Edgar Filing: INTUIT INC

Intuit, Inc., Form 8-K, 07/31/02

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K
CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

August 15, 2002
(Date of Report)
Date of earliest event reported: July 31, 2002

Intuit Inc.
(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation)


0-21180		77-0034661
(Commission File Number)		(I.R.S. Employer Identification No.)

2535 Garcia Avenue
Mountain View, California 94043
(Address of principal executive offices)
(Zip Code)

Registrant’s telephone number, including area code:
(650) 944-6000

TABLE OF CONTENTS


	ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
	ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
		UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
		UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
		NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET AND STATEMENTS OF OPERATIONS
SIGNATURES
EXHIBIT INDEX
EXHIBIT 2.01
EXHIBIT 2.02
EXHIBIT 10.01

ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.

On July 31, 2002, Intuit Inc. (“Intuit”) completed the sale of its Quicken Loans mortgage business to BRFC LLC (“BRFC”). The sale was structured as the transfer by Intuit of all of the capital stock of Quicken Loans Inc. and Title Source, Inc., both wholly owned subsidiaries of Intuit, to Rock Acquisition Corporation (“Rock”), a newly-created corporation, and the subsequent sale by Intuit of all of the voting stock of Rock to BRFC, which represented 87.5% of the common stock outstanding. In advance of completion of the sale, Quicken Loans Inc. and Title Source, Inc. repaid to Intuit all outstanding intercompany balances as well as paid out the net tangible shareholders’ equity in excess of $33 million to Intuit. Consideration for the sale included $33 million from BRFC and a promissory note in the principal amount of $23.3 million from Rock. The promissory note is secured by all the assets of Rock, Quicken Loans and Title Source. Intuit retained nonvoting stock of Rock representing a 12.5% interest in Rock. In addition, Intuit agreed to continue providing a line of credit of up to $375 million to fund mortgage loans for a transition period of up to six months after the closing of the sale. Intuit will earn market interest rates on the outstanding balances under the line of credit, which is secured by all of the assets of Rock, Quicken Loans and Title Source.

Other Relationships

Quicken Loans has also licensed from Intuit the right to use the Quicken Loans trademark for its residential home loan and home equity loan products and agreed to pay an annual license fee. Quicken Loans and Intuit entered into a five-year distribution agreement through which Quicken Loans will provide mortgage services on Quicken.com for an annual license fee. Daniel R. Gilbert, a managing member of BRFC, served as Vice President, Quicken Loans, from December 1999 to February 2002 and as an executive officer of Intuit from March 2000 to February 2002. William Emerson, also a member of BRFC, served as Vice President, Quicken Loans, and an executive officer of Intuit from February 2002 to July 31, 2002.

Accounting Treatment

Intuit preliminarily estimates that it will recognize a gain for accounting purposes of $23.3 million on the sale. The amount of the gain is subject to change based on the final audited tangible shareholders’ equity position as of the final consummation date and accordingly this amount may change. Intuit purchased the Quicken Loans business in December 1999. Because the transaction was accounted for as a pooling of interests, the value of the business was reflected on Intuit’s balance sheet as the net value of the tangible assets, rather than the purchase price paid. The gain represents the premium over the net value of the tangible assets.

ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements of Businesses Acquired

Not applicable.

(b) Pro Forma Financial Information

UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION

The unaudited pro forma condensed financial information below includes an Unaudited Pro Forma Condensed Balance Sheet at April 30, 2002,and Unaudited Pro Forma Condensed Statements of Operations for the fiscal year ended July 31, 2001 and the nine months ended April 30, 2002. The Unaudited Pro Forma Condensed Balance Sheet at April 30, 2002 gives effect to the disposition of Quicken Loans as if it had occurred on April 30, 2002. The Unaudited Pro Forma Condensed Statement of Operations for the fiscal year ended July 31, 2001 gives effect to the disposition of Quicken Loans as if it had occurred on August 1, 2000, and the Unaudited Pro Forma Condensed Statement of Operations for the nine months ended April 30, 2002 gives effect to the disposition of Quicken Loans as if it had occurred on August 1, 2001.

The Unaudited Pro Forma Condensed Statements of Operations do not purport to represent what Intuit’s results of operations would actually have been if the disposition had occurred on August 1, 2000 or August 1, 2001, and do not purport to project the results of operations of Intuit for the current year or for any future period. The adjustments in the pro forma financial information are based on available information and on assumptions which management believes are reasonable. All information contained in this item 7 should be read in conjunction with the Notes to Unaudited Pro Forma Condensed Balance Sheet and Statements of Operations included in this report, and the Consolidated Financial Statements, the Notes to the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Form 10-K for the fiscal year ended July 31, 2001 and the in the Form 10-Q’s for the quarters ended October 31, 2001, January 31, 2002 and April 30, 2002.

