of a tax return. The seasonality of
our Consumer Tax and Accounting Professionals revenue is also affected by the timing of the
availability of tax forms from taxing agencies and the ability of those agencies to receive
electronic tax return submissions. Delays in the availability of tax forms or the ability of taxing
agencies to receive submissions can cause revenue to shift from our second fiscal quarter to our
third fiscal quarter. These seasonal patterns mean that our total net revenue is usually highest
during our second quarter ending January 31 and third quarter ending April 30. We typically report
losses in our first quarter ending October 31 and fourth quarter ending July 31, when revenue from
our tax businesses is minimal while operating expenses continue at relatively consistent levels. We
believe the seasonality of our revenue is likely to continue in the future. In our MD&A we often
focus on year-to-date results for our seasonal businesses as they are generally more meaningful
than quarterly results.
Overview of Financial Results
Total net revenue for the first three months of fiscal 2009 was $481.4 million, up 8% compared with
the first three months of fiscal 2008. The fiscal 2009 revenue increase was driven by revenue
growth in our Payroll and Payments segment and our QuickBooks segment. Excluding the impact of our
acquisitions of Homestead Technologies Inc. (Homestead) and Electronic Clearing House, Inc. (ECHO),
total net revenue for the first three months of fiscal 2009 increased 4% compared with the same
period of fiscal 2008.
Operating loss from continuing operations of $76.0 million for the first three months of fiscal
2009 improved 26% compared with a loss of $103.2 million for the first three months of fiscal 2008.
Fiscal 2009 revenue growth of about $36 million was partially offset by about $9 million in higher
total costs and expenses. Total costs and expenses increased about $24 million due to our
acquisitions of Homestead and ECHO and about $10 million due to higher advertising and other
marketing expenses to support the launch of QuickBooks 2009. Total costs and expenses decreased
about $28 million as a result of certain compensation-related items and, to a lesser extent, from
restructuring decisions we made in the fourth quarter of fiscal 2008 in connection with a
reallocation of resources to key growth businesses. These factors are described in more detail
under Cost of Revenue and Operating Expenses later in this Item 2.
Net loss from continuing operations of $52.1 million for the first three months of fiscal 2009
increased from $47.6 million for the first three months of fiscal 2008. Interest and other income
(expense) decreased from income of $17.2 million in the first three months of fiscal 2008 to
expense of $1.9 million in the first three months of fiscal 2009 due to lower interest rates and
lower average invested balances affecting interest income and to a decline in the value of assets
associated with our executive deferred compensation plan. In the first three months of fiscal 2008
we recorded a pre-tax gain of $24.0 million on the sale of certain outsourced payroll assets; there
was no comparable transaction in fiscal 2009. Our effective tax rates for the first quarters of
fiscal 2009 and 2008 were approximately 42% and 38%.
Average shares outstanding declined during the first three months of fiscal 2009 as a result of
repurchases of 6.0 million shares of common stock under our stock repurchase programs, partially
offset by the issuance of 4.6 million shares in connection with our employee stock plans. Due to
the foregoing factors, diluted net loss per share from continuing operations of $0.16 for the first
three months of fiscal 2009 increased from $0.14 for the same period of fiscal 2008.
25
We ended the first quarter of fiscal 2009 with cash, cash equivalents and investments totaling
$458.6 million, a decrease of $369.2 million from July 31, 2008. At October 31, 2008, we also held
$285.1 million in municipal
auction rate securities that we classified as long-term investments on our balance sheet. See Note
8 to the financial statements in Item 1 of this report for more information. In the first three
months of fiscal 2009 we generated $63.3 million in cash from the issuance of common stock under
employee stock plans. During the same period we used $165.2 million in cash for the repurchase of
6.0 million shares of our common stock under our stock repurchase programs, $199.7 million in cash
for operations and $67.2 million in cash for capital expenditures. At October 31, 2008, we had
authorization from our Board of Directors to expend up to an additional $434.8 million for stock
repurchases through May 15, 2011. See Liquidity and Capital Resources later in this Item 2 for
more information.
Critical Accounting Policies and Estimates
In preparing our financial statements, we make estimates, assumptions and judgments that can have a
significant impact on our net revenue, operating income or loss and net income or loss, as well as
on the value of certain assets and liabilities on our balance sheet. We believe that the estimates,
assumptions and judgments involved in the accounting policies described in Managements Discussion
and Analysis of Financial Condition and Results of Operations in Item 7 of our Annual Report on
Form 10-K for the fiscal year ended July 31, 2008 have the greatest potential impact on our
financial statements, so we consider them to be our critical accounting policies and estimates.
Except for the change to our fair value measurement policy that is discussed in Fair Value
Measurements Adoption of SFAS 157 below, we believe that during the first three months of fiscal
2009 there were no significant changes in those critical accounting policies and estimates. Senior
management has reviewed the development and selection of our critical accounting policies and
estimates and their disclosure in this Quarterly Report on Form 10-Q with the Audit Committee of
our Board of Directors.
Fair Value Measurements Adoption of SFAS 157
On August 1, 2008 we adopted Statement of Financial Accounting Standards (SFAS) No.157, Fair Value
Measurements, for financial assets and financial liabilities and for non-financial assets and
non-financial liabilities that we recognize or disclose at fair value on a recurring basis. See
Note 1 and Note 8 to the financial statements in Item 1 of this report for more information.
SFAS 157 defines fair value as the price that would be received from the sale of an asset or paid
to transfer a liability (an exit price) in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants on the measurement date. SFAS
157 establishes a three-level hierarchy for disclosure that is based on the extent and level of
judgment used to estimate the fair value of assets and liabilities. Significant judgment is
required to estimate the fair value of assets and liabilities, particularly when observable inputs
are not available. For example, we use a discounted cash flow model to estimate the fair value of
our municipal auction rate securities because current market data is generally unavailable. See
Note 8 to the financial statements in Item 1 of this report for more information. Changes in our
estimates of the fair values of our assets and liabilities could result in material increases or
decreases in our net income in the period in which the change occurs.
26
Results of Operations
Financial Overview
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, |
|
|
|
|
|
|
|
|
except per |
|
Q1 |
|
Q1 |
|
$ |
|
% |
share amounts) |
|
FY09 |
|
FY08 |
|
Change |
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue |
|
$ |
481.4 |
|
|
$ |
444.9 |
|
|
$ |
36.5 |
|
|
|
8 |
% |
Operating loss
from continuing
operations |
|
|
(76.0 |
) |
|
|
(103.2 |
) |
|
|
27.2 |
|
|
|
(26 |
%) |
Net loss from
continuing
operations |
|
|
(52.1 |
) |
|
|
(47.6 |
) |
|
|
(4.5 |
) |
|
|
9 |
% |
Diluted net loss
per share from
continuing
operations |
|
$ |
(0.16 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.02 |
) |
|
|
14 |
% |
Total net revenue increased $36.5 million or 8% in the first quarter of fiscal 2009 compared with
the first quarter of fiscal 2008. Total net revenue was higher in the first quarter of fiscal 2009
due to 16% revenue growth in our Payroll and Payments segment and 6% revenue growth in our
QuickBooks segment. Excluding the impact of our acquisitions of Homestead and ECHO, total net
revenue for the first quarter of fiscal 2009 increased 4% compared with the same period of fiscal
2008. Payroll and Payments segment revenue for the first quarter of fiscal 2009 increased 9% when
adjusted for our acquisition of ECHO and QuickBooks segment revenue increased 1% when adjusted for
our acquisition of Homestead. See Total Net Revenue by Business Segment later in this Item 2 for
more information.
