<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended OCTOBER 31, 1996 or
[ ] 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)
Delaware 77-0034661
(State of incorporation) (IRS employer identification no.)
2535 GARCIA AVENUE, MOUNTAIN VIEW, CA 94043
(Address of principal executive offices)
(415) 944-6000
(Registrant's telephone number, including area code)
Indicate by a 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 X No
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
46,370,243 shares of Common Stock, $.01 par value, as of November 30, 1996
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FORM 10-Q
INTUIT INC.
INDEX
PART I FINANCIAL INFORMATION PAGE
NUMBER
------
ITEM 1: Financial Statements
Condensed Consolidated Balance Sheets as of
July 31, 1996 and October 31, 1996.................... 3
Condensed Consolidated Statements of Operations for
the three months ended October 31, 1995 and 1996....... 4
Condensed Consolidated Statements of Cash Flows for
the three months ended October 31, 1995 and 1996....... 5
Notes to Condensed Consolidated Financial
Statements............................................. 6
ITEM 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations....................11
PART II OTHER INFORMATION
ITEM 1: Legal Proceedings..........................................18
ITEM 6: Exhibits and Reports on Form 8-K...........................19
Signatures.................................................20
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INTUIT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31, OCT. 31,
1996 1996
---- ----
<S> <C> <C>
(In thousands, except par value; unaudited)
ASSETS
Current assets:
Cash and cash equivalents............................................... $ 44,584 $ 45,595
Short-term investments.................................................. 153,434 125,205
Accounts receivable, net................................................ 49,473 84,372
Inventories............................................................. 4,448 4,935
Prepaid expenses........................................................ 9,269 23,371
Deferred income taxes................................................... 19,205 19,116
----------- -----------
Total current assets............................................ 280,413 302,594
Property and equipment, net............................................... 95,611 97,169
Purchased intangibles..................................................... 16,449 15,005
Goodwill.................................................................. 15,194 13,966
Long-term deferred income tax asset....................................... 6,892 6,892
Other assets.............................................................. 3,461 3,649
----------- -----------
Total assets............................................................ $ 418,020 $ 439,275
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................ $ 33,972 $ 38,463
Accrued compensation and related liabilities............................ 15,473 18,445
Deferred revenue........................................................ 18,974 30,460
Other accrued liabilities............................................... 42,270 60,145
----------- -----------
Total current liabilities....................................... 110,689 147,513
Deferred income taxes..................................................... 2,513 2,821
Long-term notes payable................................................... 5,583 5,259
Stockholders' equity:
Preferred stock, $0.01 par value
Authorized -- 3,000 shares
Issued and outstanding -- none....................................... -- --
Common stock, $0.01 par value
Authorized -- 250,000 shares
Issued and outstanding -- 45,807 and 46,264 shares, respectively.. .. 458 463
Additional paid-in capital................................................ 530,818 543,538
Cumulative translation adjustment and other............................... (502) (278)
Accumulated deficit....................................................... (231,539) (260,041)
----------- -----------
Total stockholders' equity...................................... 299,235 283,682
----------- -----------
Total liabilities and stockholders' equity.............................. $ 418,020 $ 439,275
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
1995 1996
---- ----
<S> <C> <C>
(In thousands, except per share amounts; unaudited)
Net revenue.............................................................. $ 102,250 $ 102,506
Costs and expenses:
Cost of goods sold:
Product............................................................. 27,416 27,045
Amortization of purchased software.................................. 675 40
Customer service and technical support................................. 24,952 27,512
Selling and marketing.................................................. 36,380 37,401
Research and development............................................... 20,151 22,461
General and administrative............................................. 10,053 11,906
Charge for purchased research and development.......................... -- 4,929
Amortization of goodwill and purchased intangibles..................... 9,875 10,302
---------- ----------
Total costs and expenses....................................... 129,502 141,596
---------- ----------
Loss from operations........................................... (27,252) (39,090)
Interest and other income and expense, net............................... 2,064 2,048
---------- ----------
Loss from continuing operations before income taxes...................... (25,188) (37,042)
Income tax benefit....................................................... (6,504) (8,738)
---------- ----------
Loss from continuing operations.......................................... (18,684) (28,304)
Loss from operations of discontinued operations,
net of income tax benefit of $962..................................... (1,638) --
---------- ----------
Net loss................................................................. $ (20,322) $ (28,304)
========== ==========
Loss per share from continuing operations................................ $ (0.42) $ (0.61)
Loss per share from discontinued operations.............................. (0.04) --
---------- ----------
Net loss per share....................................................... $ (0.46) $ (0.61)
========== ==========
Shares used in computing net loss per share.............................. 44,677 46,049
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
1995 1996
---- ----
<S> <C> <C>
(In thousands, unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................................................... $ (20,322) $ (28,304)
Adjustments to reconcile net loss to net cash used in
operating activities:
Charge for purchased research and development........................ -- 4,929
Amortization of goodwill and other purchased intangibles............. 11,458 10,412
Depreciation......................................................... 4,928 7,712
Changes in assets and liabilities:
Accounts receivable............................................... (37,456) (34,639)
Inventories....................................................... (1,004) (487)
Prepaid expenses.................................................. (7,445) (13,563)
Deferred income tax assets and liabilities........................ 466 (38)
Accounts payable.................................................. 20,930 4,232
Accrued compensation and related liabilities...................... (1,600) 2,886
Deferred revenue.................................................. 4,665 11,486
Accrued acquisition liabilities................................... (5,076) (94)
Other accrued liabilities......................................... 13,826 17,167
Income taxes payable.............................................. (3,314) 2,335
---------- ----------
Net cash used in operating activities............................ (19,944) (15,966)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment..................................... (24,417) (8,620)
Payment for acquisitions, net of cash acquired......................... -- 235
Increase in other assets............................................... (1,341) (119)
Purchase of short-term investments..................................... (38,881) (61,526)
Liquidation and maturity of short-term investments..................... 37,291 85,852
---------- ----------
Net cash provided by (used in) investment activities............. (27,348) 15,822
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt................................... (1,523) (324)
Net proceeds from issuance of common stock............................. 4,181 1,479
---------- ----------
Net cash provided by financing activities........................ 2,658 1,155
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..................... (44,634) 1,011
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD......................... 76,298 44,584
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................... $ 31,664 $ 45,595
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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INTUIT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
Intuit Inc. ("Intuit" or the "Company") is a leading developer of personal
finance, small business accounting, and tax preparation software. The Company
develops, markets, and supports software products and services that enable
individuals, professionals, and small businesses to automate commonly performed
financial tasks and better organize, understand, manage, and plan their
financial lives. Principal products include personal and small business
financial software, personal and corporate tax software, online financial
services, and supplies such as invoice forms and checks. The Company markets its
products through distributors and retailers and by direct sales to OEMs and
individual users. The Company's customers are located primarily in North
America, Europe, and Asia.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the
Company for the quarters ended October 31, 1995 and 1996 have been prepared in
accordance with generally accepted accounting principles for interim financial
statements and include all adjustments (consisting of normal recurring
adjustments) that the Company considers necessary for a fair presentation of the
operating results and cash flows for those periods. Results of operations for
the quarter ended October 31, 1996 are not necessarily indicative of the results
to be expected for the year ending July 31, 1997 or any other quarterly period.
