10-Q
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 January 31, 2016
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
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, 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
 
Smaller reporting company o
 
 
 
 
(Do not check if a smaller reporting company)
 
 

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. 256,821,224 shares of Common Stock, $0.01 par value, were outstanding at February 19, 2016.
 


INTUIT INC.
FORM 10-Q
INDEX

 
Page
Number
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 EX-10.02
 EX-10.03
 EX-31.01
 EX-31.02
 EX-32.01
 EX-32.02
 EX-101.INS XBRL Instance Document
 EX-101.SCH XBRL Taxonomy Extension Schema
 EX-101.CAL XBRL Taxonomy Extension Calculation Linkbase
 EX-101.LAB XBRL Taxonomy Extension Label Linkbase
 EX-101.PRE XBRL Taxonomy Extension Presentation Linkbase
 EX-101.DEF XBRL Taxonomy Extension Definition Linkbase

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

2
Table of Contents

PART I
ITEM 1
FINANCIAL STATEMENTS

INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three Months Ended
 
Six Months Ended
(In millions, except per share amounts)
January 31,
2016
 
January 31,
2015
 
January 31,
2016
 
January 31,
2015
Net revenue:
 
 
 
 
 
 
 
Product
$
264

 
$
195

 
$
535

 
$
423

Service and other
659

 
554

 
1,101

 
938

Total net revenue
923

 
749

 
1,636

 
1,361

Costs and expenses:
 
 
 
 
 
 
 
Cost of revenue:
 
 
 
 
 
 
 
Cost of product revenue
40

 
42

 
69

 
75

Cost of service and other revenue
153

 
139

 
284

 
258

Amortization of acquired technology
6

 
7

 
12

 
14

Selling and marketing
356

 
344

 
600

 
595

Research and development
205

 
188

 
418

 
377

General and administrative
120

 
115

 
237

 
234

Amortization of other acquired intangible assets
1

 
3

 
3

 
6

Total costs and expenses
881

 
838

 
1,623

 
1,559

Operating income (loss) from continuing operations
42

 
(89
)
 
13

 
(198
)
Interest expense
(9
)
 
(7
)
 
(16
)
 
(14
)
Interest and other income (expense), net
(5
)
 
2

 
(9
)
 
2

Income (loss) before income taxes
28

 
(94
)
 
(12
)
 
(210
)
Income tax benefit
(1
)
 
(34
)
 
(10
)
 
(69
)
Net income (loss) from continuing operations
29

 
(60
)
 
(2
)
 
(141
)
Net loss from discontinued operations
(5
)
 
(6
)
 
(5
)
 
(9
)
Net income (loss)
$
24

 
$
(66
)
 
$
(7
)
 
$
(150
)
 
 
 
 
 
 
 
 
Basic net income (loss) per share from continuing operations
$
0.11

 
$
(0.21
)
 
$
(0.01
)
 
$
(0.50
)
Basic net loss per share from discontinued operations
(0.02
)
 
(0.02
)
 
(0.02
)
 
(0.03
)
Basic net income (loss) per share
$
0.09

 
$
(0.23
)
 
$
(0.03
)
 
$
(0.53
)
Shares used in basic per share calculations
263

 
285

 
267

 
285

 
 
 
 
 
 
 
 
Diluted net income (loss) per share from continuing operations
$
0.11

 
$
(0.21
)
 
$
(0.01
)
 
$
(0.50
)
Diluted net loss per share from discontinued operations
(0.02
)
 
(0.02
)
 
(0.02
)
 
(0.03
)
Diluted net income (loss) per share
$
0.09

 
$
(0.23
)
 
$
(0.03
)
 
$
(0.53
)
Shares used in diluted per share calculations
266

 
285

 
267

 
285

 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
0.30

 
$
0.25

 
$
0.60

 
$
0.50

See accompanying notes.

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Table of Contents

INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)

 
Three Months Ended
 
Six Months Ended
(In millions)
January 31,
2016
 
January 31,
2015
 
January 31,
2016
 
January 31,
2015
 
 
 
 
 
 
 
 
Net income (loss)
$
24

 
$
(66
)
 
$
(7
)
 
$
(150
)
Other comprehensive loss, net of income taxes:
 
 
 
 
 
 
 
Foreign currency translation losses
(10
)
 
(15
)
 
(12
)
 
(20
)
Total other comprehensive loss, net
(10
)
 
(15
)
 
(12
)
 
(20
)
Comprehensive income (loss)
$
14

 
$
(81
)
 
$
(19
)
 
$
(170
)


See accompanying notes.


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Table of Contents

INTUIT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
January 31,
2016
 
July 31,
2015
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
334

 
$
808

Investments
—

 
889

Accounts receivable, net
512

 
91

Income taxes receivable
108

 
84

Deferred income taxes
—

 
231

Prepaid expenses and other current assets
110

 
94

Current assets of discontinued operations
30

 
26

Current assets before funds held for customers
1,094

 
2,223

Funds held for customers
373

 
337

Total current assets
1,467

 
2,560

Long-term investments
28

 
27

Property and equipment, net
980

 
682

Goodwill
1,278

 
1,266

Acquired intangible assets, net
67

 
87

Long-term deferred income taxes
211

 
5

Other assets
103

 
106

Long-term assets of discontinued operations
215

 
235

Total assets
$
4,349

 
$
4,968

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Short-term debt
$
245

 
$
—

Accounts payable
286

 
190

Accrued compensation and related liabilities
179

 
283

Deferred revenue
961

 
691

Other current liabilities
208

 
150

Current liabilities of discontinued operations
97

 
93

Current liabilities before customer fund deposits
1,976

 
1,407

Customer fund deposits
373

 
337

Total current liabilities
2,349

 
1,744

Long-term debt
1,000

 
500

Long-term deferred revenue
153

 
152

Other long-term obligations
138

 
172

Long-term obligations of discontinued operations
68

 
68

Total liabilities
3,708

 
2,636

Commitments and contingencies

 

Stockholders’ equity:
 
 
 
Preferred stock
—

 
—

Common stock and additional paid-in capital
4,226

 
4,010

Treasury stock, at cost
(9,400
)
 
(7,675
)
Accumulated other comprehensive loss
(42
)
 
(30
)
Retained earnings
5,857

 
6,027

Total stockholders’ equity
641

 
2,332

Total liabilities and stockholders’ equity
$
4,349

 
$
4,968

See accompanying notes.