Operating loss from continuing operations improved $27.2 million or 26% in the first three months
of fiscal 2009 compared with the same quarter of fiscal 2008. Higher revenue in the first quarter
of fiscal 2009 was partially offset by $9.3 million in higher total costs and expenses. Total costs
and expenses increased about $24 million due to our acquisitions of Homestead and ECHO and about
$10 million due to higher advertising and other marketing expenses to support the launch of
QuickBooks 2009. Total costs and expenses decreased about $28 million as a result of certain
compensation-related items and, to a lesser extent, from lower employee and facilities expenses
that resulted from restructuring decisions we made in the fourth quarter of fiscal 2008 in
connection with a reallocation of resources to key growth businesses. See Cost of Revenue and
Operating Expenses later in this Item 2 for more information.
Net loss from continuing operations increased $4.5 million or 9% in the first three months of
fiscal 2009 compared with the first three months of fiscal 2008. Interest and other income
(expense) decreased from income of $17.2 million in the first three months of fiscal 2008 to
expense of $1.9 million in the first three months of fiscal 2009. This total decrease in income of
$19.1 million was due in part to lower interest rates and lower average invested balances that
resulted in $4 million lower interest income. Another $12 million of the decrease in interest and
other income (expense) in the first three months of fiscal 2009 compared with the same period of
fiscal 2008 was due to a $9 million decline in the value of assets associated with our executive
deferred compensation plan, compared with a $3 million increase in the value of those assets in the
first three months of fiscal 2008. These amounts were offset by amounts recorded in operating
expenses in connection with changes in the related liabilities. We recorded a pre-tax gain of $24.0
million on the sale of certain outsourced payroll assets to ADP in the first three months of fiscal
2008; there was no comparable transaction in fiscal 2009. See Dispositions and Discontinued
Operations later in this Item 2 for more information. Our effective tax rates for the first
quarters of fiscal 2009 and 2008 were approximately 42% and 38%. See Income Taxes later in this
Item 2 for more information.
27
Total Net Revenue by Business Segment
The table below and the discussion of net revenue by business segment that follows it are organized
in accordance with our six reportable business segments. See Note 5 to the financial statements in
Item 1 of this report for descriptions of product revenue and service and other revenue for each
segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
Total |
|
|
|
|
|
|
Q1 |
|
|
Net |
|
|
Q1 |
|
|
Net |
|
|
% |
|
(Dollars in millions) |
|
FY09 |
|
|
Revenue |
|
|
FY08 |
|
|
Revenue |
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QuickBooks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenue |
|
$ |
105.4 |
|
|
|
|
|
|
$ |
113.3 |
|
|
|
|
|
|
|
|
|
Service and
other revenue |
|
|
46.5 |
|
|
|
|
|
|
|
29.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
151.9 |
|
|
|
32 |
% |
|
|
142.9 |
|
|
|
32 |
% |
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payroll and
Payments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenue |
|
|
58.3 |
|
|
|
|
|
|
|
53.5 |
|
|
|
|
|
|
|
|
|
Service and
other revenue |
|
|
93.7 |
|
|
|
|
|
|
|
77.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
152.0 |
|
|
|
32 |
% |
|
|
131.3 |
|
|
|
30 |
% |
|
|
16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenue |
|
|
4.2 |
|
|
|
|
|
|
|
2.8 |
|
|
|
|
|
|
|
|
|
Service and
other revenue |
|
|
10.1 |
|
|
|
|
|
|
|
10.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
14.3 |
|
|
|
3 |
% |
|
|
13.3 |
|
|
|
3 |
% |
|
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting
Professionals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenue |
|
|
19.1 |
|
|
|
|
|
|
|
16.8 |
|
|
|
|
|
|
|
|
|
Service and
other revenue |
|
|
2.3 |
|
|
|
|
|
|
|
1.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
21.4 |
|
|
|
4 |
% |
|
|
18.4 |
|
|
|
4 |
% |
|
|
16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Institutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenue |
|
|
0.2 |
|
|
|
|
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
Service and
other revenue |
|
|
74.5 |
|
|
|
|
|
|
|
72.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
74.7 |
|
|
|
15 |
% |
|
|
72.2 |
|
|
|
16 |
% |
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Businesses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenue |
|
|
33.4 |
|
|
|
|
|
|
|
32.1 |
|
|
|
|
|
|
|
|
|
Service and
other revenue |
|
|
33.7 |
|
|
|
|
|
|
|
34.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
67.1 |
|
|
|
14 |
% |
|
|
66.8 |
|
|
|
15 |
% |
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenue |
|
|
220.6 |
|
|
|
|
|
|
|
218.6 |
|
|
|
|
|
|
|
|
|
Service and
other revenue |
|
|
260.8 |
|
|
|
|
|
|
|
226.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue |
|
$ |
481.4 |
|
|
|
100 |
% |
|
$ |
444.9 |
|
|
|
100 |
% |
|
|
8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
QuickBooks
QuickBooks segment total net revenue increased $9.0 million or 6% in the first quarter of fiscal
2009 compared with the first quarter of fiscal 2008. Excluding about $8 million in revenue from
Homestead, which we acquired in December 2007, QuickBooks segment total net revenue increased 1% in
the first quarter of fiscal 2009. Total QuickBooks software unit sales, including activations of
our free Simple Start offering, were down 3% in the first quarter of fiscal 2009 compared with the
same period of fiscal 2008. Revenue growth in that period was driven by a 9% increase in QuickBooks
Online subscribers and a 22% increase in the number of active QuickBooks Enterprise Solutions
customers.
Payroll and Payments
Payroll and Payments total net revenue increased $20.7 million or 16% in the first quarter of
fiscal 2009 compared with the first quarter of fiscal 2008. In our Payments business, revenue
increased 24% due to 18% growth in our core merchant services customer base and about $9 million in
revenue from ECHO, which we acquired in February 2008. Transaction volume per customer was down 4%
compared with the first quarter of fiscal 2008, reflecting an overall reduction in consumer
spending. Payroll revenue was up 11% in the first quarter of fiscal 2009 compared with the same
quarter of fiscal 2008 due to 3% growth in the customer base and price increases. Excluding the
ECHO revenue, Payroll and Payments segment revenue increased approximately 9% in the fiscal 2009
quarter.
Consumer Tax
Due to the seasonal nature of our Consumer Tax business, we typically generate nominal revenue from
consumer and small business tax products and services in our first fiscal quarter compared with our
second and third fiscal quarters. We do not believe that Consumer Tax net revenue results for the
first quarter of fiscal 2009 compared with the first quarter of fiscal 2008 are indicative of
revenue trends for the full fiscal year. We will not have substantially complete results for the
2008 tax season until the third quarter of fiscal 2009.
Accounting Professionals
Due to the seasonal nature of our Accounting Professionals business, we typically generate nominal
revenue from professional tax products and services in our first fiscal quarter compared with our
second and third fiscal quarters. We do not believe that Accounting Professionals net revenue
results for the first quarter of fiscal 2009 compared with the first quarter of fiscal 2008 are
indicative of revenue trends for the full fiscal year. We will not have substantially complete
results for the 2008 tax season until the third quarter of fiscal 2009.
Financial Institutions
Financial Institutions total net revenue increased $2.5 million or 3% in the first quarter of
fiscal 2009 compared with the first quarter of fiscal 2008 due to 8% growth in Internet banking end
users and 18% growth in bill-pay end users. Growth in the Internet banking and bill-pay customer
bases was partially offset by lower revenue per user.
Other Businesses
Other Businesses total net revenue was flat in the first quarter of fiscal 2009 compared with the
first quarter of fiscal 2008. In the first quarter of fiscal 2009, revenue from our business in
Canada increased 8% while revenue from Quicken and our Intuit Real Estate Solutions business was
flat. The stronger U.S. dollar contributed to slower Canadian revenue growth and lowered Other
Businesses segment revenue growth by approximately two percentage points in the first quarter of
fiscal 2009 compared with the same period of fiscal 2008.
