nke-20221130

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO .

Commission File No. 1-10635

NIKE, Inc.

(Exact name of Registrant as specified in its charter)


Oregon						93-0584541
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

One Bowerman Drive, Beaverton, Oregon 97005-6453

(Address of principal executive offices and zip code)

(503) 671-6453

(Registrant's telephone number, including area code)


SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Class B Common Stock	NKE	New York Stock Exchange
(Title of each class)	(Trading symbol)	(Name of each exchange on which registered)

Indicate by check mark:

YES

•

whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☐

•

whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☐

•

whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

•

if an emerging growth company, if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

•

whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

☐


As of December 28, 2022, the number of shares of the Registrant's Common Stock outstanding were:
Class A			304,897,252
Class B			1,245,665,731
			1,550,562,983

Table of Contents

NIKE, INC.

FORM 10-Q

TABLE OF CONTENTS


		PAGE
PART I - FINANCIAL INFORMATION		1
ITEM 1.	Financial Statements	1
	Unaudited Condensed Consolidated Statements of Income	1
	Unaudited Condensed Consolidated Statements of Comprehensive Income	2
	Unaudited Condensed Consolidated Balance Sheets	3
	Unaudited Condensed Consolidated Statements of Cash Flows	4
	Unaudited Condensed Consolidated Statements of Shareholders' Equity	5
	Notes to the Unaudited Condensed Consolidated Financial Statements	7
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	43
ITEM 4.	Controls and Procedures	43
PART II - OTHER INFORMATION		45
ITEM 1.	Legal Proceedings	45
ITEM 1A.	Risk Factors	45
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
ITEM 6.	Exhibits	47
	Signatures	48

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NIKE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME


	THREE MONTHS ENDED NOVEMBER 30,				SIX MONTHS ENDED NOVEMBER 30,
(In millions, except per share data)	2022		2021		2022		2021
Revenues	$	13,315	$	11,357	$	26,002	$	23,605
Cost of sales	7,604		6,144		14,676		12,696
Gross profit	5,711		5,213		11,326		10,909
Demand creation expense	1,102		1,017		2,045		1,935
Operating overhead expense	3,022		2,742		5,999		5,396
Total selling and administrative expense	4,124		3,759		8,044		7,331
Interest expense (income), net	16		55		29		112
Other (income) expense, net	(79)		(102)		(225)		(141)
Income before income taxes	1,650		1,501		3,478		3,607
Income tax expense	319		164		679		396
NET INCOME	$	1,331	$	1,337	$	2,799	$	3,211
Earnings per common share:
Basic	$	0.85	$	0.84	$	1.79	$	2.03
Diluted	$	0.85	$	0.83	$	1.77	$	1.98
Weighted average common shares outstanding:
Basic	1,559.0		1,582.4		1,563.1		1,582.2
Diluted	1,572.4		1,617.4		1,579.1		1,618.5

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

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NIKE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	THREE MONTHS ENDED NOVEMBER 30,				SIX MONTHS ENDED NOVEMBER 30,
(Dollars in millions)	2022		2021		2022		2021
Net income	$	1,331	$	1,337	$	2,799	$	3,211
Other comprehensive income (loss), net of tax:
Change in net foreign currency translation adjustment	354		(155)		128		(283)
Change in net gains (losses) on cash flow hedges	(401)		366		154		804
Change in net gains (losses) on other	(30)		1		(41)		4
Total other comprehensive income (loss), net of tax	(77)		212		241		525
TOTAL COMPREHENSIVE INCOME	$	1,254	$	1,549	$	3,040	$	3,736

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

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NIKE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


