NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  


15. STOCKHOLDERS' EQUITY

Stock Option Plans

Our 1993 Equity Incentive Plan terminated on January 18, 2002 when our stockholders approved our 2002 Equity Incentive Plan to replace the 1993 Plan. When the 1993 Plan terminated, all outstanding options under the 1993 Plan remained in effect in accordance with their terms. There were 3,809,906 shares available for grant under the 1993 Plan at its termination. We transferred 1,900,000 of these shares to our new 2002 Plan to be available for grant under that plan. The remaining 1,909,906 shares ceased to be available for grant under any of our equity compensation plans. Under the 1993 Plan, we were permitted to grant incentive and non-qualified stock options, restricted stock awards, stock bonuses and performance awards to employees, directors, consultants, and independent contractors of and advisors to Intuit. The Compensation and Organizational Development Committee of the Board of Directors or its delegees determined who would receive grants, exercisability, exercise price and other terms. The option exercise price was generally the fair market value at the date of grant. The outstanding options generally vest over four years based on continued service and expire after ten years.

    Under our 2002 Equity Incentive Plan, we may grant incentive and non-qualified stock options, restricted stock awards and stock bonuses to employees, directors, consultants, and independent contractors of and advisors to Intuit. The Compensation and Organizational Development Committee of the Board of Directors or its delegees determines who will receive grants, exercisability, exercise price and other terms. The option exercise price is generally the fair market value at the date of grant. During fiscal 2002 Intuit changed its standard option vesting schedule for the 2002 Plan so that future options granted generally become exercisable over a three-year period based on continued service and expire seven years after the grant date. Prior to that change, options vested over four years and expired ten years after the grant date.

    During fiscal 2003, we launched a mandatory share ownership program. Under this program all senior vice presidents, the executive vice president and Board members are required to hold a minimum of 3,000 shares by the later of May 2006 or three years from the date the individual becomes subject to the share ownership program. The chief executive officer is required to hold 100,000 shares. To provide an incentive to the senior vice presidents and the executive vice president, we implemented a matching unit award component to the share ownership program. Under this matching unit program, for each two shares one of these officers purchases during his or her three year compliance period, we grant a matching unit award for one share, up to a maximum of 1,500 matching unit awards. These matching unit awards are granted as stock bonus awards under the 2002 Plan. These matching units vest as to 100% of the shares subject to the stock bonus award four years after grant, or earlier on the officer's retirement, death or disability. We record deferred compensation expense for these matching units based on the fair value of the award at the date of grant and recognize compensation expense at the time the matching units vest. We awarded a total of 2,849 matching units in fiscal 2003 and 3,424 matching units in fiscal 2004.

    On two occasions we have granted restricted stock units to our chief executive officer as stock bonus awards under the 2002 Plan. On July 30, 2003, we granted 425,000 restricted stock units and on July 31, 2004 we granted 25,000 restricted stock units. The 2003 award vests as to 255,000 shares on July 31, 2006 and as to an additional 85,000 shares on each of July 31, 2007 and July 31, 2008. The 2004 award vests as to 25,000 shares on July 31, 2007. We record deferred compensation expense for these restricted stock units based on the fair value of the award at the date of grant and recognize compensation expense ratably over the vesting period.

    On November 25, 1996, our stockholders approved our 1996 Directors Stock Option Plan. This plan provides for non-qualified stock options for a specified number of shares to be granted to all non-employee directors of Intuit. As of December 2002, Board members who serve on the Audit Committee, Compensation and Organizational Development Committee and Nominating and Governance Committee receive additional annual grants. The option exercise price equals the fair market value at the date of grant. Most options are subject to vesting over time based on continued service, with vesting periods ranging from one to four years. All options expire after ten years.

On November 11, 1998, we adopted the 1998 Option Plan for Mergers and Acquisitions. Under the 1998 Plan, we may grant non-qualified stock options to individuals who we hire as a result of our acquisitions of or mergers with, other companies. The 1998 Plan was designed to meet the "broadly based plans" exemption from the stockholder approval requirement for stock option plans under the NASDAQ Stock Market listing requirements at the time the plan was adopted and, accordingly, has not been submitted to Intuit stockholders for approval. Options under the 1998 Plan can only be granted to eligible individuals within 18 months following the completion of the relevant acquisition or merger. Options granted to officers hired as a result of a merger or acquisition cannot exceed 45% of all shares reserved for grant under the 1998 Plan. Options granted under the 1998 Plan cannot have an exercise price that is less than the fair market value of Intuit's common stock on the date of grant. During fiscal 2002, Intuit changed its standard option vesting schedule for the 1998 Plan so that future options granted generally become exercisable over a three-year period based on continued service and expire seven years after the grant date. Prior to that change, options generally vested over four years and expired ten years after the grant date.