29
Cost of Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
Q1 |
|
|
Related |
|
|
Q1 |
|
|
Related |
|
(Dollars in millions) |
|
FY09 |
|
|
Revenue |
|
|
FY08 |
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product revenue |
|
$ |
33.4 |
|
|
|
15 |
% |
|
$ |
33.7 |
|
|
|
15 |
% |
Cost of service and
other revenue |
|
|
111.7 |
|
|
|
43 |
% |
|
|
97.5 |
|
|
|
43 |
% |
Amortization of
purchased intangible
assets |
|
|
15.2 |
|
|
|
n/a |
|
|
|
12.8 |
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenue |
|
$ |
160.3 |
|
|
|
33 |
% |
|
$ |
144.0 |
|
|
|
32 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenue as a percentage of related revenue and of total revenue were consistent in the
first quarter of fiscal 2009 compared with the first quarter of fiscal 2008. This reflected a
relatively constant mix of revenue across segments and no significant changes in cost structures.
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
Total |
|
|
|
Q1 |
|
|
Net |
|
|
Q1 |
|
|
Net |
|
(Dollars in millions) |
|
FY09 |
|
|
Revenue |
|
|
FY08 |
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing |
|
$ |
186.2 |
|
|
|
39 |
% |
|
$ |
169.7 |
|
|
|
38 |
% |
Research and development |
|
|
136.2 |
|
|
|
28 |
% |
|
|
149.3 |
|
|
|
34 |
% |
General and administrative |
|
|
65.1 |
|
|
|
13 |
% |
|
|
77.1 |
|
|
|
17 |
% |
Acquisition-related charges |
|
|
9.6 |
|
|
|
2 |
% |
|
|
8.0 |
|
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
$ |
397.1 |
|
|
|
82 |
% |
|
$ |
404.1 |
|
|
|
91 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses as a percentage of total net revenue decreased to 82% in the first quarter
of fiscal 2009 from 91% in the first quarter of fiscal 2008. Total operating expenses in the first
quarter of fiscal 2009 included an increase of approximately $15 million for Homestead and ECHO
operating expenses and an increase of approximately $10 million for advertising and other marketing
expenses to support the launch of QuickBooks 2009. These increases were more than offset by a total
of $28 million in lower compensation-related expenses. These reductions in compensation-related
expenses included a $16 million decrease due to changes in estimates for our stock compensation and
401(k) benefits plans and a $12 million decrease due to a decline in the value of liabilities
associated with our executive deferred compensation plan.
Our selling and marketing expenses increased about $17 million in the first quarter of fiscal 2009
compared with the first quarter of fiscal 2008. Our acquisitions of Homestead and ECHO added about
$9 million to selling and marketing expenses and increases in advertising and other marketing
expenses to support the launch of QuickBooks 2009 added about $10 million. These increases were partially offset by lower compensation expenses as described above.
We spent about $13 million less on research and development expenses in the first quarter of fiscal
2009 than we did in the same quarter of fiscal 2008. More than half of this decline was due to
lower compensation expenses as described above.
Our general and administrative expenses decreased about $12 million in the first quarter of fiscal
2009 compared with the first quarter of fiscal 2008. The majority of the decline in general and
administrative expenses was due to decreases in compensation expenses as described above. To a
lesser extent, the decrease in general and administrative expenses was a result of restructuring
decisions we made in the fourth quarter of fiscal 2008 in connection with a reallocation of
resources to key growth businesses. These decisions resulted in a reduction in our workforce and
the closure of certain facilities. See Note 6 to the financial statements in Item 1 of this report
for more information.
30
Segment Operating Income (Loss)
Segment operating income or loss is segment net revenue less segment cost of revenue and operating
expenses. See Executive Overview Seasonality and Trends earlier in this Item 2 for a
description of the seasonality of our business. Segment expenses do not include certain costs, such
as corporate selling and marketing, product development, and general and administrative expenses
and share-based compensation expenses, which are not allocated to specific segments. These
unallocated costs totaled $117.5 million in the first quarter of fiscal 2009 and $144.8 million in
the first quarter of fiscal 2008. Segment expenses also do not include amortization of purchased
intangible assets, acquisition-related charges, interest expense, interest and other income, and
realized net gains or losses on marketable equity securities and other investments. See Note 5 to
the financial statements in Item 1 of this report for reconciliations of total segment operating
income or loss to income or loss from continuing operations before income taxes for each fiscal
period presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
Q1 |
|
|
Related |
|
|
Q1 |
|
|
Related |
|
(Dollars in millions) |
|
FY09 |
|
|
Revenue |
|
|
FY08 |
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QuickBooks |
|
$ |
29.3 |
|
|
|
19 |
% |
|
$ |
36.6 |
|
|
|
26 |
% |
Payroll and Payments |
|
|
61.5 |
|
|
|
40 |
% |
|
|
57.1 |
|
|
|
43 |
% |
Consumer Tax |
|
|
(31.6 |
) |
|
NM |
|
|
(33.7 |
) |
|
NM |
Accounting Professionals |
|
|
(17.1 |
) |
|
NM |
|
|
(20.5 |
) |
|
NM |
Financial Institutions |
|
|
14.9 |
|
|
|
20 |
% |
|
|
12.4 |
|
|
|
17 |
% |
Other Businesses |
|
|
9.2 |
|
|
|
14 |
% |
|
|
10.5 |
|
|
|
16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment
operating income |
|
$ |
66.2 |
|
|
|
14 |
% |
|
$ |
62.4 |
|
|
|
14 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM = Not Meaningful
QuickBooks
QuickBooks segment revenue grew $9.0 million, including about $8 million in revenue from Homestead,
which we acquired in December 2007. QuickBooks segment operating income as a percentage of related
revenue decreased to 19% in the first quarter of fiscal 2009 from 26% in the first quarter of
fiscal 2008. Cost of revenue declined approximately $3 million in the fiscal 2009 quarter due to
cost efficiencies achieved for our QuickBooks 2009 and financial supplies product lines. Selling
and marketing expenses increased approximately $6 million due to our acquisition of Homestead and
approximately $10 million due to higher advertising and other marketing expenses to support the
launch of QuickBooks 2009. Product development expenses increased approximately $4 million in the
first quarter of fiscal 2009 compared with the first quarter of fiscal 2008.
Payroll and Payments
Payroll and Payments segment revenue grew $20.7 million, including about $9 million in revenue from
ECHO, which we acquired in February 2008. Payroll and Payments segment operating income as a
percentage of related revenue decreased to 40% in the first quarter of fiscal 2009 from 43% in the
first quarter of fiscal 2008. Operating margins for ECHO are lower than the operating margins for
the rest of our Payroll and Payments segment. In addition, we continue to make infrastructure
investments in our Payments business to support its long-term growth.
Consumer Tax
Due to the seasonal nature of our Consumer Tax business, in our first fiscal quarter this segment
typically generates operating losses because revenue is nominal while operating expenses continue
at relatively consistent levels. We do not believe that Consumer Tax operating results for the
first quarter of fiscal 2009 compared with the same period of fiscal 2008 are indicative of trends
for the full fiscal year.
Accounting Professionals
Due to the seasonal nature of our Accounting Professionals business, in our first fiscal quarter
this segment typically generates operating losses because revenue is nominal while operating
expenses continue at relatively consistent
31
levels. We do not believe that Accounting Professionals operating results for the first quarter of
fiscal 2009 compared with the same period of fiscal 2008 are indicative of trends for the full
fiscal year.
Financial Institutions
Financial Institutions segment operating income as a percentage of related revenue increased to 20%
in the first quarter of fiscal 2009 from 17% in the first quarter of fiscal 2008. Financial
Institutions revenue for the first quarter of fiscal 2009 increased $2.5 million while total costs
and expenses remained relatively stable compared with the first quarter of fiscal 2008.
Other Businesses
Other Businesses revenue was flat while segment operating income as a percentage of related revenue
decreased to 14% in the first quarter of fiscal 2009 from 16% in the first quarter of fiscal 2008.
