Stock-Based Compensation

6 Months Ended

Nov. 30, 2021

Share-based Payment Arrangement, Noncash Expense [Abstract]

Stock-Based Compensation

NOTE 6 — STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

The NIKE, Inc. Stock Incentive Plan (the “Stock Incentive Plan”) provides for the issuance of up to 798 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, 2021 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 NOVEMBER 30,				SIX MONTHS ENDED NOVEMBER 30,
(Dollars in millions)	2021		2020		2021		2020
Stock options(1)	$	81	$	107	$	146	$	177
ESPPs	14		17		29		35
Restricted stock and restricted stock units(1)(2)	75		65		131		113
TOTAL STOCK-BASED COMPENSATION EXPENSE	$	170	$	189	$	306	$	325

(1)Expense for stock options includes the expense associated with stock appreciation rights. Accelerated stock option expense is primarily recorded for employees meeting certain retirement eligibility requirements and certain employees impacted by the Company's organizational realignment. For more information, see Note 13 — Restructuring.

(2)Includes expense for performance-based restricted stock units granted during the six months ended November 30, 2021.

The income tax benefit related to stock-based compensation expense was $87 million and $108 million for the three months ended November 30, 2021 and 2020, respectively, and $273 million and $189 million for the six months ended November 30, 2021 and 2020, respectively.

STOCK OPTIONS

The weighted average fair value per share of the options granted during the six months ended November 30, 2021 and 2020, computed as of the grant date using the Black-Scholes pricing model, was $37.53 and $26.75, respectively. The weighted average assumptions used to estimate these fair values were as follows:

	SIX MONTHS ENDED NOVEMBER 30,
	2021		2020
Dividend yield	0.8	%	0.9	%
Expected volatility	24.9	%	27.3	%
Weighted average expected life (in years)	5.8		6.0
Risk-free interest rate	0.9	%	0.4	%

Expected volatilities are based on an analysis of 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 November 30, 2021, the Company had $570 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 2.7 years.

RESTRICTED STOCK AND RESTRICTED STOCK UNITS

The weighted average fair value per share of restricted stock and restricted stock units granted for the six months ended November 30, 2021 and 2020, computed as of the grant date, was $163.27 and $109.36, respectively.

During the six months ended November 30, 2021, under the Stock Incentive Plan, the Company granted performance-based restricted stock units (PSUs), which were historically in the form of cash-based long-term incentive awards under the Company's Long-Term Incentive Plan. The Company estimates the fair value of these PSUs as of the grant date using a Monte Carlo simulation. The weighted average fair value per share of PSUs granted for the six months ended November 30, 2021, computed as of the grant date, was $250.52. The impact of granting PSUs during the six months ended November 30, 2021, was not material to the Company's Unaudited Condensed Consolidated Financial Statements.

As of November 30, 2021, the Company had $624 million of unrecognized compensation costs from restricted stock, restricted stock units and PSUs, net of estimated forfeitures, to be recognized in Cost of sales or Operating overhead expense, as applicable, over a weighted average remaining period of 2.7 years.