	NOVEMBER 30,		MAY 31,
(In millions)	2022		2022
ASSETS
Current assets:
Cash and equivalents	$	6,490	$	8,574
Short-term investments	4,131		4,423
Accounts receivable, net	5,437		4,667
Inventories	9,326		8,420
Prepaid expenses and other current assets	2,063		2,129
Total current assets	27,447		28,213
Property, plant and equipment, net	4,854		4,791
Operating lease right-of-use assets, net	2,809		2,926
Identifiable intangible assets, net	280		286
Goodwill	281		284
Deferred income taxes and other assets	3,976		3,821
TOTAL ASSETS	$	39,647	$	40,321
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	500	$	500
Notes payable	7		10
Accounts payable	2,810		3,358
Current portion of operating lease liabilities	426		420
Accrued liabilities	6,020		6,220
Income taxes payable	436		222
Total current liabilities	10,199		10,730
Long-term debt	8,924		8,920
Operating lease liabilities	2,668		2,777
Deferred income taxes and other liabilities	2,584		2,613
Commitments and contingencies (Note 12)
Redeemable preferred stock	—		—
Shareholders' equity:
Common stock at stated value:
Class A convertible — 305 and 305 shares outstanding	—		—
Class B — 1,245 and 1,266 shares outstanding	3		3
Capital in excess of stated value	11,851		11,484
Accumulated other comprehensive income (loss)	559		318
Retained earnings	2,859		3,476
Total shareholders' equity	15,272		15,281
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	39,647	$	40,321

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

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NIKE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	SIX MONTHS ENDED NOVEMBER 30,
(Dollars in millions)	2022		2021
Cash provided (used) by operations:
Net income	$	2,799	$	3,211
Adjustments to reconcile net income to net cash provided (used) by operations:
Depreciation	342		358
Deferred income taxes	(150)		(222)
Stock-based compensation	364		306
Amortization, impairment and other	137		3
Net foreign currency adjustments	(125)		48
Changes in certain working capital components and other assets and liabilities:
(Increase) decrease in accounts receivable	(878)		543
(Increase) decrease in inventories	(948)		268
(Increase) decrease in prepaid expenses, operating lease right-of-use assets and other current and non-current assets	(239)		(444)
Increase (decrease) in accounts payable, accrued liabilities, operating lease liabilities and other current and non-current liabilities	56		(203)
Cash provided (used) by operations	1,358		3,868
Cash provided (used) by investing activities:
Purchases of short-term investments	(3,500)		(6,699)
Maturities of short-term investments	1,951		3,891
Sales of short-term investments	1,972		2,032
Additions to property, plant and equipment	(500)		(362)
Other investing activities	54		33
Cash provided (used) by investing activities	(23)		(1,105)
Cash provided (used) by financing activities:
Increase (decrease) in notes payable	(3)		13
Proceeds from exercise of stock options and other stock issuances	260		846
Repurchase of common stock	(2,550)		(1,723)
Dividends — common and preferred	(960)		(873)
Other financing activities	(68)		(109)
Cash provided (used) by financing activities	(3,321)		(1,846)
Effect of exchange rate changes on cash and equivalents	(98)		(55)
Net increase (decrease) in cash and equivalents	(2,084)		862
Cash and equivalents, beginning of period	8,574		9,889
CASH AND EQUIVALENTS, END OF PERIOD	$	6,490	$	10,751
Supplemental disclosure of cash flow information:
Non-cash additions to property, plant and equipment	$	124	$	103
Dividends declared and not paid	526		481

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

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NIKE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


	COMMON STOCK						CAPITAL IN EXCESS OF STATED VALUE		ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)		RETAINED EARNINGS		TOTAL
	CLASS A			CLASS B
(In millions, except per share data)	SHARES	AMOUNT		SHARES	AMOUNT
Balance at August 31, 2022	305	$	—	1,259	$	3	$	11,648	$	636	$	3,535	$	15,822
Stock options exercised				1			69						69
Repurchase of Class B Common Stock				(17)			(123)				(1,484)		(1,607)
Dividends on common stock ($0.340 per share)											(526)		(526)
Issuance of shares to employees, net of shares withheld for employee taxes				2			63				3		66
Stock-based compensation							194						194
Net income											1,331		1,331
Other comprehensive income (loss)									(77)				(77)
Balance at November 30, 2022	305	$	—	1,245	$	3	$	11,851	$	559	$	2,859	$	15,272


	COMMON STOCK						CAPITAL IN EXCESS OF STATED VALUE		ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)		RETAINED EARNINGS		TOTAL
	CLASS A			CLASS B
(In millions, except per share data)	SHARES	AMOUNT		SHARES	AMOUNT
Balance at August 31, 2021	305	$	—	1,278	$	3	$	10,521	$	(67)	$	3,886	$	14,343
Stock options exercised				3			256						256
Repurchase of Class B Common Stock				(6)			(40)				(928)		(968)
Dividends on common stock ($0.305 per share)											(483)		(483)
Issuance of shares to employees, net of shares withheld for employee taxes				3			83				(26)		57
Stock-based compensation							170						170
Net income											1,337		1,337
Other comprehensive income (loss)									212				212
Balance at November 30, 2021	305	$	—	1,278	$	3	$	10,990	$	145	$	3,786	$	14,924