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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, 2015
277,706

 
$
4,010

 
$
(7,675
)
 
$
(30
)
 
$
6,027

 
$
2,332

Comprehensive loss
—

 
—

 
—

 
(12
)
 
(7
)
 
(19
)
Issuance of stock under employee stock plans
1,901

 
56

 
—

 
—

 
—

 
56

Stock repurchases under stock repurchase programs
(19,134
)
 
—

 
(1,725
)
 
—

 
—

 
(1,725
)
Dividends and dividend rights declared ($0.60 per share)
—

 
—

 
—

 
—

 
(163
)
 
(163
)
Tax benefit from share-based compensation plans
—

 
20

 
—

 
—

 
—

 
20

Share-based compensation expense
—

 
140

 
—

 
—

 
—

 
140

Balance at January 31, 2016
260,473

 
$
4,226

 
$
(9,400
)
 
$
(42
)
 
$
5,857

 
$
641


(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, 2014
284,950

 
$
3,561

 
$
(6,430
)
 
$
(2
)
 
$
5,949

 
$
3,078

Comprehensive loss
—

 
—

 
—

 
(20
)
 
(150
)
 
(170
)
Issuance of stock under employee stock plans
3,463

 
101

 
—

 
—

 
—

 
101

Stock repurchases under stock repurchase programs
(7,473
)
 
—

 
(668
)
 
—

 
—

 
(668
)
Dividends and dividend rights declared ($0.50 per share)
—

 
—

 
—

 
—

 
(147
)
 
(147
)
Tax benefit from share-based compensation plans
—

 
38

 
—

 
—

 
—

 
38

Share-based compensation expense
—

 
122

 
—

 
—

 
—

 
122

Balance at January 31, 2015
280,940

 
$
3,822

 
$
(7,098
)
 
$
(22
)
 
$
5,652

 
$
2,354



See accompanying notes.

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Table of Contents

INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six Months Ended
(In millions)
January 31,
2016
 
January 31,
2015
Cash flows from operating activities:
 
 
 
Net loss
$
(7
)
 
$
(150
)
 Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation
94

 
75

Amortization of acquired intangible assets
19

 
36

Share-based compensation expense
137

 
122

Deferred income taxes
(11
)
 
(16
)
Tax benefit from share-based compensation plans
20

 
38

Excess tax benefit from share-based compensation plans
(20
)
 
(38
)
Other
10

 
19

Total adjustments
249

 
236

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(431
)
 
(327
)
Income taxes receivable
(26
)
 
(110
)
Prepaid expenses and other assets
(18
)
 
12

Accounts payable
103

 
116

Accrued compensation and related liabilities
(100
)
 
(79
)
Deferred revenue
296

 
439

Other liabilities
43

 
110

Total changes in operating assets and liabilities
(133
)
 
161

Net cash provided by operating activities
109

 
247

Cash flows from investing activities:
 
 
 
Purchases of available-for-sale debt securities
(181
)
 
(619
)
Sales of available-for-sale debt securities
942

 
458

Maturities of available-for-sale debt securities
126

 
328

Net change in money market funds and other cash equivalents held
 to satisfy customer fund obligations
(35
)
 
(65
)
Net change in customer fund deposits
35

 
65

Purchases of property and equipment
(394
)
 
(116
)
Acquisitions of businesses, net of cash acquired
—

 
(76
)
Other
—

 
(10
)
Net cash provided by (used in) investing activities
493

 
(35
)
Cash flows from financing activities:
 
 
 
Proceeds from borrowings under credit facility
745

 
—

Net proceeds from issuance of stock under employee stock plans
56

 
101

Cash paid for purchases of treasury stock
(1,725
)
 
(554
)
Dividends and dividend rights paid
(161
)
 
(143
)
Excess tax benefit from share-based compensation plans
20

 
38

Net cash used in financing activities
(1,065
)
 
(558
)
Effect of exchange rates on cash and cash equivalents
(11
)
 
(21
)
Net decrease in cash and cash equivalents
(474
)
 
(367
)
Cash and cash equivalents at beginning of period
808

 
849

Cash and cash equivalents at end of period
$
334

 
$
482

_________________________
Because the cash flows of our discontinued operations were not material for any period presented, we have not segregated the cash flows of those businesses on these statements of cash flows. See Note 4, “Discontinued Operations,” for more information.
See accompanying notes.

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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 Inc. provides business and financial management solutions for small businesses, consumers, and accounting professionals. With flagship products and services that include QuickBooks and TurboTax, we help customers solve important business and financial management problems such as running a small business, paying bills, and filing income taxes. ProSeries and Lacerte are Intuit’s tax preparation offerings for professional accountants. Incorporated in 1984 and headquartered in Mountain View, California, we sell our products and services primarily in the United States.
Basis of Presentation
These condensed consolidated financial statements include the financial statements of Intuit and its wholly owned subsidiaries. We have eliminated all significant intercompany balances and transactions in consolidation. We have included all adjustments, consisting only of normal recurring items, which we considered necessary for a fair presentation of our financial results for the interim periods presented. We have reclassified certain amounts previously reported in our financial statements to conform to the current presentation, including amounts related to discontinued operations and reportable segments. See Note 4, “Discontinued Operations,” and Note 10, “Segment Information,” for more information.
As discussed in Note 4, we classified our Demandforce, QuickBase, and Quicken businesses as discontinued operations in the fourth quarter of fiscal 2015. We have reclassified our statements of operations and balance sheets for all periods presented to reflect these businesses as discontinued operations. Because the cash flows of these businesses were not material for any period presented, we have not segregated them on our statements of cash flows. Unless noted otherwise, discussions in these notes pertain to our continuing operations.
These unaudited condensed consolidated financial statements and accompanying notes should be read together with the audited consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2015. Results for the six months ended January 31, 2016 do not necessarily indicate the results we expect for the fiscal year ending July 31, 2016 or any other future period.
Seasonality
Our Consumer Tax 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, 2015. There have been no changes to our significant accounting policies during the first six months of fiscal 2016.
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 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.

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Table of Contents

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 combined 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 combined 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.
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.

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The following table presents the composition of shares used in the computation of basic and diluted net income (loss) per share for the periods indicated.
 
Three Months Ended
 
Six Months Ended
(In millions, except per share amounts)
January 31,
2016
 
January 31,
2015
 
January 31,
2016
 
January 31,
2015
Numerator:
 
 
 
 
 
 
 
Net income (loss) from continuing operations
$
29

 
$
(60
)
 
$
(2
)
 
$
(141
)
Net loss from discontinued operations
(5
)
 
(6
)
 
(5
)
 
(9
)
Net income (loss)
$
24

 
$
(66
)
 
$
(7
)
 
$
(150
)
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Shares used in basic per share amounts:
 
 
 
 
 
 
 
Weighted average common shares outstanding
263

 
285

 
267

 
285

 
 
 
 
 
 
 
 
Shares used in diluted per share amounts:
 
 
 
 
 
 
 
Weighted average common shares outstanding
263

 
285

 
267

 
285

Dilutive common equivalent shares from stock options
 
 
 
 
 
 
 
and restricted stock awards
3

 
—

 
—

 
—

Dilutive weighted average common shares outstanding
266

 
285

 
267

 
285

 
 
 
 
 
 
 
 
Basic and diluted net loss per share:
 
 
 
 
 
 
 
Basic net income (loss) per share from continuing operations
$
0.11

 
$
(0.21
)
 
$
(0.01
)
 
$
(0.50
)
Basic net loss per share from discontinued operations
(0.02
)
 
(0.02
)
 
(0.02
)
 
(0.03
)
Basic net income (loss) per share
$
0.09

 
$
(0.23
)
 
$
(0.03
)
 
$
(0.53
)
 
 
 
 
 
 
 
 
Diluted net income (loss) per share from continuing operations
$
0.11

 
$
(0.21
)
 
$
(0.01
)
 
$
(0.50
)
Diluted net loss per share from discontinued operations
(0.02
)
 
(0.02
)
 
(0.02
)
 
(0.03
)
Diluted net income (loss) per share
$
0.09

 
$
(0.23
)
 
