May 25, 2012 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

Form: 10-Q

Documents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________________

FORM 10-Q



R		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the quarterly period ended April 30, 2012



o		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 (State of incorporation)		77-0034661 (IRS employer identification no.)
	2700 Coast Avenue, Mountain View, CA 94043 (Address of principal executive offices)

	(650) 944-6000 (Registrant’s telephone number, including area code)

Indicate by 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 R No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes R No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No R

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 293,668,960 shares of Common Stock, $0.01 par value, were outstanding at May 18, 2012.

INTUIT INC.

FORM 10-Q

INDEX



	Page Number
PART I FINANCIAL INFORMATION

ITEM 1: Financial Statements

Condensed Consolidated Statements of Operations for the three and nine months ended April 30, 2012 and 2011	3

Condensed Consolidated Balance Sheets at April 30, 2012 and July 31, 2011	4

Condensed Consolidated Statements of Stockholders’ Equity for the nine months ended April 30, 2012 and 2011	5

Condensed Consolidated Statements of Cash Flows for the three and nine months ended April 30, 2012 and 2011	6

Notes to Condensed Consolidated Financial Statements	7

ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

ITEM 3: Quantitative and Qualitative Disclosures about Market Risk	32

ITEM 4: Controls and Procedures	33

PART II OTHER INFORMATION

ITEM 1: Legal Proceedings	34

ITEM 1A: Risk Factors	34

ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds	44

ITEM 6: Exhibits	45

Signatures	46


EX-31.01
EX-31.02
EX-32.01
EX-32.02
EX-101.INS XBRL Instance Document
EX-101.SCH XBRL Taxonomy Extension Schema
EX-101.CAL XBRL Taxonomy Extension Calculation Linkbase
EX-101.LAB XBRL Taxonomy Extension Label Linkbase
EX-101.PRE XBRL Taxonomy Extension Presentation Linkbase
EX-101.DEF XBRL Taxonomy Extension Definition Linkbase

Intuit, the Intuit logo, QuickBooks, TurboTax, Lacerte, ProSeries, Quicken and Mint, among others, are registered trademarks and/or registered service marks of Intuit Inc., or one of its subsidiaries, in the United States and other countries. Other parties’ marks are the property of their respective owners.

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PART I

ITEM 1

FINANCIAL STATEMENTS

INTUIT INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



	Three Months Ended						Nine Months Ended
(In millions, except per share amounts)	April 30, 2012			April 30, 2011			April 30, 2012			April 30, 2011
Net revenue:
Product	$	598		$	602		$	1,239		$	1,248
Service and other	1,347			1,246			2,319			2,010
Total net revenue	1,945			1,848			3,558			3,258
Costs and expenses:
Cost of revenue:
Cost of product revenue	32			32			116			110
Cost of service and other revenue	166			132			456			384
Amortization of acquired technology	4			4			12			13
Selling and marketing	365			351			945			901
Research and development	167			164			502			478
General and administrative	102			93			289			271
Amortization of other acquired intangible assets	2			11			33			33
Total costs and expenses	838			787			2,353			2,190
Operating income	1,107			1,061			1,205			1,068
Interest expense	(12		)	(15		)	(43		)	(45		)
Interest and other income, net	9			6			23			20
Income before income taxes	1,104			1,052			1,185			1,043
Income tax provision	370			364			397			352
Net income	$	734		$	688		$	788		$	691

Basic net income per share	$	2.49		$	2.27		$	2.65		$	2.23
Shares used in basic per share calculations	295			303			297			309

Diluted net income per share	$	2.42		$	2.20		$	2.58		$	2.16
Shares used in diluted per share calculations	303			313			306			319

Dividends declared per common share	$	0.15		$	—		$	0.45		$	—

See accompanying notes.

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INTUIT INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



(In millions)	April 30, 2012			July 31, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	859		$	722
Investments	663			699
Accounts receivable, net	294			171
Income taxes receivable	5			72
Deferred income taxes	119			94
Prepaid expenses and other current assets	65			82
Current assets before funds held for customers	2,005			1,840
Funds held for customers	325			414
Total current assets	2,330			2,254
Long-term investments	90			63
Property and equipment, net	555			561
Goodwill	1,883			1,886
Acquired intangible assets, net	138			180
Long-term deferred income taxes	18			55
Other assets	102			111
Total assets	$	5,116		$	5,110
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	—		$	500
Accounts payable	209			129
Accrued compensation and related liabilities	210			215
Deferred revenue	368			406
Income taxes payable	257			—
Other current liabilities	218			141
Current liabilities before customer fund deposits	1,262			1,391
Customer fund deposits	325			414
Total current liabilities	1,587			1,805
Long-term debt	499			499
Other long-term obligations	195			190
Total liabilities	2,281			2,494
Commitments and contingencies
Stockholders’ equity:
Preferred stock	—			—
Common stock and additional paid-in capital	3,007			2,886
Treasury stock, at cost	(4,878		)	(4,316		)
Accumulated other comprehensive income	29			15
Retained earnings	4,677			4,031
Total stockholders’ equity	2,835			2,616
Total liabilities and stockholders’ equity	$	5,116		$	5,110

See accompanying notes.

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INTUIT INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)



(In millions, except shares in thousands)	Shares of Common Stock		Common Stock and Additional Paid-In Capital			Treasury Stock			Accumulated Other Comprehensive Income		Retained Earnings			Total Stockholders' Equity
Balance at July 31, 2011	300,597		$	2,886		$	(4,316	)	$	15	$	4,031		$	2,616
Components of comprehensive net income:
Net income	—		—			—			—		788			788
Other comprehensive income, net of tax	—		—			—			14		—			14
Comprehensive net income														802
Issuance of treasury stock under employee stock plans	8,705		(63		)	231			—		(8		)	160
Stock repurchases under stock repurchase programs	(14,973	)	—			(793		)	—		—			(793		)
Cash dividends declared ($0.45 per share)	—		—			—			—		(134		)	(134		)
Tax benefit from share-based compensation plans	—		64			—			—		—			64
Share-based compensation expense	—		120			—			—		—			120
Balance at April 30, 2012	294,329		$	3,007		$	(4,878	)	$	29	$	4,677		$	2,835



(In millions, except shares in thousands)	Shares of Common Stock		Common Stock and Additional Paid-In Capital		Treasury Stock		Accumulated Other Comprehensive Income	Retained Earnings	Total Stockholders' Equity
Balance at July 31, 2010	313,861		2,728		(3,315	)	11	3,397	2,821
Components of comprehensive net income:
Net income	—		—		—		—	691	691
Other comprehensive income, net of tax	—		—		—		4	—	4
Comprehensive net income									695
Issuance of treasury stock under employee stock plans	13,069		(73	)	308		—	—	235
Stock repurchases under stock repurchase programs	(23,349	)	—		(1,110	)	—	—	(1,110	)
Tax benefit from share-based compensation plans	—		68		—		—	—	68
Share-based compensation expense	—		112		—		—	—	112
Balance at April 30, 2011	303,581		2,835		(4,117	)	15	4,088	2,821

See accompanying notes.

