Stockholders' Equity

12 Months Ended

Jul. 31, 2011

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Stock Repurchase Programs

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. Under these programs, we repurchased 28.2 million shares of our common stock for $1.4 billion during the twelve months ended July 31, 2011; 28.7 million shares for $900 million during the twelve months ended July 31, 2010; and 10.9 million shares for $300 million during the twelve months ended July 31, 2009. At July 31, 2011, authorization from our Board of Directors to expend up to $640 million remained available under the existing program for stock repurchases through August 16, 2013. On August 18, 2011 we announced a new stock repurchase program under which we are authorized to repurchase up to an additional $2 billion of our common stock from time to time over a three-year period ending on August 15, 2014.

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.

Dividends on Common Stock

In August 2011 our Board of Directors declared the first cash dividend in our history of $0.15 per share of outstanding common stock payable on October 18, 2011 to stockholders of record at the close of business on October 10, 2011. 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.

Description of 2005 Equity Incentive Plan

Our stockholders initially approved our 2005 Equity Incentive Plan (2005 Plan) on December 9, 2004. On January 19, 2011 our stockholders approved an Amended and Restated 2005 Equity Incentive Plan (Restated 2005 Plan) that expires on January 19, 2015. Under the Restated 2005 Plan, we are permitted to grant incentive and non-qualified stock options, restricted stock awards, restricted stock units (RSUs), stock appreciation rights and stock bonus awards to our employees, non-employee directors and consultants. The Compensation and Organizational Development Committee of our Board of Directors or its delegates determine who will receive grants, when those grants will be exercisable, their exercise price and other terms. We are permitted to issue up to 96,000,000 shares under the Restated 2005 Plan. The plan provides a fungible share reserve. Each stock option granted on or after November 1, 2010 reduces the share reserve by one share and each restricted stock award or restricted stock unit granted reduces the share reserve by 2.3 shares. Stock options forfeited and returned to the pool of shares available for grant increase the pool by one share for each share forfeited. Restricted stock awards and RSUs forfeited and returned to the pool of shares available for grant increase the pool by 2.3 shares for each share forfeited. At July 31, 2011, there were approximately 30.7 million shares available for grant under this plan. Stock options granted under the 2005 Plan and the Restated 2005 Plan typically vest over three years based on continued service and have a seven year term. RSUs granted under those plans typically vest over three years based on continued service. Certain RSUs granted to senior management vest based on the achievement of pre-established performance or market goals.

Description of Employee Stock Purchase Plan

On November 26, 1996 our stockholders initially adopted our Employee Stock Purchase Plan (ESPP) under Section 423 of the Internal Revenue Code. The ESPP permits our eligible employees to make payroll deductions to purchase our stock on regularly scheduled purchase dates at a discount. Our stockholders have approved amendments to the ESPP to permit the issuance of up to 16,800,000 shares under the ESPP, which expires on July 27, 2015. During fiscal 2011, offering periods under the ESPP were three months in duration and shares were purchased at 85% of the lower of the closing price for Intuit common stock on the first day or the last day of the offering period. Effective September 16, 2011, offering periods under the ESPP will be six months in duration and composed of two consecutive three-month accrual periods. Shares will be purchased at 85% of the lower of the closing price for Intuit common stock on the first day of the offering period or the last day of the accrual period.

Under the ESPP, employees purchased 840,654 shares of Intuit common stock during the twelve months ended July 31, 2011; 1,120,030 shares during the twelve months ended July 31, 2010; and 1,368,005 shares during the twelve months ended July 31, 2009. At July 31, 2011, there were 1,780,671 shares available for issuance under this plan.

Share-Based Compensation Expense

The following table summarizes the total share-based compensation expense that we recorded for the periods shown.

	Twelve Months Ended July 31,
(In millions except per share amounts)	2011			2010			2009
Cost of product revenue	$	1		$	1		$	2
Cost of service and other revenue	6			7			7
Selling and marketing	46			41			45
Research and development	51			41			39
General and administrative	49			44			37
Discontinued operations	—			1			3
Total share-based compensation expense	153			135			133
Income tax benefit	(53		)	(48		)	(48		)
Decrease in net income	$	100		$	87		$	85
Decrease in net income per share:
Basic	$	0.33		$	0.28		$	0.26
Diluted	$	0.32		$	0.27		$	0.26

Determining Fair Value

Valuation and Amortization Method. We estimate the fair value of stock options granted using a lattice binomial model and a multiple option award approach. Our stock options have various restrictions, including vesting provisions and restrictions on transfer, and are often exercised prior to their contractual maturity. We believe that lattice binomial models are more capable of incorporating the features of our stock options than closed-form models such as the Black Scholes model. The use of a lattice binomial model requires the use of extensive actual employee exercise behavior and a number of complex assumptions including the expected volatility of our stock price over the term of the options, risk-free interest rates and expected dividends. We amortize the fair value of options on a straight-line basis over the requisite service periods of the awards, which are generally the vesting periods.