These condensed consolidated financial statements and notes thereto should be
read in conjunction with the audited consolidated financial statements for the
fiscal year ended July 31, 1996 included in the Company's Annual Report on Form
10-K dated October 24, 1996.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Significant estimates are used in determining both the collectibility of
accounts receivable and reserves for returns and exchanges, and in assessing the
carrying value of goodwill and purchased intangibles. Actual results could
differ from those estimates.
Net Revenue
Revenue is generally recognized at the time of shipment, net of allowances for
estimated future returns and for excess quantities in distribution channels,
provided that no significant vendor obligations exist and collections of
accounts receivable are probable. Reserves are provided for quantities of
current product versions that are considered excess and for inventories of all
previous versions of products at the time new product versions are introduced.
Advance payments are recorded as deferred revenue until the products are shipped
or services are provided. Rebate costs are provided at the time revenue is
recognized. The Company provides warranty reserves for the estimated cost of
replacing defective products at the time revenue is recognized.
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Customer Service and Technical Support
Customer service and technical support costs include order processing, customer
inquiries and telephone assistance. The costs of post-contract customer support
are included in customer service and technical support expenses and are not
included in cost of goods sold.
Cash Equivalents and Short-Term Investments
The Company considers all highly liquid investments purchased with a maturity of
three months or less at date of acquisition to be cash equivalents. The
available-for-sale securities are carried at amortized cost which approximates
fair value. For the purpose of determining gross realized gains and losses, the
cost of securities sold is based on specific identification. The following is a
summary of the estimated fair value of available-for-sale securities at July 31,
1996 and October 31, 1996:
<TABLE>
<CAPTION>
JULY 31, OCT. 31,
1996 1996
---- ----
<S> <C> <C>
(in thousands)
Certificates of deposit........................................ $ 10,003 $ 8,004
Corporate notes................................................ 15,875 32,520
Money market funds............................................. 10,767 9,262
Municipal bonds................................................ 77,487 80,292
Commercial paper............................................... 13,866 129
U.S. Government securities..................................... 51,288 20,432
--------- ----------
$ 179,286 $ 150,639
========= ==========
</TABLE>
Short-term investments generally mature within two years or less. Total cash,
cash equivalents and short-term investments at July 31, 1996 and October 31,
1996 were $198,018 and $170,800, respectively.
Goodwill and Intangible Assets
The excess cost over the fair value of net assets acquired (goodwill) is
generally amortized on a straight-line basis over periods generally not
exceeding three years. The cost of identified intangibles is generally amortized
on a straight-line basis over periods from 1 to 10 years. The carrying value of
goodwill and intangible assets is reviewed on a regular basis for the existence
of facts or circumstances, both internal and external, that may suggest
impairment. To date no such impairment has been indicated. Should there be an
impairment in the future, the Company will measure the amount of the impairment
based on undiscounted expected future cash flows from the impaired assets. The
cash flow estimates that will be used will contain management's best estimates,
using appropriate and customary assumptions and projections at the time.
Components of goodwill and intangible assets are as follows:
<TABLE>
<CAPTION>
NET BALANCE AT
LIFE IN JULY 31, OCT. 31,
YEARS 1996 1996
----- ---- ----
<S> <C> <C> <C>
(dollars in thousands)
Goodwill........................................................ 3 $15,194 $13,966
Customer lists.................................................. 3-5 6,952 5,368
Covenants not to compete........................................ 4-5 4,248 3,796
Purchased technology............................................ 1-5 857 1,360
Other intangibles 1-10 4,392 4,481
</TABLE>
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Other intangibles include items such as trade names, logos, and other identified
intangible assets. The balances presented above are net of total accumulated
amortization of $125.1 million and $135.5 million at July 31, 1996 and October
31, 1996, respectively.
Concentration of Credit Risk
The Company's product revenues are concentrated in the personal computer
software industry which is highly competitive and rapidly changing. Significant
technological changes in the industry or customer requirements, or the emergence
of competitive products with new capabilities or technologies, could adversely
affect the Company's operating results.
Financial investments that potentially subject the Company to concentration of
credit risk consist principally of short-term investments and trade accounts
receivable. The Company's investment portfolio is diversified and generally
consists of short-term investment grade securities. The credit risk in the
Company's accounts receivable is mitigated by the fact that the Company performs
ongoing credit evaluations of its customers' financial condition and that
accounts receivable are primarily derived from customers in North America.
Generally, no collateral is required. The Company maintains reserves for
estimated credit losses and such losses have historically been within
management's expectations.
