false--07-31Q120182017-10-310000896878Large Accelerated Filer20.05P5Y0 0000896878 2017-08-01 2017-10-31 0000896878 2017-11-14 0000896878 2016-08-01 2016-10-31 0000896878 2017-07-31 0000896878 2017-10-31 0000896878 2016-07-31 0000896878 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2016-08-01 2016-10-31 0000896878 us-gaap:RetainedEarningsMember 2016-10-31 0000896878 us-gaap:CommonStockMember 2016-08-01 2016-10-31 0000896878 us-gaap:TreasuryStockMember 2016-07-31 0000896878 2016-10-31 0000896878 us-gaap:RetainedEarningsMember 2016-08-01 2016-10-31 0000896878 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2016-10-31 0000896878 us-gaap:TreasuryStockMember 2016-10-31 0000896878 intu:CommonStockAndAdditionalPaidInCapitalMember 2016-08-01 2016-10-31 0000896878 intu:CommonStockAndAdditionalPaidInCapitalMember 2016-07-31 0000896878 us-gaap:CommonStockMember 2016-07-31 0000896878 us-gaap:TreasuryStockMember 2016-08-01 2016-10-31 0000896878 us-gaap:RetainedEarningsMember 2016-07-31 0000896878 us-gaap:CommonStockMember 2016-10-31 0000896878 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2016-07-31 0000896878 intu:CommonStockAndAdditionalPaidInCapitalMember 2016-10-31 0000896878 us-gaap:CommonStockMember 2017-08-01 2017-10-31 0000896878 intu:CommonStockAndAdditionalPaidInCapitalMember 2017-08-01 2017-10-31 0000896878 us-gaap:TreasuryStockMember 2017-08-01 2017-10-31 0000896878 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-07-31 0000896878 us-gaap:RetainedEarningsMember 2017-08-01 2017-10-31 0000896878 intu:CommonStockAndAdditionalPaidInCapitalMember 2017-07-31 0000896878 us-gaap:RetainedEarningsMember 2017-07-31 0000896878 us-gaap:TreasuryStockMember 2017-07-31 0000896878 us-gaap:CommonStockMember 2017-10-31 0000896878 us-gaap:CommonStockMember 2017-07-31 0000896878 intu:CommonStockAndAdditionalPaidInCapitalMember 2017-10-31 0000896878 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-08-01 2017-10-31 0000896878 us-gaap:RetainedEarningsMember 2017-10-31 0000896878 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-10-31 0000896878 us-gaap:TreasuryStockMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MunicipalBondsMember 2017-10-31 0000896878 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:EquitySecuritiesMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MunicipalBondsMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2017-10-31 0000896878 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:AuctionRateSecuritiesMember 2017-07-31 0000896878 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateNoteSecuritiesMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:AuctionRateSecuritiesMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateNoteSecuritiesMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateNoteSecuritiesMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:AuctionRateSecuritiesMember 2017-10-31 0000896878 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember 2017-07-31 0000896878 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:EquitySecuritiesMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2017-10-31 0000896878 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:EquitySecuritiesMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateNoteSecuritiesMember 2017-07-31 0000896878 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:AuctionRateSecuritiesMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:AuctionRateSecuritiesMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:EquitySecuritiesMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateNoteSecuritiesMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:AuctionRateSecuritiesMember 2017-07-31 0000896878 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateNoteSecuritiesMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MunicipalBondsMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:EquitySecuritiesMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2017-07-31 0000896878 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:EquitySecuritiesMember 2017-10-31 0000896878 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:MunicipalBondsMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MunicipalBondsMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:EquitySecuritiesMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateNoteSecuritiesMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateNoteSecuritiesMember 2017-10-31 0000896878 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:MunicipalBondsMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MunicipalBondsMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MunicipalBondsMember 2017-07-31 0000896878 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:AuctionRateSecuritiesMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:AuctionRateSecuritiesMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:EquitySecuritiesMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember intu:AvailableForSaleDebtSecuritiesInInvestmentsMember 2017-07-31 0000896878 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember intu:AvailableForSaleDebtSecuritiesInInvestmentsMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember intu:AvailableForSaleDebtSecuritiesInFundsHeldForCustomersMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CashAndCashEquivalentsMember 2017-07-31 0000896878 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember intu:AvailableForSaleDebtSecuritiesInFundsHeldForCustomersMember 2017-10-31 0000896878 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:CashAndCashEquivalentsMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember intu:AvailableForSaleDebtSecuritiesInFundsHeldForCustomersMember 2017-07-31 0000896878 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:CashAndCashEquivalentsMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember intu:AvailableForSaleDebtSecuritiesInInvestmentsMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember intu:AvailableForSaleDebtSecuritiesInFundsHeldForCustomersMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember intu:AvailableForSaleDebtSecuritiesInFundsHeldForCustomersMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CashAndCashEquivalentsMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember intu:AvailableForSaleDebtSecuritiesInInvestmentsMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember intu:AvailableForSaleDebtSecuritiesInInvestmentsMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember intu:InLongTermInvestmentsMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember intu:InLongTermInvestmentsMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember intu:AvailableForSaleDebtSecuritiesInFundsHeldForCustomersMember 2017-10-31 0000896878 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember intu:InLongTermInvestmentsMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CashAndCashEquivalentsMember 2017-07-31 0000896878 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember intu:InLongTermInvestmentsMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember intu:AvailableForSaleDebtSecuritiesInInvestmentsMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember intu:AvailableForSaleDebtSecuritiesInFundsHeldForCustomersMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CashAndCashEquivalentsMember 2017-10-31 0000896878 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember intu:AvailableForSaleDebtSecuritiesInFundsHeldForCustomersMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember intu:InLongTermInvestmentsMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember intu:AvailableForSaleDebtSecuritiesInInvestmentsMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CashAndCashEquivalentsMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember intu:InLongTermInvestmentsMember 2017-07-31 0000896878 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember intu:InLongTermInvestmentsMember 2017-10-31 0000896878 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember intu:AvailableForSaleDebtSecuritiesInInvestmentsMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember intu:InLongTermInvestmentsMember 2017-10-31 0000896878 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CashAndCashEquivalentsMember 2017-07-31 0000896878 intu:LongTermInvestmentMember 2017-07-31 0000896878 intu:FundsHeldForCustomersMember 2017-10-31 0000896878 us-gaap:CashAndCashEquivalentsMember 2017-10-31 0000896878 intu:LongTermInvestmentMember 2017-10-31 0000896878 us-gaap:CashAndCashEquivalentsMember 2017-07-31 0000896878 us-gaap:ShortTermInvestmentsMember 2017-10-31 0000896878 us-gaap:ShortTermInvestmentsMember 2017-07-31 0000896878 intu:FundsHeldForCustomersMember 2017-07-31 0000896878 us-gaap:OtherLongTermInvestmentsMember 2017-10-31 0000896878 us-gaap:MunicipalBondsMember 2017-07-31 0000896878 us-gaap:AuctionRateSecuritiesMember 2017-10-31 0000896878 us-gaap:AvailableforsaleSecuritiesMember 2017-07-31 0000896878 us-gaap:AvailableforsaleSecuritiesMember 2017-10-31 0000896878 us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2017-10-31 0000896878 us-gaap:AuctionRateSecuritiesMember 2017-07-31 0000896878 us-gaap:MunicipalBondsMember 2017-10-31 0000896878 us-gaap:CorporateNoteSecuritiesMember 2017-07-31 0000896878 us-gaap:CorporateNoteSecuritiesMember 2017-10-31 0000896878 us-gaap:OtherLongTermInvestmentsMember 2017-07-31 0000896878 intu:CashAndCashEquivalentsIncludingFundsHeldForCustomersMember 2017-07-31 0000896878 us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2017-07-31 0000896878 intu:CashAndCashEquivalentsIncludingFundsHeldForCustomersMember 2017-10-31 0000896878 us-gaap:RevolvingCreditFacilityMember intu:February12016CreditAgreementMember us-gaap:LineOfCreditMember us-gaap:MaximumMember us-gaap:BaseRateMember 2016-02-01 2016-02-01 0000896878 us-gaap:RevolvingCreditFacilityMember intu:February12016CreditAgreementMember us-gaap:LineOfCreditMember us-gaap:MinimumMember us-gaap:LondonInterbankOfferedRateLIBORMember 2016-02-01 2016-02-01 0000896878 intu:TermLoanMember intu:February12016CreditAgreementMember us-gaap:LineOfCreditMember 2017-10-31 0000896878 us-gaap:RevolvingCreditFacilityMember intu:February12016CreditAgreementMember us-gaap:LineOfCreditMember 2017-10-31 0000896878 us-gaap:RevolvingCreditFacilityMember