$
(0.03
)
 
$
(0.53
)
 
 
 
 
 
 
 
 
Shares excluded from computation of diluted net income (loss)
per share:
 
 
 
 
 
 
 
Weighted average stock options and restricted stock units that would have been included in the computation of dilutive common equivalent shares outstanding if net income had been reported in the period
—

 
14

 
13

 
15

 
 
 
 
 
 
 
 
Weighted average stock options and restricted stock units excluded from computation due to anti-dilutive effect
2

 
2

 
2

 
2

Concentration of Credit Risk and Significant Customers
No customer accounted for 10% or more of total net revenue in the three or six months ended January 31, 2016 or January 31, 2015. Due to the seasonality of our consumer tax offerings, one retail customer accounted for 15% of gross accounts receivable at January 31, 2016. No customer accounted for 10% or more of gross accounts receivable at July 31, 2015.
Accounting Pronouncements Not Yet Adopted
ASU 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.”
In September 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.” ASU 2015-16 eliminates the requirement for an acquirer to retrospectively adjust provisional amounts recorded in a business combination to reflect new information about the facts and circumstances that existed as of the acquisition date and that, if known, would have affected measurement or recognition of amounts initially recognized. As an alternative, the amendment

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requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments require that the acquirer record, in the financial statements of the period in which adjustments to provisional amounts are determined, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. ASU 2015-16 is effective prospectively for fiscal years beginning after December 15, 2015, 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, 2016. Early adoption is permitted. We are currently evaluating the impact of our pending adoption of ASU 2015-16 on our consolidated financial statements.
ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”
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. ASU 2014-09 supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 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. ASU 2014-09 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. Early adoption of one year prior to the required effective date is permitted. ASU 2014-09 allows adoption using either of two methods: (i) retrospective to each prior reporting period presented, with the option to elect certain practical expedients; or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures. We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements.
Accounting Pronouncements Recently Adopted
ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”
In November 2015 the FASB issued ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,” requiring all deferred tax assets and liabilities, and any related valuation allowance, to be classified as noncurrent on the balance sheet. We elected to early adopt this standard in the second quarter of fiscal 2016 on a prospective basis. ASU 2015-17 did not have a material impact on our consolidated balance sheets and had no impact on our consolidated statements of operations or cash flows. Prior periods were not adjusted.
We do not expect that any other recently issued accounting pronouncements will have a significant effect on our financial statements.


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

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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.
 
January 31, 2016
 
July 31, 2015
(In millions)
Level 1
 
Level 2
 
Level 3
 
Total
Fair Value
 
Level 1
 
Level 2
 
Level 3
 
Total
Fair Value
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents, primarily money market funds
$
280

 
$
—

 
$
—

 
$
280

 
$
695

 
$
—

 
$
—

 
$
695

Available-for-sale debt securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Municipal bonds
—

 
6

 
—

 
6

 
—

 
506

 
—

 
506

Corporate notes
—

 
169

 
—

 
169

 
—

 
546

 
—

 
546

U.S. agency securities
—

 
—

 
—

 
—

 
—

 
12

 
—

 
12

Municipal auction rate securities
—

 
—

 
15

 
15

 
—

 
—

 
15

 
15

Total available-for-sale securities
—

 
175

 
15

 
190

 
—

 
1,064

 
15

 
1,079

Total assets measured at fair value on a recurring basis
$
280

 
$
175

 
$
15

 
$
470

 
$
695

 
$
1,064

 
$
15

 
$
1,774

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior notes (1)
$
—

 
$
523

 
$
—

 
$
523

 
$
—

 
$
531

 
$
—

 
$
531

______________________________
(1)
Carrying value in long-term debt on our balance sheets at January 31, 2016 was $500 million and at July 31, 2015 was $500 million. See Note 6, “Long-Term Obligations and Commitments,” for more information.


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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.
 
January 31, 2016
 
July 31, 2015
(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
$
82

 
$
—

 
$
—

 
$
82

 
$
533

 
$
—

 
$
—

 
$
533

In funds held for customers
198

 
—

 
—

 
198

 
162

 
—

 
—

 
162

Total cash equivalents
$
280

 
$
—

 
$
—

 
$
280

 
$
695

 
$
—

 
$
—

 
$
695

Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
In investments
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
889

 
$
—

 
$
889

In funds held for customers
—

 
175

 
—

 
175

 
—

 
175

 
—

 
175

In long-term investments
—

 
—

 
15

 
15

 
—

 
—

 
15

 
15

Total available-for-sale securities
$
—

 
$
175

 
$
15

 
$
190

 
$
—

 
$
1,064

 
$
15

 
$
1,079

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 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 liabilities whose fair values we measure using Level 2 inputs consist of senior unsecured notes. See Note 6, “Long-Term Obligations and Commitments,” for more information. We measure the fair value of our senior notes based on their trading prices and the interest rates we could obtain for other borrowings with similar terms.
Financial assets whose fair values we measure using significant unobservable (Level 3) inputs consist of municipal auction rate securities that are no longer liquid. 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 six months ended January 31, 2016.


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 at July 31, 2015 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.

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The following table summarizes our cash and cash equivalents, investments, and funds held for customers by balance sheet classification at the dates indicated.
 
January 31, 2016
 
July 31, 2015
(In millions)
Amortized
Cost
 
Fair Value
 
Amortized
Cost
 
Fair Value
Classification on balance sheets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
334

 
$
334

 
$
808

 
$
808

Investments
—

 
—

 
890

 
889

Funds held for customers
373

 
373

 
337

 
337

Long-term investments
28

 
28

 
27

 
27

Total cash and cash equivalents, investments, and funds
held for customers
$
735

 
$
735

 
$
2,062

 
$
2,061

The following table summarizes our cash and cash equivalents, investments, and funds held for customers by investment category at the dates indicated.
 
January 31, 2016
 
July 31, 2015
(In millions)
Amortized
Cost
 
Fair Value
 
Amortized
Cost
 
Fair Value
Type of issue:
 
 
 
 
 
 
 
Total cash and cash equivalents
$
532

 
$
532

 
$
970

 
$
970

Available-for-sale debt securities:
 
 
 
 
 
 
 
Municipal bonds
6

 
6

 
507

 
506

Corporate notes
169

 
169

 
546

 
546

U.S. agency securities
—

 
—

 
12

 
12

Municipal auction rate securities
15

 
15

 
15

 
15

Total available-for-sale debt securities
190

 
190

 
1,080

 
1,079

Other long-term investments
13

 
13

 
12

 
12

Total cash and cash equivalents, investments, and funds
held for customers
$
735

 
$
735

 
$
2,062

 
$
2,061

We use the specific identification method to compute gains and losses on investments. We include realized gains and losses on our available-for-sale debt securities in interest and other income, net in our statements of operations. Gross realized gains and losses on our available-for-sale debt securities for the three and six months ended January 31, 2016 and January 31, 2015 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 January 31, 2016 and July 31, 2015 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 January 31, 2016 were not other-than-temporarily impaired. Unrealized losses on available-for-sale debt securities at January 31, 2016 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.

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The following table summarizes our available-for-sale debt securities classified by the stated maturity date of the security at the dates indicated.
 