    In addition, in several instances we have assumed the outstanding options of companies that we acquired. Intuit granted no further options under the acquired companies' option plans after the date of acquisition. We assumed options in connection with our acquisitions of The Flagship Group in May 2002 and CBS Employer Services, Inc. in June 2002.

A summary of activity under all option plans is as follows:

    OPTIONS OUTSTANDING
  SHARES
AVAILABLE
FOR GRANT		 NUMBER OF
SHARES		 EXERCISE PRICE
PER SHARE		 WEIGHTED AVERAGE
EXERCISE PRICE
PER SHARE
Balance at July 31, 2001   11,038,503     35,833,833     $0.003 - $72.31               $ 29.77      
    Additional shares authorized   8,090,000     -     -     -  
    Options assumed related to acquisitions   324,207     -     -     -  
    Options converted related to acquisitions   (324,207 )   324,207     6.93 - 43.10     26.26  
    Options granted   (8,887,021 )   8,887,021     7.29 - 67.50     39.03  
    Options exercised   -     (5,961,223 )   0.03 - 49.31     19.07  
    Options and shares canceled or expired:
        Options canceled or expired and returned to option pool   2,061,912     (2,061,912 )   7.25 - 67.50     38.09  
        Options canceled from expired plans   2,364,140     (2,364,140 )   0.18 - 67.50     36.58  
        Options and shares removed from shares available for grant (1)   (4,274,046 )   -     -     -  
Balance at July 31, 2002   10,393,488     34,657,786     $0.003 - $72.31   $ 32.99  
    Additional shares authorized   5,000,000     -     -     -  
    Options granted   (6,148,327 )   6,148,327     26.75 - 54.24     44.26  
    Stock bonus awards granted   (427,849 )   -     -     -  
    Options exercised   -     (5,564,618 )   0.003 - 51.06     24.69  
    Options and shares canceled or expired:
        Options canceled or expired and returned to option pool   843,835     (843,835 )   26.31 - 67.50     44.67  
        Options canceled from expired plans   1,402,864     (1,402,864 )   0.18 - 67.50     42.08  
        Options removed from shares available for grant   (1,402,864 )   -     -     -  
Balance at July 31, 2003   9,661,147     32,994,796     $ 0.18 - $72.31   $ 35.83  
    Options granted   (6,941,908 )   6,941,908     37.04 - 52.86     41.34  
    Stock bonus awards granted   (28,424 )   -     -     -  
    Stock bonus awards canceled   559     -     -     -  
    Options exercised   -     (3,611,671 )   0.18 - 51.06     27.19  
    Options and shares canceled or expired:
        Options canceled or expired and returned to option pool		   1,464,790     (1,464,790 )   26.31 - 67.50     45.35  
        Options canceled from expired plans   912,527     (912,527 )   6.93 - 67.50     45.13  
        Options removed from shares available for grant   (912,527 )   -     -     -  
Balance at July 31, 2004   4,156,164     33,947,716     $ 0.18 - $72.31   $ 37.22  

(1) Includes 2,364,140 shares reflecting options that were canceled and not returned to any option pool because they were granted under expired plans, and 1,909,906 shares that were eliminated from shares available for grant in connection with the termination of the 1993 Plan.

We define net option grants as options granted less options canceled or expired and returned to the pool of options available for grant. We also monitor net option grants by subtracting from options granted both canceled or expired options that were returned to the pool of options available for grant and options canceled from expired plans. Net option grants under these two methods in shares and as a percentage of shares outstanding for fiscal 2002, 2003 and 2004 are shown in the following table.

  FISCAL
  2002 2003 2004
Net option grants (shares)   6,825,109     5,304,492     5,485,814  
Net option grants (%)   3.2%     2.7%     2.9%  
Net option grants including options canceled from expired plans (shares)   4,460,969     3,901,628     4,573,287  
Net option grants including options canceled from expired plans (%)   2.1%     2.0%     2.4%  
Shares outstanding at July 31   211,163,641     199,471,717     190,090,604  

There were 18,264,940 options exercisable under our stock option plans at July 31, 2002, 19,789,835 at July 31, 2003 and 22,310,306 at July 31, 2004. At July 31, 2004, there were 1,904,706 shares available for grant under the 2002 Plan, 2,229,583 shares available for grant under the 1998 Plan and 21,875 shares available for grant under the 1996 Directors Stock Option Plan.