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INTUIT INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Three Months Ended						Nine Months Ended
(In millions)	April 30, 2012			April 30, 2011			April 30, 2012			April 30, 2011
Cash flows from operating activities:
Net income	$	734		$	688		$	788		$	691
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	42			42			130			120
Amortization of acquired intangible assets	10			19			55			58
Share-based compensation expense	37			39			120			112
Deferred income taxes	18			9			1			25
Tax benefit from share-based compensation plans	19			20			64			68
Excess tax benefit from share-based compensation plans	(19		)	(18		)	(62		)	(59		)
Other	1			3			3			14
Total adjustments	108			114			311			338
Changes in operating assets and liabilities:
Accounts receivable	297			215			(124		)	(130		)
Prepaid expenses, income taxes receivable and other assets	102			132			84			17
Accounts payable	(4		)	(4		)	80			42
Accrued compensation and related liabilities	42			53			(5		)	(6		)
Deferred revenue	(218		)	(226		)	(36		)	(41		)
Income taxes payable	256			208			257			195
Other liabilities	(39		)	(42		)	73			79
Total changes in operating assets and liabilities	436			336			329			156
Net cash provided by operating activities	1,278			1,138			1,428			1,185
Cash flows from investing activities:
Purchases of available-for-sale debt securities	(149		)	(80		)	(492		)	(803		)
Sales of available-for-sale debt securities	116			55			382			1,470
Maturities of available-for-sale debt securities	49			33			138			254
Net change in money market funds and other cash equivalents held to satisfy customer fund obligations	5			(46		)	89			(20		)
Net change in customer fund deposits	(5		)	46			(89		)	46
Purchases of property and equipment	(33		)	(31		)	(125		)	(166		)
Acquisitions of intangible assets	—			—			—			(3		)
Other	—			(1		)	15			2
Net cash (used in) provided by investing activities	(17		)	(24		)	(82		)	780
Cash flows from financing activities:
Repayment of debt	(500		)	—			(500		)	—
Net proceeds from issuance of treasury stock under employee stock plans	54			48			160			235
Purchases of treasury stock	(207		)	(250		)	(793		)	(1,110		)
Cash dividends paid to stockholders	(45		)	—			(134		)	—
Excess tax benefit from share-based compensation plans	19			18			62			59
Net cash used in financing activities	(679		)	(184		)	(1,205		)	(816		)
Effect of exchange rates on cash and cash equivalents	—			6			(4		)	6
Net increase in cash and cash equivalents	582			936			137			1,155
Cash and cash equivalents at beginning of period	277			433			722			214
Cash and cash equivalents at end of period	$	859		$	1,369		$	859		$	1,369

See accompanying notes.

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INTUIT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


1.	Description of Business and Summary of Significant Accounting Policies

Description of Business

Intuit Inc. provides business and financial management solutions for small and medium-sized businesses, consumers, accounting professionals and financial institutions. Our flagship products and services, including QuickBooks, TurboTax and Quicken, simplify small business management including payment and payroll processing, tax preparation and filing, and personal finance. Lacerte and ProSeries are Intuit’s tax preparation offerings for professional accountants. Our Financial Services business provides online banking solutions and services to banks and credit unions. 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. 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, 2011. Results for the three and nine months ended April 30, 2012 do not necessarily indicate the results we expect for the fiscal year ending July 31, 2012 or any other future period.

Seasonality

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, 2011. There have been no changes to our significant accounting policies during the first nine months of fiscal 2012.

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.

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



	Three Months Ended				Nine Months Ended
(In millions, except per share amounts)	April 30, 2012		April 30, 2011		April 30, 2012		April 30, 2011
Numerator:
Net income	$	734	$	688	$	788	$	691

Denominator:
Shares used in basic per share amounts:
Weighted average common shares outstanding	295		303		297		309

Shares used in diluted per share amounts:
Weighted average common shares outstanding	295		303		297		309
Dilutive common equivalent shares from stock options
and restricted stock awards	8		10		9		10
Dilutive weighted average common shares outstanding	303		313		306		319

Basic and diluted net income per share:
Basic net income per share	$	2.49	$	2.27	$	2.65	$	2.23
Diluted net income per share	$	2.42	$	2.20	$	2.58	$	2.16

Weighted average stock options and restricted stock units excluded from calculation due to anti-dilutive effect	—		1		3		—

Concentration of Credit Risk and Significant Customers

No customer accounted for 10% or more of total net revenue in the three or nine months ended April 30, 2012 or April 30, 2011. No customer accounted for 10% or more of total accounts receivable at April 30, 2012 or July 31, 2011.

Recent Accounting Pronouncements

ASU 2011-05 and ASU 2011-12, “Comprehensive Income (Topic 220)”

On June 16, 2011 the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income” (ASU 2011-05) and on December 23, 2011 the FASB issued ASU No. 2011-12, "Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05." These updates amend ASC Topic 220, “Comprehensive Income” to provide that total comprehensive income will be reported in one continuous statement or two separate but consecutive statements of financial performance. Presentation of total comprehensive income in the statement of stockholders' equity or the footnotes will no longer be allowed. The calculation of net income and basic and diluted net income per share will not be affected. ASU 2011-05 is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2011, which means that it will be effective for our fiscal year beginning August 1, 2012. Retrospective adoption is required and early adoption is permitted. We do not believe that adoption of ASU 2011-05 will have a significant impact on our consolidated financial statements.

ASU 2011-08, “Intangibles – Goodwill and Other (Topic 350)”

On September 15, 2011, the FASB issued ASU No. 2011-08, “Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment” (ASU 2011-08)." This update amends ASC Topic 350, “Intangibles – Goodwill and Other” to give companies the option to perform a qualitative assessment that may allow them to skip the annual two-step test and reduce costs. ASU 2011-08 is effective for fiscal years beginning after December 15, 2011, which means that it will be effective for our fiscal year beginning August 1, 2012. Early adoption is permitted. We are in the process of evaluating this update and therefore have not yet determined the impact that adoption of ASU 2011-08 will have on our consolidated financial statements.