INTUIT INC.
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET


			As of April 30, 2002

								Pro Forma for
					Pro Forma			Sale of
*(In thousands)*			Historic		Adjustments			Quicken Loans

ASSETS
Current assets:
	Cash and cash equivalents		$	454,791	$	(334,781	)(a)	$	390,523
						550,019	(b)
						(279,506	)(d)
	Short-term investments			1,297,133		—			1,297,133
	Marketable securities			48,469		—			48,469
	Customer deposits			283,748		(27,395	)(a)		256,353
	Warehouse line of credit			—		279,506	(d)		279,506
	Accounts receivable, net			69,216		(2,022	)(a)		67,194
	Mortgage loans			279,506		(279,506	)(a)		—
	Deferred income taxes			87,816		(4,770	)(a)		83,046
	Prepaid expenses and other current assets			35,091		(984	)(a)		34,107

		Total current assets		2,555,770		(99,439	)		2,456,331

Property and equipment, net				181,442		(14,213	)(a)		167,229
Goodwill and intangibles, net				310,949		(177	)(a)		310,772
Long-term deferred income taxes				146,020		—	(a)		146,020
Notes receivable				—		23,300	(c)		23,300
Investments				13,149		—			13,149
Other assets				16,168		(30	)(a)		16,138

Total assets			$	3,223,498	$	(90,559	)	$	3,132,939

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable		$	77,310	$	(5,303	)(a)	$	72,007
	Payroll service obligations			256,369		—			256,369
	Escrow liabilities			27,335		(27,335	)(a)		—
	Drafts payable			67,005		(67,005	)(a)		—
	Deferred revenue			97,509		(264	)(a)		97,245
	Income taxes payable			104,293		(315	)(a)		103,978
	Short-term note payable			17,451		—			17,451
	Other current liabilities			255,001		(13,637	)(a)		241,364

		Total current liabilities		902,273		(113,859	)		788,414

Long-term obligations				11,209		—			11,209

Stockholders’ equity				2,310,016		23,300	(c)		2,333,316

Total liabilities and stockholders’ equity			$	3,223,498	$	(90,559	)	$	3,132,939

See accompanying notes

INTUIT INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


				Nine Months Ended April 30, 2002

										Pro Forma for
							Pro Forma			Sale of
(In thousands, except per share data)				Historic			Adjustments			Quicken Loans

Net revenue:
	Products			$	869,907		$	—		$	869,907
	Services				381,772			(140,048	)(e)		241,724
	Other				49,558			—			49,558

			Total net revenue		1,301,237			(140,048	)		1,161,189
Costs and expenses:
	Cost of revenue:
		Cost of products, service and other			273,929			(33,801	)(e)		240,128
		Amortization of purchased software			10,442			—			10,442
	Customer service and technical support				137,899			(3,146	)(e)		134,753
	Selling and marketing				256,656			(40,737	)(e)		215,919
	Research and development				156,111			(2,581	)(e)		153,530
	General and administrative				90,055			(7,008	)(e)		83,047
	Charge for vacant facilities				13,237			—			13,237
	Acquisition related charges				140,748			(18	)(e)		140,730
	Loss on impairment of long-lived asset				27,000			—			27,000

			Total costs and expenses		1,106,077			(87,291	)		1,018,786

			Income from operations		195,160			(52,757	)		142,403
Interest and other income and expense, net					28,631			—			28,631
Net losses on marketable securities and other investments, net					(9,266	)		(4,127	)(e)		(13,393	)
Net gains on divestitures					8,308			—			8,308

Income before income taxes and minority interest					222,833			(56,884	)		165,949
Income tax provision					50,893			(20,479	)(e)		30,414
Minority interest					18			(18	)(e)		—

Net income				$	171,922		$	(36,387	)(e)	$	135,535

Basic net income per share				$	0.81		$	(0.17	)	$	0.64

Shares used in basic net income per share amounts					211,724			211,724			211,724

Diluted net income per share				$	0.79		$	(0.17	)	$	0.62

Shares used in diluted net income per share amounts					217,667			217,667			217,667

See accompanying notes.

INTUIT INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


				Twelve Months Ended July 31, 2001

										Pro Forma for
							Pro Forma			Sale of
(In thousands, except per share data)				Historic			Adjustments			Quicken Loans

Net revenue:
	Products			$	883,512		$	—		$	883,512
	Services				304,910			(113,056	)(e)		191,854
	Other				73,039			—			73,039

			Total net revenue		1,261,461			(113,056	)		1,148,405
Costs and expenses:
	Cost of revenue:
		Cost of products, services and other			312,040			(32,735	)(e)		279,305
		Amortization of purchased software			14,949			—			14,949
	Customer service and technical support				149,353			(3,831	)(e)		145,522
	Selling and marketing				270,216			(34,960	)(e)		235,256
	Research and development				207,085			(3,346	)(e)		203,739
	General and administrative				102,918			(7,214	)(e)		95,704
	Charge for purchased research and development				238			—			238
	Acquisition related charges				248,202			(23	)(e)		248,179