January 31, 2016
 
July 31, 2015
(In millions)
Amortized
Cost
 
Fair Value
 
Amortized
Cost
 
Fair Value
Due within one year
$
89

 
$
89

 
$
434

 
$
435

Due within two years
41

 
41

 
443

 
442

Due within three years
45

 
45

 
156

 
156

Due after three years
15

 
15

 
47

 
46

Total available-for-sale debt securities
$
190

 
$
190

 
$
1,080

 
$
1,079

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


4.
Discontinued Operations
In the fourth quarter of fiscal 2015 management having the authority to do so formally approved a plan to sell our Demandforce, QuickBase, and Quicken businesses. The decision was a result of management’s desire to focus resources on our core small business and tax strategies. We determined that these businesses became long-lived assets held for sale in the fourth quarter of fiscal 2015. A long-lived asset classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. Since the carrying values of these three businesses at January 31, 2016 and July 31, 2015 were less than the estimated fair values less cost to sell, no adjustments to the carrying values of these long-lived assets were necessary at those dates.
We also classified our Demandforce, QuickBase, and Quicken businesses as discontinued operations in the fourth quarter of fiscal 2015 and have therefore segregated their operating results from continuing operations in our statements of operations and on our balance sheets for all periods presented. Because the cash flows of these businesses were not material for any period presented, we have not segregated them on our statements of cash flows. Demandforce and QuickBase were part of our Small Business segment and Quicken was part of our former Consumer segment.

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The carrying amounts of the major classes of assets and liabilities of Demandforce, QuickBase, and Quicken at January 31, 2016 and July 31, 2015 were as shown in the following table.
(In millions)
January 31,
2016
 
July 31,
2015
Accounts receivable
$
28

 
$
19

Deferred income taxes
—

 
5

Prepaid and other current assets
2

 
2

Property and equipment, net
19

 
25

Goodwill
151

 
165

Purchased intangible assets, net
43

 
43

Other assets
2

 
2

Total assets
245

 
261

 
 
 
 
Accounts payable
8

 
7

Accrued compensation
20

 
21

Deferred revenue
56

 
48

Other current liabilities
13

 
17

Long-term deferred revenue
52

 
39

Long-term obligations
16

 
29

Total liabilities
165

 
161

Net assets
$
80

 
$
100

Net revenue from discontinued operations, income (loss) from discontinued operations before income taxes, and the components of net income (loss) from discontinued operations were as follows for the periods indicated:
 
Three Months Ended
 
Six Months Ended
(In millions)
January 31,
2016
 
January 31,
2015
 
January 31,
2016
 
January 31,
2015
Net revenue from discontinued operations:
 
 
 
 
 
 
 
Demandforce
$
24

 
$
30

 
$
49

 
$
61

QuickBase
20

 
17

 
40

 
34

Quicken
12

 
12

 
26

 
25

Total net revenue from discontinued operations
$
56

 
$
59

 
$
115

 
$
120

 
 
 
 
 
 
 
 
Income (loss) from discontinued operations before income taxes:
 
 
 
 
 
 
 
Demandforce
$
(6
)
 
$
(14
)
 
$
(10
)
 
$
(28
)
QuickBase
2

 
4

 
6

 
7

Quicken
(5
)
 
1

 
(1
)
 
7

Total loss from discontinued operations before income taxes
$
(9
)
 
$
(9
)
 
$
(5
)
 
$
(14
)
 
 
 
 
 
 
 
 
Net income (loss) from discontinued operations:
 
 
 
 
 
 
 
Net loss from Demandforce operations
$
(3
)
 
$
(10
)
 
$
(6
)
 
$
(19
)
Net income from QuickBase operations
1

 
3

 
4

 
5

Net income (loss) from Quicken operations
(3
)
 
1

 
—

 
5

Tax expense from discontinued operations
—

 
—

 
(3
)
 
—

Total net loss from discontinued operations
$
(5
)
 
$
(6
)
 
$
(5
)
 
$
(9
)



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5.
Current Liabilities
Unsecured Revolving Credit Facility
On February 17, 2012 we entered into an agreement with certain institutional lenders for a $500 million unsecured revolving credit facility that will expire on February 17, 2017. We may, subject to certain customary conditions, on one or more occasions increase commitments under the facility in an amount not to exceed $250 million in the aggregate. Advances under the unsecured revolving credit facility accrue interest at rates that are equal to, at our election, either JP Morgan's alternate base rate plus a margin that ranges from 0.0% to 0.5% or London Interbank Offered Rate (LIBOR) plus a margin that ranges from 0.9% to 1.5%. Actual margins under either election are based on our senior debt credit ratings. The agreement includes customary affirmative and negative covenants, including financial covenants that require us to maintain a ratio of total debt to annual earnings before interest, taxes, depreciation and amortization (EBITDA) of not greater than 3.25 to 1.00 as of any date and a ratio of annual EBITDA to interest payable of not less than 3.00 to 1.00 as of the last day of each fiscal quarter. We remained in compliance with these covenants at all times during the quarter ended January 31, 2016. As of January 31, 2016, there was $745 million in outstanding borrowings on this credit facility, of which $245 million was considered short term.
Other Current Liabilities
Other current liabilities were as follows at the dates indicated:
(In millions)
January 31,
2016
 
July 31,
2015
Reserve for product returns
$
50

 
$
12

Reserve for rebates
40

 
12

Current portion of license fee payable
10

 
10

Current portion of deferred rent
3

 
8

Interest payable
11

 
10

Executive deferred compensation plan liabilities
59

 
63

Other
35

 
35

Total other current liabilities
$
208

 
$
150

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


6.
Long-Term Obligations and Commitments
Long-Term Debt
Unsecured Revolving Credit Facility
We have an unsecured revolving credit facility that will expire on February 17, 2017. As of January 31, 2016, there was $745 million in outstanding borrowings on this credit facility, of which $500 million was considered long term. See Note 5, “Current Liabilities,” for more information.
Senior Unsecured Notes
On March 12, 2007 we issued $500 million of 5.75% senior unsecured notes due on March 15, 2017 (the Notes). We carried the Notes at face value less the unamortized discount in long-term debt on our balance sheets at January 31, 2016 and July 31, 2015. The Notes are redeemable by Intuit at any time, subject to a make-whole premium, and include covenants that limit our ability to grant liens on our facilities and to enter into sale and leaseback transactions, subject to significant allowances. Interest on the Notes is payable semi-annually on March 15 and September 15. We paid $14 million in cash for interest on the Notes during the six months ended January 31, 2016 and $14 million in cash for interest on the Notes during the six months ended January 31, 2015.


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Other Long-Term Obligations
Other long-term obligations were as follows at the dates indicated:
(In millions)
January 31,
2016
 
July 31,
2015
Total deferred rent
$
54

 
$
49

Total license fee payable
35

 
34

Long-term income tax liabilities
47

 
45

Long-term deferred income tax liabilities
5

 
50

Other
11

 
13

Total long-term obligations
152

 
191

Less current portion (included in other current liabilities)
(14
)
 
(19
)
Long-term obligations due after one year
$
138

 
$
172

Operating Lease Commitments
We describe our operating lease commitments in Note 9 to the financial statements in Item 8 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2015. In January 2016 we completed the purchase of certain leased facilities for $262 million in cash. The lease on these facilities was scheduled to expire in July 2017 and the remaining operating lease commitment was not significant. There were no other significant changes in our operating lease commitments during the first six months of fiscal 2016.