New Accounting Standard
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), which establishes a fair value method of
accounting for stock options and other equity instruments. The Company adopted
SFAS No. 123 beginning in fiscal year 1997 and will use the disclosure method as
described in the statement. The required disclosure will be included in the
Company's Annual Report on Form 10-K for the year ending July 31, 1997.
Reclassifications
Certain previously reported amounts have been reclassified to conform to the
current presentation format.
2. ACQUISITIONS
In January 1996, the Company completed its acquisition of Milkyway KK
("Milkyway"), a provider of PC-based financial software in Japan. The
acquisition was treated as a pooling of interests for accounting purposes. In
addition to the issuance of 650,000 shares of Intuit common stock, the Company
recorded acquisition related expenses of $0.6 million. The accompanying
consolidated financial statements are presented on a combined basis for all
periods.
In June 1996, the Company completed its acquisition of Interactive Insurance
Services Corp. ("IIS"), a developer of an Internet based system designed to
allow consumers to obtain personalized insurance information from national
insurance carriers via the World Wide Web. The acquisition, which was treated as
a purchase for accounting purposes, had a purchase price of approximately $9.0
million. Under the terms of the acquisition agreement, the Company issued
169,181 shares of Intuit common stock and options to purchase 3,255 shares of
Intuit common stock to IIS stockholders at the date of acquisition.
Approximately $8.0 million of in-process research and development was expensed
in the quarter ended July 31, 1996. Pro forma information for this acquisition
has not been presented due to immateriality.
In September 1996, the Company completed its acquisition of Galt Technologies,
Inc. ("Galt"), a provider of mutual fund information on the World Wide Web. The
acquisition was treated as a purchase for accounting purposes. Under the terms
of the acquisition agreement, the Company issued 212,053 shares of Intuit common
stock and options to purchase approximately 33,686 shares of Intuit common stock
to Galt stockholders at the date of acquisition. Of the purchase price of $14.6
million, approximately $8.5 million was allocated to identified
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<PAGE> 9
intangible assets and goodwill which will be amortized over a period not to
exceed three years. Approximately $4.9 million of in-process research and
development was expensed in the quarter ended October 31, 1996.
The following information shows the pro forma net revenue, net loss and loss per
share of Intuit and Galt combined as if the acquisition had taken place as of
the beginning of each of the periods presented:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
1995 1996
---- ----
<S> <C> <C>
(in thousands, except loss per share)
Net revenue........................................ $ 102,358 $ 102,506
Net loss........................................... (26,470) (28,304)
Loss per common share.............................. $ (0.59) $ (0.61)
</TABLE>
The unaudited pro forma results of operations for the three months ended October
31, 1995 and 1996 reflect a charge for in-process research and development of
$4.9 million and the amortization of intangible assets related to the Galt
acquisition. Pro forma information excludes August 1996 activity for Galt due to
immateriality.
Consistent with the guidelines established by Statement of Financial Accounting
Standards No. 86, "Accounting for the Costs of Computer Software to Be Sold,
Leased or Otherwise Marketed" ("SFAS No. 86"), for each acquisition accounted
for as a purchase, the Company determined the amounts allocated to developed and
in-process research and development based on whether technological feasibility
had been achieved and whether there was an alternative future use for the
technology. Due to the absence of detailed program designs, evidence of
technological feasibility was established through the existence of a completed
working model at which point functions, features and technical performance
requirements can be demonstrated. As of the respective dates of the
acquisitions, the Company concluded that the in-process research and development
had no alternative future use after taking into consideration the potential for
usage of the software in different products, resale of the software and internal
usage.
3. DISCONTINUED OPERATIONS AND DIVESTITURE
On September 16, 1996, the Company announced plans to sell Intuit Services
Corporation ("ISC"), a wholly-owned subsidiary acquired in July 1994, to
CheckFree Corporation ("CheckFree") in exchange for 12.6 million shares of
CheckFree common stock, which will represent approximately 23% of the resulting
54.0 million shares of CheckFree common stock outstanding following consummation
of the transaction. The closing price of CheckFree common stock was $17 per
share on November 29, 1996. The Company intends to account for its investment in
CheckFree using the cost method of accounting. Accordingly, the Company plans to
sell approximately two million shares of CheckFree common stock acquired in the
proposed transaction. Subject to CheckFree stockholder approval, as well as
other conditions, the transaction is expected to be consummated in early
calendar year 1997.
The divested online banking and bill payment business of ISC has been accounted
for as a discontinued operation and, accordingly, its operating results have
been segregated for fiscal 1996. Revenue and net loss from discontinued
operations were $14.3 million and $6.3 million, respectively, for fiscal 1996.
Liabilities of discontinued operations consist of accounts payable and other
accrued compensation and liabilities totaling $3.0 million at July 31, 1996.
Assets of discontinued operations consist of fixed assets, accounts receivable,
cash, prepaid expenses and intangibles totaling $21.4 million at July 31, 1996.
Operating results for discontinued operations for the period beginning August 1,
1996 until the close of the transaction are being deferred. The net loss for the
quarter ended October 31, 1996 was approximately $1.7 million. The loss will be
netted against the gain on the sale of discontinued operations in the period
when the transaction is consummated.
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4. OTHER ACCRUED LIABILITIES
<TABLE>
<CAPTION>
JULY 31, OCT. 31,
1996 1996
---- ----
<S> <C> <C>
(in thousands)
Reserve for returns and exchanges......................................... $ 24,229 $ 34,469
Acquisition-related items, including deferred acquisition costs........... 3,677 3,861
Rebates................................................................... 2,787 5,820
Post-customer contract support............................................ 3,500 5,568
Other accruals............................................................ 8,077 10,427
-------- --------
$ 42,270 $ 60,145
======== ========
</TABLE>
5. INCOME TAXES
The provision for income taxes was computed by applying the estimated annual
effective tax rate to recurring operations and amortization of intangible
assets, exclusive of the write-off of in-process research and development and
the amortization of goodwill.
