Nike 2006 Annual Report Download - page 62

NIKE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 10 — Common Stock
The authorized number of shares of Class A Common Stock, no par value, and Class B Common Stock, no
par value, are 175 million and 750 million, respectively. Included in these figures are 65 million of Class A
Common Stock, no par value, and 400 million shares of Class B Common Stock, no par value, which were
authorized and approved by the Board of Directors and shareholders during the year ended May 31, 2006. Each
share of Class A Common Stock is convertible into one share of Class B Common Stock. Voting rights of Class
B Common Stock are limited in certain circumstances with respect to the election of directors.
In 1990, the Board of Directors adopted, and the shareholders approved, the NIKE, Inc. 1990 Stock
Incentive Plan (the “1990 Plan”). The 1990 Plan provides for the issuance of up to 66 million shares of Class B
Common Stock in connection with stock options and other awards granted under such plan, included is
16 million shares of Class B Common Stock approved by the Board of Directors and shareholders during the
year ended May 31, 2006. The 1990 Plan authorizes the grant of incentive stock options, non-statutory stock
options, stock appreciation rights, stock bonuses and the sale of restricted stock. The exercise price for incentive
stock options may not be less than the fair market value of the underlying shares on the date of grant and
substantially all grants vest ratably over four years and expire 10 years from the date of grant. The exercise price
for non-statutory stock options, stock appreciation rights and the purchase price of restricted stock may not be
less than 75% of the fair market value of the underlying shares on the date of grant. No consideration will be paid
for stock bonuses awarded under the 1990 Plan. A committee of the Board of Directors administers the 1990
Plan. The committee has the authority to determine the employees to whom awards will be made, the amount of
the awards, and the other terms and conditions of the awards. As of May 31, 2006 the committee has granted
substantially all non- statutory stock options at 100% of fair market value on the date of grant under the 1990
Plan.
From time to time, the Company grants restricted stock and unrestricted stock to key employees under the
1990 Plan. The number of shares granted to employees during the years ended May 31, 2006, 2005 and 2004
were 71,000, 114,000 and 148,000 with weighted average prices of $86.75, $89.29 and $52.32, respectively.
Recipients of restricted shares are entitled to cash dividends and to vote their respective shares throughout the
period of restriction. The value of all of the granted shares was established by the market price on the date of
grant. Unearned compensation was charged for the market value of the restricted shares. The unearned
compensation is shown as a reduction of shareholders’ equity and is being amortized ratably over the vesting
period. During the years ended May 31, 2006, 2005, and 2004, respectively, the Company recognized $11.5
million, $3.9 million and $2.4 million in selling and administrative expense related to the grants, net of
forfeitures.
During the years ended May 31, 2006, 2005 and 2004, the Company also granted shares of stock under the
Long-Term Incentive Plan (“LTIP”), adopted by the Board of Directors and approved by shareholders in
September 1997. The LTIP provides for the issuance of up to 1.0 million shares of Class B Common Stock.
Under the LTIP, awards are made to certain executives in their choice of either cash or stock, based on
performance targets established over three year time periods. Once performance targets are achieved, cash or
shares of stock are issued. The shares are immediately vested upon grant. The value of the shares is established
by the market price on the date of issuance. Under the LTIP 3,000, 4,000 and 8,000 shares with a price of $81.58,
$69.69 and $54.80, respectively, were issued during the years ended May 31, 2006, May 31, 2005 and May 31,
2004 for the plan years ended May 31, 2005, May 31, 2004 and May 31, 2003, respectively. Related to the LTIP
the Company recognized $21.7 million, $22.2 million and $18.9 million of selling and administrative expense in
the years ending May 31, 2006, 2005 and 2004, respectively, net of forfeitures.
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