The fiscal 2009 decline in segment operating income was due in part to our investment in emerging
markets.
Non-Operating Income and Expenses
Interest Expense
In March 2007 we issued $1 billion in senior notes to finance a portion of our acquisition of
Digital Insight and to fund our operations. Interest expense of $11.7 million for the first quarter
of fiscal 2009 and $14.0 million for the first quarter of fiscal 2008 consisted primarily of
interest on $500 million in principal amount of the senior notes at 5.40% and interest on $500
million in principal amount of the senior notes at 5.75%. The senior notes are due in March 2012
and March 2017 and are redeemable by Intuit at any time, subject to a make-whole premium.
Interest and Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
October 31, |
|
|
October 31, |
|
(In millions) |
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
7.9 |
|
|
$ |
11.7 |
|
Net gains (losses) on executive deferred
compensation plan assets |
|
|
(9.2 |
) |
|
|
3.0 |
|
Other |
|
|
(0.6 |
) |
|
|
2.5 |
|
|
|
|
|
|
|
|
Total interest and other income |
|
$ |
(1.9 |
) |
|
$ |
17.2 |
|
|
|
|
|
|
|
|
Lower interest rates and lower average invested balances resulted in lower interest income in the
first quarter of fiscal 2009 compared with the same period of fiscal 2008. We record gains and
losses associated with executive deferred compensation plan assets in interest and other income. We
record gains and losses associated with the related liabilities in operating expense.
Income Taxes
Effective Tax Rate
Our effective tax benefit rate for the first quarter of fiscal 2009 was approximately 42%.
Excluding net one-time benefits primarily related to the reinstatement of the federal research and
experimentation credit as described below, our effective tax benefit rate for that period was
approximately 35% and did not differ significantly from the federal statutory rate. State income
taxes were offset primarily by the benefit we received from federal and state research and
experimentation credits, the domestic production activities deduction, and tax exempt interest
income. Our effective tax benefit rate for the first quarter of fiscal 2008 was approximately 38%.
Excluding net one-time benefits primarily related to executive stock compensation, our effective
tax benefit rate for that period was approximately 36%. This differed from the federal statutory
rate of 35% due primarily to state income taxes, which were partially offset by the benefit we
received from tax exempt interest income, federal and state research and experimentation credits,
and the domestic production activities deduction.
32
In October 2008 the Emergency Economic Stabilization Act of 2008 was signed into law. The Act
includes a reinstatement of the federal research and experimentation credit through December 31,
2009 that was retroactive to January 1, 2008. We recorded a discrete tax benefit of approximately
$6.9 million for the retroactive amount related to fiscal 2008 during the three months ended
October 31, 2008.
Net Deferred Tax Assets
At October 31, 2008, we had total net deferred tax assets of $118.2 million and no valuation
allowance. While we believe no valuation allowance was appropriate at that date, it may be
necessary to record a valuation allowance if it becomes more likely that we will not realize some
portion of the net deferred tax assets. We assess the need for an adjustment to the valuation
allowance on a quarterly basis. The assessment is based on our estimates of future sources of
taxable income for the jurisdictions in which we operate and the periods over which our deferred
tax assets will be realizable. See Note 9 to the financial statements in Item 1 of this report for
more information.
Dispositions and Discontinued Operations
During fiscal 2008 and fiscal 2007 we sold the assets and businesses described below. See Note 4 to
the financial statements in Item 1 of this report for more complete descriptions of these
dispositions and discontinued operations.
Intuit Distribution Management Solutions Discontinued Operations
In August 2007 we sold our Intuit Distribution Management Solutions (IDMS) business for
approximately $100 million in cash and recorded a net gain on disposal of $27.5 million. In
accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, we have accounted for IDMS as a
discontinued operation and segregated its operating results from continuing operations in our
statements of operations for all periods prior to the sale. Revenue and net loss from IDMS
discontinued operations were $1.9 million and $0.7 million for the first quarter of fiscal 2008.
IDMS was part of our Other Businesses segment.
Sale of Outsourced Payroll Assets
In March 2007 we sold certain assets related to our Complete Payroll and Premier Payroll Service
business to Automated Data Processing, Inc. (ADP) for a purchase price of up to approximately $135
million in cash. The final purchase price was contingent upon the number of customers that
transitioned to ADP pursuant to the purchase agreement over a period of approximately one year from
the date of sale. In the first quarter of fiscal 2008 we recorded a pre-tax gain of $24.0 million
in our statement of operations for customers who transitioned to ADP during that period. We
received a total purchase price of $93.6 million and recorded a total pre-tax gain of $83.2 million
from the inception of this transaction through its completion in the third quarter of fiscal 2008.
In accordance with the provisions of SFAS 144, we did not account for this transaction as a
discontinued operation. The assets were part of our Payroll and Payments segment.
Liquidity and Capital Resources
Overview
At October 31, 2008, our cash, cash equivalents and investments totaled $458.6 million, a decrease
of $369.2 million from July 31, 2008 due to the factors noted under Statements of Cash Flows
below. At October 31, 2008, we also held $285.1 million in municipal auction rate securities that
we classified as long-term investments on our balance sheet. See Auction Rate Securities below
for more information. Our primary source of liquidity has been cash from operations, which entails
the collection of accounts receivable for products and services. Our primary uses of cash have been
for research and development programs, selling and marketing activities, capital projects, debt
service costs, repurchases of common stock and acquisitions of businesses.
In March 2007 we issued five-year and ten-year senior unsecured notes totaling $1 billion. The
estimated fair value of these notes decreased from $964.7 million at July 31, 2008 to $842.6
million at October 31, 2008. Although this decrease in estimated fair value was caused by recent
events in the credit markets rather than a change in the credit
33
ratings of the notes, the decline could impact our future cost of capital. We also have a $500
million unsecured revolving line of credit facility that is described later in this Item 2. To date
we have not borrowed under the facility.
The following table summarizes selected measures of our liquidity and capital resources at the
dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, |
|
July 31, |
|
$ |
|
% |
(Dollars in millions) |
|
2008 |
|
2008 |
|
Change |
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and investments |
|
$ |
458.6 |
|
|
$ |
827.8 |
|
|
$ |
(369.2 |
) |
|
|
(45 |
%) |
Long-term investments |
|
|
288.4 |
|
|
|
288.3 |
|
|
|
0.1 |
|
|
|
0 |
% |
Long-term debt |
|
|
998.0 |
|
|
|
998.0 |
|
|
|
|
|
|
|
0 |
% |
Working capital |
|
|
208.1 |
|
|
|
306.3 |
|
|
|
(98.2 |
) |
|
|
(32 |
%) |
Ratio of current assets to current liabilities |
|
|
1.2 : 1 |
|
|
|
1.2 : 1 |
|
|
|
|
|
|
|
|
|
Auction Rate Securities
At October 31, 2008, we held $285.1 million in municipal auction rate securities. These securities
are collateralized long-term debt instruments that provide liquidity through a Dutch auction
process that resets the applicable interest rate at pre-determined intervals, typically every 35
days. Due to a decrease in liquidity in the global credit markets, in February 2008 auctions began
failing for the municipal auction rate securities we held. Regularly scheduled auctions for these
securities have generally continued to fail since that time. When these auctions initially failed,
higher interest rates for many of the securities went into effect. Of the total auction rate
securities we held at October 31, 2008, the underlying assets of $220.7 million or 77% were student
loans which are guaranteed by the U.S. Department of Education and $240.9 million or 85% were rated
AAA/Aaa by the major credit rating agencies.