6. LITIGATION
On July 31, 1996, Trio Systems L.L.C. ("Trio") filed a lawsuit against the
Company in the U.S. District Court, Central District of California (Los Angeles)
alleging copyright infringement and violation of a license agreement. The
complaint seeks declaratory relief, rescission and $60 million in damages. Trio
alleges that the Company infringed Trio's copyrights in certain software by,
among other things, allegedly violating the license that was attached to the
software in various forms, and by allegedly making copies of the software
without the authorization of Trio, or in violation of various terms of the
license. Trio also contends that the Company has violated the terms of the
license by publishing software that contains software belonging to Trio under
conditions that allegedly violate the terms of the license. The Company answered
the complaint on September 3, 1996, denying all material allegations, and
discovery is proceeding. On September 30, 1996, Trio filed a motion for a
preliminary injunction seeking to prevent the Company from shipping any Intuit
products containing Trio software, including Quicken products. The Court denied
the motion on October 28, 1996. Although discovery has just begun, based on the
investigation conducted by the Company to date and a review of its products, the
Company believes that the complaint is without merit and intends to defend the
litigation vigorously.
The Company is subject to legal proceedings and claims that arise in the
ordinary course of its business. While management currently believes that the
ultimate amount of liability, if any, with respect to any pending actions will
not materially affect the financial position, results of operations or liquidity
of the Company, the ultimate outcome of any litigation is uncertain. If an
unfavorable outcome were to occur, the impact could be material. Furthermore,
any litigation, regardless of outcome, can have a material adverse impact on the
Company as a result of defense costs, diversion of management resources and
other factors.
7. SUBSEQUENT EVENTS
On November 15, 1996, the Company entered into an agreement to purchase 250,000
shares of preferred stock from Verisign, Inc. for $2.0 million. Verisign is a
developer of encryption software to enable more secure transactions over the
World Wide Web.
On November 25, 1996, the following proposals were approved at the Company's
annual meeting of stockholders: an amendment to the Intuit Inc. 1993 Equity
Incentive Plan to increase the number of shares of Intuit common stock available
for issuance pursuant to awards thereunder by 3,000,000 shares; adoption of the
Intuit Inc. 1996 Employee Stock Purchase Plan and authorization of the issuance
of 300,000 shares of Intuit common stock for purchases thereunder; and adoption
of the Intuit Inc. 1996 Directors Stock Option Plan and authorization of the
issuance of 120,000 shares of Intuit common stock issuable upon exercise of
stock options granted thereunder.
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<PAGE> 11
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The following discussion contains forward-looking statements that are subject to
risks and uncertainties. Statements indicating that the Company "expects,"
"estimates" or "believes" are forward-looking, as are all other statements
concerning future financial results, product offerings or other events that have
not yet occurred. There are several important factors that could cause actual
results or events to differ materially from those anticipated by the
forward-looking statements contained in the following discussion. Such factors
include, but are not limited to: the growth rates of certain market segments;
the positioning of the Company's products in those segments; retail sell-through
of personal finance, tax preparation and other software products; the
possibility of calculation errors or other "bugs" in the Company's software
products; variations in the cost of, and demand for, customer service and
technical support; shifts in retail demand for personal finance, tax preparation
and other software products; pricing pressures and the competitive environment
in the consumer and small business software industry; the Company's ability to
manage its businesses in a rapidly changing environment; the emergence of the
electronic financial marketplace; the cost of implementing the Company's
electronic financial services strategy; acceptance of online offers of financial
services by both financial institutions and prospective customers; the Company's
ability to establish strategic relationships with financial institutions and
processors of financial information; changing alliances among financial
institutions and other strategic partners; the emergence of competition from
these entities, as well as from other software companies; changes in laws which
may govern any of these products or services; consumer use of the Internet; the
timing and consumer acceptance of new product releases and services including
current users' willingness to upgrade from older versions of the Company's
products; the consummation of possible acquisitions; the Company's ability to
integrate acquired operations into its existing business; the consummation of
the planned transfer of ISC to CheckFree Corporation; the Company's ability to
successfully transition its online banking and bill payment operations to
CheckFree Corporation; possible fluctuations in the value of the Company's
investment in CheckFree Corporation; and the Company's ability to penetrate
international markets and manage its international operations. Additional
information on these and other risk factors which could affect the Company's
financial results is included elsewhere in this document as well as in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission on October 24, 1996.
OVERVIEW
The Company's revenue for the quarter ended October 31, 1996 was essentially
flat when compared with revenue for the quarter ended October 31, 1995. The
Company's net revenue varies significantly by quarter due to seasonality in
consumer buying patterns, particularly with respect to the Company's personal
and professional tax return preparation products which are sold primarily in the
November through March time frame, as well as the timing of new and upgrade
product releases.
The Company's earnings and stock price have been and may continue to be
subject to significant volatility, particularly on a quarterly basis. The
Company has previously experienced shortfalls in revenue and earnings from
levels expected by securities analysts, which has had an immediate and
significant adverse effect on the trading price of the Company's common stock.
There can be no assurance that this will not recur in the future. Additionally,
the Company participates in a highly dynamic industry which often results in
significant volatility of the Company's common stock price. In particular, the
impact of, and investors' assessment of the impact of, the market's acceptance
and the adoption rate of electronic financial services or the introduction of
competing electronic financial services on the Company's business may result in
significant increases in the volatility of the Company's stock price. In
addition, the trend towards Internet-based products and services could have a
material adverse effect on sales of the Company's products.