	COMMON STOCK						CAPITAL IN EXCESS OF STATED VALUE		ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)		RETAINED EARNINGS		TOTAL
	CLASS A			CLASS B
(In millions, except per share data)	SHARES	AMOUNT		SHARES	AMOUNT
Balance at May 31, 2022	305	$	—	1,266	$	3	$	11,484	$	318	$	3,476	$	15,281
Stock options exercised				3			149						149
Repurchase of Class B Common Stock				(26)			(189)				(2,409)		(2,598)
Dividends on common stock ($0.645 per share) and preferred stock ($0.10 per share)											(1,008)		(1,008)
Issuance of shares to employees, net of shares withheld for employee taxes				2			43				1		44
Stock-based compensation							364						364
Net income											2,799		2,799
Other comprehensive income (loss)									241				241
Balance at November 30, 2022	305	$	—	1,245	$	3	$	11,851	$	559	$	2,859	$	15,272

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	COMMON STOCK						CAPITAL IN EXCESS OF STATED VALUE		ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)		RETAINED EARNINGS		TOTAL
	CLASS A			CLASS B
(In millions, except per share data)	SHARES	AMOUNT		SHARES	AMOUNT
Balance at May 31, 2021	305	$	—	1,273	$	3	$	9,965	$	(380)	$	3,179	$	12,767
Stock options exercised				13			725						725
Repurchase of Class B Common Stock				(11)			(69)				(1,641)		(1,710)
Dividends on common stock ($0.580 per share) and preferred stock ($0.10 per share)											(918)		(918)
Issuance of shares to employees, net of shares withheld for employee taxes				3			63				(45)		18
Stock-based compensation							306						306
Net income											3,211		3,211
Other comprehensive income (loss)									525				525
Balance at November 30, 2021	305	$	—	1,278	$	3	$	10,990	$	145	$	3,786	$	14,924

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1	Summary of Significant Accounting Policies	8
NOTE 2	Inventories	8
NOTE 3	Accrued Liabilities	8
NOTE 4	Fair Value Measurements	8
NOTE 5	Income Taxes	10
NOTE 6	Stock-Based Compensation	11
NOTE 7	Earnings Per Share	12
NOTE 8	Risk Management and Derivatives	12
NOTE 9	Accumulated Other Comprehensive Income (Loss)	17
NOTE 10	Revenues	19
NOTE 11	Operating Segments	21
NOTE 12	Contingencies	23
NOTE 13	Acquisitions and Divestitures	23

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NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The Unaudited Condensed Consolidated Financial Statements include the accounts of NIKE, Inc. and its subsidiaries (the “Company” or “NIKE”) and reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim period. The year-end Condensed Consolidated Balance Sheet data as of May 31, 2022, was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). The interim financial information and notes thereto should be read in conjunction with the Company's latest Annual Report on Form 10-K for the fiscal year ended May 31, 2022. The results of operations for the three and six months ended November 30, 2022, are not necessarily indicative of results to be expected for the entire fiscal year.

The uncertain state of the global economy or worsening macroeconomic conditions could affect the Company’s business, including, among other things, higher inventory levels in various markets, higher inventory obsolescence reserves, higher promotional activity, reduced demand for product, reduced orders from wholesale customers for product and order cancellations. There could also be new or prolonged COVID-19 related restrictions or disruptions. Any of these factors, among others, could have material adverse impacts on the Company’s revenue growth as well as overall profitability in future periods.


NOTE 2 — INVENTORIES

Inventory balances of $9,326 million and $8,420 million at November 30, 2022 and May 31, 2022, respectively, were substantially all finished goods.


NOTE 3 — ACCRUED LIABILITIES

Accrued liabilities included the following:


	NOVEMBER 30,		MAY 31,
(Dollars in millions)	2022		2022
Compensation and benefits, excluding taxes	$	1,220	$	1,297
Sales-related reserves	1,149		1,015
Import and logistics costs	580		489
Dividends payable	534		485
Allowance for expected loss on sale(1)	—		397
Other	2,537		2,537
TOTAL ACCRUED LIABILITIES	$	6,020	$	6,220

(1) Refer to Note 13 — Acquisitions and Divestitures for additional information.