We estimated the fair values of the municipal auction rate securities we held at October 31, 2008
based on a discounted cash flow model that we prepared and inputs from third parties. Using our
discounted cash flow model and inputs from third parties we determined that the fair values of the
municipal auction rate securities we held at October 31, 2008 were substantially equal to their par
values. As a result, we recorded no decrease in the fair values of those securities for the three
months then ended. Based on our ability and intent to hold these auction rate securities until
liquidity returns to the market or they mature, we classified them as long-term investments on our
balance sheet at October 31, 2008.
In August 2008 the broker-dealers for our municipal auction rate securities announced settlements
under which they may provide liquidity solutions, or purchase, the auction rate securities held by
their institutional clients. On November 4, 2008 we accepted an offer from UBS AG (UBS), one of
the broker-dealers for our municipal auction rate securities, that gives us the option to sell UBS
a total of $165.7 million in municipal auction rate securities at par value at any time during a
two-year period beginning June 30, 2010. The offer also gives UBS the discretion to buy any or all
of these municipal auction rate securities from us at par value at any time. As discussed above, at
October 31, 2008 we carried these securities at par value on our balance sheet. We continue to have
counter-party risk associated with UBS.
Based on our expected operating cash flows and our other sources of cash, we do not believe that
the reduction in liquidity of our municipal auction rate securities will have a material impact on
our overall ability to meet our liquidity needs.
34
Statements of Cash Flows
The following table summarizes selected items from our statements of cash flows for the three
months ended October 31, 2008 and 2007. See the financial statements in Item 1 of this report for
complete statements of cash flows for those periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
October 31, |
|
October 31, |
|
$ |
|
% |
(In millions) |
|
2008 |
|
2007 |
|
Change |
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used in continuing operations |
|
$ |
(199.7 |
) |
|
$ |
(161.4 |
) |
|
$ |
(38.3 |
) |
|
|
24 |
% |
Net liquidation (purchases) of
available-for-sale debt securities |
|
|
122.6 |
|
|
|
191.0 |
|
|
|
(68.4 |
) |
|
|
(36 |
%) |
Proceeds from the sale of businesses and assets |
|
|
|
|
|
|
117.2 |
|
|
|
(117.2 |
) |
|
|
(100 |
%) |
Purchases of property and equipment |
|
|
(67.2 |
) |
|
|
(65.3 |
) |
|
|
(1.9 |
) |
|
|
3 |
% |
Purchases of treasury stock |
|
|
(165.2 |
) |
|
|
(250.0 |
) |
|
|
84.8 |
|
|
|
(34 |
%) |
Net proceeds from issuance of common stock and release of restricted stock units under employee stock plans |
|
|
63.3 |
|
|
|
51.2 |
|
|
|
12.1 |
|
|
|
24 |
% |
Operating Activities
During the first three months of fiscal 2009 we used $199.7 in cash for our continuing operations.
This included a seasonal net loss of $52.1 million, an increase of $97.4 million in income taxes
receivable, and the payment of accrued fiscal 2008 annual bonuses, partially offset by adjustments
for depreciation and amortization of $60.7 million and share-based compensation expense of $21.8
million.
During the first three months of fiscal 2008 we used $161.4 million in cash for our continuing
operations. This included a seasonal net loss of $20.8 million and the payment of accrued fiscal
2007 annual bonuses, partially offset by adjustments for depreciation and amortization of $48.9
million and share-based compensation of $26.7 million.
Investing Activities
Investing activities generated $57.7 million during the first three months of fiscal 2009. We
received $122.6 million in cash from the sale of investments, which was partially offset by the use
of $67.2 million in cash for capital expenditures.
Investing activities generated $233.6 million during the first three months of fiscal 2008. We
received $191.0 million in cash from the sale of investments and $117.2 million from the sales of
our Intuit Distribution Management Solutions business and certain outsourced payroll assets. We
used $65.3 million in cash for capital expenditures during the first three months of fiscal 2008.
During fiscal 2008 we invested in a new data center and expanded office capacity to support the
expected growth in our business. We expect our capital expenditures to decrease from approximately
$300 million in fiscal 2008 to approximately $200 million in fiscal 2009.
Financing Activities
We used $94.2 million in cash for financing activities during the first three months of fiscal
2009, including $165.2 million for the repurchase of common stock under our stock repurchase
programs partially offset by the receipt of $63.3 million in cash from the issuance of common stock
under employee stock plans.
We used $187.2 million in cash for financing activities during the first three months of fiscal
2008, including $250.0 million for the repurchase of common stock under our stock repurchase
programs partially offset by the receipt of $51.2 million in cash from the issuance of common stock
under employee stock plans.
35
Stock Repurchase Programs
Our Board of Directors has authorized a series of common stock repurchase programs. Shares of
common stock repurchased under these programs become treasury shares. During the first quarters of
fiscal 2009 and 2008 we repurchased 6.0 million and 8.1 million shares of our common stock for
$165.2 million and $250.0 million under our stock repurchase programs. At October 31, 2008, we had
authorization from our Board of Directors to expend up to an additional $434.8 million for stock
repurchases through May 15, 2011.
Unsecured Revolving Credit Facility
On March 22, 2007 we entered into an agreement with certain institutional lenders for a $500
million unsecured revolving credit facility that will expire on March 22, 2012. Advances under the
credit facility will accrue interest at rates that are equal to, at our election, either Citibanks
base rate or the London InterBank Offered Rate (LIBOR) plus a margin that ranges from 0.18% to
0.575% based on our senior debt credit ratings. The applicable interest rate will be increased by
0.05% for any period in which the total principal amount of advances and letters of credit under
the credit facility exceeds $250 million. The agreement includes covenants that require us to
maintain a ratio of total debt to annual earnings before interest, taxes, depreciation and
amortization (EBITDA) of not greater than 3.25 to 1.00 and a ratio of annual EBITDA to interest
payable of not less than 3.00 to 1.00. We were in compliance with these covenants at October 31,
2008. We may use amounts borrowed under this credit facility for general corporate purposes or for
future acquisitions or expansion of our business. To date we have not borrowed under the credit
facility. We currently believe that the credit facility will be available to us should we choose to
borrow under it.
Liquidity and Capital Resource Requirements
We evaluate, on an ongoing basis, the merits of acquiring technology or businesses, or establishing
strategic relationships with and investing in other companies. We may decide to use cash and cash
equivalents, investments, and our revolving line of credit facility to fund such activities in the
future.
Based on past performance and current expectations, we believe that our cash and cash equivalents,
investments, and cash generated from operations will be sufficient to meet anticipated seasonal
working capital needs, capital expenditure requirements, contractual obligations, commitments and
other liquidity requirements associated with our operations for at least the next 12 months. As
discussed above in this Item 2 under Liquidity and Capital Resources Auction Rate Securities,
we do not believe that the reduction in the liquidity of our municipal auction rate securities will
have a material impact on our overall ability to meet our liquidity needs.
Reserves for Returns and Rebates
Activity in our reserves for product returns and for rebates during the first three months of
fiscal 2009 and comparative balances at October 31, 2007 were as shown in the following table. Due
to the seasonality of our business, we compare our returns and rebate reserve balances at the end
of the current fiscal quarter to the reserve balances at the end of the same quarter of the
previous fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
|
|
|
|
|
|
|
|
|
|
Balance |
|
Charged |
|
|
|
|
|
Balance |
|
Balance |
|
|
July 31, |
|
Against |
|
Returns/ |
|
October 31, |
|
October 31, |
(In thousands) |
|
2008 |
|
Revenue |
|
Redemptions |
|
2008 |
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for product returns |
|
$ |
27,910 |
|
|
$ |
12,158 |
|
|
$ |
(11,674 |
) |
|
$ |
28,394 |
|
|
$ |
28,042 |
|
Reserve for rebates |
|
|
13,408 |
|
|
|
6,638 |
|
|
|
(8,414 |
) |
|
|
11,632 |
|
|
|
14,706 |
|
The fiscal 2009 decrease in our reserve for rebates was due to faster rebate payments to retailers
in fiscal 2009 compared with fiscal 2008.
