Stock-Based Compensation:

9 Months Ended

Feb. 29, 2012

Stock-Based Compensation:

NOTE 9—Stock-Based Compensation:

A committee of the Board of Directors grants stock options, stock appreciation rights, restricted stock and restricted stock units under the NIKE, Inc. 1990 Stock Incentive Plan (the “1990 Plan”). The committee has granted substantially all stock appreciation rights and stock options at 100% of the market price on the date of grant. Substantially all stock option grants outstanding under the 1990 Plan were granted in the first quarter of each fiscal year, vest ratably over four years, and expire 10 years from the date of grant. In addition to the 1990 Plan, the Company gives employees the right to purchase shares at a discount to the market price under employee stock purchase plans (“ESPPs”).

The Company accounts for stock-based compensation by estimating the fair value of options granted under the 1990 Plan and employees’ purchase rights under the ESPPs using the Black-Scholes option pricing model. The Company recognizes this fair value as operating overhead expense over the vesting period using the straight-line method.

The following table summarizes the Company’s total stock-based compensation expense:

	Three Months Ended February 29 and 28,				Nine Months Ended February 29 and 28,
	2012		2011		2012		2011
	(in millions)
Stock Options (1)	$	26	$	21	$	70	$	56
ESPPs		4		3		12		11
Restricted Stock		4		4		13		11
Total stock-based compensation expense	$	34	$	28	$	95	$	78

(1) Expense for stock options includes the expense associated with stock appreciation rights. Accelerated stock option expense is recorded for employees eligible for accelerated stock option vesting upon retirement. Accelerated stock option expense for the three and nine month periods ended February 29, 2012 was $4 million and $12 million, respectively. The accelerated stock option expense for the three and nine month periods ended February 28, 2011 was $3 million and $9 million, respectively.

As of February 29, 2012, the Company had $177 million of unrecognized compensation costs from stock options, net of estimated forfeitures, to be recognized as operating overhead expense over a weighted average period of 2.5 years.

The weighted average fair value per share of the options granted during the nine months ended February 29, 2012 and February 28, 2011 as computed using the Black-Scholes pricing model was $22.14 and $17.67, respectively. The weighted average assumptions used to estimate these fair values are as follows:

	Nine Months Ended February 29 and 28,
	2012			2011
Dividend yield		1.4	%		1.6	%
Expected volatility		29.5	%		31.5	%
Weighted-average expected life (in years)		5.0			5.0
Risk-free interest rate		1.4	%		1.7	%

The Company estimates the expected volatility based on the implied volatility in market traded options on the Company’s common stock with a term greater than one year, along with 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.