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Intuit Annual Report (Amendment), Year Ended Jul 31, 1999

Filing Date
Filed October 27, 1999
Period End
July 31, 1999
Security
INTU
In the record · 2016–202610-K1110-Q328-K101

INTU filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 101 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Feb ’16Feb ’16
  2. FY2019 annual report10-K · Aug ’19Aug ’19
  3. Leadership change8-K · Jan ’22Jan ’22
  4. Leadership change8-K · Nov ’25Nov ’25

01—Abstract

Summary

Summary of the 10-K/A filed October 27, 1999. Cited figures are marked; the original filing is the authoritative source.

Intuit's fiscal 1999 10-K/A (amended to correct typographical and immaterial errors in Items 4A and 6-8) shows a year dominated by one-time investment gains rather than operating strength.

Revenue rose 43% to $847.6 milliona, but roughly 27% growth excluding the Lacerte and CRI acquisitions. Net income of $376.5 million ($1.97 diluted EPS) was driven by $579.2 million in pre-tax gains on marketable securities, mainly from selling Excite and converting Excite shares to Excite@Home. Excluding those gains, discontinued operations, divestiture gains, acquisition costs, and restructuring, net income would have been about $88.9 million, versus $46.7 million in fiscal 1998.

Operating income was only $19.9 millionb, and acquisition-related expenses reached $100.7 million, so the operating business remained thin-margin. The company is investing heavily in its Internet strategy, which generated about 15% of revenue (roughly 9% from Internet products and services, 6% from electronic distribution). Management expects R&D, selling and marketing, and amortization to rise in fiscal 2000.

Growth risks are concentrated in several areas: Microsoft's expected entry into the personal tax market, rising interest rates hurting the mortgage business, a pending $370 millionc stock acquisition of Rock Financial, and the cancellation of the Mortgage.com agreement. The CEO also resigned on September 27, 1999, and William Campbell is serving as Acting CEO while the board searches for a successor. Liquidity is strong.

Unrestricted cash and equivalents reached $518.3 milliond, and total cash plus short-term investments and marketable securities exceeded $1.2 billion. Management believes this is sufficient for the next twelve months. Investors should note that a significant portion of the balance sheet is tied to volatile equity stakes in Checkfree (about 19% ownership, $302 million fair value) and Excite@Home, and that future price declines could hit earnings directly because Excite@Home is accounted for as a trading security.

02—Key points

Key Highlights

  1. Revenue grew 43% to $847.6 million in fiscal 1999, but only about 27% excluding the Lacerte and CRI acquisitions.
  2. Net income of $376.5 million ($1.97 diluted EPS) was inflated by $579.2 million in pre-tax gains on marketable securities, largely from the Excite stake sale and conversion. Excluding these and other one-time items, net income was about $88.9 million.
  3. Operating income was only $19.9 million, with acquisition-related charges of $100.7 million, reflecting heavy amortization and Internet investment.
  4. Internet-based revenue was about 15% of total revenue, split roughly 9% Internet products and services and 6% electronic distribution.
  5. Cash and equivalents of $518.3 million (plus large short-term and marketable securities balances) provide a strong liquidity position, though much of the portfolio is concentrated in Checkfree, Excite@Home, and Security First shares.
  6. Key risks include Microsoft's expected entry into personal tax software, rising interest rates pressuring mortgage volumes, the pending $370 million Rock Financial acquisition, and the Mortgage.com agreement termination.
  7. CEO William Harris resigned September 27, 1999; Chairman William Campbell is Acting CEO while the board searches for a permanent successor.

03—Questions

Frequently Asked Questions

  1. How much of Intuit's fiscal 1999 net income came from core operations?

    Very little. Reported net income was $376.5 million, but that included $579.2 million in pre-tax gains on marketable securities. Management's adjusted figure, excluding those gains, discontinued operations, divestiture gains, acquisition costs, and restructuring charges, was about $88.9 million, compared with $46.7 million in fiscal 1998.

  2. What is driving Intuit's revenue growth?

    Growth came from several sources: the June 1998 Lacerte acquisition, which contributed a full year of revenue; the May 1999 CRI payroll acquisition, which added three months; a strong QuickBooks release cycle; and a 35%+ increase in federal 1040 tax customers. Excluding the acquisitions, growth was about 27%.

  3. What risks could affect Intuit's outlook for fiscal 2000?

    The company expects Microsoft to enter the personal tax market, which could increase price pressure and weaken retail negotiating power. Management also expects higher R&D and marketing spending for Internet initiatives, continued amortization of about $123 million, and possible revenue declines in Europe after shifting to the Lexware partnership. Mortgage volumes are sensitive to rising interest rates, and the Mortgage.com agreement is being phased out.

  4. How exposed is Intuit's balance sheet to stock market volatility?

    Significantly. Intuit holds about 19% of Checkfree, about 0.6% of Excite@Home, and about 3.5% of Security First. Excite@Home is treated as a trading security, so its price swings flow directly through earnings. Marketable securities totaled $431.3 million at year end and fell in value from the prior year.

  5. Is Intuit's leadership stable?

    Not fully. CEO William Harris resigned on September 27, 1999. Chairman William Campbell is serving as Acting CEO, handling day-to-day operations, while the board searches for a permanent replacement. Harris remains on the board to assist in the search.

04—Continue

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