Off-Balance Sheet Arrangements
At October 31, 2008, we did not have any significant off-balance sheet arrangements, as defined in
Item 303(a)(4)(ii) of Regulation S-K.
36
Contractual Obligations
We presented our contractual obligations in our Annual Report on Form 10-K for the fiscal year
ended July 31, 2008. Except as discussed below, there have been no significant changes in those
obligations during the three months ended October 31, 2008.
Commitment for Interest Payments on Senior Notes
On March 12, 2007 we issued $500 million of 5.40% senior unsecured notes due on March 15, 2012 and
$500 million of 5.75% senior unsecured notes due on March 15, 2017 (together, the Notes). The Notes
are redeemable by Intuit at any time, subject to a make-whole premium. Interest is payable
semiannually on March 15 and September 15. At October 31, 2008, our maximum commitment for interest
payments under the Notes was $338.4 million.
Recent Accounting Pronouncements
SFAS 157, Fair Value Measurements
In September 2006 the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 157, Fair Value Measurements. SFAS 157 provides enhanced guidance
for using fair value to measure assets and liabilities. The standard also responds to investors
requests for expanded information about the extent to which companies measure assets and
liabilities at fair value, the information used to measure fair value and the effect of fair value
measurements on earnings. SFAS 157 applies whenever other standards require or permit assets or
liabilities to be measured at fair value. This standard does not expand the use of fair value in
any new circumstances. SFAS 157 is effective for fiscal years beginning after November 15, 2007. In
February 2008 the FASB issued FASB Staff Position (FSP) 157-2, Effective Date of FASB Statement
No. 157, which partially defers the effective date of SFAS 157 for one year for non-financial
assets and liabilities, except for items that are recognized or disclosed at fair value in an
entitys financial statements on a recurring basis (at least annually). In October 2008 the FASB
issued FSP 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset
Is Not Active, which clarifies the application of SFAS 157 in an inactive market and illustrates
how an entity would determine fair value when the market for a financial asset is not active. On
August 1, 2008 we adopted the provisions of SFAS 157 related to financial assets and financial
liabilities and to non-financial assets and non-financial liabilities that we recognize or disclose
at fair value on a recurring basis. We also adopted FSP 157-3 on that date. See Note 8 to the financial statements in Item 1 of this report. In
accordance with FSP 157-2, we have delayed the implementation of the provisions of SFAS 157 related
to the fair value of goodwill, other intangible assets and non-financial long-lived assets until
our fiscal year beginning August 1, 2009. We are in the process of evaluating these portions of the
standard and therefore have not yet determined the impact that their adoption will have on our
financial position, results of operations or cash flows.
SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities
In February 2007 the FASB issued SFAS 159, The Fair Value Option for Financial Assets and
Financial Liabilities. SFAS 159 provides companies with an option to report selected financial
assets and liabilities at fair value. The standards objective is to reduce both complexity in
accounting for financial instruments and the volatility in earnings caused by measuring related
assets and liabilities differently. The standard requires companies to provide additional
information that will help investors and other users of financial statements to more easily
understand the effect of the companys choice to use fair value on its earnings. It also requires
companies to display the fair value of those assets and liabilities for which the company has
chosen to use fair value on the face of the balance sheet. The new standard does not eliminate
disclosure requirements included in other accounting standards, including requirements for
disclosures about fair value measurements included in SFAS 157, Fair Value Measurements, and SFAS
107, Disclosures about Fair Value of Financial Instruments. SFAS 159 is effective for fiscal
years beginning after November 15, 2007. On August 1, 2008 we adopted SFAS 159 but did not elect
the fair value option for any additional financial assets or liabilities that we held at that date.
SFAS 141 (revised 2007), Business Combinations
In December 2007 the FASB issued SFAS 141 (revised 2007), Business Combinations. SFAS 141R will
significantly change the accounting for business combinations in a number of areas, including the
measurement of assets and liabilities acquired and the treatment of contingent consideration,
contingencies, acquisition costs, in-
37
process research and development and restructuring costs. In addition, under SFAS 141R, changes in
deferred tax asset valuation allowances and acquired income tax uncertainties in a business
combination after the measurement period will impact the income tax provision. SFAS 141R is
effective for business combinations for which the acquisition date is on or after the beginning of
the first annual reporting period beginning after December 15, 2008, which means that it will be
effective for our fiscal year beginning August 1, 2009. Early adoption is prohibited. We are in the
process of evaluating this standard and therefore have not yet determined the impact that the
adoption of SFAS 141R will have on our financial position, results of operations or cash flows.
SFAS 160, Noncontrolling Interests in Consolidated Financial Statements
In December 2007 the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial
Statements, which establishes accounting and reporting standards for the noncontrolling (minority)
interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for
business arrangements entered into in fiscal years beginning on or after December 15, 2008, which
means that it will be effective for our fiscal year beginning August 1, 2009. Early adoption is
prohibited. We are in the process of evaluating this standard and therefore have not yet determined
the impact that the adoption of SFAS 160 will have on our financial position, results of operations
or cash flows.
FSP SFAS 142-3, Determination of the Useful Life of Intangible Assets
In April 2008 the FASB issued FSP SFAS 142-3, Determination of the Useful
Life of Intangible Assets. FSP SFAS 142-3 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of a recognized
intangible asset under SFAS 142, Goodwill and Other Intangible Assets. This new staff position is
intended to improve the consistency between the useful life of a recognized intangible asset under
SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under
SFAS 141(R), Business Combinations. FSP SFAS 142-3 is effective for fiscal years beginning after
December 15, 2008, which means that it will be effective for our fiscal year beginning August 1,
2009. We are in the process of evaluating this staff position and therefore have not yet determined
the impact that adoption of FSP SFAS 142-3 will have on our financial position, results of
operations or cash flows.
38
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Investment Risk
There has been significant deterioration and instability in the financial markets during fiscal
2009. This period of extraordinary disruption and readjustment in the financial markets exposes us
to additional investment risk. The value and liquidity of the securities in which we invest could
deteriorate rapidly and the issuers of these securities could be subject to credit rating
downgrades. In light of the current market conditions and these additional risks, we actively
monitor market conditions and developments specific to the securities in which we invest. We
believe that we take a conservative approach to investing our funds in that we invest only in
highly-rated securities and diversify our portfolio of investments. While we believe we take
prudent measures to mitigate investment related risks, such risks cannot be fully eliminated
because of market circumstances that are outside our control.
Our investments consist of instruments that meet quality standards consistent with our investment
policy. This policy specifies that, except for direct obligations of the United States government,
securities issued by agencies of the United States government, and money market funds, we diversify
our investments by limiting our holdings with any individual issuer. We do not hold derivative
financial instruments in our portfolio of investments.
See Note 2 to the financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for
a summary of the cost and fair value of our investments by type of issue. See Note 8 to the
financial statements and Managements Discussion and Analysis of Financial Condition and Results
of Operations Liquidity and Capital Resources, in Part I, Item 2 for a description of market
events that have affected the liquidity of certain municipal auction rate securities that we held
at October 31, 2008.
Interest Rate Risk
Our cash equivalents and investments are subject to market risk due to changes in interest rates.
Interest rate movements affect the interest income we earn on cash equivalents and investments and
the fair value of those investments. Should the Federal Reserve Target Rate increase by 25 basis
points from the level of October 31, 2008, the value of our investments would decline by
approximately $0.7 million. Should the Federal Reserve Target Rate increase by 100 basis points
from the level of October 31, 2008, the value of our investments would decline by approximately
$2.6 million.
We are also exposed to the impact of changes in interest rates as they affect our $500 million
revolving credit facility. Advances under the credit facility accrue interest at rates that are
equal to Citibanks base rate or the London InterBank Offered Rate (LIBOR) plus a margin that
ranges from 0.18% to 0.575% based on our senior debt credit ratings. Consequently, our interest
expense would fluctuate with changes in the general level of these interest rates if we were to
borrow any amounts under the credit facility. At October 31, 2008, no amounts were outstanding
under the credit facility.
