Fiscal Year Financial Review
For its fiscal year ended July 31, 1997, the Company reported record net revenue of $598.9 million, an increase of 11% from net revenue of $538.6 million reported for the prior fiscal year ended July 31, 1996. Net income for the fiscal year ended July 31, 1997 was $68.3 million, or $1.44 per share, and included a gain of $71.2 million, net of tax, on the sale of Intuit Services Corporation which occurred in the second fiscal quarter. Results for the prior fiscal year ended July 31, 1996 reflected a net loss of $20.7 million, or $0.46 per share. Fiscal 1997 results were also impacted by restructuring and acquisition-related charges, while fiscal 1996 results were impacted by a combination of discontinued operations and acquisition-related charges. (See Table A).

For continuing operations and excluding acquisition and restructuring charges, the Company would have reported net income of $37.9 million, or $0.80 per share, for the fiscal year ended July 31, 1997, up 18% as compared to $32.2 million, or $0.68 per share, for the fiscal year ended July 31, 1996. (See Tables B, C and E).

Fourth Quarter Financial Review
For the fourth fiscal quarter ended July 31, 1997, the Company reported net revenue of $94.1 million, reflecting an increase of 10% versus net revenue of $85.3 million reported for the fourth quarter of fiscal 1996. During the fourth quarter of fiscal 1997, the Company announced a restructuring of technical support operations in the United States and Europe. For the fourth fiscal quarter ended July 31, 1997, the Company reported a one-time restructuring charge of $10.4 million as part of its net loss of $19.8 million, or $0.42 per share. Results for the year ago quarter ended July 31, 1996 reflected a net loss of $22.0 million, or $0.48 per share. (See Table A).

For continuing operations and excluding acquisition and restructuring charges, the Company would have reported a net loss of $8.0 million, or $0.17 per share, for the fourth fiscal quarter ended July 31, 1997, compared to a net loss of $7.3 million, or $0.16 per share, for the year ago quarter ended July 31, 1996. (See Tables B, C and E).

As previously reported, the Company typically experiences lower revenue and operating losses for the July and October fiscal quarters due to the seasonal nature of its tax return preparation products. During these periods, few people buy tax return preparation software while operating expenses necessary to develop and support the updated versions continue. As a result, the Company normally produces more than 100% of its annual profits in the January and April quarters.

Fiscal 1997 Business Review
Scott D. Cook, Chairman of the Board, commented, "The results for fiscal 1997 show the benefit of our strong market positions in desktop software, led by the solid performance of our Business Products and Tax divisions. We also made great progress in building the components of our Internet strategy. In addition, we responded to the continuing softness in the consumer software market by implementing company-wide measures aimed at improving operating performance and profitability.

"Our small business accounting software delivered strong growth in both revenue and profits in fiscal 1997. QuickBooks grew its share of retail sales to over 80% for the first time in history. Internationally, we acquired Nihon Micom in March and merged it together with our Milkyway subsidiary to create Intuit KK, now the largest Windows PC accounting software company in a growing Japanese market.

"We again had a successful tax season with our fiscal 1997 tax preparation products delivering revenue and profit growth from fiscal 1996 levels despite strong competition. During the year, we saw a dramatic increase in the number of tax returns filed electronically using our tax software.

"The dramatic growth of the Internet has provided Intuit significant opportunities to grow our business. We are increasing the power of our desktop software by adding Web integration, and we are making aggressive investments in new, entirely Web-based businesses. Although fiscal 1997 Internet revenue was limited, progress to date can be seen in our Quicken.com website. For example, Quicken InsureMarket offers real-time life insurance quotes and tools enabling people to shop for and buy term life insurance online. InsureMarket now has eight insurance carriers including State Farm, Transamerica, Zurich Direct, Lincoln Benefit Life, John Hancock and more, providing either online quotes or referrals to agents. Quicken.com's investment site enables easy access to comprehensive, real-time stock and mutual fund information. Recently we added The Financial Health Checkup to Quicken.com, a unique approach that evaluates a person's financial condition, provides customized tips and suggests next steps to achieve one's specific financial goals. There is much more under development for Quicken.com, in addition to our recent announcements with Excite, the Active Desktop in Windows 98, and five large mortgage lenders. While the Internet presents many opportunities, we remind investors that potential Internet-related revenue and profits may be difficult to predict or achieve.

"Our market-leading Quicken commands an 80% plus share of retail sales, although it did experience softness in sales as it participated in the overall sluggishness of the personal finance software market during fiscal 1997. In response to this downward pressure on revenue, we heightened our focus on achieving increased profitability. Technical support operations were consolidated, which is expected to decrease costs and provide improved customer service capabilities. Similarly, we consolidated our European support and administration functions into a single location in order to achieve greater efficiency and operating savings.

"On August 7, 1997, the Company announced that it had completed the sale of its consumer software and direct marketing subsidiary, Parsons Technology, to Broderbund Software, Inc. Parsons' consumer software business was not central to our strategic focus on financial services over the Internet. This transaction will be reflected in the results of the first quarter of fiscal 1998."