NOTE 4 — FAIR VALUE MEASUREMENTS

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including derivatives, equity securities and available-for-sale debt securities. For additional information about the Company's fair value policies, refer to Note 1 — Summary of Significant Accounting Policies of the Annual Report on Form 10-K for the fiscal year ended May 31, 2022.

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The following tables present information about the Company's financial assets measured at fair value on a recurring basis as of November 30, 2022 and May 31, 2022, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement:


	NOVEMBER 30, 2022
(Dollars in millions)	ASSETS AT FAIR VALUE		CASH AND EQUIVALENTS		SHORT-TERM INVESTMENTS
Cash	$	788	$	788	$	—
Level 1:
U.S. Treasury securities	3,417		4		3,413
Level 2:
Commercial paper and bonds	622		29		593
Money market funds	5,024		5,024		—
Time deposits	753		645		108
U.S. Agency securities	17		—		17
Total Level 2	6,416		5,698		718
TOTAL	$	10,621	$	6,490	$	4,131


	MAY 31, 2022
(Dollars in millions)	ASSETS AT FAIR VALUE		CASH AND EQUIVALENTS		SHORT-TERM INVESTMENTS
Cash	$	839	$	839	$	—
Level 1:
U.S. Treasury securities	3,801		8		3,793
Level 2:
Commercial paper and bonds	660		37		623
Money market funds	6,458		6,458		—
Time deposits	1,237		1,232		5
U.S. Agency securities	2		—		2
Total Level 2	8,357		7,727		630
TOTAL	$	12,997	$	8,574	$	4,423

As of November 30, 2022, the Company held $3,060 million of available-for-sale debt securities with maturity dates within one year and $1,071 million with maturity dates greater than one year and less than five years in Short-term investments on the Unaudited Condensed Consolidated Balance Sheets. The fair value of the Company's available-for-sale debt securities approximates their amortized cost.

Included in Interest expense (income), net was interest income related to the Company's investment portfolio of $49 million and $18 million for the three months ended November 30, 2022 and 2021, respectively, and $114 million and $35 million for the six months ended November 30, 2022 and 2021, respectively.

The following tables present information about the Company's derivative assets and liabilities measured at fair value on a recurring basis and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement:


	NOVEMBER 30, 2022
	DERIVATIVE ASSETS						DERIVATIVE LIABILITIES
(Dollars in millions)	ASSETS AT FAIR VALUE		OTHER CURRENT ASSETS		OTHER LONG-TERM ASSETS		LIABILITIES AT FAIR VALUE		ACCRUED LIABILITIES		OTHER LONG-TERM LIABILITIES
Level 2:
Foreign exchange forwards and options(1)	$	953	$	759	$	194	$	134	$	93	$	41
Embedded derivatives	6		6		—		1		1		—
TOTAL	$	959	$	765	$	194	$	135	$	94	$	41

(1)If the foreign exchange derivative instruments had been netted on the Unaudited Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $133 million as of November 30, 2022. As of that date, the Company received $345 million of cash collateral from counterparties related to foreign exchange derivative instruments. No amount of collateral was posted on the derivative liability balance as of November 30, 2022.

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	MAY 31, 2022
	DERIVATIVE ASSETS						DERIVATIVE LIABILITIES
(Dollars in millions)	ASSETS AT FAIR VALUE		OTHER CURRENT ASSETS		OTHER LONG-TERM ASSETS		LIABILITIES AT FAIR VALUE		ACCRUED LIABILITIES		OTHER LONG-TERM LIABILITIES
Level 2:
Foreign exchange forwards and options(1)	$	875	$	669	$	206	$	76	$	65	$	11
Embedded derivatives	5		5		—		1		1		—
TOTAL	$	880	$	674	$	206	$	77	$	66	$	11

(1)If the foreign exchange derivative instruments had been netted on the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $76 million as of May 31, 2022. As of that date, the Company received $486 million of cash collateral from counterparties related to foreign exchange derivative instruments. No amount of collateral was posted on the derivative liability balance as of May 31, 2022.

For additional information related to the Company's derivative financial instruments and credit risk, refer to Note 8 — Risk Management and Derivatives.

The carrying amounts of other current financial assets and other current financial liabilities approximate fair value.

