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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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RESULTS OF OPERATIONS
Overview
| FISCAL |
|
| (Dollars in millions, except per share amounts) |
2002 |
2003 |
2004 |
2002-2003
% CHANGE |
2003-2004
% CHANGE |
|
Total net revenue |
$ |
1,312.2 |
|
$ |
1,650.7 |
|
$ |
1,867.7 |
|
|
26 |
% |
|
13 |
% |
 |
Income from continuing operations |
|
50.5 |
|
|
343.2 |
|
|
420.3 |
|
|
580 |
% |
|
22 |
% |
|
Net income from continuing operations |
|
53.6 |
|
|
263.2 |
|
|
317.0 |
|
|
391 |
% |
|
20 |
% |
|
Diluted net income per share from
continuing operations |
$ |
0.24 |
|
$ |
1.25 |
|
$ |
1.58 |
|
|
421 |
% |
|
26 |
% |
|
Net cash provided by operating activities |
$ |
351.6 |
|
$ |
570.2 |
|
$ |
574.6 |
|
|
62 |
% |
|
1 |
% |
|
In fiscal 2004 we revised our reportable segments to reflect the way we currently manage our operations and view our results. Our five business segments are now QuickBooks-Related, Intuit-Branded Small Business, Consumer Tax, Professional Tax and Other Businesses. Total net revenue increased in
fiscal 2004 compared with fiscal 2003 primarily due to growth in our QuickBooks-Related and Consumer Tax segments. Fiscal 2004 growth in our
QuickBooks-Related segment was driven by sales of higher-priced versions of QuickBooks and by continuing growth in the QuickBooks Do-It-Yourself Payroll, or DIY, customer base and average selling prices, which resulted in higher DIY revenue. Total net revenue increased in fiscal 2003 compared with fiscal 2002 primarily due to growth in our QuickBooks-Related and Consumer Tax segments, with the QuickBooks-Related revenue increase fueled by sales of higher-priced versions of QuickBooks and by DIY revenue. Fiscal 2003 revenue also increased compared with fiscal 2002 because of acquisitions in our Intuit-Branded Small Business segment.
The markets for many of our products are maturing and as a result we believe that our revenue growth is slowing. We continue to develop new
products and services to mitigate the impact of this slowing growth in the long term.
Income from continuing operations grew faster than revenue in fiscal 2004 primarily due to an increase in revenue from higher-margin products,
such as industry-specific versions of QuickBooks and DIY, and to the fact that we reduced costs while revenue grew in our Quicken business. Income from continuing operations grew faster than revenue in fiscal 2003 primarily due to an increase in revenue from higher-margin products, efficiencies in customer service and technical support, significantly lower acquisition-related charges in fiscal 2003 and fiscal 2002 charges for vacant facilities,
impairment of goodwill and intangible assets, and impairment of long-lived assets that did not recur in fiscal 2003. Fiscal 2003 acquisition-related charges were significantly lower compared with fiscal 2002 because due to our adoption of SFAS 142 fiscal 2003 acquisition-related charges do not include amortization of goodwill.
Net income (after tax) from continuing operations grew faster than revenue in fiscal 2004 primarily due to the factors cited above and the reversal of
$35.7 million in reserves related to potential income tax exposures that were resolved, partially offset by lower interest and other income and lower gains on marketable securities and other investments. Net income (after tax) from continuing operations grew faster than revenue in fiscal 2003 primarily due to the factors cited above and to higher interest and other income and gains on marketable securities and other investments in fiscal 2003, partially offset by a fiscal 2002 gain on divestiture of businesses that did not recur in fiscal 2003 and a higher effective tax rate in fiscal 2003 than in fiscal 2002.
Diluted net income per share from continuing operations grew faster than net income (after tax) from continuing operations for fiscal 2004 and 2003
primarily due to the net reduction of average shares outstanding resulting from repurchases of stock under our stock repurchase programs.
At July 31, 2004, our cash, cash equivalents and short-term investments totaled $1.0 billion. In fiscal 2004 we generated cash primarily from continuing operations and the issuance of common stock under employee stock plans and we used cash primarily for our stock repurchase programs, acquisitions and capital expenditures. In fiscal 2004 we bought 13.5 million shares of our common stock under our stock repurchase programs at an average price of $45.01 for a total price of $609.4 million. We completed our third stock repurchase program in June 2004 and at July 31, 2004 authorized funds of $500.0 million remained available under our fourth program.
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