intu:February12016CreditAgreementMember us-gaap:LineOfCreditMember 2016-02-01 0000896878 us-gaap:RevolvingCreditFacilityMember intu:February12016CreditAgreementMember 2017-08-01 2017-10-31 0000896878 us-gaap:RevolvingCreditFacilityMember intu:February12016CreditAgreementMember us-gaap:LineOfCreditMember us-gaap:MinimumMember us-gaap:BaseRateMember 2016-02-01 2016-02-01 0000896878 intu:February12016CreditAgreementMember us-gaap:LineOfCreditMember 2016-02-01 0000896878 intu:TermLoanMember intu:February12016CreditAgreementMember us-gaap:LineOfCreditMember 2016-02-01 0000896878 us-gaap:RevolvingCreditFacilityMember intu:February12016CreditAgreementMember us-gaap:LineOfCreditMember us-gaap:MaximumMember us-gaap:LondonInterbankOfferedRateLIBORMember 2016-02-01 2016-02-01 0000896878 us-gaap:RevolvingCreditFacilityMember intu:February12016CreditAgreementMember us-gaap:LineOfCreditMember 2017-08-01 2017-10-31 0000896878 intu:February12016CreditAgreementMember 2016-02-01 0000896878 us-gaap:RevolvingCreditFacilityMember intu:February12016CreditAgreementMember us-gaap:LineOfCreditMember 2016-02-01 2016-02-01 0000896878 us-gaap:RevolvingCreditFacilityMember intu:February12016CreditAgreementMember us-gaap:LineOfCreditMember 2016-08-01 2016-10-31 0000896878 intu:February12016CreditAgreementMember 2016-02-01 2016-02-01 0000896878 intu:TermLoanMember intu:February12016CreditAgreementMember us-gaap:LineOfCreditMember us-gaap:MaximumMember us-gaap:BaseRateMember 2016-02-01 2016-02-01 0000896878 intu:TermLoanMember intu:February12016CreditAgreementMember us-gaap:LineOfCreditMember us-gaap:MinimumMember us-gaap:BaseRateMember 2016-02-01 2016-02-01 0000896878 2017-09-13 0000896878 intu:TermLoanMember 2017-08-01 2017-10-31 0000896878 intu:TermLoanMember intu:February12016CreditAgreementMember us-gaap:LineOfCreditMember us-gaap:MaximumMember us-gaap:LondonInterbankOfferedRateLIBORMember 2016-02-01 2016-02-01 0000896878 intu:TermLoanMember 2016-08-01 2016-10-31 0000896878 intu:February12016CreditAgreementMember us-gaap:LineOfCreditMember 2016-02-01 2016-02-01 0000896878 intu:TermLoanMember intu:February12016CreditAgreementMember us-gaap:LineOfCreditMember us-gaap:MinimumMember us-gaap:LondonInterbankOfferedRateLIBORMember 2016-02-01 2016-02-01 0000896878 us-gaap:GeneralAndAdministrativeExpenseMember 2017-08-01 2017-10-31 0000896878 us-gaap:SellingAndMarketingExpenseMember 2016-08-01 2016-10-31 0000896878 us-gaap:SellingAndMarketingExpenseMember 2017-08-01 2017-10-31 0000896878 us-gaap:GeneralAndAdministrativeExpenseMember 2016-08-01 2016-10-31 0000896878 us-gaap:ResearchAndDevelopmentExpenseMember 2017-08-01 2017-10-31 0000896878 us-gaap:CostOfSalesMember 2016-08-01 2016-10-31 0000896878 us-gaap:ResearchAndDevelopmentExpenseMember 2016-08-01 2016-10-31 0000896878 us-gaap:CostOfSalesMember 2017-08-01 2017-10-31 0000896878 us-gaap:RestrictedStockUnitsRSUMember 2017-10-31 0000896878 us-gaap:SubsequentEventMember 2017-11-01 2017-11-20 0000896878 us-gaap:EmployeeStockOptionMember 2017-08-01 2017-10-31 0000896878 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2016-08-01 2016-10-31 0000896878 intu:NewProgramMember 2017-10-31 0000896878 us-gaap:EmployeeStockOptionMember 2017-10-31 0000896878 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2017-08-01 2017-10-31 0000896878 us-gaap:RestrictedStockUnitsRSUMember 2017-08-01 2017-10-31 0000896878 us-gaap:CorporateNonSegmentMember 2016-08-01 2016-10-31 0000896878 us-gaap:OperatingSegmentsMember intu:ConsumerSegmentMember 2016-08-01 2016-10-31 0000896878 intu:SmallBusinessSelfEmployedSegmentMember 2017-08-01 2017-10-31 0000896878 intu:StrategicPartnerSegmentMember 2016-08-01 2016-10-31 0000896878 us-gaap:CorporateNonSegmentMember us-gaap:TechnologyBasedIntangibleAssetsMember 2017-08-01 2017-10-31 0000896878 us-gaap:CorporateNonSegmentMember 2017-08-01 2017-10-31 0000896878 us-gaap:OperatingSegmentsMember 2016-08-01 2016-10-31 0000896878 intu:ConsumerSegmentMember 2017-08-01 2017-10-31 0000896878 us-gaap:OperatingSegmentsMember intu:SmallBusinessSelfEmployedSegmentMember 2016-08-01 2016-10-31 0000896878 us-gaap:OperatingSegmentsMember intu:ConsumerSegmentMember 2017-08-01 2017-10-31 0000896878 us-gaap:CorporateNonSegmentMember us-gaap:OtherIntangibleAssetsMember 2017-08-01 2017-10-31 0000896878 intu:ConsumerSegmentMember 2016-08-01 2016-10-31 0000896878 us-gaap:OperatingSegmentsMember intu:StrategicPartnerSegmentMember 2017-08-01 2017-10-31 0000896878 us-gaap:CorporateNonSegmentMember us-gaap:OtherIntangibleAssetsMember 2016-08-01 2016-10-31 0000896878 us-gaap:OperatingSegmentsMember intu:SmallBusinessSelfEmployedSegmentMember 2017-08-01 2017-10-31 0000896878 us-gaap:OperatingSegmentsMember intu:StrategicPartnerSegmentMember 2016-08-01 2016-10-31 0000896878 us-gaap:OperatingSegmentsMember 2017-08-01 2017-10-31 0000896878 intu:StrategicPartnerSegmentMember 2017-08-01 2017-10-31 0000896878 us-gaap:CorporateNonSegmentMember us-gaap:TechnologyBasedIntangibleAssetsMember 2016-08-01 2016-10-31 0000896878 intu:SmallBusinessSelfEmployedSegmentMember 2016-08-01 2016-10-31 iso4217:USD xbrli:shares intu:extension intu:segment xbrli:shares xbrli:pure iso4217:USD
Table of Contents