In September 1996, the Company announced three Internet-related strategic
initiatives designed to accelerate the adoption of electronic financial data
exchange and communication by individuals, small businesses and their
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<PAGE> 12
financial service providers. First, the Company announced plans to "open" the
architecture of its software products to financial service providers so that
such providers can connect directly through the Internet to their customers who
use Intuit products. Second, the Company announced that it would coordinate
efforts with several third parties to develop a comprehensive framework for
exchanging financial data over the Internet in an integrated collection of
specifications and protocols called OpenExchange(TM). Third, the Company
announced the signing of an agreement pursuant to which it will sell its banking
and bill payment processing subsidiary, ISC, to CheckFree.
ACQUISITIONS AND DIVESTITURE
In January 1996, the Company completed its acquisition of Milkyway KK
("Milkyway"), a provider of PC-based financial software in Japan. The
acquisition was treated as a pooling of interests for accounting purposes. In
addition to the issuance of 650,000 shares of Intuit common stock, the Company
recorded acquisition related expenses of $0.6 million. The accompanying
consolidated financial statements, and discussion thereof, are presented on a
combined basis for all periods.
In June 1996, the Company completed its acquisition of Interactive Insurance
Services Corp. ("IIS"), a developer of an Internet based system designed to
allow consumers to obtain personalized insurance information from national
insurance carriers via the World Wide Web. The acquisition, which was treated as
a purchase for accounting purposes, had a purchase price of approximately $9.0
million. Under the terms of the acquisition agreement, the Company issued
169,181 shares of Intuit common stock and options to purchase 3,255 shares of
Intuit common stock to IIS stockholders at the date of acquisition.
Approximately $8.0 million of in-process research and development was expensed
in the quarter ended July 31, 1996.
In September 1996, the Company completed its acquisition of Galt Technologies,
Inc. ("Galt"), a provider of mutual fund information on the World Wide Web. The
acquisition was treated as a purchase for accounting purposes. Under the terms
of the acquisition agreement, the Company issued 212,053 shares of Intuit common
stock and options to purchase approximately 33,686 shares of Intuit common stock
to Galt stockholders at the date of acquisition. Of the purchase price of $14.6
million, approximately $8.5 million was allocated to identified intangible
assets and goodwill which will be amortized over a period not to exceed three
years. Approximately $4.9 million of in-process research and development was
expensed in the quarter ended October 31, 1996.
Consistent with the guidelines established by Statement of Financial Accounting
Standards No. 86, "Accounting for the Costs of Computer Software to Be Sold,
Leased or Otherwise Marketed" ("SFAS No. 86"), for each acquisition accounted
for as a purchase, the Company determined the amounts allocated to developed and
in-process research and development based on whether technological feasibility
had been achieved and whether there was an alternative future use for the
technology. Due to the absence of detailed program designs, evidence of
technological feasibility was established through the existence of a completed
working model at which point functions, features and technical performance
requirements can be demonstrated. As of the respective dates of the
acquisitions, the Company concluded that the in-process research and development
had no alternative future use after taking into consideration the potential for
usage of the software in different products, resale of the software and internal
usage.
Acquisition-related costs reduced net income by approximately $10.6 million and
$15.3 million for the quarters ended October 31, 1995 and 1996, respectively.
Assuming no acquisitions in addition to those discussed above and no impairment
of value resulting in an acceleration of amortization, the net income effect of
future amortization is anticipated to be approximately $21.3 million, $6.1
million, $3.7 million, and $0.5 million for the years ended July 31, 1997
through 2000, respectively. Because of the high levels of non-cash amortization
expense arising from the various acquisitions discussed above, the Company may
report significant losses in the fiscal year ending July 31, 1997 and future
periods. In addition, if the Company completes additional acquisitions in the
future that are accounted for as purchases, operating results could be
materially adversely affected by such future amortization.
In September 1996, the Company announced plans to sell its ISC subsidiary to
CheckFree Corporation in exchange for 12.6 million shares of CheckFree common
stock, which will represent approximately 23% of the resulting 54.0 million
shares of CheckFree common stock outstanding following consummation of the
transaction. The closing price of CheckFree common stock was $17 per share on
November 29, 1996. The Company intends to account for
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<PAGE> 13
its investment in CheckFree using the cost method of accounting. Accordingly,
the Company plans to sell approximately two million shares of CheckFree common
stock acquired in the proposed transaction. Subject to CheckFree stockholder
approval, as well as other conditions, the transaction is expected to be
consummated in early calendar year 1997. The Company is accounting for ISC as
discontinued operations. See Note 3 to Notes to Condensed Consolidated Financial
Statements.
Although the Company believes the transactions discussed above were in the best
interests of the Company and its stockholders, there are significant risks
associated with these transactions. The acquisitions have expanded the Company's
size, product lines, personnel and geographic locations. The Company's ability
to integrate and organize these new businesses and successfully manage its
growth will necessitate improvements in its operational, financial and
management information systems. The Company is continually taking steps to
improve its internal processes, but there can be no assurance that problems in
these processes will not occur in the future. The divestiture of ISC, if
consummated, will result in the elimination of the Company's direct
participation in the online banking and bill payment processing business. If the
divestiture of ISC to CheckFree is concluded, the Company's planned investment
in the shares of CheckFree common stock to be issued to the Company in that
transaction could decrease in value due to market fluctuations and the success
or failure of CheckFree. If such decline was determined to be other than
temporary, charges to earnings would result. There is also a risk that the
Company will be unable to divest the CheckFree common stock shares quickly
because of contractual and legal restrictions on the sale of such shares and the
relatively large percentage of proposed ownership of CheckFree common stock by
the Company.