			Total costs and expenses		1,305,001			(82,109	)		1,222,892

			Loss from operations		(43,540	)		(30,947	)		(74,487	)
Interest and other income and expense, net					60,366			(3,063	)(e)		57,303
Net losses on marketable securities and other investments, net					(98,053	)		—			(98,053	)
Net losses on divestitures					(15,315	)		—			(15,315	)

Loss before income taxes, minority interest and cumulative effect of accounting change					(96,542	)		(34,010	)		(130,552	)
Income tax benefit					(229	)		(12,244	)(e)		(12,473	)
Minority interest					794			(794	)(e)		—

Loss before cumulative effect of accounting change					(97,107	)		(20,972	)(e)		(118,079	)
Cumulative effect of accounting change, net of income taxes of $9,543					14,314			—			14,314

Net loss				$	(82,793	)	$	(20,972	)(e)	$	(103,765	)

Basic and diluted net loss per share before cumulative effect of accounting change				$	(0.47	)	$	(0.10	)	$	(0.57	)
Cumulative effect of accounting change					0.07			—			0.07

Basic and diluted net loss per share				$	(0.40	)	$	(0.10	)	$	(0.50	)

Shares used in basic and diluted net loss per share amounts					207,959			207,959			207,959

See accompanying notes

NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET AND
STATEMENTS OF OPERATIONS

The Unaudited Pro Forma Balance Sheet presents the financial position of Intuit at April 30, 2002 as though the disposition of Quicken Loans occurred on April 30, 2002. The Unaudited Pro Forma Statement of Operations presents the results of operations for fiscal 2001 are presented as though the disposition of Quicken Loans occurred on August 1, 2000 and the nine months ended April 31, 2002 are presented as though the disposition occurred on August 1, 2001. The following pro forma adjustments are based on available information and on assumptions which management believes are reasonable.

	(a)		Represents the disposition of the net assets of Quicken Loans pursuant to the purchase agreement.

	(b)		Represents repayment of intercompany balances and return of tangible shareholders’ equity.

	(c)		Represents the receipt of $23.3 million promissory note and the estimated gain on sale.

	(d)		Represents the funding of the warehouse line of credit.

	(e)		Reflects the portion of net revenue and expenses of Quicken Loans.

The unaudited proforma condensed statements of operations do not include the effects of the estimated gain of $23.3 million arising from this disposition, as it is a material non-recurring event. This gain will be calculated and included in the actual consolidated statement of income in fiscal year 2002. The amount of the gain is subject to change based on the final audited tangible shareholders’ equity position as of the final consummation date and accordingly, this amount may change.

(c) Exhibits

The following exhibits are filed herewith:


Exhibit
Number		Description

2.01*		Stock Purchase and Sale Agreement among BRFC LLC, Intuit Inc., Quicken Loans Inc. and Title Source, Inc., dated June 20, 2002. Pursuant to Item 601(b)(2) of Regulation S-K, certain exhibits and schedules are omitted but will be furnished supplementally to the Commission upon request.

2.02*		Amendment to Stock Purchase and Sale Agreement among Intuit Inc., BRFC LLC, Quicken Loans, Inc., and Title Source, Inc., dated July 29, 2002. Pursuant to Item 601(b)(2) of Regulation S-K, certain exhibits and schedules are omitted but will be furnished supplementally to the Commission upon request.

10.01		Mortgage Warehousing Agreement and Related Documents between Intuit Inc. and Quicken Loans, Inc., dated as of July 31, 2002.

Intuit has requested confidential treatment for portions of this exhibit. We have omitted these portions from this filing and filed them separately with the Commission.

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 hereunto duly authorized.


Date: August 14, 2002		INTUIT INC.

	By:	/s/ GREG J. SANTORA

		Greg J. Santora Senior Vice President and Chief Financial Officer

EXHIBIT INDEX


Exhibit
Number		Description

2.01*		Stock Purchase and Sale Agreement among BRFC LLC, Intuit Inc., Quicken Loans Inc. and Title Source, Inc., dated June 20, 2002. Pursuant to Item 601(b)(2) of Regulation S-K, certain exhibits and schedules are omitted but will be furnished supplementally to the Commission upon request.

2.02*		Amendment to Stock Purchase and Sale Agreement among Intuit Inc., BRFC LLC, Quicken Loans, Inc., and Title Source, Inc., dated July 29, 2002. Pursuant to Item 601(b)(2) of Regulation S-K, certain exhibits and schedules are omitted but will be furnished supplementally to the Commission upon request.

10.01		Mortgage Warehousing Agreement and Related Documents between Intuit Inc. and Quicken Loans, Inc., dated as of July 31, 2002.

Intuit has requested confidential treatment for portions of this exhibit. We have omitted these portions from this filing and filed them separately with the Commission.

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