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

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		77-0034661
(State of incorporation)		(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, 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):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company 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. 310,610,837 shares of Common Stock, $0.01 par value, were outstanding at November 30, 2010.

 

 

INTUIT INC.
FORM 10-Q
INDEX

		Page
		Number
PART I FINANCIAL INFORMATION
ITEM 1: Financial Statements
Condensed Consolidated Statements of Operations for the three months ended October 31, 2010 and October 31, 2009			3
Condensed Consolidated Balance Sheets at October 31, 2010 and July 31, 2010			4
Condensed Consolidated Statements of Stockholders’ Equity for the three months ended October 31, 2010 and October 31, 2009			5
Condensed Consolidated Statements of Cash Flows for the three months ended October 31, 2010 and October 31, 2009			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			34
PART II OTHER INFORMATION
ITEM 1: Legal Proceedings			35
ITEM 1A: Risk Factors			36
ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds			45
ITEM 6: Exhibits			46
Signatures			47
EX-10.01
EX-10.02
EX-31.01
EX-31.02
EX-32.01
EX-32.02
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

Intuit, the Intuit logo, QuickBooks, TurboTax, ProSeries, Lacerte, 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.

PART I

ITEM 1

FINANCIAL STATEMENTS

INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

		Three Months Ended
		October 31,				October 31,
(In millions, except per share amounts)		2010				2009
Net revenue:
Product		$	216			$	205
Service and other			316				269
Total net revenue			532				474
Costs and expenses:
Cost of revenue:
Cost of product revenue			32				35
Cost of service and other revenue			123				109
Amortization of acquired technology			4				22
Selling and marketing			220				180
Research and development			156				141
General and administrative			90				77
Amortization of other acquired intangible assets			11				10
Total costs and expenses			636				574
Operating loss from continuing operations			(104	)			(100	)
Interest expense			(15	)			(16	)
Interest and other income, net			8				5
Loss from continuing operations before income taxes			(111	)			(111	)
Income tax benefit			(41	)			(42	)
Net loss from continuing operations			(70	)			(69	)
Net income from discontinued operations			—				1
Net loss		$	(70	)		$	(68	)
Basic and diluted net loss per share from continuing operations		$	(0.22	)		$	(0.21	)
Basic and diluted net income per share from discontinued operations			—				—
Basic and diluted net loss per share		$	(0.22	)		$	(0.21	)
Shares used in basic and diluted per share calculations			316				320

See accompanying notes.

INTUIT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

		October 31,				July 31,
(In millions)		2010				2010
ASSETS
Current assets:
Cash and cash equivalents		$	112			$	214
Investments			1,062				1,408
Accounts receivable, net			147				135
Income taxes receivable			141				27
Deferred income taxes			108				117
Prepaid expenses and other current assets			77				57
Current assets before funds held for customers			1,647				1,958
Funds held for customers			363				337
Total current assets			2,010				2,295
Long-term investments			89				91
Property and equipment, net			547				510
Goodwill			1,911				1,914
Acquired intangible assets, net			242				256
Long-term deferred income taxes			45				41
Other assets			99				91
Total assets		$	4,943			$	5,198
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	158			$	143
Accrued compensation and related liabilities			124				206
Deferred revenue			360				387
Income taxes payable			1				14
Other current liabilities			130				134
Current liabilities before customer fund deposits			773				884
Customer fund deposits			363				337
Total current liabilities			1,136				1,221
Long-term debt			998				998
Other long-term obligations			194				158
Total liabilities			2,328				2,377
Commitments and contingencies
Stockholders’ equity:
Preferred stock			—				—
Common stock and additional paid-in capital			2,762				2,728
Treasury stock, at cost			(3,486	)			(3,315	)
Accumulated other comprehensive income			12				11
Retained earnings			3,327				3,397
Total stockholders’ equity			2,615				2,821
Total liabilities and stockholders’ equity		$	4,943			$	5,198

See accompanying notes.

INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)

						Common
						Stock and								Accumulated
		Shares of				Additional								Other								Total
(In millions, except shares in		Common				Paid-In				Treasury				Comprehensive				Retained				Stockholders’
thousands)		Stock				Capital				Stock				Income				Earnings				Equity
Balance at July 31, 2010			313,861			$	2,728			$	(3,315	)		$	11			$	3,397			$	2,821
Components of comprehensive net loss:
Net loss			—				—				—				—				(70	)			(70	)
Other comprehensive income, net of tax			—				—				—				1				—				1
Comprehensive net loss																							(69	)
Issuance of common stock under employee stock plans			5,782				24				130				—				—				154
Restricted stock units released, net of taxes			1,267				(57	)			29				—				—				(28	)
Stock repurchases under stock repurchase programs			(7,308	)			—				(330	)			—				—				(330	)
Tax benefit from share-based compensation plans			—				32				—				—				—				32
Share-based compensation			—				35				—				—				—				35
Balance at October 31, 2010			313,602			$	2,762			$	(3,486	)		$	12			$	3,327			$	2,615

						Common
						Stock and								Accumulated
		Shares of				Additional								Other								Total
(In millions, except shares in		Common				Paid-In				Treasury				Comprehensive				Retained				Stockholders’
thousands)		Stock				Capital				Stock				Income				Earnings				Equity
Balance at July 31, 2009			322,766			$	2,547			$	(2,846	)		$	7			$	2,849			$	2,557
Components of comprehensive net loss:
Net loss			—				—				—				—				(68	)			(68	)
Other comprehensive income, net of tax			—				—				—				—				—				—
Comprehensive net loss																							(68	)
Issuance of common stock under employee stock plans			3,056				—				67				—				(2	)			65
Restricted stock units released, net of taxes			954				(15	)			20				—				(20	)			(15	)
Stock repurchases under stock repurchase programs			(10,565	)			—				(300	)			—				—				(300	)
Tax benefit from share-based compensation plans			—				6				—				—				—				6
Share-based compensation			—				27				—				—				—				27
Balance at October 31, 2009			316,211			$	2,565			$	(3,059	)		$	7			$	2,759			$	2,272

INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

		Three Months Ended
		October 31,				October 31,
(In millions)		2010				2009
Cash flows from operating activities:
Net loss		$	(70	)		$	(68	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			37				39
Amortization of acquired intangible assets			19				36
Share-based compensation			35				27
Deferred income taxes			25				(24	)
Tax benefit from share-based compensation plans			32				6
Excess tax benefit from share-based compensation plans			(27	)			(3	)
Other			5				4
Total adjustments			126				85
Changes in operating assets and liabilities:
Accounts receivable			(12	)			(13	)
Prepaid expenses, income taxes receivable and other assets			(134	)			(56	)
Accounts payable			5				9
Accrued compensation and related liabilities			(82	)			(57	)
Deferred revenue			(29	)			(24	)
Income taxes payable			(13	)			—
Other liabilities			(2	)			(16	)
Total changes in operating assets and liabilities			(267	)			(157	)
Net cash used in operating activities			(211	)			(140	)
Cash flows from investing activities:
Purchases of available-for-sale debt securities			(428	)			(388	)
Sales of available-for-sale debt securities			638				322
Maturities of available-for-sale debt securities			134				36
Investment of funds held for customers as cash equivalents in available-for-sale debt securities			—				87
Net change in funds held for customers as cash equivalents			(26	)			(21	)
Net change in customer fund deposits			26				21
Purchases of property and equipment			(51	)			(32	)
Acquisitions of intangible assets			(3	)			—
Other			(5	)			(3	)
Net cash provided by investing activities			285				22
Cash flows from financing activities:
Net proceeds from issuance of common stock under stock plans			154				65
Tax payments related to issuance of restricted stock units			(28	)			(15	)
Purchases of treasury stock			(330	)			(300	)
Excess tax benefit from share-based compensation plans			27				3
Other			—				(1	)
Net cash used in financing activities			(177	)			(248	)
Effect of exchange rates on cash and cash equivalents			1				—
Net decrease in cash and cash equivalents			(102	)			(366	)
Cash and cash equivalents at beginning of period			214				679
Cash and cash equivalents at end of period		$	112			$	313

See accompanying notes.

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, Quicken and TurboTax, simplify small business management and payroll processing, personal finance, and tax preparation and filing. ProSeries and Lacerte 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. In November 2009 we acquired Mint Software Inc. for total consideration of approximately $170 million and in May 2010 we acquired Medfusion, Inc. for total consideration of approximately $89 million. We have included the results of operations for Mint and Medfusion in our consolidated results of operations from their respective dates of acquisition. In January 2010 we sold our Intuit Real Estate Solutions (IRES) business. We have reclassified our financial statements for all periods prior to the sale to reflect IRES as discontinued operations. Unless noted otherwise, discussions in these notes pertain to our continuing operations.

