Net sales for the first quarters of fiscal 1997 and 1996 were $102.5 million and $102.3 million, respectively. The Company reported a net loss of $28.3 million, or $0.61 per share, during the three month period ending October 31, 1996. The results for the current quarter include a one-time charge of $4.9 million for the write-off of in-process research and development in connection with Intuit's acquisition of GALT Technologies. The company reported a net loss of $20.3 million, or $0.46 per share, for the corresponding prior year quarter. Both quarters' results include acquisition-related charges, net of taxes, totaling $14.4 million in fiscal 1997 and $9.6 million in fiscal 1996. Results for the first fiscal quarter of 1996 include a loss from discontinued operations of $1.6 million arising from the online banking and bill payment business (see Business Review).

The Company's net loss from continuing operations, excluding acquisition-related expenses, was $13.9 million, or $0.30 per share for the most recent quarter compared with a loss of $9.1 million, or $0.20 per share, for the quarter ended October 31, 1995.

Intuit typically reports operating losses for the October and July fiscal quarters due to the seasonal nature of the Company's tax return preparations products. Few people buy tax return preparation software in the October and July quarters, yet the operating expenses necessary to develop and support the updated versions of the products continue during these quarters. While tax preparation software generates a high level of recurring revenues, its revenue pattern typically produces more than 100% of its annual profits in the January and April quarters.

Business Review
Scott D. Cook, Chairman of the Board, commented, "Overall sales for the company increased slightly compared to the same period last year. We saw strong growth in our Business Products and Supplies Groups, which service the small business accounting market. As expected, a planned shift in the initial sell-in pattern of the new version of Quicken(R) resulted in lower Personal Finance revenues versus last year. Parsons revenues were down slightly as a result of softer direct mail response rates. Intuit achieved major milestones in our early stage Internet electronic commerce businesses.

"Quicken for '97 hit the streets on October 24, 1996. This year, our sales team worked closely with retailer and distributor partners to reduce the initial sell-in levels of the new Quicken version versus last year. By helping retailers control inventory levels, we expect to develop a better pattern of reorders over the course of the year than we experienced last year. In contrast, total Quicken sales last year were skewed to the October quarter.

"Initial results of the Quicken launch are encouraging; however, it is too early in the season to accurately gauge customer acceptance. Customers are delighted with the new easier-to-use interface, and with Quicken's new abilities to help them manage debt and plan their taxes. Quicken for '97 is receiving enthusiastic support from both retailers and the press. Retailers have provided strong support this year, with key retailers offering low introductory pricing. Press reviews have been very positive. PC Computing called Quicken Financial Suite 'the single best reason to have a home PC,' awarding Quicken for '97 its highest rating of 5 stars. Windows Sources magazine said 'Quicken 6 for Windows clearly outclasses [the leading finance software competitor].'

"Revenue from both Business Products and Supplies increased over 30% in the quarter. Payroll Tax Table Service revenues increased dramatically over the same period last year. This service keeps businesses' payroll tax deductions up-to-date with changes in payroll tax laws. In addition, QuickBooks (R) revenues and revenues from our new Customer Support Network contributed to the continued strength demonstrated by our Business Products Group's performance. The growing base of Quicken and QuickBooks users fueled the growth in our Supplies business.

"Intuit achieved major milestones in our Internet electronic commerce businesses. In October 1996, Quicken InsureMarket (SM) began offering real-time quotes and facilitating purchases of term life insurance through the Internet. Term life quotes are offered through InsureMarket today by Lincoln Benefit Life, a subsidiary of Allstate Life Insurance Co., and by Zurich Direct, a unit of Zurich Kemper Life. Two other carriers, John Hancock and TIG have signed letters of intent to offer online quoting through InsureMarket. In addition, MetLife and State Farm generate business for their sales forces through InsureMarket. Finally, we just launched our first carrier-branded service for quotes and transactions located within a carrier's own Web site with Lincoln Benefit Life.

"In September, 1996, Intuit completed the acquisition of GALT Technologies, a provider of mutual fund information through its NETworth(R) Web site. NETworth provides mutual fund information on 60 mutual fund families, free stock quotes and free portfolio tracking," said Mr. Cook. The acquisition of GALT Technologies has been treated as a purchase for accounting purposes. The purchase price was approximately $14.6 million. As stated above, $4.9 million of the purchase price was written-off during the first fiscal quarter for the purchase of in-process research and development. $8.5 million has been allocated to other identified intangible assets and goodwill, and will be amortized over a period not to exceed three years.

In September 1996, the Company announced plans to sell its bill payment and processing operations (known as Intuit Services Corporation, or "ISC") to CheckFree Corporation. CheckFree Corporation recently announced that the ISC transaction is expected to be completed in January 1997, pending necessary regulatory and CheckFree shareholder approvals.

ISC's results are now accounted for as discontinued operations. For the period beginning August 1, 1996 through the closing of the transaction with CheckFree, ISC's results will be deferred. These amounts will be netted against the gain on the sale at closing, as required under Generally Accepted Accounting Principles. Comparative results for the quarter ended October 31, 1995 reflect ISC's net results in the "Loss from discontinued operations" line of the Condensed Consolidated Statements of Operations. ISC generated a loss from discontinued operations of $1.6 million in the quarter ended October 31, 1995 on net revenues of approximately $1.4 million. For the full fiscal year 1996, ISC generated a loss from discontinued operations of $6.3 million on net revenues of approximately $14.3 million.

Under the terms of the Services and License Agreement between Intuit and CheckFree, Intuit will receive a $10 million payment from CheckFree at closing and again upon the release of Quicken for Windows version 7.0 (or October 1, 1997, whichever is later). The Company currently expects the first of these payments to be received in the fiscal quarter ending January 31, 1997. If the closing of the transaction is delayed beyond January, 1997, the timing of the first payment from CheckFree will be affected accordingly and would have a material impact on results for the fiscal quarter ending January 1997.