-13-
<PAGE> 14
RESULTS OF OPERATIONS
Set forth below are certain consolidated statement of operations data, as well
as such data as a percentage of net revenue, for the quarters ended October 31,
1996 and 1995:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
1995 1996
---------------------- ----------------------
(dollars in thousands, unaudited) Dollars % of Revenue Dollars % of Revenue
------- ------------ ------- ------------
<S> <C> <C> <C> <C>
Net revenue:
Software........................................... $ 88,751 86.8% $ 84,495 82.4%
Supplies........................................... 13,499 13.2 18,011 17.6
--------- ----- --------- -----
102,250 100.0 102,506 100.0
Costs and expenses:
Cost of goods sold:
Product.......................................... 27,416 26.8 27,045 26.4
Amortization of purchased software............... 675 0.7 40 --
Customer service and technical support............. 24,952 24.4 27,512 26.8
Selling and marketing.............................. 36,380 35.6 37,401 36.5
Research and development........................... 20,151 19.7 22,461 21.9
General and administrative......................... 10,053 9.8 11,906 11.6
Charge for purchased research and development -- -- 4,929 4.8
Amortization of goodwill and purchased
intangibles...................................... 9,875 9.7 10,302 10.1
--------- ----- --------- -----
Total costs and expenses...................... 129,502 126.7 141,596 138.1
--------- ----- --------- -----
Loss from operations.......................... (27,252) (26.7) (39,090) (38.1)
Interest and other income and expense, net........... 2,064 2.0 2,048 2.0
--------- ----- --------- -----
Loss from continuing operations before income taxes (25,188) (24.7) (37,042) (36.1)
Income tax benefit................................... (6,504) (6.4) (8,738) (8.5)
--------- ----- --------- -----
Loss from continuing operations...................... (18,684) (18.3) (28,304) (27.6)
Loss from operations of discontinued operations,
net of income tax benefit of $962................... (1,638) (1.6) -- --
--------- ----- --------- -----
Net loss $ (20,322) (19.9)% $ (28,304) (27.6)%
========= ===== ========= =====
</TABLE>
NET REVENUE for the quarter ended October 31, 1996 remained relatively flat
compared to the quarter ended October 31, 1995. Supplies net revenue, including
small business check, envelope and invoice products, increased approximately
33%, primarily as a result of the increased base of Quicken and QuickBooks
users. While the Company experienced an increase in supplies and small business
accounting software net revenue, this increase was offset principally by a
decrease in Quicken net revenue. This was due to both a decrease in average
selling prices and a decrease in units shipped into the retail channel during
the quarter ended October 31, 1996 as compared with shipments in the first
quarter of the prior year. Due to the seasonality of the Company's software
sales, the proportion of sales represented by supplies will vary considerably
throughout the year.
The software industry, including the Company, is selling increasingly through
alternative channels, such as OEM, or "bundling" products for a single low
price. While this strategy introduces new customers to products, it also
significantly reduces average selling prices. The software industry, including
the Company, has experienced significant platform shifts in the past, such as
from DOS to Windows and Windows 95. There is increased competition on the
Windows and Windows 95 platforms including lower priced products and free
promotional products that compete with the Company's software. In order to
respond to these competitive pressures, the
-14-
<PAGE> 15
Company may use price reductions and/or other promotional offers which could
negatively impact net revenue and income from operations. As platform shifts
continue to occur, there are risks that competitors could introduce new products
before the Company's products are available on a particular platform or that
customers may not accept a platform that the Company has chosen or will choose
to pursue. Further consolidation of the software industry or changes in the
personal computer industry could lead to increased competition in innovation and
pricing strategies. The Company cannot quantify how much these factors have
affected or will affect its business. In addition, a number of the Company's
competitors have greater financial resources than the Company, potentially
giving them a competitive advantage.
Although the Company believes there are opportunities in international markets,
there can be no assurance that the Company's products will be accepted in these
markets. Furthermore, there can be no assurance that the Company's new or
upgraded products will be accepted, will not be delayed or canceled, or will not
contain errors or "bugs" that could affect the performance of the products or
cause damage to a user's data. If any of these events occurs, the Company may
experience reduced net revenue, loss of market share, increased maintenance
release costs and higher technical support costs. The Company derives
significant portions of its revenues from certain distributors and resellers.
Bankruptcy of a distributor or retailer could materially adversely affect the
Company's future revenue streams for a period of time.
COST OF GOODS SOLD decreased to 26.4% of net revenue for the quarter ended
October 31, 1996, from 27.5% in the comparable period of the prior year.
Decreased amortization of purchased software resulting from the Company's
acquisitions accounted for the majority of this decline. The Company anticipates
that cost of goods sold will be affected by approximately $0.6 million of
acquisition-related amortization costs in fiscal 1997. These costs could
increase if future acquisitions were to occur. Excluding acquisition-related
amortization costs, cost of goods sold would have been 26.4% and 26.8% of net
revenue for the quarters ended October 31, 1996 and 1995, respectively.
Software cost of goods sold, excluding acquisition-related amortization costs,
was $19.3 million or 22.9% of software net revenue for the quarter ended October
31, 1996, as compared to $21.5 million or 24.3% in the quarter ended October 31,
1995. The decrease resulted primarily from improvements in inventory management
and lower cost of materials. Supplies cost of goods sold increased to $7.7
million for the quarter ended October 31, 1996 from $5.9 million for the
comparable period of the prior year. As a percentage of supplies net revenue,
supplies cost of goods sold decreased slightly to 42.9% for the quarter ended
October 31, 1996 from 43.5% for the quarter ended October 31, 1995. The Company
plans to continue to take actions to reduce the materials costs of all its
products. However, there can be no assurance that margin improvements will be
achieved or that current margins will be sustained.
CUSTOMER SERVICE AND TECHNICAL SUPPORT costs were 26.8% and 24.4% of net revenue
for the quarters ended October 31, 1996 and 1995, respectively. The Company
incurs a fixed base of support costs, which is increased by seasonal staffing
and third-party services during periods of seasonally higher sales. Customer
service and technical support costs were higher during the quarter ended October
31, 1996 compared to the same period of the prior year primarily as a result of
the addition of new facilities, employees, training, systems and processes to
improve service and support to customers. In addition, the Company is selling
higher volumes of products via direct marketing which results in higher customer
service costs than sales made through other distribution channels. Post-contract
customer support costs are accrued at the time revenue is recognized, are
included in customer service and technical support expenses and are not included
in cost of goods sold.