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, 2010. Results for the three months ended October 31, 2010 do not necessarily indicate the results we expect for the fiscal year ending July 31, 2011 or any other future period.

We have reclassified certain amounts previously reported in our financial statements to conform to the current presentation, including amounts related to reportable segments and discontinued operations.

Seasonality

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. 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 operating expenses continue at relatively consistent levels.

Significant Accounting Policies

We describe our significant accounting policies in Note 1 to the financial statements in Item 8 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2010. As discussed below, on August 1, 2010 we adopted authoritative guidance on multiple-deliverable revenue arrangements. There have been no other changes to our significant accounting policies during fiscal 2011.

Multiple-Deliverable Revenue Arrangements

In October 2009 the Financial Accounting Standards Board (FASB) amended the accounting standards applicable to revenue recognition for multiple-deliverable revenue arrangements that are outside the scope of industry-specific software revenue recognition guidance. This new guidance amends the criteria for allocating consideration in

multiple-deliverable revenue arrangements by establishing a selling price hierarchy. The selling price used for each deliverable will be based on vendor-specific objective evidence (VSOE) if available, third-party evidence (TPE) if VSOE is not available, or estimated selling price (ESP) if neither VSOE nor TPE is available. The guidance also eliminates the use of the residual method of allocation and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method.

We adopted this guidance on a prospective basis on August 1, 2010, and therefore applied it to relevant revenue arrangements originating or materially modified on or after that date.

VSOE generally exists when we sell the deliverable separately and we are normally able to establish VSOE for all deliverables in these multiple-element arrangements; however, in certain limited instances VSOE cannot be established. This may be because we infrequently sell each element separately, do not price products within a narrow range, or have a limited sales history, such as in the case of our emerging market offerings. When VSOE cannot be established, we attempt to establish selling price for each element based on TPE. TPE is determined based on competitor prices for similar deliverables when sold separately.

When we are unable to establish selling price using VSOE or TPE, we use ESP in our allocation of arrangement consideration. We determine ESP for a product or service by considering multiple factors, including, but not limited to, geographies, market conditions, competitive landscape, internal costs, gross margin objectives, and pricing practices.

Our adoption of this new accounting guidance did not have a significant impact on the timing and pattern of revenue recognition when applied to multiple-element arrangements because our multiple-element offerings are predominantly software or software-related and VSOE exists for most of these offerings.

Computation of Net Income (Loss) Per Share

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

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

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

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

		Three Months Ended
		October 31,				October 31,
(In millions, except per share amounts)		2010				2009
Numerator:
Net loss from continuing operations		$	(70	)		$	(69	)
Net income from discontinued operations			—				1
Net loss		$	(70	)		$	(68	)
Denominator:
Shares used in basic and diluted per share amounts:
Weighted average common shares outstanding			316				320
Basic and diluted net loss per share:
Basic and diluted net loss per share from continuing operations		$	(0.22	)		$	(0.21	)
Basic and diluted net income per share from discontinued operations			—				—
Basic and diluted net loss per share		$	(0.22	)		$	(0.21	)
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			33				27
Weighted average stock options and restricted stock units excluded from calculation due to anti-dilutive effect			5				26

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, 2010 or October 31, 2009. No customer accounted for 10% or more of total accounts receivable at October 31, 2010 or July 31, 2010.

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.

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, 2010																July 31, 2010
														Total																Total
(In millions)		Level 1				Level 2				Level 3				Fair Value				Level 1				Level 2				Level 3				Fair Value
Assets:
Cash equivalents, primarily money market funds		$	266			$	—			$	—			$	266			$	330			$	—			$	—			$	330
Available-for-sale debt securities:
Municipal bonds			—				741				—				741				—				1,050				—				1,050
Municipal auction rate securities			—				—				85				85				—				—				87				87
Corporate notes			—				307				—				307				—				334				—				334
U.S. agency securities			—				164				—				164				—				174				—				174
Total available-for-sale debt securities			—				1,212				85				1,297				—				1,558				87				1,645
Total assets measured at fair value on a recurring basis		$	266			$	1,212			$	85			$	1,563			$	330			$	1,558			$	87			$	1,975
Liabilities:
Long-term debt (1)		$	—			$	1,091			$	—			$	1,091			$	—			$	1,086			$	—			$	1,086

