Stock-Based Compensation

3 Months Ended

Aug. 31, 2019

NOTE 7 — STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

The NIKE, Inc. Stock Incentive Plan (the “Stock Incentive Plan”) provides for the issuance of up to 718 million previously unissued shares of Class B Common Stock in connection with equity awards granted under the Stock Incentive Plan. The Stock Incentive Plan authorizes the grant of non-statutory stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units and performance-based awards. In addition to the Stock Incentive Plan, the Company gives employees the right to purchase shares at a discount from the market price under employee stock purchase plans (ESPPs). Refer to Note 11 - Common Stock and Stock-Based Compensation of the Annual Report on Form 10-K for the fiscal year ended May 31, 2019 for further information.

The following table summarizes the Company's total stock-based compensation expense recognized in Cost of sales or Operating overhead expense, as applicable:



	THREE MONTHS ENDED AUGUST 31,
(Dollars in millions)	2019		2018
Stock options⁽¹⁾	$	42	$	20
ESPPs	13		10
Restricted stock	25		11
TOTAL STOCK-BASED COMPENSATION EXPENSE	$	80	$	41


(1)	Expense for stock options includes the expense associated with stock appreciation rights. Accelerated stock option expense is recorded for employees meeting certain retirement eligibility requirements.

The income tax benefit related to stock-based compensation expense was $37 million and $53 million for the three months ended August 31, 2019 and 2018, respectively.

STOCK OPTIONS

The weighted average fair value per share of the options granted during the three months ended August 31, 2019 and 2018, computed as of the grant date using the Black-Scholes pricing model, was $18.33 and $17.44, respectively. The weighted average assumptions used to estimate these fair values were as follows:



	THREE MONTHS ENDED AUGUST 31,
	2019		2018
Dividend yield	1.1	%	1.0	%
Expected volatility	22.9	%	19.7	%
Weighted average expected life (in years)	6.0		6.0
Risk-free interest rate	1.7	%	2.9	%

Expected volatilities are based on the historical volatility of the Company's common stock, the implied volatility in market traded options on the Company's common stock with a term greater than one year, as well as other factors. The weighted average expected life of options is based on an analysis of historical and expected future exercise patterns. The interest rate is based on the U.S. Treasury (constant maturity) risk-free rate in effect at the date of grant for periods corresponding with the expected term of the options.

As of August 31, 2019, the Company had $320 million of unrecognized compensation costs from stock options, net of estimated forfeitures, to be recognized in Cost of sales or Operating overhead expense, as applicable, over a weighted average remaining period of 2.6 years.

RESTRICTED STOCK AND RESTRICTED STOCK UNITS

The weighted average fair values per share of restricted stock and restricted stock units granted for the three months ended August 31, 2019 and 2018, computed as of the grant date, was $84.19 and $76.42, respectively. As of August 31, 2019, the Company had $200 million of unrecognized compensation costs from restricted stock and restricted stock units, net of estimated forfeitures, to be recognized in Cost of sales or Operating overhead expense, as applicable, over a weighted average remaining period of 2.5 years.