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Intuit Annual Report, Year Ended Jul 31, 2006

Filing Date
Filed September 15, 2006
Period End
July 31, 2006
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 filed September 15, 2006. Cited figures are marked; the original filing is the authoritative source.

Intuit's fiscal 2006 10-K (fiscal year ended July 31, 2006) shows a company growing revenue at a healthy clip while absorbing a first-time stock option expense.

Total net revenue rose 15% to $2.34 billiona from $2.04 billion, led by Consumer Tax (up 25% to $710.5 million, driven by a 57% increase in federal TurboTax Online units) and Payroll and Payments (up 24% to $462.0 million). Operating income from continuing operations grew only about 7% to $559.5 million, held back by $66.0 million of pre-tax share-based compensation recorded under SFAS 123(R), which reduced diluted EPS from continuing operations by $0.12. Diluted EPS from continuing operations rose 6% to $1.05, helped by a roughly 5% reduction in average diluted shares following heavy buybacks.

Capital allocation was a major theme. Intuit repurchased 31.0 million shares for $784.2 millionb, funded by $595.5 million of operating cash flow, roughly $200 million from the December 2005 sale of its Intuit Information Technology Solutions business, and $279.3 million from employee stock plan issuances. Cash, cash equivalents and investments ended the year at $1.2 billion, and $506.6 million remained under buyback authorizations, including a new $500 million seventh program approved in May 2006.

The company has never paid a cash dividend and does not plan to. Key risks flagged in the filing include intensifying competition from Microsoft in small business accounting, the potential for government-provided free tax filing (including California's pilot program and the IRS's Free File Alliance agreement, which can be terminated on 24 months' notice), seasonality that produces operating losses in the first and fourth fiscal quarters, and concentration with a few large retailers, which accounted for about 51%c of gross receivables at January 31, 2006.

The company also disclosed a voluntary stock option grant review, begun in May 2006, that concluded on August 16, 2006 with no evidence of fraud or intentional wrongdoing, though an informal SEC inquiry and a U.S. Attorney subpoena remain open. Management expects fiscal 2007 R&D as a percentage of revenue to rise above fiscal 2006's 17%d.

02—Key points

Key Highlights

  1. Total net revenue grew 15% to $2.34 billion in fiscal 2006, with Consumer Tax up 25% and Payroll and Payments up 24%.
  2. Operating income from continuing operations rose 7% to $559.5 million, after absorbing $66.0 million of first-time share-based compensation expense under SFAS 123(R).
  3. Diluted EPS from continuing operations was $1.05, up 6% from $0.99, aided by a reduction in average diluted shares from buybacks; net income was $417.0 million including discontinued operations.
  4. Intuit repurchased 31.0 million shares for $784.2 million and ended the year with $1.2 billion in cash and investments and $506.6 million of remaining buyback authorization.
  5. Consumer Tax growth was driven by a 57% increase in federal TurboTax Online units, while the segment faces ongoing public-sector free-filing competition and regulatory risk.
  6. Microsoft's entry into small business accounting (launched September 2005) is identified as a growing competitive threat to QuickBooks and Payroll and Payments.
  7. A voluntary stock option review concluded in August 2006 with no evidence of fraud, but an SEC informal inquiry and a U.S. Attorney subpoena remain open.

03—Questions

Frequently Asked Questions

  1. How did Intuit perform financially in fiscal 2006?

    Intuit grew total net revenue 15% to $2.34 billion and net income to $417.0 million, or $1.16 per diluted share. Income from continuing operations was flat at $377.4 million, because the $66.0 million share-based compensation charge offset gains from revenue growth and lower share count.

  2. What drove revenue growth, and which segments are most important?

    Consumer Tax (TurboTax) revenue grew 25% to $710.5 million, driven by TurboTax Online and electronic filing, and Payroll and Payments grew 24% to $462.0 million, led by QuickBooks Payroll and merchant services. QuickBooks grew a more modest 6% to $534.6 million, while Professional Tax rose 3%.

  3. How much cash is Intuit returning to shareholders, and what remains?

    Intuit repurchased $784.2 million of stock in fiscal 2006 and has never paid a cash dividend. About $506.6 million remained authorized for repurchases at July 31, 2006, under a seventh program approved in May 2006 that authorizes up to $500 million over three years.

  4. What are the main risks investors should watch?

    Key risks include competition from Microsoft and free online alternatives, the possibility that government-provided free tax filing could erode TurboTax revenue (the IRS can end the Free File Alliance on 24 months' notice), the rollout of the San Diego lease and platform modernization, and concentration with a few large retailers. Revenue is also highly seasonal, with losses in the first and fourth fiscal quarters.

  5. Is there any open legal or regulatory exposure from the stock option review?

    Intuit's independent review found no evidence of fraud or intentional wrongdoing in its historical stock option grants. However, the company disclosed an informal SEC inquiry and a subpoena from the U.S. Attorney for the Northern District of California, both of which it says it is cooperating with. Separately, the Muriel Siebert & Co. lawsuit seeks up to $44.1 million in damages, which Intuit calls without merit.

04—Continue

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