On March 12, 2007 we issued $500 million of 5.40% senior unsecured notes due on March 15, 2012 and
$500 million of 5.75% senior unsecured notes due on March 15, 2017. Since these senior notes bear
interest at fixed rates, they are not subject to market risk due to changes in interest rates.
Impact of Foreign Currency Rate Changes
The functional currencies of our international operating subsidiaries are the local currencies. We
translate the assets and liabilities of our foreign subsidiaries at the exchange rates in effect on
the balance sheet date. We translate their revenue, costs and expenses at the average rates of
exchange in effect during the period. We include translation gains and losses in the stockholders
equity section of our balance sheets. We include net gains and losses resulting from foreign
exchange transactions in interest and other income in our statements of operations.
Since we translate foreign currencies (primarily Canadian dollars, British pounds and Indian
rupees) into U.S. dollars for financial reporting purposes, currency fluctuations can have an
impact on our financial results. The historical impact of currency fluctuations on our financial
results has generally been immaterial. We believe that our
39
exposure to currency exchange fluctuation risk is not significant because our international
subsidiaries invoice customers and satisfy their financial obligations almost exclusively in their
local currencies. Although the impact of currency fluctuations on our financial results has
generally been immaterial in the past and we believe that for the reasons cited above currency
fluctuations will not be significant in the future, there can be no guarantee that the impact of
currency fluctuations will not be material in the future. As of October 31, 2008, we did not engage
in foreign currency hedging activities.
40
ITEM 4
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Based upon an evaluation of the effectiveness of disclosure controls and procedures, Intuits Chief
Executive Officer (CEO) and Chief Financial Officer (CFO) have concluded that as of the end of the
period covered by this Quarterly Report on Form 10-Q our disclosure controls and procedures as
defined under Exchange Act Rule 13a-15(e) and 15d-15(e) were effective to provide reasonable
assurance that information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified by the Securities and Exchange
Commission and is accumulated and communicated to management, including the CEO and CFO, as
appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During our most recent fiscal quarter, there has not occurred any change in our internal control
over financial reporting that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
41
PART II
ITEM 1
LEGAL PROCEEDINGS
See Note 11 to the financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for
a description of legal proceedings.
42
ITEM 1A
RISK FACTORS
This Quarterly Report on Form 10-Q contains forward-looking statements. All statements in this
report, other than statements that are purely historical, are forward-looking statements. Words
such as expect, anticipate, intend, plan, believe, forecast, estimate, seek, and
similar expressions also identify forward-looking statements. In this report, forward-looking
statements include, without limitation, the following:
|
|
|
our expectations and beliefs regarding future conduct and growth of the business; |
|
|
|
|
the assumptions underlying our Critical Accounting Policies and Estimates, including our
estimates regarding product rebate and return reserves; stock volatility and other
assumptions used to estimate the fair value of share-based compensation; and expected
future amortization of purchased intangible assets; |
|
|
|
|
our belief that the investments we hold are not other-than-temporarily impaired; |
|
|
|
|
our belief that the reduction in liquidity of the municipal auction rate securities we
hold will not have a material impact on our overall ability to meet our liquidity needs; |
|
|
|
|
our belief that our exposure to currency exchange fluctuation risk will not be
significant in the future; |
|
|
|
|
our assessments and estimates that determine our effective tax rate; |
|
|
|
|
our belief that our income tax valuation allowance is sufficient; |
|
|
|
|
our belief that our cash and cash equivalents, investments and cash generated from
operations will be sufficient to meet our working capital, capital expenditure and other
liquidity requirements for at least the next 12 months; |
|
|
|
|
our expectations regarding capital expenditures; |
|
|
|
|
our beliefs regarding seasonality and other trends for our businesses; |
|
|
|
|
our assessments and beliefs regarding the future outcome of pending legal proceedings
and the liability, if any, that Intuit may incur as a result of those proceedings; |
|
|
|
|
our expectations regarding the costs and other effects of acquisition and disposition
transactions; and |
|
|
|
|
the expected effects of the adoption of new accounting standards. |
We caution investors that forward-looking statements are only predictions based on our current
expectations about future events and are not guarantees of future performance. We encourage you to
read carefully all information provided in this Quarterly Report and in our other filings with the
Securities and Exchange Commission before deciding to invest in our stock or to maintain or change
your investment. These forward-looking statements are based on information as of the filing date of
this Quarterly Report, and we undertake no obligation to publicly revise or update any
forward-looking statement for any reason.
Because forward-looking statements involve risks and uncertainties, there are important factors
that may cause actual results to differ materially from those contained in the forward-looking
statements. These factors include the following:
|
|
|
We face intense competitive pressures in all of our businesses that may harm our
operating results. |
|
|
|
|
Future revenue growth for our core products depends upon our successful introduction of
new and enhanced products and services. |
|
|
|
|
Interruption, failure or breach of our information technology and communication systems,
whether caused by natural disasters, malicious attacks or other events, could compromise
the availability and security of our online products and services and lead to a loss of
Intuits confidential or proprietary information or customer data, which could damage our
reputation and harm our operating results. |
|
|
|
|
If we fail to maintain reliable and responsive service levels for our electronic tax
offerings, or if the IRS or other governmental agencies experience difficulties in
receiving customer submissions, we could lose customers and our revenue and earnings could
decrease. |
|
|
|
|
The nature of our products necessitates timely product launches and if we experience
significant product quality problems or delays, it will harm our revenue, earnings and
reputation. |
|
|
|
|
Our collection, use and retention of personal customer information present business
operations and security risks, require us to incur expenses, and could harm our business. |
|
|
|
|
The growth of our business depends on our ability to adapt to rapid technological
change. |
|
|
|
|
Our reliance on a limited number of manufacturing and distribution suppliers could harm
our business. |
|
|
|
|
As our product and service offerings become more complex our revenue streams may become
less predictable. |
43
|
|
|
Our revenue and earnings are highly seasonal and our quarterly results fluctuate
significantly. |
|
|
|
|
We face a number of risks in our payment processing business that could result in a
reduction in our revenue and earnings. |
|
|
|
|
We face a number of risks associated with our financial institutions business which
could harm our revenue and results of operations. |
|
|
|
|
Because we depend on a small number of large retailers and distributors, changes in
these relationships could harm our results of operations. |
|
|
|
|
Increased government regulation of our businesses could harm our operating results. |
|
|
|
|
Expansion of our operations in international markets exposes us to operational and
compliance risks. |
|
|
|
|
If we do not respond promptly and effectively to customer service and technical support
inquiries we will lose customers and our revenue and earnings will decline. |
|
|
|
|
If we encounter problems with our third-party customer service and technical support
providers our business and operating results will be harmed. |
|
|
|
|
We are exposed to risks associated with credit card and payment fraud and with credit
card processing. |
|
|
|
|
If we fail to adequately protect our intellectual property rights, competitors may
exploit our innovations, which could weaken our competitive position and reduce our revenue
and earnings. |
|
|
|
|
Third parties claiming that we infringe their proprietary rights could cause us to incur
significant legal expenses and prevent us from selling our products. |
|
|
|
|
We expect copying and misuse of our intellectual property to be a persistent problem
causing lost revenue and increased expenses. |
|
|
|
|
We do not own all of the software, other technologies and content used in our products
and services. |
|
|
|
|
Our acquisition and divestiture activities could disrupt our ongoing business, may
involve increased expenses and may present risks not contemplated at the time of the
transactions. |
|
|
|
|
We have issued $1 billion in a debt offering and may incur other debt in the future,
which could adversely affect our financial condition and results of operations. |
|
|
|
|
We are subject to risks associated with information disseminated through our services. |
|
|
|
|
If actual product returns exceed returns reserves our financial results would be harmed. |
|
|
|
|
Acquisition-related costs and impairment charges can cause significant fluctuation in
our net income. |
|
|
|
|
Our investments in auction rate securities are subject to risks that may cause losses
and affect the liquidity of these investments. |
|
|
|
|
If we fail to operate our payroll business effectively our revenue and earnings will be
harmed. |
|
|
|
|
Interest income attributable to payroll customer deposits may fluctuate or be
eliminated, causing our revenue and earnings to decline. |
|
|
|
|
We may be unable to attract and retain key personnel. |
|
|
|
|
We are frequently a party to litigation that is costly to defend and consumes the time
of our management. |
|
|
|
|
Unanticipated changes in our tax rates could affect our future financial results. |
|
|
|
|
If we fail to maintain an effective system of internal controls, we may not be able to
detect fraud or report our financial results accurately, which could harm our business and
the trading price of our common stock. |
|
|
|
|
General economic conditions may affect our revenue and harm our business. |
|
|
|
|
Business interruptions could adversely affect our future operating results. |
This list does not include all risks that could affect our business, and if these or any other
risks or uncertainties materialize, or if our underlying assumptions prove to be inaccurate, actual
results could differ materially from past results and from our expected future results.