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________
FORM 10-Q
þ
 
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
For the quarterly period ended October 31, 2017
OR
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
intuit2016rgb080317.jpg
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 þ 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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated
filer
þ
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting
company
o
Emerging growth
company
o
 
 
 
 
(Do not check if a smaller reporting company)
 
 
 
 
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 255,649,800 shares of Common Stock, $0.01 par value, were outstanding at November 14, 2017.
 



INTUIT INC.
FORM 10-Q
INDEX
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 EX-10.01
 
 EX-10.02
 
 EX-10.03
 
 EX-10.04
 
 EX-31.01
 EX-31.02
 EX-32.01
 EX-32.02
 EX-101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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, Intuit ProConnect, Lacerte, ProSeries, 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.

    
 
 
 
 
 
 Intuit Q1 Fiscal 2018 Form 10-Q
2         
 


Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements. All statements in this report, other than statements that are purely historical, are forward-looking statements. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “forecast,” “estimate,” “seek,” and similar expressions also identify forward-looking statements. In this report, forward-looking statements include, without limitation, the following:
our expectations and beliefs regarding future conduct and growth of the business;
our beliefs and expectations regarding seasonality, competition and other trends that affect our business;
our expectation that we will solve problems faster and more efficiently for our growing base of customers by moving to more open platforms with application programming interfaces that enable the contributions of end users and third-party developers;
our expectation that we will continue to invest significant resources in our product development, marketing and sales capabilities;
our expectation that we will continue to invest significant management attention and resources in our information technology infrastructure and in our privacy and security capabilities;
our expectation that we will work with the broader industry and government to protect our customers from fraud;
our expectation that we will be able to protect our customers’ data and prevent third parties from using stolen customer information to perpetrate fraud in our tax and other offerings;
our expectation that we will generate significant cash from operations;
our expectation that connected services revenue as a percentage of our total revenue will continue to grow;
our expectations regarding the development of future products, services, business models and technology platforms and our research and development efforts;
our assumptions underlying our critical accounting policies and estimates, including our estimates regarding promotional and return reserves; the collectability of accounts receivable; stock volatility and other assumptions used to estimate the fair value of share-based compensation; the fair value of goodwill; and expected future amortization of acquired intangible assets;
our plans with respect to the adoption of Topic 606, including the adoption timing and methodology, as well our expectations and beliefs with respect to its impact on our revenue growth rates and on the timing of our quarterly revenue recognition;
our intention not to sell our investments and our belief that it is more likely than not that we will not be required to sell them before recovery at par;
our belief that the investments we hold are not other-than-temporarily impaired;
our belief that we take prudent measures to mitigate investment related risks;
our belief that our exposure to currency exchange fluctuation risk will not be significant in the future;
our assessments and estimates that determine our effective tax rate;
our belief that it is not reasonably possible that there will be a significant increase or decrease in our unrecognized tax benefits over the next 12 months;
our intent to permanently reinvest a significant portion of our earnings from foreign operations, and our belief that we will not need funds generated from foreign operations to fund our domestic operations;
our belief that our cash and cash equivalents, investments and cash generated from operations will be sufficient to meet our seasonal working capital needs, capital expenditure requirements, contractual obligations, debt service requirements and other liquidity requirements associated with our operations for at least the next 12 months;
our expectation that we will return excess cash generated by operations to our stockholders through repurchases of our common stock and the payment of cash dividends;
our belief that the credit facility will be available to us should we choose to borrow under it; and
our assessments and beliefs regarding the future outcome of pending legal proceedings and inquiries by regulatory authorities, the liability, if any, that Intuit may incur as a result of those proceedings and inquiries, and the impact of any potential losses associated with such proceedings or inquiries on our financial statements.
We caution investors that forward-looking statements are only predictions based on our current expectations about future events and are not guarantees of future performance. We encourage you to read carefully all information provided in this Quarterly Report and in our other filings with the Securities and Exchange Commission before deciding to invest in our stock or to maintain or change your investment. These forward-looking statements are based on information as of the filing date of this Quarterly Report, and we undertake no obligation to revise or update any forward-looking statement for any reason.

    
 
 
 
 
 
 Intuit Q1 Fiscal 2018 Form 10-Q
3         
 

Table of Contents

PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
 
 
 
Three Months Ended
(In millions, except per share amounts)
October 31,
2017
 
October 31,
2016
Net revenue:
 
 
 
Product
$
319

 
$
297

Service and other
567

 
481

Total net revenue
886

 
778

Costs and expenses:
 
 
 
Cost of revenue:
 
 
 
Cost of product revenue
24

 
29

Cost of service and other revenue
170

 
151

Amortization of acquired technology
2

 
3

Selling and marketing
308

 
283

Research and development
293

 
246

General and administrative
145

 
126

Amortization of other acquired intangible assets
1

 
1

Total costs and expenses
943

 
839

Operating loss
(57
)
 
(61
)
Interest expense
(5
)
 
(9
)
Interest and other income (expense), net
3

 
(2
)
Loss before income taxes
(59
)
 
(72
)
Income tax benefit
(42
)
 
(42
)
Net loss
$
(17
)
 
$
(30
)
 
 
 
 
Basic net loss per share
$
(0.07
)
 
$
(0.12
)
Shares used in basic per share calculations
256

 
258

 
 
 
 
Diluted net loss per share
$
(0.07
)
 
$
(0.12
)
Shares used in diluted per share calculations
256

 
258

 
 
 
 
Cash dividends declared per common share
$
0.39

 
$
0.34

See accompanying notes.

    
 
 
 
 
 
 Intuit Q1 Fiscal 2018 Form 10-Q
4         
 

Table of Contents

INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited)
 
 
 
Three Months Ended
(In millions)
October 31,
2017
 
October 31,
2016
 
 
 
 
Net loss
$
(17
)
 
$
(30
)
Other comprehensive income (loss), net of income taxes:
 
 
 
Unrealized losses on available-for-sale debt securities

 
(1
)
Foreign currency translation losses
(6
)
 
(4
)
Total other comprehensive loss, net
(6
)
 
(5
)
Comprehensive loss
$
(23
)
 
$
(35
)


See accompanying notes.


    
 
 
 
 
 
 Intuit Q1 Fiscal 2018 Form 10-Q
5         
 

Table of Contents

INTUIT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
 
 
 
 
(In millions)
October 31,
2017
 
July 31,
2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
529

 
$
529

Investments
248

 
248

Accounts receivable, net
116

 
103

Income taxes receivable
61

 
63

Prepaid expenses and other current assets
142

 
100

Current assets before funds held for customers
1,096

 
1,043

Funds held for customers
319

 
372

Total current assets
1,415

 
1,415

Long-term investments
31

 
31

Property and equipment, net
1,016

 
1,030

Goodwill
1,294

 
1,295

Acquired intangible assets, net
18

 
22

Long-term deferred income taxes
144

 
132

Other assets
146

 
143

Total assets
$
4,064

 
$
4,068

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Short-term debt
$
450

 
$
50

Accounts payable
220

 
157

Accrued compensation and related liabilities
146

 
300

Deferred revenue
799

 
887

Other current liabilities
183

 
178

Current liabilities before customer fund deposits
1,798

 
1,572

Customer fund deposits
319

 
372

Total current liabilities
2,117

 
1,944

Long-term debt
425

 
438

Long-term deferred revenue
191

 
202

Other long-term obligations
128

 
130

Total liabilities
2,861

 
2,714

Commitments and contingencies

 

Stockholders’ equity:
 
 
 
Preferred stock

 

Common stock and additional paid-in capital
4,999

 
4,857

Treasury stock, at cost
(10,948
)
 
(10,778
)
Accumulated other comprehensive loss
(28
)
 
(22
)
Retained earnings
7,180

 
7,297

Total stockholders’ equity
1,203

 
1,354

Total liabilities and stockholders’ equity
$
4,064

 
$
4,068

See accompanying notes.