The following table summarizes information about stock options outstanding at July 31, 2004:

OPTIONS OUTSTANDING     OPTIONS EXERCISABLE
EXERCISE PRICE NUMBER WEIGHTED AVERAGE
REMAINING CONTRACTUAL
LIFE (YEARS)		 WEIGHTED AVERAGE
EXERCISE PRICE		 NUMBER WEIGHTED AVERAGE
EXERCISE PRICE
$  0.18 - $  15.98 3,866,914 3.20 $  10.96 3,861,310 $  10.96
  16.13 -     29.25 3,327,400 4.88 25.89 3,278,890 25.91
  29.26 -     34.38 3,760,747 6.39 31.61 3,161,354 31.62
  35.00 -     37.26 4,194,423 6.70 36.59 3,157,990 36.41
  37.44 -     39.00 4,589,411 6.94 37.61 487,564 38.52
  39.25 -     42.27 3,765,534 6.21 41.64 1,895,134 41.29
  42.44 -     44.32 3,291,776 5.67 43.66 1,703,935 43.84
  44.51 -     52.28 3,809,843 6.06 48.07 1,697,787 47.93
  52.86 -     64.81 1,923,738 5.96 57.49 1,765,403 57.75
  67.50 -     72.31 1,417,930 5.80 67.62 1,300,939 67.62
$  0.18 - $  72.31 33,947,716 5.81 $  37.22 22,310,306 $  35.20

Distribution and Dilutive Effect of Options

The following table shows option grants to "Named Executives" and to all employees for the periods indicated. Named Executives are defined as the Company's chief executive officer and each of the four other most highly compensated executive officers during fiscal 2004.

  FISCAL
  2002 2003    2004   
Net option grants during the period as a
percentage of outstanding shares		 3.2% 2.7%    2.9%   
Grants to Named Executives during the period
as a percentage of total options granted		 3.5% 8.9%    7.1%   
Grants to Named Executives during the period
as a percentage of outstanding shares		 0.1% 0.3%    0.3%   
Options held by Named Executives as a
percentage of total options outstanding		 9.0% 11.6%    12.7%   

Stock Repurchase Programs

Intuit's Board of Directors has initiated a series of common stock repurchase programs. Shares of common stock repurchased under these programs become treasury shares. The following table summarizes our stock repurchase programs at July 31, 2004.

PLAN NAME DATE INITIATED /INCREASED DATE CONCLUDED AMOUNT AUTHORIZED
(Dollars in thousands)
Repurchase Plan I May 2001 / July 2002 December 2002 $  750,000
Repurchase Plan II March 2003 November 2003     500,000
Repurchase Plan III August 2003 June 2004     500,000
Repurchase Plan IV May 2004 Still active     500,000

The following table summarizes our stock repurchase activity under these plans, including broker commissions, through July 31, 2004:

     PLAN I    PLAN II    PLAN III     
FISCAL YEAR (Dollars in thousands,
except per share amounts)		 SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT AVERAGE PRICE
PER SHARE
2001 238,500 $     8,358 - $             - - $             - $ 35.04
2002 7,361,839 318,422 - - - - 43.25
2003 9,002,244 423,211 8,937,809 390,432 - - 45.35
2004 - - 2,342,800 109,525 11,197,779 499,893 45.01
  16,602,583 $ 749,991 11,280,609 $ 499,957 11,197,779 $ 499,893 44.77

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.

Employee Stock Purchase Plan

On November 26, 1996, our stockholders adopted our Employee Stock Purchase Plan 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. Effective after the June 2003 purchase, the ESPP has twelve-month rolling concurrent offering periods that are composed of four three-month accrual periods at the end of which the employees may purchase shares at a discount. The discount at which the employee will be able to purchase shares under the ESPP will depend on the offering period in which she or he is participating since each rolling twelve-month offering period will be in its first, second, third or fourth three-month accrual period. The purchase price will be 85% of the lower of the closing price for Intuit common stock on the first day of the twelve-month offering period in which the employee is participating or the last day of the three-month accrual period of that offering period. Employees purchased 583,991 shares of Intuit common stock in fiscal 2002, 476,454 shares in fiscal 2003 and 564,918 shares in fiscal 2004 under the ESPP. At July 31, 2004, there were 1,820,107 shares available for issuance under this Plan.