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2.	Fair Value Measurements

The authoritative guidance defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. When determining fair value, we consider the principal or most advantageous market for an asset or liability and assumptions that market participants would use when pricing the asset or liability. In addition, we consider and use all valuation methods that are appropriate in estimating the fair value of an asset or liability.

The authoritative guidance establishes a fair value hierarchy that is based on the extent and level of judgment used to estimate the fair value of assets and liabilities. In general, the authoritative guidance requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset or liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the measurement of its fair value. The three levels of input defined by the authoritative guidance are as follows:


•	Level 1 uses unadjusted quoted prices that are available in active markets for identical assets or liabilities.

•

Level 2 uses inputs other than quoted prices included in Level 1 that are either directly or indirectly observable through correlation with market data. These include quoted prices in active markets for similar assets or liabilities; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs to valuation models or other pricing methodologies that do not require significant judgment because the inputs used in the model, such as interest rates and volatility, can be corroborated by readily observable market data for substantially the full term of the assets or liabilities.


•	Level 3 uses one or more significant inputs that are supported by little or no market activity and that are significant to the determination of fair value. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques and significant management judgment or estimation.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes financial assets and financial liabilities that we measured at fair value on a recurring basis at the dates indicated, classified in accordance with the fair value hierarchy described above.



	April 30, 2012								July 31, 2011
(In millions)	Level 1		Level 2		Level 3		Total Fair Value		Level 1		Level 2		Level 3		Total Fair Value
Assets:
Cash equivalents, primarily money market funds	$	798	$	—	$	—	$	798	$	854	$	—	$	—	$	854
Available-for-sale securities:
Municipal bonds	—		388		—		388		—		434		—		434
Municipal auction rate securities	—		—		54		54		—		—		59		59
Corporate notes	—		319		—		319		—		288		—		288
U.S. agency securities	—		131		—		131		—		152		—		152
Marketable equity securities	35		—		—		35		—		—		—		—
Total available-for-sale securities	35		838		54		927		—		874		59		933
Total assets measured at fair value on a recurring basis	$	833	$	838	$	54	$	1,725	$	854	$	874	$	59	$	1,787
Liabilities:
Senior notes (1)	$	—	$	576	$	—	$	576	$	—	$	1,084	$	—	$	1,084

______________________________


(1)	Carrying value on our balance sheet at April 30, 2012 was $499 million and at July 31, 2011 was $999 million. See Note 6.

The following table summarizes our cash equivalents and available-for-sale debt and equity securities by balance sheet classification and level in the fair value hierarchy at the dates indicated.



	April 30, 2012								July 31, 2011
(In millions)	Level 1		Level 2		Level 3		Total Fair Value		Level 1		Level 2		Level 3		Total Fair Value
Cash equivalents:
In cash and cash equivalents	$	648	$	—	$	—	$	648	$	615	$	—	$	—	$	615
In funds held for customers	150		—		—		150		239		—		—		239
Total cash equivalents	$	798	$	—	$	—	$	798	$	854	$	—	$	—	$	854
Available-for-sale securities:
In investments	$	—	$	663	$	—	$	663	$	—	$	699	$	—	$	699
In funds held for customers	—		175		—		175		—		175		—		175
In long-term investments	35		—		54		89		—		—		59		59
Total available-for-sale securities	$	35	$	838	$	54	$	927	$	—	$	874	$	59	$	933

We value our Level 1 assets, consisting primarily of money market funds, using quoted prices in active markets for identical instruments. Financial assets whose fair values we measure on a recurring basis using Level 2 inputs consist of municipal bonds, corporate notes and U.S. agency securities. We measure the fair values of these assets using quoted prices in active markets for similar instruments. Financial liabilities whose fair values we measure using Level 2 inputs consist of debt. See

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Note 6. We measure the fair value of our senior notes based on their trading prices and the interest rates we could obtain for other borrowings with similar terms. Financial assets whose fair values we measure using significant unobservable (Level 3) inputs consist of municipal auction rate securities that are no longer liquid. There were no transfers between Level 1, Level 2, and Level 3 of the fair value hierarchy during the nine months ended April 30, 2012.

The following table presents a reconciliation of activity for our Level 3 assets for the nine months ended April 30, 2012.



	Nine Months
	Ended
(In millions)	April 30, 2012
Beginning balance	$	59
Settlements at par	(5		)
Ending balance	$	54

We estimated the fair values of these municipal auction rate securities at April 30, 2012 and July 31, 2011 using a discounted cash flow model whose key inputs included the projected future interest rates; the likely timing of principal repayments; the probability of full repayment considering guarantees by the U.S. Department of Education of the underlying student loans or insurance by other third parties; publicly available pricing data for recently issued student loan backed securities that are not subject to auctions; and the impact of the reduced liquidity for auction rate securities. Any significant changes in the inputs to the model may have a significant impact on the estimated fair values of these securities.

Using our discounted cash flow model we determined that the fair values of the municipal auction rate securities we held at April 30, 2012 were approximately equal to their par values. As a result, we recorded no decrease in the fair values of those securities for the nine months then ended. These securities are included in long-term investments on our balance sheets at April 30, 2012 and July 31, 2011 based on the maturities of the underlying securities. We do not intend to sell our municipal auction rate securities and it is not more likely than not that we will be required to sell them before recovery at par, which may be at maturity. Based on our expected operating cash flows and our other sources of cash, we do not believe that the reduction in liquidity of our municipal auction rate securities will have a material impact on our overall ability to meet our liquidity needs.


3.	Cash and Cash Equivalents, Investments and Funds Held for Customers

We consider highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Cash equivalents consist primarily of AAA-rated money market funds in all periods presented. Investments consist of available-for-sale investment-grade debt securities that we carry at fair value. Funds held for customers consist of cash and cash equivalents and available-for-sale investment-grade debt securities. Long-term investments consist primarily of municipal auction rate securities that we carry at fair value and an available-for-sale equity investment. Except for direct obligations of the United States government, securities issued by agencies of the United States government, and money market funds, we diversify our investments in debt securities by limiting our holdings with any individual issuer.

The following table summarizes our cash and cash equivalents, investments and funds held for customers by balance sheet classification at the dates indicated.



