Mountain View, Calif. – June 20, 2002 – Intuit Inc. (NASDAQ: INTU) today announced it has signed a definitive agreement to sell its Quicken Loans mortgage business. When the transaction closes, Quicken Loans will become a wholly owned subsidiary of a newly created company and will continue to offer residential home mortgages and home equity loans under the Quicken Loans brand. The new company’s investors will be led by Dan Gilbert, chairman of Quicken Loans and founder of Rock Financial Corp. (the predecessor of Quicken Loans), which Intuit acquired in December 1999. Intuit will hold a 12.5 percent equity interest in the new company.
Intuit expects to treat the sale of the Quicken Loans business as a discontinued operation for accounting purposes. Accordingly, after the closing Intuit will amend its financial results for fiscal years 2000, 2001 and 2002 to reflect the exclusion of the results of the discontinued business.
Intuit Updates FY 02 and Raises FY 03 Revenue and Profit Growth Rate Guidance
Intuit has updated its guidance for fiscal 2002, as shown below, to reflect both the sale of Quicken Loans as well as stronger-than-expected performance in its small business and tax businesses in the fourth quarter.
Intuit’s previous revenue guidance for fiscal 2002, provided on May 15, 2002, was $1.501 billion-$1.511 billion, or growth of 19-20 percent over fiscal 2001. Due to the stronger-than-expected fourth-quarter performance of Intuit’s small business and tax businesses, the company expects additional fiscal 2002 revenue of approximately $25 million and additional pro forma operating income of approximately $14 million. The sale of Quicken Loans will represent a reduction in fiscal 2002 revenue of approximately $180 million and a reduction in pro forma operating income of approximately $65 million. Updated fiscal 2002 guidance is:
- Revenue of approximately $1.355 billion, up 18 percent from fiscal 2001;
- Pro forma operating income of about $275 million, up 45 percent from fiscal 2001;
- Pro forma earnings per share of $0.95, up 25 percent from fiscal 2001.
The table at the end of the press release provides more details about Intuit’s pro forma financial information and its historical performance without Quicken Loans.
New Fiscal 2003 Guidance
Intuit has raised its revenue and profit growth rate guidance for fiscal 2003 to reflect greater anticipated strength in the company’s portfolio of businesses and the impact of the sale of Quicken Loans. New fiscal 2003 guidance is:
- Revenue of $1.650 billion-$1.725 billion, growth of 22-28 percent from fiscal 2002;
- Pro forma operating income of $385 million-$405 million, growth of 40-47 percent from fiscal 2002;
- Pro forma earnings per share of $1.25-$1.31, growth of 32-38 percent from fiscal 2002.
Sale of Quicken Loans Better Aligns Business Portfolio to Drive Growth
“Intuit acquired Rock Financial and entered the mortgage origination business when consumer ‘e-finance’ services were central to Intuit’s strategy,” said Steve Bennett, Intuit’s president and chief executive officer. “Since then, Intuit has focused more on driving growth in small business and tax – businesses where we have strong leadership positions in large and growing markets.” Bennett noted that by exiting the mortgage origination business, which is cyclical and produces less predictable earnings, Intuit will be better positioned to drive sustained increases in annual revenue and profits.
“Quicken Loans is a great business and has produced strong results for Intuit over the last two fiscal years,” said Bennett. “They have outstanding products and services and an experienced and talented management team, but the business is no longer a good strategic fit for Intuit.”
Over the past two years, Intuit has made a number of moves to realign its business portfolio. Intuit has exited two other non-strategic consumer e-businesses – online insurance and online bill management. At the same time, Intuit has moved aggressively to execute its “Right for My Business” small business strategy and to expand its tax business.
In fiscal 2002, Intuit has made three acquisitions and announced a fourth to execute its “Right for My Business” strategy to penetrate the large, under-served small business markets both through new QuickBooks products and services as well as acquisitions to drive new growth platforms. It has acquired two companies that provide business management solutions for specific vertical industries – OMware, Inc., which provides solutions for the construction industry, and American Fundware, which provides business management software solutions to public sector organizations. Earlier this month, Intuit announced a third such acquisition, Management Reports, Inc., which provides business management software solutions for commercial and residential property managers. In early June, Intuit also acquired CBS Payroll, which provides a full-service outsourced payroll solution, as part of its strategy to serve larger small businesses and provide solutions beyond accounting.