FINANCIAL ASSETS AND LIABILITIES NOT RECORDED AT FAIR VALUE

The Company's Long-term debt is recorded at adjusted cost, net of unamortized premiums, discounts and debt issuance costs. The fair value of long-term debt is estimated based upon quoted prices for similar instruments or quoted prices for identical instruments in inactive markets (Level 2). The fair value of the Company's Long-term debt, including the current portion, was approximately $8,410 million at November 30, 2022 and $8,933 million at May 31, 2022.

The carrying amounts reflected on the Unaudited Condensed Consolidated Balance Sheets for Notes payable approximate fair value.


NOTE 5 — INCOME TAXES

The effective tax rate was 19.5% and 11.0% for the six months ended November 30, 2022 and 2021, respectively. The increase in the Company's effective tax rate was primarily due to a less favorable impact from stock-based compensation and a shift in the Company's earnings mix.

As of November 30, 2022, total gross unrecognized tax benefits, excluding related interest and penalties, were $867 million, $652 million of which would affect the Company's effective tax rate if recognized in future periods. The majority of the total gross unrecognized tax benefits are long-term in nature and included within Deferred income taxes and other liabilities on the Unaudited Condensed Consolidated Balance Sheets. As of May 31, 2022, total gross unrecognized tax benefits, excluding related interest and penalties, were $848 million. As of November 30, 2022 and May 31, 2022, accrued interest and penalties related to uncertain tax positions were $276 million and $248 million, respectively, (excluding federal benefit) and included within Deferred income taxes and other liabilities on the Unaudited Condensed Consolidated Balance Sheets.

The Company is subject to taxation in the U.S., as well as various state and foreign jurisdictions. The Company is currently under audit by the U.S. IRS for fiscal years 2017 through 2019. The Company has closed all U.S. federal income tax matters through fiscal 2016, with the exception of certain transfer pricing adjustments.

Tax years after 2011 remain open in certain major foreign jurisdictions. Although the timing of resolution of audits is not certain, the Company evaluates all domestic and foreign audit issues in the aggregate, along with the expiration of applicable statutes of limitations, and estimates that it is reasonably possible the total gross unrecognized tax benefits could decrease by up to $20 million within the next 12 months. In January 2019, the European Commission opened a formal investigation to examine whether the Netherlands has breached State Aid rules when granting certain tax rulings to the Company. The Company believes the investigation is without merit. If this matter is adversely resolved, the Netherlands may be required to assess additional amounts with respect to prior periods, and the Company's income taxes related to prior periods in the Netherlands could increase.

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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 and stock awards, including restricted stock and restricted stock units. Restricted stock units include both time-vesting restricted stock units (RSUs) as well as performance-based restricted stock units (PSUs). 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, 2022 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)	2022		2021		2022		2021
Stock options(1)	$	79	$	81	$	154	$	146
ESPPs	18		14		33		29
Restricted stock and restricted stock units(1)(2)	97		75		177		131
TOTAL STOCK-BASED COMPENSATION EXPENSE	$	194	$	170	$	364	$	306

(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.

(2)Restricted stock units include RSUs and PSUs.

The income tax benefit related to stock-based compensation expense was $2 million and $87 million for the three months ended November 30, 2022 and 2021, respectively, and $22 million and $273 million for the six months ended November 30, 2022 and 2021, respectively, and reported within Income tax expense.

STOCK OPTIONS

The weighted average fair value per share of options granted during the six months ended November 30, 2022 and 2021, computed as of the grant date using the Black-Scholes pricing model, was $31.31 and $37.53, respectively. The weighted average assumptions used to estimate these fair values were as follows:


	SIX MONTHS ENDED NOVEMBER 30,
	2022		2021
Dividend yield	0.9	%	0.8	%
Expected volatility	27.1	%	24.9	%
Weighted average expected life (in years)	5.8		5.8
Risk-free interest rate	3.3	%	0.9	%

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, 2022, the Company had $584 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 RSUs granted for the six months ended November 30, 2022 and 2021, computed as of the grant date, was $107.60 and $163.27, respectively.

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The weighted average fair value per share of PSUs granted for the six months ended November 30, 2022 and 2021, computed as of the grant date, was $134.71 and $250.52, respectively.

As of November 30, 2022, the Company had $760 million of unrecognized compensation costs from restricted stock and restricted stock units,