	April 30, 2012				July 31, 2011
(In millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Classification on balance sheets:
Cash and cash equivalents	$	859	$	859	$	722	$	722
Investments	663		663		698		699
Funds held for customers	324		325		413		414
Long-term investments	59		90		63		63
Total cash and cash equivalents, investments, and funds held for customers	$	1,905	$	1,937	$	1,896	$	1,898

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The following table summarizes our cash and cash equivalents, investments and funds held for customers by investment category at the dates indicated.



	April 30, 2012				July 31, 2011
(In millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Type of issue:
Total cash and cash equivalents	$	1,009	$	1,009	$	961	$	961
Available-for-sale debt securities:
Municipal bonds	387		388		434		434
Municipal auction rate securities	54		54		59		59
Corporate notes	318		319		287		288
U.S. agency securities	131		131		151		152
Total available-for-sale debt securities	890		892		931		933
Available-for-sale equity securities	5		35		—		—
Other long-term investments	1		1		4		4
Total cash and cash equivalents, investments, and funds held for customers	$	1,905	$	1,937	$	1,896	$	1,898

We use the specific identification method to compute gains and losses on investments. We include realized gains and losses on our available-for-sale debt securities in interest and other income, net in our statements of operations. Gross realized gains and losses on our available-for-sale debt securities for the three and nine months ended April 30, 2012 and April 30, 2011 were not significant. We accumulate unrealized gains and losses on our available-for-sale debt and equity securities, net of tax, in accumulated other comprehensive income in the stockholders’ equity section of our balance sheets. Gross unrealized gains and losses on our available-for-sale debt securities at April 30, 2012 and July 31, 2011 were not significant. The gross unrealized gain on our available-for-sale equity security was approximately $30 million at April 30, 2012.

We periodically review our investment portfolios to determine if any investment is other-than-temporarily impaired due to changes in credit risk or other potential valuation concerns. We believe that the investments we held at April 30, 2012 were not other-than-temporarily impaired. Unrealized losses at April 30, 2012 were not significant and were due to changes in interest rates, including market credit spreads, and not due to increased credit risks associated with specific securities. We do not intend to sell these investments and it is not more likely than not that we will be required to sell them before recovery at par, which may be at maturity.

The following table summarizes our available-for-sale debt securities classified by the stated maturity date of the security at the dates indicated.



	April 30, 2012				July 31, 2011
(In millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due within one year	$	279	$	279	$	267	$	267
Due within two years	293		295		323		324
Due within three years	188		188		190		191
Due after three years	130		130		151		151
Total available-for-sale debt securities	$	890	$	892	$	931	$	933

Available-for-sale debt securities due after three years in the table above include our municipal auction rate securities. See Note 2, "Fair Value Measurements," for more information. All of the remaining securities in that category had effective maturities of three years or less due to interest reset dates or mandatory call dates.

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4.	Accumulated Other Comprehensive Income

Accumulated other comprehensive income in the equity section of our balance sheet at April 30, 2012 consisted primarily of an unrealized gain on a marketable equity security and cumulative foreign currency translation adjustments. Accumulated other comprehensive income at July 31, 2011 consisted primarily of cumulative foreign currency translation adjustments.


5.	Current Liabilities

Current Portion of Long-Term Debt

The current portion of long-term debt at July 31, 2011 consisted of $500 million of 5.40% senior unsecured notes due on March 15, 2012, less the unamortized discount. During the third quarter of fiscal 2012 we paid off those notes when they became due using cash from operations. See Note 6, "Long-Term Obligations - Long-Term Debt," for more information.

Unsecured Revolving Credit Facility

On February 17, 2012 we entered into an agreement with certain institutional lenders for a $500 million unsecured revolving credit facility that will expire on February 17, 2017. Advances under the credit facility will accrue interest at rates that are equal to, at our election, either JP Morgan's alternate base rate plus a margin that ranges from 0.0% to 0.5% or LIBOR plus a margin that ranges from 0.9% to 1.5%. Actual margins under either election will be based on our senior debt credit ratings. The agreement includes customary affirmative and negative covenants, including financial covenants that require us to maintain a ratio of total debt to annual earnings before interest, taxes, depreciation and amortization (EBITDA) of not greater than 3.25 to 1.00 as of any date and a ratio of annual EBITDA to interest payable of not less than 3.00 to 1.00 as of the last day of each fiscal quarter. We remained in compliance with these covenants at all times during the quarter ended April 30, 2012. We may use amounts borrowed under this credit facility for general corporate purposes, including future acquisitions. To date we have not borrowed under this credit facility.

Other Current Liabilities

Other current liabilities were as follows at the dates indicated:



(In millions)	April 30, 2012		July 31, 2011
Reserve for product returns	$	74	$	20
Reserve for rebates	35		11
Current portion of license fee payable	10		10
Current portion of deferred rent	7		7
Interest payable	3		21
Executive deferred compensation plan liabilities	55		50
Other	34		22
Total other current liabilities	$	218	$	141

The balances of several of our other current liabilities, particularly our reserves for product returns and rebates, are affected by the seasonality of our business. See Note 1, “Description of Business and Summary of Significant Accounting Policies - Seasonality,” for more information.


6.	Long-Term Obligations

Long-Term Debt

On March 12, 2007 we issued $500 million of 5.40% senior unsecured notes due on March 15, 2012 (the 2012 Notes) and $500 million of 5.75% senior unsecured notes due on March 15, 2017 (the 2017 Notes) (together, the Notes), for a total principal amount of $1 billion. During the third quarter of fiscal 2012 we paid off the 2012 Notes when they became due using cash from operations. We carried the Notes at face value less the unamortized discount in current portion of long-term debt and long-term debt on our balance sheets at April 30, 2012 and July 31, 2011. The 2017 Notes are redeemable by Intuit at any time, subject to a make-whole premium, and include covenants that limit our ability to grant liens on our facilities and to enter into sale and leaseback transactions, subject to significant allowances. We paid $56 million in cash for interest on the Notes during the nine months ended April 30, 2012 and $56 million during the nine months ended April 30, 2011.

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Other Long-Term Obligations

Other long-term obligations were as follows at the dates indicated:



(In millions)	April 30, 2012			July 31, 2011
Total license fee payable	$	63		$	60
Total deferred rent	53			52
Long-term deferred revenue	42			40
Long-term income tax liabilities	43			42
Long-term payables	8			12
Other	4			1
Total long-term obligations	213			207
Less current portion (included in other current liabilities)	(18		)	(17		)
Long-term obligations due after one year	$	195		$	190


7.	Income Taxes

Effective Tax Rate

We compute our provision for or benefit from income taxes by applying the estimated annual effective tax rate to income or loss from recurring operations and adding the effects of any discrete income tax items specific to the period. Our effective tax rates for the three months ended April 30, 2012 and April 30, 2011 were approximately 34% and 35% and did not differ significantly from the federal statutory rate of 35%.

