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


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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.

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  (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.

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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

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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.

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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

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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.

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(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.

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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

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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.