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, 2010																July 31, 2010
														Total																Total
(In millions)		Level 1				Level 2				Level 3				Fair Value				Level 1				Level 2				Level 3				Fair Value
Cash equivalents:
In cash and cash equivalents		$	53			$	—			$	—			$	53			$	143			$	—			$	—			$	143
In funds held for customers			213				—				—				213				187				—				—				187
Total cash equivalents		$	266			$	—			$	—			$	266			$	330			$	—			$	—			$	330
Available-for-sale debt securities:
In investments		$	—			$	1,062			$	—			$	1,062			$	—			$	1,408			$	—			$	1,408
In funds held for customers			—				150				—				150				—				150				—				150
In long-term investments			—				—				85				85				—				—				87				87
Total available-for-sale debt securities		$	—			$	1,212			$	85			$	1,297			$	—			$	1,558			$	87			$	1,645

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 long-term debt. See Note 8. We measure the fair value of our long-term debt based on the trading prices of the senior notes 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. These securities are included in long-term investments on our balance sheets at October 31, 2010 and July 31, 2010 based on the maturities of the underlying securities. There were no significant transfers between Level 1, Level 2, and Level 3 of the fair value hierarchy during the three months ended October 31, 2010.

The following table presents a reconciliation of activity for our Level 3 assets for the three months ended October 31, 2010.

		Three Months
		Ended
		October 31,
(In millions)		2010
Beginning balance		$	87
Settlements at par			(2	)
Ending balance		$	85

We estimated the fair values of these municipal auction rate securities at October 31, 2010 and July 31, 2010 using a discounted cash flow model that we prepared. See Note 2 to the financial statements in Item 8 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2010 for a description of that model and the nature of the key inputs. Using our discounted cash flow model we determined that the fair values of the municipal auction rate securities we held at October 31, 2010 were approximately equal to their par values. As a result, we recorded no decrease in the fair values of those securities for the three months then ended. 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. See Note 2. 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 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, 2010								July 31, 2010
		Amortized								Amortized
(In millions)		Cost				Fair Value				Cost				Fair Value
Classification on balance sheets:
Cash and cash equivalents		$	112			$	112			$	214			$	214
Investments			1,060				1,062				1,407				1,408
Funds held for customers			362				363				336				337
Long-term investments			89				89				91				91
Total cash and cash equivalents, investments and funds held for customers		$	1,623			$	1,626			$	2,048			$	2,050

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

		October 31, 2010								July 31, 2010
		Amortized								Amortized
(In millions)		Cost				Fair Value				Cost				Fair Value
Type of issue:
Total cash and cash equivalents		$	325			$	325			$	401			$	401
Available-for-sale debt securities:
Municipal bonds			740				741				1,049				1,050
Municipal auction rate securities			85				85				87				87
Corporate notes			305				307				333				334
U.S. agency securities			164				164				174				174
Total available-for-sale debt securities			1,294				1,297				1,643				1,645
Other long-term investments			4				4				4				4
Total cash and cash equivalents, investments and funds held for customers		$	1,623			$	1,626			$	2,048			$	2,050

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 months ended October 31, 2010 and October 31, 2009 were not significant. We accumulate unrealized gains and losses on our available-for-sale debt 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 October 31, 2010 and July 31, 2010 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, 2010 were not other-than-temporarily impaired. While 57 available-for-sale debt securities had fair values that were a total of $0.4 million below amortized cost at that date, we do not intend to sell these 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. None of these securities had been in an unrealized loss position for more than 12 months at October 31, 2010. The unrealized losses at October 31, 2010 are due to changes in interest rates, including market credit spreads, and not due to increased credit risks associated with the specific securities.

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, 2010								July 31, 2010
		Amortized								Amortized
(In millions)		Cost				Fair Value				Cost				Fair Value
Due within one year		$	423			$	424			$	432			$	433
Due within two years			275				276				365				366
Due within three years			256				257				164				164
Due after three years			340				340				682				682
Total available-for-sale debt securities		$	1,294			$	1,297			$	1,643			$	1,645

Available-for-sale debt securities due after three years in the table above included $85 million in municipal auction rate securities at October 31, 2010 and $87 million in municipal auction rate securities at July 31, 2010. See Note 2. Of the remaining available-for-sale debt securities, 80% and 89% had an interest reset date, put date or mandatory call date within two years of those dates.

4. Accumulated Other Comprehensive Income

We add components of other comprehensive income, such as changes in the fair value of available-for-sale debt securities and foreign currency translation adjustments, to our net income or loss to arrive at comprehensive net income or loss. For the three months ended October 31, 2010 and October 31, 2009, other comprehensive income was not significant.