SELLING AND MARKETING expenses were 36.5% of net revenue during the quarter
ended October 31, 1996 as compared to 35.6% in the same period of the prior
year. Selling and marketing expenses increased as a percentage of revenue
primarily as a result of increased costs to support international product
launches in the quarter ended October 31, 1996 as compared to the quarter ended
October 31, 1995. The Company expects selling and marketing expenses to continue
to increase in the future as the Company releases and promotes new products and
expands internationally; however, there can be no assurance that such increases
will result in increased net revenue.
RESEARCH AND DEVELOPMENT expenses increased to 21.9% of net revenue for the
quarter ended October 31, 1996, from 19.7% of net revenue in the same period of
the prior year. The increase was due to continued development of
-15-
<PAGE> 16
new versions and upgrades of software products and for development of electronic
commerce services in the insurance and investments areas. The Company has
experienced, and expects to continue to experience, significant growth in
research and development expenses, both in absolute dollars and as a percentage
of revenue, for development efforts on new and existing products including
foreign versions of its products. Because of the seasonality of the tax
preparation software business, expenses are higher in the July and October
quarters without corresponding net revenue during the same periods.
GENERAL AND ADMINISTRATIVE expenses increased to 11.6% of net revenue during the
quarter ended October 31, 1996 from 9.8% during the quarter ended October 31,
1995. The increase resulted from an increase in bad debt expense due to
financial difficulties experienced by a retail customer and growth in
infrastructure to support the Company's business.
INTEREST AND OTHER INCOME AND EXPENSE, NET was $2.0 million for the quarter
ended October 31, 1996 which was relatively flat compared to the same period of
the prior year.
INCOME TAXES. For the quarter ended October 31, 1996, the Company recorded an
income tax benefit of $8.7 million on a pretax loss of $37.0 million. The tax
benefit rate differs from the statutory rate primarily because of the
nondeductible status of goodwill amortization. There was no valuation allowance
for deferred tax assets of $26.0 million at October 31, 1996 based on
management's assessment that current levels of taxable income will be sufficient
to realize the net deferred tax assets.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company's business has experienced and is expected to continue to experience
substantial seasonality, due principally to the timing of the tax return
preparation season, timing of production launches for new or updated versions of
products and, to a lesser extent, consumer software buying patterns. Sales of
the Company's tax products are concentrated in the period from November, when
certain professional tax products are released, through March when consumers
purchase the products in advance of the April 15 filing deadline. Sales of the
Company's Quicken products are typically strongest during the year end holiday
buying season. As a result of these seasonal patterns, the Company typically
generates more than 100% of its income from operations before
acquisition-related charges during its fiscal quarters ending January 31 and
April 30. Because of these seasonal factors and a significantly increased level
of operating expenses to support the Company's expanded infrastructure and
development efforts, the Company incurred significant losses from operations
before acquisition-related charges during its fiscal quarters ended July 31,
1996 and October 31, 1996. The Company expects to continue to report seasonal
losses before acquisition-related costs and amortization in the July and October
quarters of future fiscal years. In addition, the Company expects to incur
significant amortization expenses relating to historical and future acquisitions
which may be accounted for as purchases. Such amortization charges will
adversely affect operating income and net income in future quarters.
The Company's quarterly operating results have varied significantly in the past,
and are likely to vary significantly in the future, based upon a number of
factors. In addition to seasonal factors, the Company's quarterly operating
results can be affected significantly by the number and timing of new product or
version releases by the Company as well as a number of other factors including
the timing of product announcements or introductions by the Company's
competitors, discretionary marketing and promotional expenditures, research and
development expenditures and a variety of non-recurring events such as
acquisitions. Products are generally shipped as orders are received and,
consequently, quarterly sales and operating results depend primarily on the
volume and timing of orders received during the quarter which are difficult to
forecast. A significant portion of the Company's operating expenses are
relatively fixed and planned expenditures are based on sales forecasts. Thus, if
net revenue levels are below expectations, operating results are likely to be
materially adversely affected. In particular, net income, if any, may be
disproportionately affected because only a small portion of the Company's
expenses varies with revenue in the short term. In response to competition, the
Company may also choose to reduce prices or increase spending, which may
adversely affect the Company's operating results and financial condition. There
can be no assurance that the Company will sustain significant revenue growth in
the future or be profitable in any future period. Due to the foregoing factors,
the Company believes that period-to-period comparisons of its results of
operations are not
-16-
<PAGE> 17
necessarily meaningful and should not be relied upon as indications of future
performance. The Company has guaranteed the calculations of its tax products and
will pay any penalties and interest due the IRS as a result of calculation
errors. As of October 31, 1996, claims made for such errors have been
insignificant, although significant claims may be received in the future.
The markets in which the Company competes are characterized by ongoing
technological developments, frequent new product announcements and
introductions, evolving industry standards, changing customer requirements and
new competitors. The introduction of products and services embodying new
technologies and the emergence of new industry standards and practices including
changes in tax laws, regulations or procedures, can render existing products
obsolete and unmarketable. The Company's future success depends upon its ability
to enhance its existing products and services, develop new products and services
that address the changing requirements of its customers, develop additional
products and services for new or other platforms and environments (such as the
Internet) and anticipate or respond to technological advances, emerging industry
standards and practices and changes in tax and other laws, regulations and
procedures in a timely, cost-effective manner. In response to major industry
changes reflected by the increasing popularity of the Internet among consumers
and financial service providers, the Company has expanded its Internet strategy.
There can be no assurance that such initiatives can be successfully implemented
or that they will result in increased revenue or profits for the Company.