In April 2001, Intuit acquired Tax and Accounting Software Solutions, which helped drive strong growth in Intuit’s professional tax business in fiscal 2002.
A Leader in Direct-to-Consumer Home Loans
Quicken Loans is a leading provider of direct-to-consumer home loans, offering mortgages in all 50 states on the Internet through Quickenloans.com and in Michigan through three Rock Financial branches. The company provides a wide variety of home financing options including conventional, government, alternative and jumbo loans, as well as home equity loans and home equity lines of credit. Quicken Loans also provides title insurance and settlement services nationally.
“The Quicken Loans leadership team is excited about the opportunity to continue to revolutionize the home mortgage experience, with a strong brand, industry-leading technology and a great selection of products and services,” said Quicken Loans’ Gilbert. “We’ve had great growth and success as part of Intuit during the past three years. This is the best team of mortgage professionals in the business, and we’re very excited about the opportunity to take it to the next level as an independent company.”
Gilbert, a former executive officer of Intuit, will serve as chairman of the new company, which has not yet been named. Bill Emerson, chief executive officer of Quicken Loans and an executive officer of Intuit, will serve as chief executive officer. Patrick McInnis, president of Quicken Loans, will be the president. Emerson will participate with Gilbert as an investor in the new company buying Quicken Loans.
The new company will retain all of the 1,000 Quicken Loans employees and will continue to be based in Livonia, Mich. Intuit will continue to offer Quicken Loans products and services on Quicken.com and through Quicken and TurboTax software.
Terms of Agreement
Based on the terms of the agreement, Intuit will receive cash, a note and multi-year licensing fees in exchange for all of the outstanding stock of Intuit’s Quicken Loans Inc. and Title Source Inc. subsidiaries. Intuit will also receive a 12.5 percent equity interest in the new company. The new company will license from Intuit use of the Quicken Loans trademark for its residential home loan and home equity loan products. In addition, the two parties have entered into a five-year distribution agreement through which Quicken Loans will provide mortgage services on Quicken.com. Intuit has also agreed to continue providing a line of credit to fund mortgage loans for a transition period of up to six months after the transaction closes. Such funding is customary in the mortgage origination market.
Intuit purchased the Quicken Loans business in December 1999. Because the transaction was accounted for as a pooling of interests, Intuit’s current balance sheet reflects the current net value of the tangible assets it acquired, rather than the purchase price paid. Accordingly, there will be no write-off of intangible assets (such as goodwill) associated with the sale of the business. Intuit expects to recognize a small gain on divestiture that will be reflected in its GAAP (Generally Accepted Accounting Principles) financial results, because the consideration Intuit will receive exceeds the book value of the assets being sold. The transaction is expected to close within 90 days.
Additional Detail on Intuit’s Financial Results With and Without Quicken Loans
|Fiscal 2001||Fiscal 2002|
|$ in millions except per share amounts||As Reported||Quicken Loans||As Amended||Previous Guidance||Quicken Loans||Business Strength||New Guidance|
|Pro Forma Operating Income||$220||$(30)||$190||$326||$(65)||$14||$275|
|Pro Forma EPS||$0.85||$(0.09)||$0.76||$1.10||$(0.19)||$0.04||$0.95|
Note: Pro forma financial information is not prepared in accordance with generally accepted accounting principles. Pro forma operating income excludes acquisition-related charges, such as amortization of goodwill and intangibles and impairment charges, and amortization of purchased software and purchased research and development. Pro forma earnings per share exclude gains and losses on marketable securities, gains and losses on divestitures and the tax effects of these transactions. Because there are no industry standards for presenting pro forma results, the method Intuit uses may differ from the methods used by other companies.
Intuit, the Intuit logo, Quicken, QuickBooks, Quicken Loans, QuickBooks Pro, QuickBase, TurboTax, ProSeries and Lacerte, among others, are registered trademarks and/or registered service marks of Intuit Inc. in the United States and other countries. Quicken.com and Intuit Master Builder, among others, are trademarks and/or service marks of Intuit Inc., or one of its subsidiaries, in the United States and other countries. Other parties’ trademarks or service marks are the property of their respective owners and should be treated as such.
# # #