Our effective tax rate for the nine months ended April 30, 2012 was approximately 34% and did not differ significantly from the federal statutory rate of 35%. Our effective tax rate for the nine months ended April 30, 2011 was approximately 34%. Excluding discrete tax benefits primarily related to the retroactive reinstatement of the federal research and experimentation credit as described below, our effective tax rate for that period was 35% and did not differ significantly from the statutory rate of 35%.

In December 2010 the Tax Relief, Unemployment Insurance Reauthorization, and Jobs Creation Act of 2010 was signed into law. The Act included a reinstatement of the federal research and experimentation credit through December 31, 2011 that was retroactive to January 1, 2010.

Unrecognized Tax Benefits and Other Considerations

The total amount of our unrecognized tax benefits at July 31, 2011 was $41 million. Net of related deferred tax assets, unrecognized tax benefits were $35 million at that date. If we were to recognize these net benefits, our income tax expense would reflect a favorable net impact of $35 million. There were no material changes to these amounts during the nine months ended April 30, 2012. We do not believe that it is reasonably possible that there will be a significant increase or decrease in our unrecognized tax benefits over the next 12 months.


8.	Stockholders’ Equity

Stock Repurchase Programs

Intuit’s Board of Directors has authorized a series of common stock repurchase programs. Shares of common stock repurchased under these programs become treasury shares. We repurchased 15.0 million shares for $793 million under these programs during the nine months ended April 30, 2012 and 23.3 million shares for $1.1 billion under these programs during the nine months ended April 30, 2011. At April 30, 2012, we had authorization from our Board of Directors to expend up to an additional $1.8 billion for stock repurchases through August 15, 2014. Future stock repurchases under the current program are at the discretion of management, and authorization of future stock repurchase programs is subject to the final determination of our Board of Directors.

Repurchased shares of our common stock are held as treasury shares until they are reissued or retired. When we reissue treasury stock, if the proceeds from the sale are more than the average price we paid to acquire the shares we record an increase in additional paid-in capital. Conversely, if the proceeds from the sale are less than the average price we paid to acquire the

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shares, we record a decrease in additional paid-in capital to the extent of increases previously recorded for similar transactions and a decrease in retained earnings for any remaining amount.

Dividends on Common Stock

During the three months ended October 31, 2011, January 31, 2012 and April 30, 2012 we declared and paid quarterly cash dividends of $0.15 per share that totaled approximately $45 million, $44 million and $45 million. In May 2012 our Board of Directors declared a quarterly cash dividend of $0.15 per share of outstanding common stock payable on July 18, 2012 to stockholders of record at the close of business on July 10, 2012. Future declarations of dividends and the establishment of future record dates and payment dates are subject to the final determination of our Board of Directors.

Share-Based Compensation Expense

The following table summarizes the total share-based compensation expense that we recorded for the periods shown.



	Three Months Ended						Nine Months Ended
(In millions, except per share amounts)	April 30, 2012			April 30, 2011			April 30, 2012			April 30, 2011
Cost of revenue	$	1		$	2		$	4		$	5
Selling and marketing	14			12			43			33
Research and development	11			13			37			38
General and administrative	11			12			36			36
Total share-based compensation expense	37			39			120			112
Income tax benefit	(12		)	(14		)	(39		)	(39		)
Decrease in net income	$	25		$	25		$	81		$	73
Decrease in net income per share:
Basic	$	0.08		$	0.08		$	0.27		$	0.24
Diluted	$	0.08		$	0.08		$	0.26		$	0.23

Stock Option Activity and Related Share-Based Compensation Expense

A summary of activity under all share-based compensation plans for the nine months ended April 30, 2012 was as follows:



			Options Outstanding
(Shares in thousands)	Shares Available for Grant		Number of Shares		Weighted Average Exercise Price Per Share
Balance at July 31, 2011	30,716		22,679		$	32.38
Options granted	(378	)	378		51.76
Restricted stock units granted (2)	(1,333	)	—		—
Options exercised	—		(6,300	)	28.31
Options canceled or expired (1)	407		(413	)	37.22
Restricted stock units forfeited (1)(2)	1,297		—		—
Balance at April 30, 2012	30,709		16,344		$	34.28

Exercisable at April 30, 2012			10,600		$	30.32

________________________________


(1)	Stock options and restricted stock units canceled, expired or forfeited under our 2005 Equity Incentive Plan are returned to the pool of shares available for grant. Stock options and restricted stock units canceled, expired or forfeited under older expired plans are not returned to the pool of shares available for grant.


(2)	Under the terms of our 2005 Equity Incentive Plan as amended on January 19, 2011, RSUs granted from the pool of shares available for grant on or after November 1, 2010 reduce the pool by 2.3 shares for each share granted. RSUs forfeited and returned

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to the pool of shares available for grant increase the pool by 2.3 shares for each share forfeited.

At April 30, 2012, there was approximately $43 million of unrecognized compensation cost related to non-vested stock options that we expect to recognize as expense in the future. We will adjust unrecognized compensation cost for future changes in estimated forfeitures. We expect to recognize that cost over a weighted average vesting period of 1.7 years.

Restricted Stock Unit Activity and Related Share-Based Compensation Expense

A summary of restricted stock unit activity for the nine months ended April 30, 2012 was as follows:



	Restricted Stock Units
(Shares in thousands)	Number of Shares		Weighted Average Grant Date Fair Value
Nonvested at July 31, 2011	11,055		$	37.92
Granted	580		49.43
Vested	(2,661	)	28.84
Forfeited	(579	)	38.71
Nonvested at April 30, 2012	8,395		$	41.54

At April 30, 2012, there was approximately $169 million of unrecognized compensation cost related to non-vested RSUs and restricted stock that we expect to recognize as expense in the future. We will adjust unrecognized compensation cost for future changes in estimated forfeitures. We expect to recognize that cost over a weighted average vesting period of 2.0 years.