Restricted stock units (RSUs) granted typically vest based on continued service. Prior to July 2011, we valued these time-based RSUs at the date of grant using the intrinsic value method, adjusted for estimated forfeitures. Certain RSUs granted to senior management vest based on the achievement of pre-established performance or market goals. Prior to July 2011, we estimated the fair value of performance-based RSUs at the date of grant using the intrinsic value method and the probability that the specified performance criteria would be met, adjusted for estimated forfeitures. As discussed below under "Dividends," in July 2011 we determined that it was probable that we would pay cash dividends in the future. Since RSU holders are not entitled to dividends, starting in July 2011 we began reducing the market price of our stock on the date of grant, which is used in the intrinsic value method, by the present value of the dividends expected to be paid on the shares during the vesting period, discounted at the appropriate risk-free interest rate. We amortize the fair value of time-based RSUs on a straight-line basis adjusted for estimated forfeitures over the restriction period. We amortize the fair values of performance-based RSUs over the requisite service period adjusted for estimated forfeitures for each separately vesting tranche of the award. We estimate the fair value of market-based RSUs at the date of grant using a Monte Carlo valuation methodology and amortize those fair values over the requisite service period adjusted for estimated forfeitures for each separately vesting tranche of the award.

Expected Term. The expected term of options granted represents the period of time that they are expected to be outstanding and is a derived output of the lattice binomial model. The expected term of stock options is impacted by all of the underlying assumptions and calibration of our model. The lattice binomial model assumes that option exercise behavior is a function of the option’s remaining vested life and the extent to which the market price of our common stock exceeds the option exercise price. The lattice binomial model estimates the probability of exercise as a function of these two variables based on the history of exercises and cancellations on all past option grants made by us.

Expected Volatility. We estimate the volatility of our common stock at the date of grant based on the implied volatility of one-year and two-year publicly traded options on our common stock. Our decision to use implied volatility was based upon the availability of actively traded options on our common stock and our assessment that implied volatility is more representative of future stock price trends than historical volatility.

Risk-Free Interest Rate. We base the risk-free interest rate that we use in our option valuation model on the implied yield in effect at the time of option grant on constant maturity U.S. Treasury issues with equivalent remaining terms.

Dividends. In the past, we never paid any cash dividends on our common stock and we did not anticipate paying any cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero in our option valuation model. In July 2011 we determined that it was probable that we would pay cash dividends in the future and as a result we began using an expected dividend yield in our option valuation model. See "Dividends on Common Stock" above for more information.

Forfeitures. We estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. We use historical data to estimate pre-vesting option forfeitures and record share-based compensation expense only for those awards that are expected to vest.

We used the following assumptions to estimate the fair value of stock options granted and shares purchased under our Employee Stock Purchase Plan for the periods indicated:

	Twelve Months Ended July 31,
	2011		2010		2009
Assumptions for stock options:
Expected volatility (range)	27% - 30%		24% - 30%		28% - 44%
Weighted average expected volatility	28	%	28	%	31	%
Risk-free interest rate (range)	0.87% - 1.91%		1.37% - 2.82%		1.13% - 3.08%
Expected dividend yield (1)	0% - 1.20%		0	%	0	%
Assumptions for ESPP:
Expected volatility (range)	27% - 33%		22% - 29%		35% - 53%
Weighted average expected volatility	29	%	26	%	42	%
Risk-free interest rate (range)	0.05% - 0.16%		0.04% - 0.16%		0.04% - 0.84%
Expected dividend yield	0	%	0	%	0	%

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(1) Expected dividend yield assumption was zero for fiscal 2011 option grants prior to July 2011. In July 2011 we determined that it was probable that we would pay cash dividends in the future and as a result we began using an expected dividend yield assumption in our valuation models. See "Dividends on Common Stock" above for more information.

