Description of Business and Summary of Significant Accounting Policies

Description of Business

Intuit Inc. provides business and financial management solutions for small businesses, consumers, and accounting professionals. With flagship products and services that include QuickBooks, TurboTax and Quicken, we help customers solve important business and financial management problems, such as running a small business, paying bills, filing income tax returns, and managing personal finances. ProSeries and Lacerte are Intuit’s tax preparation offerings for professional accountants. Incorporated in 1984 and headquartered in Mountain View, California, we sell our products and services primarily in the United States.

Basis of Presentation

These condensed consolidated financial statements include the financial statements of Intuit and its wholly owned subsidiaries. We have eliminated all significant intercompany balances and transactions in consolidation. We have included all adjustments, consisting only of normal recurring items, which we considered necessary for a fair presentation of our financial results for the interim periods presented. We have reclassified certain amounts previously reported in our financial statements to conform to the current presentation, including amounts related to discontinued operations and reportable segments. See Note 4, “Discontinued Operations,” and Note 10, “Segment Information,” for more information.

As discussed in Note 4, we sold our Intuit Websites business in September 2012. In August 2013 we sold our Intuit Financial Services (IFS) business and our Intuit Health business. We have reclassified our statements of operations for all periods presented to reflect these three businesses as discontinued operations. We have also segregated the net assets of IFS from continuing operations on our balance sheet at July 31, 2013. The net assets of Intuit Websites and Intuit Health were not significant, so we have not segregated them from continuing operations on our balance sheet at July 31, 2013. Because the cash flows of our Intuit Websites, IFS, and Intuit Health discontinued operations were not material for any period presented, we have not segregated the cash flows of those businesses from continuing operations on our statements of cash flows. Unless noted otherwise, discussions in these notes pertain to our continuing operations.

These unaudited condensed consolidated financial statements and accompanying notes should be read together with the audited consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2013. Results for the six months ended January 31, 2014 do not necessarily indicate the results we expect for the fiscal year ending July 31, 2014 or any other future period.

Seasonality

Our QuickBooks, Consumer Tax, and Professional Tax offerings are highly seasonal. Revenue from our QuickBooks software products tends to be highest during our second and third fiscal quarters. Sales of income tax preparation products and services are heavily concentrated in the period from November through April. These seasonal patterns mean that our total net revenue is usually highest during our second quarter ending January 31 and third quarter ending April 30. We typically report losses in our first quarter ending October 31 and fourth quarter ending July 31. During these quarters, revenue from our tax businesses is minimal while core operating expenses such as research and development continue at relatively consistent levels.

Significant Accounting Policies

We describe our significant accounting policies in Note 1 to the financial statements in Item 8 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2013. There have been no changes to our significant accounting policies during the first six months of fiscal 2014.

Computation of Net Income (Loss) Per Share

We compute basic net income or loss per share using the weighted average number of common shares outstanding during the period. We compute diluted net income per share using the weighted average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares include shares issuable upon the exercise of stock options and upon the vesting of restricted stock units (RSUs) under the treasury stock method.

We include stock options with combined exercise prices, unrecognized compensation expense and tax benefits that are less than the average market price for our common stock, and RSUs with unrecognized compensation expense and tax benefits that are less than the average market price for our common stock, in the calculation of diluted net income per share. We exclude stock options with combined exercise prices, unrecognized compensation expense and tax benefits that are greater than the average market price for our common stock, and RSUs with unrecognized compensation expense and tax benefits that are greater than the average market price for our common stock, from the calculation of diluted net income per share because their effect is anti-dilutive. Under the treasury stock method, the amount that must be paid to exercise stock options, the amount of compensation expense for future service that we have not yet recognized for stock options and RSUs, and the amount of tax benefits that will be recorded in additional paid-in capital when the awards become deductible are assumed to be used to repurchase shares.

In loss periods, basic net loss per share and diluted net loss per share are the same since the effect of potential common shares is anti-dilutive and therefore excluded.

The following table presents the composition of shares used in the computation of basic and diluted net income (loss) per share for the periods indicated.



	Three Months Ended					Six Months Ended
(In millions, except per share amounts)	January 31, 2014			January 31, 2013		January 31, 2014			January 31, 2013
Numerator:
Net income (loss) from continuing operations	$	(37	)	$	65	$	(94	)	$	11
Net income from discontinued operations	—			6		46			41
Net income (loss)	$	(37	)	$	71	$	(48	)	$	52

Denominator:
Shares used in basic per share amounts:
Weighted average common shares outstanding	284			296		286			296

Shares used in diluted per share amounts:
Weighted average common shares outstanding	284			296		286			296
Dilutive common equivalent shares from stock options
and restricted stock awards	—			7		—			6
Dilutive weighted average common shares outstanding	284			303		286			302

Basic and diluted net income (loss) per share:
Basic net income (loss) per share from continuing operations	$	(0.13	)	$	0.22	$	(0.33	)	$	0.04
Basic net income per share from discontinued operations	—			0.02		0.16			0.14
Basic net income (loss) per share	$	(0.13	)	$	0.24	$	(0.17	)	$	0.18

Diluted net income (loss) per share from continuing operations	$	(0.13	)	$	0.21	$	(0.33	)	$	0.04
Diluted net income per share from discontinued operations	—			0.02		0.16			0.13
Diluted net income (loss) per share	$	(0.13	)	$	0.23	$	(0.17	)	$	0.17

Shares excluded from computation of diluted net income (loss) per share:
Weighted average stock options and restricted stock units that would have been included in the computation of dilutive common equivalent shares outstanding if net income had been reported in the period	19			—		17			—

Weighted average stock options and restricted stock units excluded from computation due to anti-dilutive effect	—			3		3			3

Concentration of Credit Risk and Significant Customers

No customer accounted for 10% or more of total net revenue in the three or six months ended January 31, 2014 or January 31, 2013. Due to the seasonality of our small business, consumer tax and personal finance offerings, one retail customer accounted for 19% of gross accounts receivable at January 31, 2014. No customer accounted for 10% or more of gross accounts receivable at July 31, 2013.