Nike 2016 Annual Report Download - page 62

PART II
NOTE 11 — Common Stock and Stock-Based Compensation
The authorized number of shares of Class A Common Stock, no par value,
and Class B Common Stock, no par value, are 400 million and 2,400 million,
respectively. 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. There
are no differences in the dividend and liquidation preferences or participation
rights of the Class A and Class B common shareholders.
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 stock options and other 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. The exercise price for stock options and stock appreciation rights
may not be less than the fair market value of the underlying shares on the date
of grant. A committee of the Board of Directors administers the Stock
Incentive 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. Substantially all stock option grants
outstanding under the Stock Incentive Plan are granted in the first quarter of
each fiscal year, vest ratably over four years and expire ten years from the
date of grant.
The following table summarizes the Company’s total stock-based compensation expense recognized in Operating overhead expense:
Year Ended May 31,
(In millions) 2016 2015 2014
Stock options(1) $ 171 $ 136 $ 125
ESPPs 31 24 22
Restricted stock 34 31 30
TOTAL STOCK-BASED COMPENSATION EXPENSE $ 236 $ 191 $ 177
(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 years ended May 31, 2016, 2015 and 2014 was $30 million, $19 million and $15 million, respectively.
As of May 31, 2016, the Company had $245 million of unrecognized compensation costs from stock options, net of estimated forfeitures, to be recognized in
Operating overhead expense over a weighted average period of 2.0 years.
The weighted average fair value per share of the options granted during the years ended May 31, 2016, 2015 and 2014, as computed using the Black-Scholes
pricing model, was $12.66, $8.48 and $7.45, respectively. The weighted average assumptions used to estimate these fair values are as follows:
Year Ended May 31,
2016 2015 2014
Dividend yield 1.0% 1.2% 1.3%
Expected volatility 23.6% 23.6% 27.9%
Weighted average expected life (in years) 5.8 5.8 5.3
Risk-free interest rate 1.7% 1.7% 1.3%
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 1 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.
The following summarizes the stock option transactions under the plan discussed above:
Shares(1)
Weighted Average
Option Price
(In millions)
Options outstanding May 31, 2013 135.3 $ 17.36
Exercised (22.0) 14.15
Forfeited (2.5) 24.17
Granted 16.3 31.77
Options outstanding May 31, 2014 127.1 19.64
Exercised (27.2) 15.39
Forfeited (2.1) 29.51
Granted 18.4 38.84
Options outstanding May 31, 2015 116.2 23.50
Exercised (22.5) 17.75
Forfeited (2.3) 39.96
Granted 20.6 56.41
Options outstanding May 31, 2016 112.0 $ 30.38
Options exercisable at May 31,
2014 74.0 $ 15.71
2015 68.6 18.26
2016 66.5 21.48
(1) Includes stock appreciation rights transactions.
NIKE, INC. 2016 Annual Report and Notice of Annual Meeting 115
FORM 10-K