Our Annual Report on Form 10-K for the fiscal year ended July 31, 2008 lists in more detail various
important risk factors facing our business in Part I, Item 1A under the heading Risk Factors.
There have been no material changes from the risk factors disclosed in that section of our Form
10-K. We incorporate that section of the Form 10-K into this filing and encourage you to review
that information. We also encourage you to review our other reports filed periodically with the
Securities and Exchange Commission for any further information regarding risks facing our business.
44
ITEM 2
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Stock repurchase activity during the three months ended October 31, 2008 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number |
|
Approximate |
|
|
|
|
|
|
|
|
|
|
of Shares |
|
Dollar Value of |
|
|
Total Number |
|
Average |
|
Purchased as |
|
Shares That May |
|
|
of Shares |
|
Price Paid |
|
Part of Publicly |
|
Yet Be Purchased |
Period |
|
Purchased |
|
per Share |
|
Announced Plans |
|
Under the Plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 1, 2008 through
August 31, 2008
|
|
|
1,015,000 |
|
|
$ |
29.56 |
|
|
|
1,015,000 |
|
|
$ |
569,994,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 1, 2008 through
September 30, 2008
|
|
|
1,960,000 |
|
|
$ |
30.13 |
|
|
|
1,960,000 |
|
|
$ |
510,933,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 1, 2008 through
October 31, 2008
|
|
|
3,046,307 |
|
|
$ |
24.99 |
|
|
|
3,046,307 |
|
|
$ |
434,795,472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,021,307 |
|
|
$ |
27.44 |
|
|
|
6,021,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes: |
|
|
|
1. |
|
All shares purchased as part of publicly announced plans during the three months ended
October 31, 2008 were purchased under a plan we announced on May 20, 2008 under which we were
authorized to repurchase up to $600 million of our common stock from time to time over a
three-year period ending on May 15, 2011. |
45
ITEM 6
EXHIBITS
We have filed the following exhibits as part of this report:
|
|
|
|
|
|
|
Exhibit |
|
|
|
Filed |
|
Incorporated |
Number |
|
Exhibit Description |
|
Herewith |
|
by Reference |
|
10.01+ |
|
Forms of Restricted Stock Unit Agreements: Intuit
Inc. MSPP Matching Award Agreement; Intuit Inc.
Performance-Based Vesting Agreement; Homestead
Technologies Inc. Service-Based Vesting Agreement;
and Intuit Inc. Service-Based Vesting Agreement
|
|
X |
|
|
|
|
|
|
|
|
|
10.02+
|
|
Amendment dated December 1, 2008 to Letter
Regarding Terms of Employment by and between Intuit
Inc. and Mr. R. Neil Williams dated November 2,
2007
|
|
X |
|
|
|
|
|
|
|
|
|
10.03+
|
|
Amendment dated December 1, 2008 to Offer Letter
Agreement between Intuit and Alexander M. Lintner
dated June 24, 2005 and accepted by Mr. Lintner on
June 29, 2005
|
|
X |
|
|
|
|
|
|
|
|
|
10.04+
|
|
Letter Regarding Terms of Employment by and between
Intuit Inc. and Mr. Sasan K. Goodarzi dated May 18,
2004 and Amendment dated December 1, 2008
|
|
X |
|
|
|
|
|
|
|
|
|
10.05+
|
|
Amendment dated December 1, 2008 to Letter
Regarding Terms of Employment by and between Intuit
Inc. and Mr. Brad D. Smith dated October 1, 2007
|
|
X |
|
|
|
|
|
|
|
|
|
31.01
|
|
Certification of Chief Executive Officer
|
|
X |
|
|
|
|
|
|
|
|
|
31.02
|
|
Certification of Chief Financial Officer
|
|
X |
|
|
|
|
|
|
|
|
|
32.01
|
|
Section 1350 Certification (Chief Executive Officer)
|
|
X |
|
|
|
|
|
|
|
|
|
32.02
|
|
Section 1350 Certification (Chief Financial Officer)
|
|
X |
|
|
|
|
|
+ |
|
Indicates a management contract or compensatory plan or arrangement. |
46
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
INTUIT INC.
(Registrant)
|
|
Date: December 4, 2008 |
By: |
/s/ R. NEIL WILLIAMS
|
|
|
|
R. Neil Williams |
|
|
|
Senior Vice President and Chief Financial Officer
(Authorized Officer and Principal Financial Officer) |
|
47
EXHIBIT INDEX
|
|
|
|
|
|
|
Exhibit |
|
|
|
Filed |
|
Incorporated |
Number |
|
Exhibit Description |
|
Herewith |
|
by Reference |
|
10.01+
|
|
Forms of Restricted Stock Unit Agreements: Intuit
Inc. MSPP Matching Award Agreement; Intuit Inc.
Performance-Based Vesting Agreement; Homestead
Technologies Inc. Service-Based Vesting Agreement;
and Intuit Inc. Service-Based Vesting Agreement
|
|
X |
|
|
|
|
|
|
|
|
|
10.02+
|
|
Amendment dated December 1, 2008 to Letter
Regarding Terms of Employment by and between Intuit
Inc. and Mr. R. Neil Williams dated November 2,
2007
|
|
X |
|
|
|
|
|
|
|
|
|
10.03+
|
|
Amendment dated December 1, 2008 to Offer Letter
Agreement between Intuit and Alexander M. Lintner
dated June 24, 2005 and accepted by Mr. Lintner on
June 29, 2005
|
|
X |
|
|
|
|
|
|
|
|
|
10.04+
|
|
Letter Regarding Terms of Employment by and between
Intuit Inc. and Mr. Sasan K. Goodarzi dated May 18,
2004 and Amendment dated December 1, 2008
|
|
X |
|
|
|
|
|
|
|
|
|
10.05+
|
|
Amendment dated December 1, 2008 to Letter
Regarding Terms of Employment by and between Intuit
Inc. and Mr. Brad D. Smith dated October 1, 2007
|
|
X |
|
|
|
|
|
|
|
|
|
31.01
|
|
Certification of Chief Executive Officer
|
|
X |
|
|
|
|
|
|
|
|
|
31.02
|
|
Certification of Chief Financial Officer
|
|
X |
|
|
|
|
|
|
|
|
|
32.01
|
|
Section 1350 Certification (Chief Executive Officer)
|
|
X |
|
|
|
|
|
|
|
|
|
32.02
|
|
Section 1350 Certification (Chief Financial Officer)
|
|
X |
|
|
|
|
|
+ |
|
Indicates a management contract or compensatory plan or arrangement. |
48