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Common Stock and Stock-Based Compensation | 12 Months Ended
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May 31, 2022
Share-based Payment Arrangement, Noncash Expense [Abstract] |
Common Stock and Stock-Based Compensation |
NOTE 11 — COMMON STOCK AND STOCK-BASED COMPENSATION
COMMON STOCK 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 holders of Class A and Class B Common Stock. From time to time, the Company's Board of Directors authorizes share repurchase programs for the repurchase of Class B Common Stock. The value of repurchased shares is deducted from Total shareholders' equity through allocation to Capital in excess of stated value and Retained earnings. 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). A committee of the Board of Directors administers the Stock Incentive Plan and 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. The Company generally grants stock options, restricted stock and restricted stock units on an annual basis. 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. Substantially all awards under the Stock Incentive Plan vest ratably over 4 years of continued employment, with stock options expiring 10 years from the date of grant. During the fiscal year ended May 31, 2022, under the Stock Incentive Plan, the Company granted PSUs which replaced cash-based long-term incentive awards historically granted under the Company's Long-Term Incentive Plan. The impact of granting PSUs during the fiscal year ended May 31, 2022, was not material to the Company’s Consolidated Financial Statements. The following table summarizes the Company's total stock-based compensation expense recognized in Cost of sales or Operating overhead expense, as applicable:
| YEAR ENDED MAY 31,
(Dollars in millions) | 2022 | 2021 | 2020
Stock options(1) | $ | 297 |  | $ | 323 |  | $ | 237 |
ESPPs | 60 |  | 63 |  | 53 |
Restricted stock and restricted stock units(1)(2) | 281 |  | 225 |  | 139 |
TOTAL STOCK-BASED COMPENSATION EXPENSE | $ | 638 |  | $ | 611 |  | $ | 429 |
(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 and was $57 million, $67 million and $53 million for the fiscal years ended May 31, 2022, 2021 and 2020, respectively. During fiscal 2022 and 2021, an immaterial amount of accelerated stock option and restricted stock unit expense was also recorded for certain employees impacted by the Company's organizational realignment. For more information, see Note 21 — Restructuring. (2)Restricted stock units includes RSUs and PSUs. The income tax benefit related to stock-based compensation expense was $327 million, $297 million and $207 million for the fiscal years ended May 31, 2022, 2021 and 2020, respectively, and reported within Income tax expense. STOCK OPTIONS The weighted average fair value per share of the options granted during the years ended May 31, 2022, 2021 and 2020, computed as of the grant date using the Black-Scholes pricing model, was $37.53, $26.75 and $18.71, respectively. The weighted average assumptions used to estimate these fair values were as follows:
| YEAR ENDED MAY 31,
| 2022 | 2021 | 2020
Dividend yield | 0.8 | % | 0.9 | % | 1.0 | %
Expected volatility | 24.9 | % | 27.3 | % | 23.0 | %
Weighted average expected life (in years) | 5.8 | 6.0 | 6.0
Risk-free interest rate | 0.9 | % | 0.4 | % | 1.5 | %
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. The following summarizes the stock option transactions under the plan discussed above:
| SHARES(1) | WEIGHTED AVERAGE OPTION PRICE
| (In millions) |
Options outstanding as of May 31, 2021 | 78.3 |  | $ | 72.88 |
Exercised | (17.1) |  | 54.32 |
Forfeited | (2.5) |  | 114.89 |
Granted | 9.3 |  | 164.91 |
Options outstanding as of May 31, 2022 | 68.0 |  | $ | 88.66 |
(1)Includes stock appreciation rights transactions. Options exercisable as of May 31, 2022 were 40.3 million and had a weighted average option price of $68.15 per share. The aggregate intrinsic value for options outstanding and exercisable as of May 31, 2022 was $2,456 million and $2,045 million, respectively. The total intrinsic value of the options exercised during the years ended May 31, 2022, 2021 and 2020 was $1,742 million, $1,571 million and $1,161 million, respectively. The intrinsic value is the amount by which the market value of the underlying stock exceeds the exercise price of the options. The weighted average contractual life remaining for options outstanding and options exercisable as of May 31, 2022 was 6.0 years and 4.6 years, respectively. As of May 31, 2022, the Company had $405 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 2.5 years. EMPLOYEE STOCK PURCHASE PLANS 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). Subject to the annual statutory limit, employees are eligible to participate through payroll deductions of up to 10% of their compensation. At the end of each six-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 2.0 million, 2.5 million and 2.7 million shares during each of the fiscal years ended May 31, 2022, 2021 and 2020, respectively. RESTRICTED STOCK AND RESTRICTED STOCK UNITS 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, which includes RSUs and PSUs, are entitled to dividend equivalent cash payments upon vesting. The number of shares of restricted stock and restricted stock units vested includes shares of common stock withheld by the Company on behalf of employees to satisfy the minimum statutory tax withholding requirements. PSUs provide the right to receive shares of the Company's common stock based on the Company's achievement of certain performance criteria throughout the three-year performance period and continued employment through the vesting date. As such, the number of shares issued at the end of the performance period may range between 0% and 200% of the original target award amount (100%). The following summarizes the restricted stock and restricted stock unit activity under the plan discussed above:
|  | SHARES | WEIGHTED AVERAGE GRANT DATE FAIR VALUE
|  | (In millions) |
Nonvested as of May 31, 2021 |  | 6.6 |  | $ | 99.70
Vested |  | (2.3) |  | 93.70
Forfeited |  | (0.7) |  | 123.54
Granted(1) |  | 3.1 |  | 168.04
Nonvested as of May 31, 2022 |  | 6.7 |  | $ | 130.88
(1)Includes 0.5 million PSUs, which are presented assuming issuance at the original target award amount (100%). The weighted average fair value per share of restricted stock and RSUs granted for the fiscal years ended May 31, 2022, 2021 and 2020, computed as of the grant date, was $153.63, $113.84 and $88.26, respectively. During the fiscal years ended May 31, 2022, 2021 and 2020, the aggregate fair value of vested restricted stock and RSUs was $354 million, $310 million and $98 million, respectively, computed as of the date of vesting. The weighted average fair value per share of PSUs granted for the fiscal year ended May 31, 2022, computed as of the grant date was $239.38. The fair value of PSUs is estimated on the grant date using a Monte Carlo simulation assuming a weighted average expected volatility of 27.1% and weighted average risk-free interest rate of 0.5%. Expected volatilities are based on an analysis of the historical volatility of the Company's common stock at the date of grant for periods corresponding with the vesting period of the PSU. 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 vesting period of the PSU. No PSUs vested during the fiscal year ended May 31, 2022. As of May 31, 2022, the Company had $587 million of unrecognized compensation costs from restricted stock and restricted stock units, net of estimated forfeitures, to be recognized in Cost of sales or Operating overhead expense, as applicable, over a weighted average remaining period of 2.4 years.

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