    
 
 
 
 
 
 Intuit Q1 Fiscal 2018 Form 10-Q
6         
 

Table of Contents

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
Loss
 
Retained
Earnings
 
Total
Stockholders'
Equity
Balance at July 31, 2017
255,668

 
$
4,857

 
$
(10,778
)
 
$
(22
)
 
$
7,297

 
$
1,354

Comprehensive loss

 

 

 
(6
)
 
(17
)
 
(23
)
Issuance of stock under employee stock plans, net of shares withheld for employee taxes
1,224

 
44

 


 

 

 
44

Stock repurchases under stock repurchase programs
(1,225
)
 

 
(170
)
 

 

 
(170
)
Dividends and dividend rights declared ($0.39 per share)

 

 

 

 
(100
)
 
(100
)
Share-based compensation expense

 
98

 

 

 

 
98

Balance at October 31, 2017
255,667

 
$
4,999

 
$
(10,948
)
 
$
(28
)
 
$
7,180

 
$
1,203


(In millions, except shares in thousands)
Shares of
Common
Stock
 
Common
Stock and
Additional
Paid-In
Capital
 
Treasury
Stock
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Total
Stockholders'
Equity
Balance at July 31, 2016
257,853

 
$
4,445

 
$
(9,939
)
 
$
(32
)
 
$
6,687

 
$
1,161

Comprehensive loss

 

 

 
(5
)
 
(30
)
 
(35
)
Issuance of stock under employee stock plans, net of shares withheld for employee taxes
975

 
(2
)
 

 

 

 
(2
)
Stock repurchases under stock repurchase programs
(1,760
)
 

 
(192
)
 

 

 
(192
)
Dividends and dividend rights declared ($0.34 per share)

 

 

 

 
(89
)
 
(89
)
Cumulative effect of change in
accounting principle

 
6

 

 

 
(4
)
 
2

Share-based compensation expense

 
91

 

 

 

 
91

Balance at October 31, 2016
257,068

 
$
4,540

 
$
(10,131
)
 
$
(37
)
 
$
6,564

 
$
936



See accompanying notes.

    
 
 
 
 
 
 Intuit Q1 Fiscal 2018 Form 10-Q
7         
 

Table of Contents

INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
 
 
 
 
 
Three Months Ended
(In millions)
October 31,
2017
 
October 31,
2016
Cash flows from operating activities:
 
 
 
Net loss
$
(17
)
 
$
(30
)
 Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation
60

 
49

Amortization of acquired intangible assets
5

 
6

Share-based compensation expense
97

 
89

Deferred income taxes
(11
)
 
(9
)
Other
2

 
1

Total adjustments
153

 
136

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(14
)
 
(14
)
Income taxes receivable
2

 
(38
)
Prepaid expenses and other assets
(25
)
 
(50
)
Accounts payable
61

 
(2
)
Accrued compensation and related liabilities
(147
)
 
(148
)
Deferred revenue
(99
)
 
(67
)
Other liabilities
8

 
8

Total changes in operating assets and liabilities
(214
)
 
(311
)
Net cash used in operating activities
(78
)
 
(205
)
Cash flows from investing activities:
 
 
 
Purchases of corporate and customer fund investments
(86
)
 
(125
)
Sales of corporate and customer fund investments
38

 
298

Maturities of corporate and customer fund investments
46

 
22

Net change in cash and cash equivalents held to satisfy customer fund obligations
53

 
(22
)
Net change in customer fund deposits
(53
)
 
22

Purchases of property and equipment
(50
)
 
(86
)
Other
(23
)
 
(11
)
Net cash provided by (used in) investing activities
(75
)
 
98

Cash flows from financing activities:
 
 
 
Proceeds from borrowings under revolving credit facility
400

 
100

Repayment of debt
(13
)
 

Proceeds from issuance of stock under employee stock plans
83

 
43

Payments for employee taxes withheld upon vesting of restricted stock units
(39
)
 
(45
)
Cash paid for purchases of treasury stock
(168
)
 
(175
)
Dividends and dividend rights paid
(105
)
 
(89
)
Net cash provided by (used in) financing activities
158

 
(166
)
Effect of exchange rates on cash and cash equivalents
(5
)
 
(5
)
Net decrease in cash and cash equivalents

 
(278
)
Cash and cash equivalents at beginning of period
529

 
638

Cash and cash equivalents at end of period
$
529

 
$
360



See accompanying notes.

    
 
 
 
 
 
 Intuit Q1 Fiscal 2018 Form 10-Q
8         
 

Table of Contents

INTUIT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. Description of Business and Summary of Significant Accounting Policies
Description of Business
Intuit helps consumers, small businesses, and the self-employed prosper by delivering financial management and compliance products and services. We also provide specialized tax products to accounting professionals, who are key partners that help us reach small business customers.
Our flagship brands, QuickBooks and TurboTax, help customers run their small businesses, pay employees and bills, separate business and personal expenses, track their money, and file income taxes. ProSeries and Lacerte are our leading 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 reportable segments. See Note 9, “Segment Information,” for more information.
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, 2017. Results for the three months ended October 31, 2017 do not necessarily indicate the results we expect for the fiscal year ending July 31, 2018 or any other future period.
Seasonality
Our Consumer offerings have significant seasonal patterns and revenue from those income tax preparation products and services is heavily concentrated in our third fiscal quarter ending April 30.
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, 2017. There have been no changes to our significant accounting policies during the first three months of fiscal 2018.
Use of Estimates

In preparing our consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP), we make certain estimates and assumptions that affect the amounts reported in our financial statements and the disclosures made in the accompanying notes. For example, we use estimates in determining the appropriate levels of reserves for product returns, promotional discounts and rebates, the collectibility of accounts receivable, the appropriate levels of various accruals including accruals for litigation contingencies, the amount of our worldwide tax provision, and the realizability of deferred tax assets. We also use estimates in determining the remaining economic lives and fair values of acquired intangible assets, property and equipment, and other long-lived assets. In addition, we use assumptions to estimate the fair value of reporting units and share-based compensation. Despite our intention to establish accurate estimates and use reasonable assumptions, actual results may differ from our estimates.
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 consist of the shares issuable upon the exercise of stock options and upon the vesting of restricted stock units (RSUs) under the treasury stock method.