The balances in accumulated other comprehensive income in the equity section of our balance sheets at October 31, 2010 and July 31, 2010 consisted primarily of cumulative foreign currency translation adjustments and were not significant.

5. Business Combinations

We completed the business combinations described below during fiscal 2010. We have included the results of operations for each of them in our consolidated results of operations from their respective dates of acquisition. Their results of operations for periods prior to the dates of acquisition were not material, individually or in the aggregate, when compared with our consolidated results of operations. The fair values assigned to the identifiable intangible assets acquired were based on estimates and assumptions determined by management.

Medfusion, Inc.

On May 21, 2010 we acquired privately held Medfusion, Inc. for total consideration of approximately $89 million. The total consideration included approximately $10 million for the fair value of cash retention bonuses that is being charged to expense over a three year service period. Medfusion is a provider of online patient-to-provider communication solutions and became part of our Other Businesses segment. We acquired Medfusion to expand our online healthcare offerings in support of our Connected Services strategy.

Under the acquisition method of accounting we allocated the fair value of the total consideration transferred to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. We recorded the excess of consideration over the aggregate fair values as goodwill. Using information available at the time the acquisition closed, we allocated approximately $8 million of the consideration to net tangible liabilities and approximately $23 million of the consideration to identified intangible assets. We recorded the excess consideration of approximately $62 million as goodwill, none of which is deductible for income tax purposes. The identified intangible assets are being amortized over a weighted average life of six years.

Mint Software Inc.

On November 2, 2009 we acquired all of the outstanding equity interests of Mint Software Inc. for total consideration of approximately $170 million. The total consideration included approximately $24 million for cash retention bonuses and the fair value of assumed equity awards and Intuit common stock issued to the holder of Mint Series D Preferred Stock. The total of $24 million is being charged to expense over a three year service period. Mint is a provider of online personal finance services and became part of our Other Businesses segment. We acquired Mint to expand our online personal finance offerings in support of our Connected Services strategy.

Under the acquisition method of accounting we allocated the fair value of the total consideration transferred to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. The fair values assigned to identifiable intangible assets acquired were based on estimates and assumptions determined by management. We recorded the excess of consideration over the aggregate fair values as goodwill. Using information available at the time the acquisition closed, we allocated approximately $1 million of the consideration to tangible assets and liabilities and approximately $43 million of the consideration to identified intangible assets. We recorded the excess consideration of approximately $102 million as goodwill, none of which is deductible for income tax purposes. The identified intangible assets are being amortized over a weighted average life of seven years.

6. Discontinued Operations

On January 15, 2010 we sold our Intuit Real Estate Solutions (IRES) business for approximately $128 million in cash and recorded a net gain on disposal of $35 million. The decision to sell IRES was a result of management’s desire to focus resources on Intuit’s core products and services. IRES was part of our Other Businesses segment.

We determined that IRES became a discontinued operation in the second quarter of fiscal 2010. We have therefore segregated the operating results of IRES from continuing operations in our statements of operations for all periods prior to the sale. For the three months ended October 31, 2009, net revenue from IRES was $19 million and net income from IRES was $1 million. Because IRES operating cash flows were not material for any period presented, we have not segregated them from continuing operations on our statements of cash flows.

7. Current Liabilities

Unsecured Revolving Credit Facility

On March 22, 2007 we entered into an agreement with certain institutional lenders for a $500 million unsecured revolving credit facility that will expire on March 22, 2012. Advances under the credit facility will accrue interest at rates that are equal to, at our election, either Citibank’s base rate or the London InterBank Offered Rate (LIBOR) plus a margin that ranges from 0.18% to 0.575% based on our senior debt credit ratings. The applicable interest rate will be increased by 0.05% for any period in which the total principal amount of advances and letters of credit under the credit facility exceeds $250 million. The agreement includes 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 and a ratio of annual EBITDA to interest payable of not less than 3.00 to 1.00. We were in compliance with these covenants at October 31, 2010. We may use amounts borrowed under this credit facility for general corporate purposes or for future acquisitions or expansion of our business. To date we have not borrowed under this credit facility.

Other Current Liabilities

Other current liabilities were as follows at the dates indicated:

		October 31,				July 31,
(In millions)		2010				2010
Reserve for product returns		$	24			$	20
Reserve for rebates			10				11
Current portion of license fee payable			10				10
Current portion of deferred rent			7				7
Interest payable			7				21
Executive deferred compensation plan liabilities			52				43
Other			20				22
Total other current liabilities		$	130			$	134

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, “Seasonality.”