9.	Litigation

On January 13, 2012, two putative class actions were filed against Intuit Inc. in connection with our TurboTax income tax preparation software: Smith v. Intuit Inc. (U.S. District Court, Northern District of California) and Quildon v. Intuit Inc. (California Superior Court, Santa Clara County). The plaintiffs in both cases assert that the fees charged for the refund processing service offered within TurboTax are “refund anticipation loans” and the disclosures about those fees do not comply with California and federal laws. The Smith case was brought in federal court on behalf of a proposed nationwide class and subclasses; the Quildon case was brought in state court on behalf of a proposed California class and subclasses. Otherwise the two complaints are substantively identical. In each case the plaintiffs seek monetary relief (including restitution, statutory damages, treble damages, and interest) in an unspecified amount, as well as attorneys' fees and costs. On February 22, 2012, Intuit removed the Quildon case to federal court. On March 16, 2012, the plaintiffs filed a motion to remand the Quildon case to state court. On March 19, 2012, Intuit filed motions to dismiss the plaintiffs' claims in both cases. On May 25, 2012, the federal court remanded the Quildon case to state court and denied as moot the motion to dismiss that case. A hearing on Intuit's motion to dismiss the Smith case is currently scheduled for June 1, 2012. We continue to believe we have meritorious defenses to the claims asserted in these actions and intend to defend vigorously against them. We believe that liabilities associated with these cases, while possible, are not probable, and therefore we have not recorded any accrual for them as of April 30, 2012. Further, any possible range of loss cannot be reasonably estimated at this time.

Intuit is subject to certain routine legal proceedings, as well as demands, claims and threatened litigation, that arise in the normal course of our business, including assertions that we may be infringing patents or other intellectual property rights of others. We currently believe that, in addition to any amounts accrued, the amount of potential losses, if any, for any pending claims of any type (either alone or combined) will not have a material impact on our consolidated financial statements. The ultimate outcome of any litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on Intuit because of defense costs, negative publicity, diversion of management resources and other factors. Our failure to obtain necessary license or other rights, or litigation arising out of intellectual property claims, could adversely affect our business.

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10.	Segment Information

We have defined seven reportable segments based on factors such as how we manage our operations and how our chief operating decision maker views results. We define the chief operating decision maker as our Chief Executive Officer and our Chief Financial Officer. Our chief operating decision maker organizes and manages our business primarily on the basis of product and service offerings.

All of our business segments except Other Businesses operate primarily in the United States and sell primarily to customers in the United States. International total net revenue was less than 5% of consolidated total net revenue for all periods presented.

We include expenses such as corporate selling and marketing, product development, and general and administrative expenses and share-based compensation expenses that are not allocated to specific segments in unallocated corporate items. Unallocated corporate items also include amortization of acquired technology, amortization of other acquired intangible assets, and goodwill and intangible asset impairment charges.

The accounting policies of our reportable segments are the same as those described in the summary of 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, 2011. Except for goodwill and purchased intangible assets, we do not generally track assets by reportable segment and, consequently, we do not disclose total assets by reportable segment.

The following table shows our financial results by reportable segment for the periods indicated.



	Three Months Ended						Nine Months Ended
(In millions)	April 30, 2012			April 30, 2011			April 30, 2012			April 30, 2011
Net revenue:
Financial Management Solutions	$	197		$	183		$	564		$	524
Employee Management Solutions	129			115			378			338
Payment Solutions	107			93			300			258
Consumer Tax	1,072			1,036			1,408			1,270
Accounting Professionals	236			225			394			372
Financial Services	91			89			272			254
Other Businesses	113			107			242			242
Total net revenue	$	1,945		$	1,848		$	3,558		$	3,258

Operating income:
Financial Management Solutions	$	72		$	61		$	181		$	154
Employee Management Solutions	81			70			228			197
Payment Solutions	25			20			72			44
Consumer Tax	845			853			931			877
Accounting Professionals	194			187			261			241
Financial Services	23			20			66			57
Other Businesses	49			42			58			59
Total segment operating income	1,289			1,253			1,797			1,629
Unallocated corporate items:
Share-based compensation expense	(37		)	(39		)	(120		)	(112		)
Other common expenses	(139		)	(138		)	(427		)	(403		)
Amortization of acquired technology	(4		)	(4		)	(12		)	(13		)
Amortization of other acquired intangible assets	(2		)	(11		)	(33		)	(33		)
Total unallocated corporate items	(182		)	(192		)	(592		)	(561		)
Total operating income	$	1,107		$	1,061		$	1,205		$	1,068

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11.	Subsequent Event

On May 18, 2012 we acquired all of the outstanding equity interests of Demandforce, Inc. for total cash and other consideration of approximately $423.5 million. Demandforce is a provider of online marketing and customer communication solutions for small and medium-sized businesses (SMBs) and became part of our Financial Management Solutions segment. We acquired Demandforce to expand our online SMB offerings in support of our connected services strategy. We will include Demandforce's results of operations in our consolidated results of operations from the date of acquisition. Demandforce's results of operations for periods prior to the date of acquisition were not material when compared with our consolidated results of operations.

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ITEM 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) includes the following sections:


•	Executive Overview that discusses at a high level our operating results and some of the trends that affect our business.


•	Significant changes since our most recent Annual Report on Form 10-K in the Critical Accounting Policies and Estimates that we believe are important to understanding the assumptions and judgments underlying our financial statements.


•	Results of Operations that includes a more detailed discussion of our revenue and expenses.


•	Liquidity and Capital Resources which discusses key aspects of our statements of cash flows, changes in our balance sheets, and our financial commitments.

You should note that this MD&A discussion contains forward-looking statements that involve risks and uncertainties. Please see Item 1A in Part II of this Quarterly Report on Form 10-Q for important information to consider when evaluating such statements.

You should read this MD&A in conjunction with the financial statements and related notes in Part I, Item 1 of this report and our Annual Report on Form 10-K for the fiscal year ended July 31, 2011.

Executive Overview

This overview provides a high level discussion of our operating results and some of the trends that affect our business. We believe that an understanding of these trends is important in order to understand our financial results for the first nine months of fiscal 2012 as well as our future prospects. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this Quarterly Report on Form 10-Q.

About Intuit

Intuit is a leading provider of business and financial management solutions for small and medium-sized businesses, consumers, accounting professionals and financial institutions. We organize our portfolio of businesses into four principal categories — Small Business Group, Tax, Financial Services and Other Businesses. These categories include seven financial reporting segments.

Small Business Group: This category includes three segments — Financial Management Solutions, Employee Management Solutions, and Payment Solutions.