7.
Income Taxes
Adoption of ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”
In the second quarter of fiscal 2016, we elected to early adopt ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,” on a prospective basis. This new standard requires all deferred tax assets and liabilities, and any related valuation allowance, to be classified as noncurrent on the balance sheet. Prior periods were not adjusted.
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 December 2015 the Consolidated Appropriations Act, 2016 was signed into law. The Act includes a permanent reinstatement of the federal research and experimentation credit that was retroactive to January 1, 2015. We recorded a discrete tax benefit of approximately $12 million for the retroactive effect during the second quarter of fiscal 2016.
We recorded a $1 million tax benefit on income of $28 million for the three months ended January 31, 2016. Our effective tax rate for the six months ended January 31, 2016 was approximately 87%. Excluding discrete tax items primarily related to the permanent reinstatement of the federal research and experimentation credit, as well as including the effects of losses in certain jurisdictions where we do not recognize a tax benefit, our effective tax rate for those periods was approximately 35% and did not differ significantly from the federal statutory rate of 35%. Tax expense related to share-based compensation, state income taxes, and the effects of losses in certain jurisdictions where we do not recognize a tax benefit were partially offset by the benefit we received from the domestic production activities deduction and the federal research and experimentation credit.
Our effective tax rates for the three and six months ended January 31, 2015 were approximately 37% and 33%. Excluding discrete tax items primarily related to the reinstatement of the federal research and experimentation credit, as well as including the effects of losses in certain jurisdictions where we do not recognize a tax benefit, our effective tax rate for those periods was approximately 36% and did not differ significantly from the federal statutory rate of 35%. Tax expense related to share-based compensation, state income taxes, and the effects of losses in certain jurisdictions where we do not recognize a tax benefit 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, 2015 was $56 million. Net of related deferred tax assets, unrecognized tax benefits were $37 million at that date. If we were to recognize these net benefits, our income tax expense

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would reflect a favorable net impact of $37 million. There were no material changes to these amounts during the six months ended January 31, 2016. We do not believe that it is reasonably possible that there will be a significant increase or decrease in our unrecognized tax benefits over the next 12 months.

8.
Stockholders’ Equity
Stock Repurchase Programs and Treasury Shares
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 19.1 million shares for $1.7 billion under these programs during the six months ended January 31, 2016. We repurchased 7.5 million shares for $668 million under these programs during the six months ended January 31, 2015. At January 31, 2016, we had authorization from our Board of Directors to expend up to an additional $900 million for stock repurchases through May 19, 2019. Future stock repurchases under the current program are at the discretion of management, and authorization of future stock repurchase programs is subject to the final determination of our Board of Directors.
Our treasury shares are repurchased at the market price on the trade date; accordingly, all amounts paid to reacquire these shares have been recorded as treasury stock on our balance sheets. 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.
In the past we have satisfied option exercises and restricted stock unit vesting under our employee equity incentive plans by reissuing treasury shares, and we may do so again in the future. During the second quarter of fiscal 2014 we began issuing new shares of common stock to satisfy option exercises and RSU vesting under our 2005 Equity Incentive Plan. We have not yet determined the ultimate disposition of the shares that we have repurchased in the past, and consequently we continue to hold them as treasury shares.
Dividends on Common Stock
During the six months ended January 31, 2016 we declared and paid quarterly cash dividends that totaled $0.60 per share of outstanding common stock or $163 million. In February 2016 our Board of Directors declared a quarterly cash dividend of $0.30 per share of outstanding common stock payable on April 18, 2016 to stockholders of record at the close of business on April 11, 2016. Future declarations of dividends and the establishment of future record dates and payment dates are subject to the final determination of our Board of Directors.
Share-Based Compensation Expense
The following table summarizes the total share-based compensation expense that we recorded in operating income (loss) from continuing operations for the periods shown.
 
Three Months Ended
 
Six Months Ended
(In millions, except per share amounts)
January 31,
2016
 
January 31,
2015
 
January 31,
2016
 
January 31,
2015
Cost of revenue
$
2

 
$
1

 
$
4

 
$
2

Selling and marketing
18

 
17

 
37

 
33

Research and development
21

 
18

 
42

 
37

General and administrative
24

 
20

 
49

 
41

Total share-based compensation expense
65

 
56

 
132

 
113

Income tax benefit
(20
)
 
(18
)
 
(40
)
 
(36
)
Decrease in net income or increase in net loss from
continuing operations
$
45

 
$
38

 
$
92

 
$
77

Decrease in net income or increase in net loss per share:
 
 
 
 

 

Basic
$
0.17

 
$
0.13

 
$
0.34

 
$
0.27

Diluted
$
0.17

 
$
0.13

 
$
0.34

 
$
0.27

We capitalized $3 million in share-based compensation related to internal use software projects during the six months ended January 31, 2016. The table above also excludes share-based compensation expense for our discontinued operations, which totaled $5 million during the six months ended January 31, 2016 and $9 million during the six months ended January 31, 2015.

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Because we have not reclassified our statements of cash flows to segregate discontinued operations, these amounts are included in share-based compensation expense on our statements of cash flows for those periods.
Share-Based Awards Available for Grant
A summary of share-based awards available for grant under our 2005 Equity Incentive Plan for the six months ended January 31, 2016 was as follows:
(Shares in thousands)
Shares
Available
for Grant
Balance at July 31, 2015
17,183

Options granted
(9
)
Restricted stock units granted (1)
(681
)
Share-based awards canceled/forfeited/expired (1)(2)
2,740

Balance at January 31, 2016
19,233

________________________________
(1)
RSUs granted from the pool of shares available for grant under our 2005 Equity Incentive Plan reduce the pool by 2.3 shares for each share granted. RSUs forfeited and returned to the pool of shares available for grant increase the pool by 2.3 shares for each share forfeited.
(2)
Stock options and restricted stock units canceled, expired or forfeited under our 2005 Equity Incentive Plan are returned to the pool of shares available for grant. Stock options and restricted stock units canceled, expired or forfeited under older expired plans are not returned to the pool of shares available for grant.
Stock Option Activity and Related Share-Based Compensation Expense
A summary of stock option activity for the six months ended January 31, 2016 was as follows:
 
Options Outstanding
(Shares in thousands)
Number
of Shares
 
Weighted
Average
Exercise
Price
Per Share
Balance at July 31, 2015
8,713

 
$
69.13

Granted
9

 
94.88

Exercised
(999
)
 
46.65

Canceled or expired
(293
)
 
74.11

Balance at January 31, 2016
7,430

 
$
71.98

 
 
 
 
Exercisable at January 31, 2016
4,043

 
$
55.13

At January 31, 2016, there was approximately $48 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 two years.

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Restricted Stock Unit Activity and Related Share-Based Compensation Expense
A summary of restricted stock unit activity for the six months ended January 31, 2016 was as follows:
 
Restricted Stock Units
(Shares in thousands)
Number
of Shares
 
Weighted
Average
Grant Date
Fair Value
Nonvested at July 31, 2015
8,916

 
$
76.64

Granted
296

 
96.50

Vested
(796
)
 
68.44

Forfeited
(1,032
)
 
69.71

Nonvested at January 31, 2016
7,384

 
$
79.29

At January 31, 2016, there was approximately $339 million of unrecognized compensation cost related to non-vested RSUs 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 two years.