8. Long-Term Obligations and Commitments

Long-Term Debt

On March 12, 2007 we issued $500 million of 5.40% senior unsecured notes due on March 15, 2012 and $500 million of 5.75% senior unsecured notes due on March 15, 2017 (together, the Notes), for a total principal amount of $1 billion. We carried the Notes at face value less the unamortized discount of $2 million on our balance sheets at October 31, 2010 and July 31, 2010. The Notes are redeemable by Intuit at any time, subject to a make-whole

premium. The Notes 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 $28 million in cash for interest on the Notes during the three months ended October 31, 2010 and October 31, 2009.

Other Long-Term Obligations

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

		October 31,				July 31,
(In millions)		2010				2010
Total license fee payable		$	67			$	65
Total deferred rent			55				60
Long-term deferred revenue			27				29
Long-term income tax liabilities			40				20
Long-term payables			22				—
Other			2				3
Total long-term obligations			213				177
Less current portion (included in other current liabilities)			(19	)			(19	)
Long-term obligations due after one year		$	194			$	158

9. 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 other taxable items. Our effective tax benefit rate for the three months ended October 31, 2010 was approximately 37%. This differed from the statutory rate of 35% primarily due to state income taxes, which were partially offset by the benefit we received from the domestic production activities deduction. Our effective tax benefit rate for the three months ended October 31, 2009 was approximately 38%. This differed from the federal statutory rate of 35% primarily due to state income taxes, which were partially offset by the benefit we received from the domestic production activities deduction and the federal research and experimentation credit.

Unrecognized Tax Benefits and Other Considerations

The total amount of our unrecognized tax benefits at July 31, 2010 was $35 million. Net of related deferred tax assets, unrecognized tax benefits were $30 million at that date. If we were to recognize these net benefits, our income tax expense would reflect a favorable net impact of $30 million. There were no material changes to these amounts during the three months ended October 31, 2010. 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.

10. 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 7.3 million shares for $330 million under these programs during the three months ended October 31, 2010 and 10.6 million shares for $300 million under these programs during the three months ended October 31, 2009. At October 31, 2010, we had authorization from our Board of Directors to expend up to an additional $1.67 billion for stock repurchases through August 16, 2013.

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 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.

Share-Based Compensation Expense

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

		Three Months Ended
		October 31,				October 31,
(In millions, except per share amounts)		2010				2009
Cost of service and other revenue		$	1			$	2
Selling and marketing			9				7
Research and development			13				9
General and administrative			12				9
Total share-based compensation expense			35				27
Income tax benefit			(12	)			(10	)
Increase in net loss		$	23			$	17
Increase in net loss per share:
Basic and diluted		$	0.07			$	0.05

Stock Option Activity and Related Share-Based Compensation Expense

A summary of activity under all share-based compensation plans for the three months ended October 31, 2010 was as follows:

						Options Outstanding
										Weighted
										Average
		Shares								Exercise
		Available				Number				Price
(Shares in thousands)		for Grant				of Shares				Per Share
Balance at July 31, 2010			8,761				32,593			$	28.45
Options granted			(252	)			252				42.58
Restricted stock units granted			(281	)			—				—
Options exercised			—				(5,571	)			26.46
Options canceled or expired (1)			342				(361	)			29.22
Restricted stock units forfeited (1)			288				—				—
Balance at October 31, 2010			8,858				26,913			$	28.99
Exercisable at October 31, 2010							15,969			$	26.46

At October 31, 2010, there was approximately $81 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 2.1 years.

Restricted Stock Unit Activity and Related Share-Based Compensation Expense

A summary of restricted stock unit activity for the three months ended October 31, 2010 was as follows:

		Restricted Stock Units
						Weighted
						Average
		Number				Grant Date
(Shares in thousands)		of Shares				Fair Value
Nonvested at July 31, 2010			11,531			$	30.93
Granted			281				35.02
Vested			(2,021	)			28.40
Forfeited			(289	)			29.52
Nonvested at October 31, 2010			9,502			$	31.63

At October 31, 2010, there was approximately $180 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 2.3 years.

11. Litigation

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 the ultimate amount of liability, if any, for any pending claims of any type (either alone or combined) will not materially affect our financial position, results of operations or cash flows. 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.

12. 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 and amortization of other acquired intangible assets.