Stock Option Activity and Related Share-Based Compensation Expense

A summary of activity under all share-based compensation plans for the fiscal periods indicated was as follows:

			Options Outstanding
(Shares in thousands)	Shares Available for Grant		Number of Shares		Weighted Average Exercise Price Per Share
Balance at July 31, 2008	7,976		50,206			$24.70
Additional shares authorized	10,000		—		—
Options assumed and converted in connection with acquisitions	—		178		6.45
Options granted	(6,538	)	6,538		28.83
Restricted stock units granted	(6,242	)	—		—
Options exercised	—		(8,760	)	19.37
Options canceled or expired (1)	2,208		(2,488	)	29.20
Restricted stock units forfeited (1)	682		—		—
Balance at July 31, 2009	8,086		45,674		26.00
Additional shares authorized	9,000		—		—
Options assumed and converted in connection with acquisitions	—		372		3.08
Options granted	(6,338	)	6,338		35.93
Restricted stock units granted	(5,253	)	—		—
Options exercised	—		(17,212	)	24.00
Options canceled or expired (1)	2,089		(2,579	)	29.46
Restricted stock units forfeited (1)	1,177		—		—
Balance at July 31, 2010	8,761		32,593		28.45
Additional shares authorized	31,000		—		—
Options granted	(3,055	)	3,055		47.70
Restricted stock units granted (2)	(8,501	)	—		—
Options exercised	—		(11,997	)	25.68
Options canceled or expired (1)	915		(972	)	31.44
Restricted stock units forfeited (1)(2)	1,596		—		—
Balance at July 31, 2011	30,716		22,679			$32.38

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(1) 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.

(2) Under the terms of our 2005 Equity Incentive Plan as amended on January 19, 2011, RSUs granted from the pool of shares available for grant on or after November 1, 2010 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.

Options outstanding, exercisable and expected to vest, and exercisable as of July 31, 2011 were as follows:

	Number of Shares (in thousands)	Weighted Average Remaining Contractual Life (in Years)	Weighted Average Exercise Price per Share		Aggregate Intrinsic Value (in millions)
Options outstanding	22,679	4.39		$32.38		$329
Options exercisable and expected to vest	22,118	4.34		$32.12		$322
Options exercisable	14,271	3.45		$28.69		$257

Options expected to vest are unvested shares net of expected forfeitures. The aggregate intrinsic value of options outstanding at July 31, 2011 is calculated as the difference between the exercise price of the underlying options and the market price of our common stock for shares that were in-the-money at that date. In-the-money options at July 31, 2011 were options that had exercise prices that were lower than the $46.70 market price of our common stock at that date.

Additional information regarding our stock options, restricted stock and ESPP shares is shown in the table below.

	Twelve Months Ended July 31,
(In millions except per share amounts)	2011		2010		2009
Weighted average fair value of options granted (per share)	$	10.44	$	8.73	$	7.86
Total fair value of options vested	$	53	$	57	$	58
Aggregate intrinsic value of options exercised	$	261	$	157	$	79
Share-based compensation expense for stock options, restricted stock and ESPP	$	53	$	67	$	63
Total tax benefit for stock option, restricted stock and ESPP share-based compensation	$	17	$	24	$	22
Cash received from option exercises	$	308	$	413	$	169
Cash tax benefits realized related to tax deductions for non-qualified option exercises and disqualifying dispositions under all share-based payment arrangements	$	99	$	61	$	32

At July 31, 2011, there was $69 million of unrecognized compensation cost related to non-vested stock options and restricted stock that we will amortize to expense in the future. Unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. We expect to recognize that cost over a weighted average vesting period of 2.1 years.

Due to our ongoing program of repurchasing our common stock on the open market, at July 31, 2011 we had approximately 129 million treasury shares. We satisfy option exercises and RSU vesting from this pool of treasury shares.

Restricted Stock Unit Activity and Related Share-Based Compensation Expense

A summary of restricted stock unit (RSU) activity for the periods indicated was as follows:

(Shares in thousands)	Number of Shares		Weighted Average Grant Date Fair Value
Nonvested at July 31, 2008	4,997			$29.29
Granted	6,242		26.09
Vested	(1,150	)	30.54
Forfeited	(691	)	28.53
Nonvested at July 31, 2009	9,398		27.06
Granted	5,253		36.24
Restricted stock units assumed and converted in connection with acquisitions	231		29.14
Vested	(2,172	)	29.30
Forfeited	(1,179	)	26.46
Nonvested at July 31, 2010	11,531		30.93
Granted	3,855		47.02
Vested	(3,474	)	26.33
Forfeited	(857	)	31.73
Nonvested at July 31, 2011	11,055		$	37.92

Additional information regarding our RSUs is shown in the table below.

	Twelve Months Ended July 31,
(In millions)	2011		2010		2009
Total fair value of RSUs vested	$	150	$	64	$	35
Share-based compensation for RSUs	$	100	$	68	$	70
Total tax benefit related to RSU share-based compensation expense	$	36	$	25	$	26
Cash tax benefits realized for tax deductions for RSUs	$	36	$	24	$	14

At July 31, 2011, there was $238 million of unrecognized compensation cost related to non-vested RSUs that we will amortize to expense in the future. Unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. We expect to recognize that cost over a weighted average vesting period of 2.5 years.