9.
Litigation
In fiscal 2015 Intuit was contacted by regulatory authorities, including Congress, the Federal Trade Commission, the SEC, the Department of Justice and certain state Attorneys General, which are conducting inquiries in connection with the increase during the 2015 tax season in attempts by criminals using stolen identity information to file fraudulent tax returns and claim refunds at the state and federal levels. Intuit is cooperating with all such government inquiries, including formal requests for information. In addition, we are the subject of certain actions, including a consolidated putative class action lawsuit by individuals who claim to have suffered damages in connection with the foregoing events. We believe that the allegations contained within these lawsuits are without merit, and we intend to vigorously defend against them.
Intuit is subject to certain routine legal proceedings, including class action lawsuits like those described above, as well as demands, claims, government inquiries and threatened litigation, that arise in the normal course of our business, including assertions that we may be infringing patents or other intellectual property rights of others. We currently believe that, in addition to any amounts accrued, the amount of potential losses, if any, for any pending claims of any type (either alone or combined) will not have a material impact on our consolidated financial statements. The ultimate outcome of any litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on Intuit because of defense costs, negative publicity, diversion of management resources and other factors. Our failure to obtain necessary license or other rights, or litigation arising out of intellectual property claims could adversely affect our business.


10.
Segment Information
We have defined three reportable segments, described below, 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.
Small Business. Our Small Business segment includes the following offerings, which target small businesses and the accounting professionals who serve them.
•
QuickBooks financial and business management online services and desktop software; QuickBooks technical support; and financial supplies.
•
QuickBooks Accountant, QuickBooks Accountant Plus, and QuickBooks Online Accountant as well as the QuickBooks ProAdvisor Program, all of which are intended for the accounting professionals who serve small businesses.
•
Small business payroll products and services, including online payroll offerings such as Quickbooks Online Payroll and Intuit Online Payroll; desktop payroll offerings such as QuickBooks Basic Payroll and QuickBooks Enhanced Payroll; and full service payroll offerings such as Intuit Full Service Payroll and QuickBooks Assisted Payroll.

21
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•
Payment processing services for small businesses, including merchant services such as credit and debit card processing; Web-based transaction processing services for online merchants; secure online payments for small businesses and their customers through the Intuit Commerce Network; GoPayment mobile payment processing services; and QuickBooks Point of Sale solutions.
Consumer Tax. Our Consumer Tax segment targets consumers and includes TurboTax income tax preparation products and services and electronic tax filing services.
Professional Tax. Our Professional Tax segment targets professional accountants in the U.S. and Canada and includes Lacerte, ProSeries, ProFile, and Intuit Tax Online professional tax preparation products and services, electronic tax filing services, bank product transmission services, and training services.
All of our segments 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, which are not allocated to specific segments, in unallocated corporate items. Unallocated corporate items also include amortization of acquired technology, amortization of other acquired intangible assets, and goodwill and intangible asset impairment charges.
The accounting policies of our reportable segments are the same as those described in the summary of significant accounting policies in Note 1 to the financial statements in Item 8 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2015 and in Note 1, "Description of Business and Summary of Significant Accounting Policies – Significant Accounting Policies" in this Quarterly Report on Form 10-Q. 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 all periods presented have been adjusted to exclude results for our Demandforce, QuickBase, and Quicken businesses, which we classified as discontinued operations in the fourth quarter of fiscal 2015. See Note 4, “Discontinued Operations,” for more information.
 
Three Months Ended
 
Six Months Ended
(In millions)
January 31,
2016
 
January 31,
2015
 
January 31,
2016
 
January 31,
2015
Net revenue:
 
 
 
 
 
 
 
Small Business segment
$
564

 
$
525

 
$
1,110

 
$
1,044

Consumer Tax segment
275

 
213

 
332

 
270

Professional Tax segment
84

 
11

 
194

 
47

Total net revenue
$
923

 
$
749

 
$
1,636

 
$
1,361

 
 
 
 
 
 
 
 
Operating income (loss) from continuing operations:
 
 
 
 
 
 
 
Small Business segment
$
199

 
$
170

 
$
410

 
$
358

Consumer Tax segment
62

 
26

 
34

 
(10
)
Professional Tax segment
41

 
(37
)
 
113

 
(40
)
Total segment operating income
302

 
159

 
557

 
308

Unallocated corporate items:
 
 
 
 
 
 
 
Share-based compensation expense
(65
)
 
(56
)
 
(132
)
 
(113
)
Other common expenses
(188
)
 
(182
)
 
(397
)
 
(373
)
Amortization of acquired technology
(6
)
 
(7
)
 
(12
)
 
(14
)
Amortization of other acquired intangible assets
(1
)
 
(3
)
 
(3
)
 
(6
)
Total unallocated corporate items
(260
)
 
(248
)
 
(544
)
 
(506
)
Total operating income (loss) from continuing operations
$
42

 
$
(89
)
 
$
13

 
$
(198
)



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11.
Subsequent Event
On February 1, 2016 we entered into a credit agreement with certain institutional lenders for a new five-year credit facility in an aggregate principal amount of $1.5 billion. The credit agreement replaces our February 2012 unsecured revolving credit facility which was due to expire on February 17, 2017 and was terminated on February 1, 2016. The new credit agreement provides for a $500 million unsecured term loan and a $1 billion unsecured revolving credit facility that will expire on February 1, 2021. We may, subject to certain customary conditions, on one or more occasions increase commitments under the credit facility in an amount not to exceed $750 million in the aggregate and may extend the maturity date of the unsecured revolving credit facility up to two times. Advances under the unsecured 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%. The unsecured 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 all of these elections are based on our senior debt credit ratings. The 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. The unsecured term loan is subject to quarterly principal payments of 2.5% of the loan amount beginning in July 2017, with the balance payable on the maturity date. On February 1, 2016 we borrowed $250 million on the unsecured revolving credit facility.



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ITEM 2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) includes the following sections:
•
Executive Overview that discusses at a high level our operating results and some of the trends that affect our business.
•
Significant changes since our most recent Annual Report on Form 10-K in the Critical Accounting Policies and Estimates that we believe are important to understanding the assumptions and judgments underlying our financial statements.
•
Results of Operations that includes a more detailed discussion of our revenue and expenses.
•
Liquidity and Capital Resources which discusses key aspects of our statements of cash flows, changes in our balance sheets, and our financial commitments.
You should note that this MD&A discussion contains forward-looking statements that involve risks and uncertainties. Please see Item 1A in Part II of this Quarterly Report on Form 10-Q for important information to consider when evaluating such statements.
You should read this MD&A in conjunction with the financial statements and related notes in Part I, Item 1 of this Quarterly Report and our Annual Report on Form 10-K for the fiscal year ended July 31, 2015. In the fourth quarter fiscal 2015 we determined that our Demandforce, QuickBase, and Quicken businesses became long-lived assets held for sale. We accounted for these businesses as discontinued operations and have therefore reclassified our statements of operations and balance sheets for all periods presented to reflect them as such. Because the cash flows of these discontinued operations were not material for any period presented, we have not segregated the cash flows of those businesses on our statements of cash flows. See “Results of Operations – Discontinued Operations” later in this Item 2 for more information. Unless otherwise noted, the following discussion pertains only to our continuing operations.