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, 2010. 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. Results for our Other Businesses segment for the three months ended October 31, 2009 have been adjusted to exclude results for our Intuit Real Estate Solutions business, which we sold in January 2010. See Note 6.

		Three Months Ended
		October 31,				October 31,
(In millions)		2010				2009
Net revenue:
Financial Management Solutions		$	154			$	134
Employee Management Solutions			107				97
Payment Solutions			80				75
Consumer Tax			29				22
Accounting Professionals			25				22
Financial Services			81				80
Other Businesses			56				44
Total net revenue		$	532			$	474
Operating loss:
Financial Management Solutions		$	33			$	25
Employee Management Solutions			64				56
Payment Solutions			12				13
Consumer Tax			(29	)			(31	)
Accounting Professionals			(16	)			(15	)
Financial Services			15				19
Other Businesses			1				3
Total segment operating income			80				70
Unallocated corporate items:
Share-based compensation expense			(35	)			(27	)
Other common expenses			(134	)			(111	)
Amortization of acquired technology			(4	)			(22	)
Amortization of other acquired intangible assets			(11	)			(10	)
Total unallocated corporate items			(184	)			(170	)
Total operating loss from continuing operations		$	(104	)		$	(100	)

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, 2010. In November 2009 we acquired Mint Software Inc. for total consideration of approximately $170 million and in May 2010 we acquired Medfusion, Inc. for total consideration of approximately $89 million. We have included the results of operations for Mint and Medfusion in our consolidated results of operations from their respective dates of acquisition. In January 2010 we sold our Intuit Real Estate Solutions (IRES) business. We have reclassified our financial statements for all periods prior to the sale to reflect IRES as discontinued operations. Unless noted otherwise, the following discussion pertains to our continuing operations.

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 three months of fiscal 2011 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; technical support; financial supplies; and Intuit Websites, which provides website design and hosting services for small and medium-sized businesses.
	•		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 ProSeries and Lacerte 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 services for banks and credit unions provided by our Intuit Financial Services business. These include comprehensive online financial management solutions for consumers and businesses.

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 and the United Kingdom.

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. Delays in the availability of tax forms or the ability of taxing agencies to receive submissions can cause revenue to shift from our second fiscal quarter to our third fiscal quarter. 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 operating expenses 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 quarter of fiscal 2011 was $532 million, an increase of 12% compared with the same quarter of fiscal 2010. Revenue was higher in all of our business segments, with about 60% of the revenue growth for the first quarter of fiscal 2011 coming from the three segments in our Small Business Group. Operating loss increased 4% in the first quarter of fiscal 2011 compared with the same quarter of fiscal 2010. Higher costs and expenses included the addition of costs and expenses for acquired businesses, higher spending for staffing expenses and marketing programs, and higher share-based compensation expense. Net loss from continuing operations increased 1% in the first quarter of fiscal 2011 compared with the same quarter of fiscal 2010. Our effective tax benefit rate for the first quarter of fiscal 2011 was approximately 37% while our effective tax benefit rate for the first quarter of fiscal 2010 was approximately 38%. Due to all of the foregoing factors, basic and diluted net loss per share from continuing operations of $0.22 for the first quarter of fiscal 2011 increased 5% compared with the same quarter of fiscal 2010.

We ended the first quarter of fiscal 2011 with cash, cash equivalents and investments totaling $1.2 billion. At that date we also held $85 million in municipal auction rate securities that we classified as long-term investments. In the first quarter of fiscal 2011 we generated cash from net sales of investments and from the issuance of common stock under employee stock plans. During the same period we used cash for operations, for the repurchase of shares of our common stock under our stock repurchase programs, and for capital expenditures. At October 31, 2010, we had authorization from our Board of Directors to expend up to an additional $1.67 billion for stock repurchases through August 16, 2013.

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, 2010 have the greatest potential impact on our financial statements, so we consider them to be our critical accounting policies and

estimates. Except for the changes to our critical accounting policies and estimates discussed below, we believe that there were no significant changes in those critical accounting policies and estimates during the first three months of fiscal 2011. 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.

Multiple-Deliverable Revenue Arrangements

On August 1, 2010 we adopted new accounting guidance for multiple-deliverable revenue arrangements that are outside the scope of industry-specific software revenue recognition guidance on a prospective basis. This guidance amends the criteria for allocating consideration in multiple-deliverable revenue arrangements by establishing a selling price hierarchy. The selling price used for each deliverable will be based on vendor-specific objective evidence (VSOE) if available, third-party evidence (TPE) if VSOE is not available, or estimated selling price (ESP) if neither VSOE nor TPE is available. See Note 1 to the financial statements in Part I, Item 1 of this report for more information. We regularly review VSOE, TPE, and ESP and maintain internal controls over the establishment and updates of these estimates.

