Nike 2016 Annual Report Download - page 63

PART II
The weighted average contractual life remaining for options outstanding and
options exercisable at May 31, 2016 was 6.0 years and 4.6 years,
respectively. The aggregate intrinsic value for options outstanding and
exercisable at May 31, 2016 was $2,806 million and $2,242 million,
respectively. The aggregate intrinsic value was the amount by which the
market value of the underlying stock exceeded the exercise price of the
options. The total intrinsic value of the options exercised during the years
ended May 31, 2016, 2015 and 2014 was $946 million, $795 million and
$474 million, respectively.
In addition to the Stock Incentive Plan, the Company gives employees the
right to purchase shares at a discount to the market price under employee
stock purchase plans (“ESPPs”). Employees are eligible to participate through
payroll deductions of up to 10% of their compensation. At the end of each 6-
month offering period, shares are purchased by the participants at 85% of the
lower of the fair market value at the beginning or the end of the offering period.
Employees purchased 2.5 million, 2.7 million and 2.8 million shares during
each of the three years ended May 31, 2016, 2015 and 2014, respectively.
From time to time, the Company grants restricted stock and restricted stock
units to key employees under the Stock Incentive Plan. The number of shares
underlying such awards granted to employees during the years ended
May 31, 2016, 2015 and 2014 were 1 million, 0.5 million and 0.6 million,
respectively, with weighted average values per share of $54.87, $39.69 and
$31.94, respectively. Recipients of restricted stock are entitled to cash
dividends and to vote their respective shares throughout the period of
restriction. Recipients of restricted stock units are entitled to dividend
equivalent cash payments upon vesting. The value of all grants of restricted
stock and restricted stock units was established by the market price on the
date of grant. During the years ended May 31, 2016, 2015 and 2014, the
aggregate fair value of restricted stock and restricted stock units vested was
$49 million, $20 million and $28 million, respectively, determined as of the
date of vesting. As of May 31, 2016, the Company had $62 million of
unrecognized compensation costs from restricted stock and restricted stock
units to be recognized in Operating overhead expense over a weighted
average period of 2.8 years.
NOTE 12 — Earnings Per Share
The following is a reconciliation from basic earnings per common share to diluted earnings per common share. The computations of diluted earnings per common
share excluded options, including shares under employee stock purchase plans (“ESPPs”), to purchase an additional 0.2 million, 1.7 million and 1.5 million shares
of common stock outstanding for the years ended May 31, 2016, 2015 and 2014, respectively, because the options were anti-dilutive.
Year Ended May 31,
(In millions, except per share data) 2016 2015 2014
Determination of shares:
Weighted average common shares outstanding 1,697.9 1,723.5 1,766.7
Assumed conversion of dilutive stock options and awards 44.6 45.3 44.9
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 1,742.5 1,768.8 1,811.6
Earnings per common share:
Basic $ 2.21 $ 1.90 $ 1.52
Diluted $ 2.16 $ 1.85 $ 1.49
NOTE 13 — Benefit Plans
The Company has a qualified 401(k) Savings and Profit Sharing Plan, in which
all U.S. employees are able to participate. The Company matches a portion of
employee contributions to the savings plan. Company contributions to the
savings plan were $72 million, $58 million and $51 million and included in
Operating overhead expense for the years ended May 31, 2016, 2015 and
2014, respectively. The terms of the plan also allow for annual discretionary
profit sharing contributions, as determined by the Board of Directors, to the
accounts of eligible U.S. employees who work at least 1,000 hours in a year.
Profit sharing contributions of $64 million, $58 million and $49 million were
made to the plan and included in Operating overhead expense for the years
ended May 31, 2016, 2015 and 2014, respectively.
The Company also has a Long-Term Incentive Plan (“LTIP”) that was adopted
by the Board of Directors and approved by shareholders in September 1997
and later amended in fiscal 2007. The Company recognized $85 million, $68
million and $46 million of Operating overhead expense related to cash awards
under the LTIP during the years ended May 31, 2016, 2015 and 2014,
respectively.
The Company allows certain highly compensated employees and non-
employee directors of the Company to defer compensation under a
nonqualified deferred compensation plan. Deferred compensation plan
liabilities were $475 million and $443 million at May 31, 2016 and 2015,
respectively, and primarily classified as long-term in Deferred income taxes
and other liabilities.
The Company has pension plans in various countries worldwide. The pension
plans are only available to local employees and are generally government
mandated. The liability related to the unfunded pension liabilities of the plans
was $93 million and $98 million at May 31, 2016 and 2015, respectively, and
primarily classified as long-term in Deferred income taxes and other liabilities.
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