Conversely, there can be no assurance that consumers' use of the Internet,
particularly for commercial transactions, will continue to increase as rapidly
as it has during the past few years.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1996, the Company had $170.8 million in cash and short-term
investments, a $27.2 million decrease from July 31, 1996. The decrease was
primarily due to the seasonality of the Company's business which generally
results in the majority of net revenues and cash receipts occurring in the
January and April quarters. During the quarter ended October 31, 1996, operating
activities used $16.0 million in cash compared with $19.9 million used in the
quarter ended October 31, 1995. The Company's investing activities provided
$15.8 million in cash in the quarter ended October 31, 1996 compared to the use
of $27.3 million in the comparable period of the prior year. In the quarter
ended October 31, 1996, cash from investing activities was provided by net
liquidations of short-term investments, partially offset by purchases of
property and equipment. Cash was used in investing activities for the comparable
period of the prior year primarily for the purchase of property and equipment.
The Company's financing activities provided $1.2 million and $2.7 million of
cash in the quarters ended October 31, 1996 and 1995, respectively, due
primarily to proceeds from the exercise of stock options.
The Company enters into leases for new or expanded facilities in the normal
course of its business. During fiscal 1996, the Company began moving its
headquarters from Menlo Park, California to larger facilities in Mountain View,
California. The move is expected to be completed in calendar year 1997. The
Company also relocated its operations in San Diego, California to a new office
facility in June 1996. The Company leases various other properties throughout
the world. The Company has no other significant expenditure commitments,
although additional cash may be used to acquire technology through purchases and
strategic acquisitions.
The Company believes cash and short-term investments will be sufficient to meet
the Company's anticipated seasonal working capital and capital expenditure
requirements for at least the next twelve months.
-17-
<PAGE> 18
PART II: OTHER INFORMATION
ITEM 1
LEGAL PROCEEDINGS
On July 31, 1996, Trio Systems L.L.C. ("Trio") filed a lawsuit against the
Company in the U.S. District Court, Central District of California (Los Angeles)
alleging copyright infringement and violation of a license agreement. The
Company answered the complaint on September 3, 1996, denying all material
allegations. On September 30, 1996, Trio filed a motion for a preliminary
injunction seeking to prevent the Company from shipping any Intuit products
containing Trio software, including Quicken products. The Court denied the
motion on October 28, 1996. Although discovery has just begun, based on the
investigation conducted by the Company to date and a review of its products, the
Company believes that the complaint is without merit and intends to defend the
litigation vigorously.
The Company is subject to other legal proceedings and claims that arise in the
ordinary course of its business. While management currently believes that the
ultimate amount of liability, if any, with respect to any pending actions will
not materially affect the financial position, results of operations or liquidity
of the Company, the ultimate outcome of any litigation is uncertain. If an
unfavorable outcome were to occur, the impact could be material. Furthermore,
any litigation, regardless of outcome, can have a material adverse impact on the
Company as a result of defense costs, diversion of management resources and
other factors. See Item 3 of the Company's Annual Report on Form 10-K for the
fiscal year ended July 31, 1996.
-18-
<PAGE> 19
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
(a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
Exhibit 11.01 Computation of net loss per share.
Exhibit 27.01 Financial Data Schedule (filed only in
electronic format)
----------
(b) REPORTS ON FORM 8-K:
A report on Form 8-K dated September 18, 1996 was filed by Intuit Inc.
pursuant to Item 2 which described Intuit's acquisition of Galt
Technologies, Inc.
-19-
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTUIT INC.
(REGISTRANT)
Date: December 13, 1996 By: /s/ JAMES J. HEEGER
--------------------------------------
James J. Heeger
Senior Vice President and Chief
Financial Officer
Date: December 13, 1996 By: /s/ GREG J. SANTORA
--------------------------------------
Greg J. Santora
Vice President of Finance
-20-
<PAGE> 21
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
11.01 Computation of Net Loss Per Share
27.01 Financial Data Schedule
<PAGE> 1
INTUIT INC. EXHIBIT 11.01
COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
1995 1996
---- ----
<S> <C> <C>
(In thousands, except per share data; unaudited)
PRIMARY AND FULLY DILUTED
Computation of common and common equivalent shares
outstanding:
Weighted average common shares outstanding...................... 44,677 46,049
Equivalent shares issuable upon exercise of
options (1) ................................................. -- --
---------- ----------
Total weighted average common and common
equivalent shares outstanding: ............................... 44,677 46,049
========== ==========
Net loss from continuing operations............................... $ (18,684) $ (28,304)
Net loss from discontinued operations............................. (1,638) --
---------- ----------
Net loss.......................................................... $ (20,322) $ (28,304)
========== ==========
Net loss per share from continuing operations..................... $ (0.42) $ (0.61)
Net loss per share from discontinued operations................... (0.04) --
---------- ----------
Net loss per share................................................ $ (0.46) $ (0.61)
========== ==========
</TABLE>
Fully diluted earnings per share are not presented on the face of the Condensed
Consolidated Statements of Operations since they are identical to primary
earnings per share.
(1) Dilutive shares are not included in periods with a net loss
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<EXCHANGE-RATE> 1
<CASH> 45,595
<SECURITIES> 125,205
<RECEIVABLES> 90,346
<ALLOWANCES> (5,974)
<INVENTORY> 4,935
<CURRENT-ASSETS> 302,594
<PP&E> 154,549
<DEPRECIATION> (57,380)
<TOTAL-ASSETS> 439,275
<CURRENT-LIABILITIES> 147,513
<BONDS> 5,259
0
0
<COMMON> 463
<OTHER-SE> 283,219
<TOTAL-LIABILITY-AND-EQUITY> 439,275
<SALES> 102,506
<TOTAL-REVENUES> 102,506
<CGS> 27,045
<TOTAL-COSTS> 27,085
<OTHER-EXPENSES> 114,511
<LOSS-PROVISION> 1,745
<INTEREST-EXPENSE> 81
<INCOME-PRETAX> (37,042)
<INCOME-TAX> (8,738)
<INCOME-CONTINUING> (28,304)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (28,304)
<EPS-PRIMARY> (.61)
<EPS-DILUTED> (.61)
</TABLE>