When we are unable to establish selling price using VSOE or TPE, we use ESP in our allocation of arrangement consideration. ESP is a more subjective measure than either VSOE or TPE, and determining ESP requires significant judgment. We determine ESP for a product or service by considering multiple factors including, but not limited to, geographies, market conditions, competitive landscape, internal costs, gross margin objectives, and pricing practices.

Results of Operations

Financial Overview

		Q1				Q1				$				%
(Dollars in millions, except per share amounts)		FY11				FY10				Change				Change
Total net revenue		$	532			$	474			$	58				12	%
Operating loss from continuing operations			(104	)			(100	)			(4	)			4	%
Net loss from continuing operations			(70	)			(69	)			(1	)			1	%
Basic and diluted net loss per share from continuing operations		$	(0.22	)		$	(0.21	)		$	(0.01	)			5	%

Total net revenue increased $58 million or 12% in the first quarter of fiscal 2011 compared with the same quarter of fiscal 2010. In our Small Business Group, Financial Management Solutions segment revenue increased 15% due to growth in Intuit Websites, QuickBooks Online and QuickBooks Enterprise Solutions customers. Employee Management Solutions segment revenue increased 11% due to favorable offering mix, improved penetration of direct deposit, and the continuing effect of fiscal 2010 price increases for desktop payroll customers. Payment Solutions segment revenue increased 7% due to growth in the merchant customer base that was partially offset by lower charge volume per merchant. Financial Services segment revenue increased 1% due to growth in bill-pay revenue partially offset by the effect of the sale of that segment’s lending business in the fourth quarter of fiscal 2010. Other Businesses segment revenue increased 27% due to higher Quicken revenue, strength in our Canadian and United Kingdom small business offerings, and our acquisitions of Mint and Medfusion. Due to the seasonal nature of our Tax businesses, we typically generate nominal revenue in our Consumer Tax and Accounting Professionals segments in our first fiscal quarter compared with our second and third fiscal quarters.

Operating loss from continuing operations increased 4% in the first quarter of fiscal 2011 compared with the same quarter of fiscal 2010. Cost of revenue as a percent of revenue decreased due to cost efficiencies, economies of scale, and $18 million lower amortization expense for acquired intangible assets. Total operating expenses were $69 million higher in the fiscal 2011 quarter, including about $15 million due to operating expenses for Mint and Medfusion, about $23 million for higher staffing expenses, about $9 million for higher marketing program expenses

in our Financial Management Solutions and Consumer Tax segments, and about $9 million for higher share-based compensation expense. See “Cost of Revenue” and “Operating Expenses” later in this Item 2 for more information.

Net loss from continuing operations increased 1% in the first quarter of fiscal 2011 compared with the same quarter of fiscal 2010. Our effective tax benefit rate for the first quarter of fiscal 2011 was approximately 37% while our effective tax benefit rate for the first quarter of fiscal 2010 was approximately 38%. See “Income Taxes” later in this Item 2 for more information about our effective tax rates for these periods.

Due to all of the foregoing factors, basic and diluted net loss per share from continuing operations of $0.22 in the first quarter of fiscal 2011 increased 5% compared with $0.21 in the same quarter of fiscal 2010.

Business Segment Results

The information below is organized in accordance with our seven reportable business segments. Results for our Other Businesses segment for the quarter ended October 31, 2009 have been adjusted to exclude results for our Intuit Real Estate Solutions business, which we sold in January 2010. See Note 6 to the financial statements in Part 1, Item 1 of this report for more information.

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 $169 million in the first quarter of fiscal 2011 and $138 million in the first quarter of fiscal 2010. Unallocated costs increased in the first three months of fiscal 2011 compared with the same period of fiscal 2010 due to increases in corporate selling and marketing expenses in support of the growth of our businesses.

Segment expenses also do not include amortization of acquired technology and amortization of other acquired intangible assets. See Note 12 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

		Q1				Q1				%
(Dollars in millions)		FY11				FY10				Change
Product revenue		$	84			$	84
Service and other revenue			70				50
Total segment revenue		$	154			$	134				15	%
% of total revenue			29	%			28	%
Segment operating income		$	33			$	25				35	%
% of related revenue			21	%			18	%

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 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.