•	Our Financial Management Solutions segment includes QuickBooks financial and business management software and services; QuickBooks technical support; financial supplies; Intuit Websites, which provides website design and hosting services for small and medium-sized businesses; and QuickBase.


•	Our Employee Management Solutions segment provides payroll products and services for small businesses.


•	Our Payment Solutions segment provides merchant services for small businesses, including credit and debit card processing, electronic check conversion and automated clearing house services.

Tax: This category includes two segments — Consumer Tax and Accounting Professionals.


•	Our Consumer Tax segment includes TurboTax income tax preparation products and services for consumers and small businesses.


•	Our Accounting Professionals segment includes Lacerte, ProSeries and Intuit Tax Online (formerly ProLine Tax Online) professional tax products and services. This segment also includes QuickBooks Premier Accountant Edition and the QuickBooks ProAdvisor Program for accounting professionals.

Financial Services: This segment consists primarily of outsourced online financial management solutions for banks and credit unions provided by our Intuit Financial Services business.

Other Businesses: This segment includes Quicken personal finance products and services; Mint.com online personal finance services; Intuit Health online patient-to-provider communication solutions; and our businesses in Canada, the United Kingdom, India and Singapore.

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Seasonality and Trends

Our QuickBooks, Consumer Tax and Accounting Professionals businesses 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. In our Consumer Tax business, a greater proportion of our revenue has been occurring later in this seasonal period due in part to the growth in sales of TurboTax Online, for which revenue is recognized upon printing or electronic filing of a tax return. The seasonality of our Consumer Tax and Accounting Professionals revenue is also affected by the timing of the availability of tax forms from taxing agencies and the ability of those agencies to receive electronic tax return submissions. The availability of tax forms or the ability of taxing agencies to receive submissions can cause revenue to shift between our second fiscal quarter and subsequent fiscal quarters. 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, when revenue from our tax businesses is minimal while core operating expenses such as research and development continue at relatively consistent levels. We believe the seasonality of our revenue is likely to continue in the future. In our MD&A we often focus on year-to-date results for our seasonal businesses as they are generally more meaningful than quarterly results.

Overview of Financial Results

Total net revenue for the first nine months of fiscal 2012 was $3.6 billion, an increase of 9% compared with the same period of fiscal 2011. Our Consumer Tax segment and our Small Business Group were the key drivers of revenue growth in the first nine months of fiscal 2012. Revenue in our Consumer Tax segment increased 11% compared with the same period a year ago due to 7% growth in paid federal units and favorable offering mix. Revenue in our Small Business Group grew 11% compared with the same period a year ago due to growth in connected services offerings and improved offering mix. Operating income for the first nine months of fiscal 2012 was $1.2 billion, an increase of 13% compared with the same period of fiscal 2011. Higher revenue was partially offset by higher costs and expenses, including higher spending for staffing and share-based compensation. Net income increased 14% in the first nine months of fiscal 2012 compared with the same period of fiscal 2011, in line with the increase in operating income. Diluted net income per share for the first nine months of fiscal 2012 increased 19% to $2.58 as a result of the increase in net income and the decline in weighted average diluted common shares compared with the same period of fiscal 2011.

We ended the first nine months of fiscal 2012 with cash, cash equivalents and investments totaling $1.5 billion. In the first nine months of fiscal 2012 we generated cash from operations and from the issuance of common stock under employee stock plans. During the same period we used cash for the repayment of debt, for the repurchase of shares of our common stock under our stock repurchase programs, for the payment of cash dividends, and for capital expenditures. At April 30, 2012, we had authorization from our Board of Directors to expend up to an additional $1.8 billion for stock repurchases through August 15, 2014.

Critical Accounting Policies and Estimates

In preparing our financial statements, we make estimates, assumptions and judgments that can have a significant impact on our net revenue, operating income or loss and net income or loss, as well as on the value of certain assets and liabilities on our balance sheet. We believe that the estimates, assumptions and judgments involved in the accounting policies described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2011 have the greatest potential impact on our financial statements, so we consider them to be our critical accounting policies and estimates. We believe that there were no significant changes in those critical accounting policies and estimates during the first nine months of fiscal 2012. Senior management has reviewed the development and selection of our critical accounting policies and estimates and their disclosure in this Quarterly Report on Form 10-Q with the Audit and Risk Committee of our Board of Directors.

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Results of Operations

Financial Overview



(Dollars in millions, except per share amounts)	Q3 FY12		Q3 FY11		$ Change		% Change		YTD Q3 FY12		YTD Q3 FY11		$ Change		% Change
Total net revenue	$	1,945	$	1,848	$	97	5	%	$	3,558	$	3,258	$	300	9	%
Operating income	1,107		1,061		46		4	%	1,205		1,068		137		13	%
Net income	734		688		46		7	%	788		691		97		14	%
Diluted net income per share	$	2.42	$	2.20	$	0.22	10	%	$	2.58	$	2.16	$	0.42	19	%

Current Fiscal Quarter

Total net revenue increased $97 million or 5% in the third quarter of fiscal 2012 compared with the same quarter of fiscal 2011. In our Small Business Group, revenue was up 11%. Financial Management Solutions segment revenue increased 8% due to growth in QuickBooks Online and QuickBooks Enterprise revenue and, to a lesser extent, to higher Financial Supplies revenue. Employee Management Solutions segment revenue increased 12% due to favorable offering mix, improved customer adoption of payroll direct deposit services, and price increases for desktop payroll customers. Payment Solutions segment revenue increased 14% due to fee structure changes, higher total card transaction volume, and growth in the merchant customer base. In our Consumer Tax segment, revenue increased 3% due to growth in paid federal units and favorable offering mix. These results include the impact of last year's delay in the Internal Revenue Service's acceptance of certain electronically filed tax returns, which contributed to a shift in Consumer Tax revenue from the second quarter of fiscal 2011 to the third quarter of fiscal 2011. Accounting Professionals segment revenue increased 5% due to price increases in our professional tax business and higher QuickBooks Premier Accountant Edition and ProAdvisor Program revenue. Financial Services segment revenue increased 2%, or 7% when adjusted for the March 2012 sale of our corporate banking business. Revenue growth in this segment was primarily due to higher mobile banking revenue. Other Businesses segment revenue increased 6% due to growth in global revenue.

Operating income increased 4% in the third quarter of fiscal 2012 compared with the same quarter of fiscal 2011 due to the increase in revenue described above partially offset by higher costs and operating expenses. Cost of service and other revenue as a percentage of service and other revenue increased slightly due to costs associated with new programs in our Consumer Tax segment. Total operating expenses were also $17 million higher in the fiscal 2012 quarter, primarily due to higher staffing expenses. See "Cost of Revenue" and "Operating Expenses” later in this Item 2 for more information.