    
 
 
 
 
 
 Intuit Q1 Fiscal 2018 Form 10-Q
9         
 

Table of Contents

We include stock options with combined exercise prices and unrecognized compensation expense that are less than the average market price for our common stock, and RSUs with unrecognized compensation expense that is 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 and unrecognized compensation expense that are greater than the average market price for our common stock, and RSUs with unrecognized compensation expense that is 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 and the amount of compensation expense for future service that we have not yet recognized for stock options and RSUs are assumed to be used to repurchase shares.
All of the RSUs we grant have dividend rights. Dividend rights are accumulated and paid when the underlying RSUs vest. Since the dividend rights are subject to the same vesting requirements as the underlying equity awards they are considered a contingent transfer of value. Consequently, the RSUs are not considered participating securities and we do not present them separately in earnings per share.
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 loss per share for the periods indicated.
 
Three Months Ended
(In millions, except per share amounts)
October 31,
2017
 
October 31,
2016
Numerator:
 
 
 
Net loss
$
(17
)
 
$
(30
)
 
 
 
 
Denominator:
 
 
 
Shares used in basic per share amounts:
 
 
 
Weighted average common shares outstanding
256

 
258

 
 
 
 
Shares used in diluted per share amounts:
 
 
 
Weighted average common shares outstanding
256

 
258

Dilutive common equivalent shares from stock options
 
 
 
and restricted stock awards

 

Dilutive weighted average common shares outstanding
256

 
258

 
 
 
 
Basic and diluted net loss per share:
 
 
 
Basic net loss per share
$
(0.07
)
 
$
(0.12
)
 
 
 
 
Diluted net loss per share
$
(0.07
)
 
$
(0.12
)
 
 
 
 
Shares excluded from computation of diluted net 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
12

 
12

 
 
 
 
Weighted average stock options and restricted stock units that would have been excluded from the computation of dilutive common equivalent shares outstanding if net income had been reported in the period due to their anti-dilutive effect
2

 
4


Concentration of Credit Risk and Significant Customers
No customer accounted for 10% or more of total net revenue in the three months ended October 31, 2017 or October 31, 2016. No customer accounted for 10% or more of gross accounts receivable at October 31, 2017 or July 31, 2017.
Accounting Standards Not Yet Adopted
Goodwill Impairment - In January 2017 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” This new standard eliminates Step 2 from the goodwill impairment test. Instead, an entity should compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, which means that it will

    
 
 
 
 
 
 Intuit Q1 Fiscal 2018 Form 10-Q
10         
 

Table of Contents

be effective for us in the first quarter of our fiscal year beginning August 1, 2020. Early adoption is permitted. We are currently evaluating the impact of our pending adoption of ASU 2017-04 on our consolidated financial statements.
Business Combinations - In January 2017 the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business. This new standard clarifies the definition of a business in order to allow for the evaluation of whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, which means that it will be effective for us in the first quarter of our fiscal year beginning August 1, 2018. Early adoption is permitted. We are currently evaluating the impact of our pending adoption of ASU 2017-01 on our consolidated financial statements.
Statement of Cash Flows - In August 2016 the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” This new standard will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2017, which means that it will be effective for us in the first quarter of our fiscal year beginning August 1, 2018. The standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case we would be required to apply the amendments prospectively as of the earliest date practicable. We are currently evaluating the impact of our pending adoption of ASU 2016-15 on our consolidated financial statements.
Financial Instruments - In June 2016 the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326).” This new standard requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, which means that it will be effective for us in the first quarter of our fiscal year beginning August 1, 2020. Earlier adoption is permitted in the first quarter of our fiscal year beginning August 1, 2019. We are currently evaluating the impact of our pending adoption of ASU 2016-13 on our consolidated financial statements.
Leases - In February 2016 the FASB issued ASU 2016-02, “Leases (Topic 842).” This new standard amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, which means that it will be effective for us in the first quarter of our fiscal year beginning August 1, 2019. Early adoption is permitted. This standard is required to be adopted using a modified retrospective approach. We are currently evaluating the impact of our pending adoption of ASU 2016-02 on our consolidated financial statements.
Revenue Recognition - In May 2014 the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),”and in August 2015 the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” which defers the effective date of ASU 2014-09 by one year. This new standard supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of the new standard is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible that more judgment and estimates may be required within the revenue recognition process than is required under present U.S. GAAP. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price, and allocating the transaction price to each separate performance obligation. The new standard also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The new standard is effective for reporting periods beginning after December 15, 2017, which means that it will be effective for us in the first quarter of our fiscal year beginning August 1, 2018.
We plan to adopt Topic 606 utilizing the full retrospective transition method when it becomes effective for us in the first fiscal quarter beginning August 1, 2018.
We have completed our preliminary assessment of the new standard and are continuing to assess all potential impacts of the standard. We currently believe the most significant changes will be the timing of revenue recognition related to our QuickBooks desktop solutions and our consumer and professional tax desktop solutions.
Under the current standard, we recognize substantially all of the revenue for QuickBooks desktop solutions ratably over the period that enhancements and connected services are provided, which is approximately three years. Under the new standard, we will recognize software license revenue for QuickBooks desktop solutions at the time the license is delivered. Due to the upfront recognition of Quickbooks desktop solutions, upon adoption, we will remove deferred revenue from our liabilities through a cumulative adjustment to retained earnings. We expect the timing of QuickBooks desktop revenue in our Small Business & Self-Employed reporting segment to shift to earlier quarters within each fiscal year as a result of these changes.
With respect to our consumer and professional tax desktop solutions, under the current standard, we recognize all revenue related to the desktop solutions as services are provided. Under the new standard, we will recognize revenue for the desktop tax preparation software license and related tax form updates as they are delivered. We will recognize revenue for our electronic filing and connected services as those services are provided. As sales and delivery of desktop tax preparation software solutions are concentrated from November through April, we expect the timing of the related desktop revenue for our Consumer and Strategic Partner reporting segments to shift to earlier quarters within each fiscal year as a result of these changes.