Executive Overview
This overview provides a high-level discussion of our business and growth strategy as well as the trends, opportunities, challenges, and risks that affect our performance and operating results. Understanding our growth strategy and the trends that affect our business provides context for the discussion of financial results and future opportunities which follows this overview. This summary is not intended to be exhaustive, nor is it a substitute for the detailed discussion and analysis provided elsewhere in this Quarterly Report on Form 10-Q.
About Intuit
Intuit creates business and financial management solutions that help simplify the business of life for small businesses, consumers, and accounting professionals. We organize our businesses into three reportable segments – Small Business, Consumer Tax, and Professional Tax.

Small Business: This segment targets small businesses and the accounting professionals who serve them and includes QuickBooks financial and business management online services and desktop software, payroll solutions, and payment processing solutions.

Consumer Tax: This segment targets consumers and includes TurboTax income tax preparation products and services.

Professional Tax: This segment targets professional accountants in the U.S. and Canada and includes Lacerte, ProSeries, ProFile, and Intuit Tax Online professional tax products and services.
Our Growth Strategy
Based on our assessment of key technology and demographic trends – an increasingly borderless world, the prevalence of mobile devices, and the scalability of the cloud – we see significant opportunities to drive future growth by continuing to solve the unmet needs of small businesses, consumers, and accounting professionals. Our evolving growth strategy includes three key elements:

•
Focus on the product – we call it “Delivering awesome product experiences.” Computing devices are moving to the palm of our hands in the form of tablets and smart phones. Our TurboTax solutions, for example, let customers prepare

24
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and file their entire tax returns online, via tablet, mobile phone, or desktop computer. We also believe that a key factor in growing our customer base is delivering an amazing first-use experience so our customers can get the value they expect from our offerings as quickly and easily as possible.

•
Creating network effect platforms – we call it “Enabling the contributions of others.” We expect to 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. One example of this is QuickBooks Online, which allows small business customers all over the world to localize, configure, and add value to the offering.

•
Leveraging our data for our customers' benefit – we call it “Using data to create delight.” Our customers generate valuable data that we seek to appropriately use to deliver better products and breakthrough benefits by eliminating the need to enter data, helping them make better decisions and improving transactions and interactions.
Industry Trends and Seasonality
Industry Trends
The industry in which we operate is dynamic and highly competitive, and we expect it to remain so in the future. The markets for software and related services, especially highly-available connected services, are characterized by rapid technological change, shifting customer needs, and frequent new product introductions and enhancements. Competitive interest and expertise in many of the markets we serve have grown markedly over the past few years and we expect this trend to continue. There are also large, cloud-based service companies who innovate quickly and serve small businesses and consumers. While today our competition with such companies may be limited, as we and those companies grow, our competition with them may increase. In recent years the widespread availability of the Internet, the emergence of mobile devices, and the explosion of social media have accelerated the pace of change and revolutionized the way that people throughout the world manage important financial tasks. The result is a global market that is shifting from traditional services that are paper-based, human-produced, and brick-and-mortar bound, to one where people understand, demand, and embrace the benefits of connected services. This trend toward connected services is the primary driver of the strategies in all of our businesses.
Seasonality
Our Consumer Tax offerings have significant seasonal patterns. As a result, during each of the last three fiscal years the total revenue for our third quarter ended April 30 has represented nearly half of our total revenue for those years. We expect the seasonality of our Consumer Tax business to continue to have a significant impact on our quarterly financial results in the future.
Key Challenges and Risks
Our growth strategy depends upon our ability to initiate and embrace disruptive technology trends, to enter new markets, and to drive broad adoption of the products and services we develop and market. Our future growth also increasingly depends on the strength of our third-party business relationships and our ability to continue to develop, maintain and strengthen new and existing relationships. To remain competitive and continue to grow, we are investing significant resources in our product development, marketing, and sales capabilities, and we expect to continue to do so in the future.
As we continue transitioning to offer more connected services, the ongoing operation and availability of our information technology and communication systems and those of our external service providers is becoming increasingly important. Because we help customers manage their financial lives, we face risks associated with the hosting, collection, use and retention of personal customer information and data. We are investing significant management attention and resources in our information technology infrastructure and in our privacy and security capabilities, and we expect to continue to do so in the future.
During the beginning of the 2015 calendar year, state taxing authorities, the IRS, and the tax preparation industry experienced an increase in attempts by criminals using stolen identity information to file fraudulent tax returns and claim refunds at the federal level and expanding into the state level. We implemented additional security measures in our products and began working with state governments to share information regarding suspicious filings while continuing to share such information with the federal government. During the current tax season, we expect continued efforts by criminals to attempt to access our customers’ accounts and to try to use stolen identities to obtain customer information and file fraudulent federal and state tax returns. We will continue to invest in security and to work with the broader industry and government to protect our customers against this type of fraud.
For a complete discussion of the most significant risks and uncertainties affecting our business, please see “Forward-Looking Statements and Risk Factors” in Item 1A of this Quarterly Report.

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Overview of Financial Results
The most important financial indicators that we use to assess our business are revenue growth for the company as a whole, for each reportable segment, and for product lines within each reportable segment; operating income growth and operating income margins for the company as a whole and for each reportable segment; earnings per share; and cash flow from operations. We also track certain non-financial drivers of revenue growth and, when material, identify them in the applicable discussions of segment results below. These non-financial drivers include, for example, customer growth and retention for all of our businesses and transaction volume for our payment processing business. Total credit and debit card transaction volume correlates strongly with the macroeconomic environment and is one of the key drivers of revenue growth in our payment processing business. Customers for our connected services offerings have generally grown faster than those for our traditional desktop software offerings, reflecting our strategic focus on connected services over the past few years. Connected services (total service and other revenue) generated $3.0 billion or 73% of our total revenue in fiscal 2015, compared with about 50% of our total revenue seven years ago. We expect connected services revenue as a percentage of our total revenue to continue to grow in the future.
Total net revenue for the first six months of fiscal 2016 was $1.6 billion, an increase of 20% compared with the same period of fiscal 2015. Revenue in our Consumer Tax segment grew 23% in the first six months of fiscal 2016 compared with the same period a year ago due to 23% growth in TurboTax Online federal units. The IRS began accepting federal income tax returns on January 19, 2016, which provided an extra weekend day in January for tax filers to process returns compared with the same period in fiscal 2015. Total net revenue growth was also affected by the changes that we made to our desktop software offerings in fiscal 2015. In fiscal 2015 we began delivering ongoing enhancements and certain connected services for our Professional Tax desktop software products and we plan to continue to provide them for all future versions of those products. Due to these changes, we recognize revenue for these offerings as services are provided through the end of each calendar year. Prior to these changes, we recognized a substantial portion of the revenue for these offerings during our third fiscal quarters ended April 30. As a result, revenue in our Professional Tax segment increased 309% to $194 million in the first six months of fiscal 2016 compared with the same period of fiscal 2015. Starting with the release of Quickbooks 2015 in the first quarter of fiscal 2015, and for all subsequent versions, we began delivering ongoing enhancements and certain connected services for our QuickBooks desktop software products. We plan to continue to provide ongoing enhancements and certain connected services for all future versions of these products. As a result of these changes, we recognize revenue for these QuickBooks desktop software products as services are provided over approximately three years. Revenue in our Small Business segment grew 6% in the first six months of fiscal 2016 compared with the same period of fiscal 2015 due to growth in QuickBooks Online and online payroll services and the impact of the changes to our QuickBooks desktop software products.
We recorded operating income from continuing operations of $13 million for the first six months of fiscal 2016 primarily due to the increase in revenue described above. Higher revenue was partially offset by higher costs and expenses, including higher spending for staffing, advertising and other marketing programs, and share-based compensation. We recorded an operating loss of $198 million for the first six months of fiscal 2015 primarily due to the impact of the changes to our desktop software offerings on fiscal 2015 revenue.
Net loss from continuing operations decreased 99% for the first six months of fiscal 2016 compared with the same period of fiscal 2015 due to the factors impacting operating income described above and a higher effective tax rate in the fiscal 2016 period. Basic and diluted net loss per share from continuing operations for the first six months of fiscal 2016 decreased 98% to $0.01, in line with the decrease in the net loss for that period.
We ended the first six months of fiscal 2016 with cash, cash equivalents and investments totaling $334 million. During the first six months of fiscal 2016 we generated cash from operations, net sales of investments, borrowings under our unsecured revolving credit facility, and the issuance of common stock under employee stock plans. During the same period we used cash for the repurchase of shares of our common stock under our stock repurchase programs, the payment of cash dividends, and capital expenditures, including the purchase of certain previously leased facilities. At January 31, 2016, we had authorization from our Board of Directors to expend up to an additional $900 million for stock repurchases through May 19, 2019.