Net income increased 7% in the third quarter of fiscal 2012 compared with the same quarter of fiscal 2011 due to higher operating income as described above and a slightly lower effective tax rate in the fiscal 2012 quarter. See "Non-Operating Income and Expenses – Income Taxes" later in this Item 2 for more information. Diluted net income per share for the third quarter of fiscal 2012 increased 10% to $2.42 as a result of the increase in net income and the decline in weighted average diluted common shares compared with the same quarter of fiscal 2011.

Fiscal Year to Date

Total net revenue increased $300 million or 9% in the first nine months of fiscal 2012 compared with the same period of fiscal 2011. In our Small Business Group, revenue was up 11%. Financial Management Solutions segment revenue increased 8% due to growth in QuickBooks Online and QuickBooks Enterprise revenue and, to a lesser extent, to higher Financial Supplies revenue. Employee Management Solutions segment revenue increased 12% due to favorable offering mix, improved customer adoption of payroll direct deposit services, and price increases for desktop payroll customers. Payment Solutions segment revenue increased 16% due to fee structure changes, higher total card transaction volume, and growth in the merchant customer base. In our Consumer Tax segment, revenue increased 11% due to 7% growth in paid federal units and favorable offering mix. Accounting Professionals segment revenue grew 6% due to price increases in our professional tax business and higher QuickBooks Premier Accountant Edition and ProAdvisor Program revenue. Financial Services segment revenue increased 7%, or 9% when adjusted for the March 2012 sale of our corporate banking business. Revenue growth in this segment was primarily due to higher mobile banking revenue and, to a lesser extent, to higher bill-pay revenue. Other Businesses segment revenue was flat due to 9% growth in global revenue offset by lower Quicken revenue.

Operating income increased 13% in the first nine months of fiscal 2012 compared with the same period of fiscal 2011 due to the increase in revenue described above partially offset by higher costs and operating expenses. Cost of service and other revenue as a percentage of service and other revenue increased slightly due to costs associated with new programs in our Consumer Tax segment. Total operating expenses were also $86 million higher in the fiscal 2012 period, including about $75 million for higher staffing expenses and about $9 million for higher share-based compensation expenses. See "Cost of Revenue"

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and "Operating Expenses” later in this Item 2 for more information.

Net income increased 14% in the first nine months of fiscal 2012 compared with the same period of fiscal 2011, in line with the increase in operating income. Diluted net income per share for the first nine months of fiscal 2012 increased 19% to $2.58 as a result of the increase in net income and the decline in weighted average diluted common shares compared with the same period of fiscal 2011.

Business Segment Results

The information below is organized in accordance with our seven reportable business segments. All of our business segments except Other Businesses operate primarily in the United States and sell primarily to customers in the United States. International total net revenue was less than 5% of consolidated total net revenue for all periods presented.

Segment operating income or loss is segment net revenue less segment cost of revenue and operating expenses. See “Executive Overview – Seasonality and Trends” earlier in this Item 2 for a description of the seasonality of our business. Segment expenses do not include certain costs, such as corporate selling and marketing, product development, and general and administrative expenses and share-based compensation expenses, which are not allocated to specific segments. These unallocated costs totaled $547 million in the first nine months of fiscal 2012 and $515 million in the first nine months of fiscal 2011. Unallocated costs increased in the fiscal 2012 period due to increases in corporate product development and selling and marketing expenses in support of the growth of our businesses, and to a lesser extent to increases in share-based compensation expenses.

Segment expenses also do not include amortization of acquired technology, amortization of other acquired intangible assets, and goodwill and intangible asset impairment charges. See Note 10 to the financial statements in Part I, Item 1 of this report for reconciliations of total segment operating income or loss to consolidated operating income or loss for each fiscal period presented.

We calculate revenue growth rates and segment operating margin figures using dollars in thousands. Those results may vary from figures calculated using the dollars in millions presented below.

Financial Management Solutions



(Dollars in millions)	Q3 FY12			Q3 FY11			% Change		YTD Q3 FY12			YTD Q3 FY11			% Change
Product revenue	$	111		$	107				$	316		$	306
Service and other revenue	86			76					248			218
Total segment revenue	$	197		$	183		8	%	$	564		$	524		8	%
% of total revenue	10		%	10		%			16		%	16		%

Segment operating income	$	72		$	61		18	%	$	181		$	154		18	%
% of related revenue	36		%	33		%			32		%	29		%

Financial Management Solutions (FMS) product revenue is derived primarily from QuickBooks desktop software products and financial supplies such as paper checks, envelopes, invoices, business cards and business stationery. FMS service and other revenue is derived primarily from QuickBooks Online; QuickBooks technical support plans; Intuit Websites, which provides website design and hosting services for small and medium-sized businesses; QuickBase; and royalties from small business online services.

FMS total net revenue increased $14 million or 8% in the third quarter of fiscal 2012 compared with the same quarter of fiscal 2011 and increased $40 million or 8% in the first nine months of fiscal 2012 compared with the same period of fiscal 2011. Total QuickBooks software units increased 1% in the first nine months of fiscal 2012. Strong growth in QuickBooks Online and QuickBooks Enterprise revenue drove higher average selling prices for QuickBooks offerings overall. Higher revenue from financial supplies also contributed to FMS revenue growth in both periods, fueled by sales of our new Secure Plus checks with Checklock^TM fraud protection.

FMS segment operating income as a percentage of related revenue increased to 36% in the third quarter of fiscal 2012 from 33% in the same quarter of fiscal 2011 and increased to 32% in the first nine months of fiscal 2012 from 29% in the same period of fiscal 2011. Segment operating income was higher in the first nine months of fiscal 2012 due to the increase in revenue described above and about $12 million in lower expenses for advertising and other marketing programs, partially offset by about $16 million for higher staffing expenses associated with higher headcount.

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Employee Management Solutions



(Dollars in millions)	Q3 FY12			Q3 FY11			% Change		YTD Q3 FY12			YTD Q3 FY11			% Change
Product revenue	$	70		$	66				$	207		$	193
Service and other revenue	59			49					171			145
Total segment revenue	$	129		$	115		12	%	$	378		$	338		12	%
% of total revenue	7		%	6		%			11		%	10		%

Segment operating income	$	81		$

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