    
 
 
 
 
 
 Intuit Q1 Fiscal 2018 Form 10-Q
11         
 

Table of Contents

Under Topic 606 we do not expect our annual total and reporting segment revenue growth rates to be significantly different as compared to growth rates under the current standard.
Accounting for commissions under the new standard will result in the deferral of incremental commission costs for obtaining contracts, which we do not expect to be material.
We do not expect that any other recently issued accounting pronouncements will have a significant effect on our financial statements.
2. Fair Value Measurements
Fair Value Hierarchy
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 unobservable 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 values are determined using pricing models, discounted cash flow methodologies or similar valuation techniques and significant management judgment or estimation.
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.
 
October 31, 2017
 
July 31, 2017
(In millions)
Level 1
 
Level 2
 
Level 3
 
Total
Fair Value
 
Level 1
 
Level 2
 
Level 3
 
Total
Fair Value
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents, primarily time deposits
$
28

 
$

 
$

 
$
28

 
$
181

 
$

 
$

 
$
181

Available-for-sale debt securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Municipal bonds

 
55

 

 
55

 

 
63

 

 
63

Corporate notes

 
383

 

 
383

 

 
382

 

 
382

U.S. agency securities

 
10

 

 
10

 

 
3

 

 
3

Municipal auction rate securities

 

 
15

 
15

 

 

 
15

 
15

Total available-for-sale securities

 
448

 
15

 
463

 

 
448

 
15

 
463

Total assets measured at fair value on a recurring basis
$
28

 
$
448

 
$
15

 
$
491

 
$
181

 
$
448

 
$
15

 
$
644



    
 
 
 
 
 
 Intuit Q1 Fiscal 2018 Form 10-Q
12         
 

Table of Contents

The following table summarizes our cash equivalents and available-for-sale debt securities by balance sheet classification and level in the fair value hierarchy at the dates indicated.
 
October 31, 2017
 
July 31, 2017
(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
$
28

 
$

 
$

 
$
28

 
$
181

 
$

 
$

 
$
181

Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
In investments
$

 
$
248

 
$

 
$
248

 
$

 
$
248

 
$

 
$
248

In funds held for customers

 
200

 

 
200

 

 
200

 

 
200

In long-term investments

 

 
15

 
15

 

 

 
15

 
15

Total available-for-sale securities
$

 
$
448

 
$
15

 
$
463

 
$

 
$
448

 
$
15

 
$
463


We value our Level 1 assets, consisting primarily of time deposits, 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 with the help of a pricing service that either provides quoted market prices in active markets for identical or similar securities or uses observable inputs for their pricing without applying significant adjustments. Our fair value processes include controls that are designed to ensure that we record appropriate fair values for our Level 2 investments. These controls include comparison to pricing provided by a secondary pricing service or investment manager, validation of pricing sources and models, review of key model inputs, analysis of period-over-period price fluctuations, and independent recalculation of prices where appropriate.
Financial assets whose fair values we measure using significant unobservable (Level 3) inputs consist of municipal auction rate securities that are no longer liquid. We estimate the fair values of the auction rate securities using a discounted cash flow model. We continue to classify them as long-term investments based on the maturities of the underlying securities at that date. We do not intend to sell our municipal auction rate securities. In addition, it is more likely than not that we will not be required to sell them before recovery at par, which may be at maturity.
There were no transfers between Level 1, Level 2, and Level 3 of the fair value hierarchy during the three months ended October 31, 2017.
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 time deposits in all periods presented. Investments at October 31, 2017 consisted of available-for-sale investment-grade debt securities that we carried at fair value. Funds held for customers consist of cash and cash equivalents and investment grade available-for-sale debt securities in all periods presented. 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.
 
October 31, 2017
 
July 31, 2017
(In millions)
Amortized
Cost
 
Fair Value
 
Amortized
Cost
 
Fair Value
Classification on balance sheets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
529

 
$
529

 
$
529

 
$
529

Investments
248

 
248

 
247

 
248

Funds held for customers
319

 
319

 
372

 
372

Long-term investments
31

 
31

 
31

 
31

Total cash and cash equivalents, investments, and funds
held for customers
$
1,127

 
$
1,127

 
$
1,179

 
$
1,180



    
 
 
 
 
 
 Intuit Q1 Fiscal 2018 Form 10-Q
13         
 

Table of Contents

The following table summarizes our cash and cash equivalents, investments, and funds held for customers by investment category at the dates indicated.
 
October 31, 2017
 
July 31, 2017
(In millions)
Amortized
Cost
 
Fair Value
 
Amortized
Cost
 
Fair Value
Type of issue:
 
 
 
 
 
 
 
Total cash and cash equivalents
$
648

 
$
648

 
$
701

 
$
701

Available-for-sale debt securities:
 
 
 
 
 
 
 
Municipal bonds
55

 
55

 
63

 
63

Corporate notes
383

 
383

 
381

 
382

U.S. agency securities
10

 
10

 
3

 
3

Municipal auction rate securities
15

 
15

 
15

 
15

Total available-for-sale debt securities
463

 
463

 
462

 
463

Other long-term investments
16

 
16

 
16

 
16

Total cash and cash equivalents, investments, and funds
held for customers
$
1,127

 
$
1,127

 
$
1,179

 
$
1,180


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 or expense on our statements of operations. Gross realized gains and losses on our available-for-sale debt securities for the three months ended October 31, 2017 and October 31, 2016 were not significant.
We accumulate unrealized gains and losses on our available-for-sale debt securities, net of tax, in accumulated other comprehensive income or loss in the stockholders’ equity section of our balance sheets. Gross unrealized gains and losses on our available-for-sale debt securities at October 31, 2017 and July 31, 2017 were not significant.
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 October 31, 2017 were not other-than-temporarily impaired. Unrealized losses on available-for-sale debt securities at October 31, 2017 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. In addition, it is more likely than not that we will not 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.
 