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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, 2015 have the greatest potential impact on our financial statements, so we consider them to be our critical accounting policies and estimates. We believe that there were no significant changes in those critical accounting policies and estimates during the first six months of fiscal 2016. 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.


Results of Operations
Financial Overview
(Dollars in millions, except per share amounts)
Q2
FY16
 
Q2
FY15
 
$
Change
 
%
Change
 
YTD
Q2
FY16
 
YTD
Q2
FY15
 
$
Change
 
%
Change
Total net revenue
$
923

 
$
749

 
$
174

 
23
%
 
$
1,636

 
$
1,361

 
$
275

 
20
 %
Operating income (loss) from continuing operations
42

 
(89
)
 
131

 
NM

 
13

 
(198
)
 
211

 
NM

Net income (loss) from continuing operations
29

 
(60
)
 
89

 
NM

 
(2
)
 
(141
)
 
139

 
(99
)%
Basic and diluted net income (loss) per share from continuing operations
$
0.11

 
$
(0.21
)
 
$
0.32

 
NM

 
$
(0.01
)
 
$
(0.50
)
 
$
0.49

 
(98
)%
NM = Not meaningful.
Current Fiscal Quarter
Total net revenue for the second quarter of fiscal 2016 increased $174 million or 23% compared with the same quarter of fiscal 2015. Revenue in our Consumer Tax segment increased 29% in the second quarter of fiscal 2016 due to 23% growth in TurboTax Online federal units. The IRS began accepting federal income tax returns on January 19, 2016, which provided an extra weekend day in January for tax filers to process returns compared with the same period in fiscal 2015. Total net revenue growth was also affected by the changes to our desktop software offerings described in “Executive Overview - Overview of Financial Results” above. In fiscal 2015 we began delivering ongoing enhancements and certain connected services for our Professional Tax desktop software products and we plan to continue to provide them for all future versions of those products. Due to these changes, we recognize revenue for these offerings as services are provided through the end of each calendar year. Prior to these changes, we recognized a substantial portion of the revenue for these offerings during our third fiscal quarters ended April 30. As a result, revenue in our Professional Tax segment increased 665% to $84 million in the second quarter of fiscal 2016. Revenue in our Small Business segment grew 7% in the second quarter of fiscal 2016 due growth in QuickBooks Online and online payroll services and the impact of the changes to our QuickBooks desktop software products. See “Segment Results” later in this Item 2 for more information about the results for all of our reportable segments.
We recorded operating income from continuing operations of $42 million for the second quarter of fiscal 2016 primarily due to the increase in revenue described above. Higher revenue was partially offset by higher costs and expenses, including higher spending for advertising and other marketing programs and share-based compensation. We recorded an operating loss from continuing operations of $89 million for the second quarter of fiscal 2015 primarily due to the impact of the changes to our desktop software offerings on fiscal 2015 revenue. See “Operating Expenses” later in this Item 2 for more information.
We recorded net income from continuing operations of $29 million for the second quarter of fiscal 2016 due to the operating income described above. We recorded a net loss from continuing operations of $60 million for the same quarter of fiscal 2015 due to the operating loss described above. Diluted net income per share from continuing operations for the second quarter of fiscal 2016 was $0.11, compared with basic and diluted net loss per share from continuing operations of $0.21 for the same quarter of fiscal 2015.

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Fiscal Year to Date
Total net revenue for the first six months of fiscal 2016 increased $275 million or 20% compared with the same period of fiscal 2015. Revenue in our Consumer Tax segment grew 23% in the first six months of fiscal 2016 compared with the same period a year ago due to 23% growth in TurboTax Online federal units. The IRS began accepting federal income tax returns on January 19, 2016, which provided an extra weekend day in January for tax filers to process returns compared with the same period in fiscal 2015. Total net revenue growth was also affected by the changes to our desktop software offerings described in “Executive Overview - Overview of Financial Results” above. In fiscal 2015 we began delivering ongoing enhancements and certain connected services for our Professional Tax desktop software products and we plan to continue to provide them for all future versions of those products. Due to these changes, we recognize revenue for these offerings as services are provided through the end of each calendar year. Prior to these changes, we recognized a substantial portion of the revenue for these offerings during our third fiscal quarters ended April 30. As a result, revenue in our Professional Tax segment increased 309% to $194 million in the first six months of fiscal 2016. Revenue in our Small Business segment grew 6% in the first six months of fiscal 2016 due to growth in QuickBooks Online and online payroll services and the impact of the changes to our QuickBooks desktop software products. See “Segment Results” later in this Item 2 for more information about the results for all of our reportable segments.
We recorded operating income from continuing operations of $13 million for the first six months of fiscal 2016 primarily due to the increase in revenue described above. Higher revenue was partially offset by higher costs and expenses, including higher spending for staffing, advertising and other marketing programs, and share-based compensation. We recorded an operating loss from continuing operations of $198 million for the same period of fiscal 2015 primarily due to the impact of the changes to our desktop software offerings on fiscal 2015 revenue. See “Operating Expenses” later in this Item 2 for more information.
Net loss from continuing operations decreased 99% for the first six months of fiscal 2016 compared with the same period of fiscal 2015 due to the factors impacting operating income described above and a higher effective tax rate in the fiscal 2016 period. Basic and diluted net loss per share from continuing operations for the first six months of fiscal 2016 decreased 98% to $0.01, in line with the decrease in the net loss for that period.
Segment Results
The information below is organized in accordance with our three reportable segments. See “Executive Overview – About Intuit” earlier in this Item 2 and Note 10 to the financial statements in Part I, Item 1 of this Quarterly Report for more information. All of our segme