October 31, 2017
 
July 31, 2017
(In millions)
Amortized
Cost
 
Fair Value
 
Amortized
Cost
 
Fair Value
Due within one year
$
197

 
$
197

 
$
209

 
$
209

Due within two years
162

 
162

 
164

 
164

Due within three years
70

 
70

 
59

 
60

Due after three years
34

 
34

 
30

 
30

Total available-for-sale debt securities
$
463

 
$
463

 
$
462

 
$
463


4. Current Liabilities
Short-Term Debt
On February 1, 2016 we entered into a master credit agreement with certain institutional lenders for a five-year credit facility in an aggregate principal amount of $1.5 billion. The master credit agreement includes a $500 million unsecured term loan and a $1 billion unsecured revolving credit facility. At October 31, 2017, $475 million was outstanding under the term loan, of which $50 million was classified as short-term debt. See Note 5, “Long-Term Obligations and Commitments – Long-Term Debt,” for more information regarding the term loan.

    
 
 
 
 
 
 Intuit Q1 Fiscal 2018 Form 10-Q
14         
 

Table of Contents

Unsecured Revolving Credit Facility
The master credit agreement we entered into on February 1, 2016 includes a $1 billion unsecured revolving credit facility that will expire on February 1, 2021. Under the master credit agreement we may, subject to certain customary conditions, on one or more occasions increase commitments under the revolving credit facility in an amount not to exceed $250 million in the aggregate and may extend the maturity date up to two times. Advances under the revolving credit facility accrue interest at rates that are equal to, at our election, either Bank of America's alternate base rate plus a margin that ranges from 0.0% to 0.5% or the London Interbank Offered Rate (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 master credit 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 annual interest expense 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 October 31, 2017. During the three months ended October 31, 2017 we borrowed $400 million under this revolving credit facility and at October 31, 2017 $400 million was outstanding. We paid $1 million in cash for interest on the revolving credit facility during the three months ended October 31, 2017. Cash paid for interest on the revolving credit facility during the three months ended October 31, 2016 was not significant.
Other Current Liabilities
Other current liabilities were as follows at the dates indicated:
(In millions)
October 31,
2017
 
July 31,
2017
Executive deferred compensation plan liabilities
$
95

 
$
83

Reserve for promotional discounts and rebates
18

 
19

Reserve for product returns
7

 
7

Current portion of license fee payable
10

 
10

Current portion of deferred rent
5

 
6

Current portion of dividend payable
5

 
9

Other
43

 
44

Total other current liabilities
$
183

 
$
178


The balances of several of our other current liabilities, particularly our reserves for product returns and promotional discounts 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.
5. Long-Term Obligations and Commitments
Long-Term Debt
On February 1, 2016 we entered into a master credit agreement with certain institutional lenders for a five-year credit facility in an aggregate principal amount of $1.5 billion, which includes a $500 million unsecured term loan. Under the master credit agreement we may, subject to certain customary conditions, on one or more occasions increase commitments under the term loan in an amount not to exceed $500 million in the aggregate. The term loan accrues interest at rates that are equal to, at our election, either Bank of America's alternate base rate plus a margin that ranges from 0.125% to 0.875% or LIBOR plus a margin that ranges from 1.125% to 1.875%. Actual margins under either election will be based on our senior debt credit ratings. The master credit agreement includes customary affirmative and negative covenants. See Note 4, “Current Liabilities – Unsecured Revolving Credit Facility,” for more information. The term loan is subject to quarterly principal payments, which began in July 2017, of 2.5% of the original loan amount, with the balance payable on February 1, 2021. At October 31, 2017, $475 million was outstanding under the term loan, of which $50 million was classified as short-term debt. Interest on the term loan is payable monthly. We paid $3 million and $2 million in cash for interest on the term loan during the three months ended October 31, 2017 and October 31, 2016 respectively.

    
 
 
 
 
 
 Intuit Q1 Fiscal 2018 Form 10-Q
15         
 

Table of Contents

Other Long-Term Obligations
Other long-term obligations were as follows at the dates indicated:
(In millions)
October 31,
2017
 
July 31,
2017
Total deferred rent
$
48

 
$
49

Long-term income tax liabilities
54

 
53

Total license fee payable
18

 
18

Total dividend payable
9

 
13

Long-term deferred income tax liabilities
7

 
7

Other
15

 
16

Total long-term obligations
151

 
156

Less current portion (included in other current liabilities)
(23
)
 
(26
)
Long-term obligations due after one year
$
128

 
$
130


Operating Lease Commitments and Unconditional Purchase Obligations
We describe our operating lease commitments and purchase obligations in Note 8 to the financial statements in Item 8 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2017. On September 13, 2017 we signed an agreement that includes a minimum purchase commitment of $450 million through August 31, 2022. There were no other significant changes in our operating lease commitments or purchase obligations during the three months ended October 31, 2017.
6. 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.
In the first quarter of fiscal 2017 we adopted ASU 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” As a result, we recognized excess tax benefits on share-based compensation of $25 million and $19 million in our provision for income taxes for the three months ended October 31, 2017 and 2016 respectively.
Our effective tax rate for the three months ended October 31, 2017 was approximately 72%. Excluding discrete tax items primarily related to share-based compensation tax benefits resulting from the adoption of ASU 2016-09, our effective tax rate for the period was 33% and did not differ significantly from the federal statutory rate of 35%. The tax benefit we received from the domestic production activities deduction and the federal research and experimentation credit were partially offset by the tax expense related to state income taxes and nondeductible share-based compensation.
Our effective tax rate for the three months ended October 31, 2016 was approximately 58%. Excluding discrete tax items primarily related to share-based compensation tax benefits resulting from the adoption of ASU 2016-09, our effective tax rate for the period was 34% and did not differ significantly from the federal statutory rate of 35%. The tax benefit we received from the domestic production activities deduction and the federal research and experimentation credit were partially offset by the tax expense related to state income taxes and nondeductible share-based compensation.
Unrecognized Tax Benefits and Other Considerations
The total amount of our unrecognized tax benefits at July 31, 2017 was $61 million. Net of related deferred tax assets, unrecognized tax benefits were $38 million at that date. If we were to recognize these net benefits, our income tax expense would reflect a favorable net impact of $38 million. There were no material changes to these amounts during the three months ended October 31, 2017. We do not believe that it is reasonably possible that there will