Nike 2003 Annual Report Download - page 53

NIKE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 37.5 million shares of Class B
Common Stock in connection with stock options and other awards granted under such plan. 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. 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, 2003, 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, 2003 and May 31, 2002
was not material. 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, 2003, 2002, and 2001, respectively, the Company recognized
$2.7 million, $4.3 million and $4.3 million in selling and administrative expense related to the grants, net of
forfeitures.
During the years ended May 31, 2003, 2002 and 2001, the Company also granted shares of restricted 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 1,000,000 shares of Class B Common Stock.
Under the LTIP, awards are made to certain executives in the form of either cash or stock based on performance
targets established over varying time periods. Once performance targets are achieved, cash or shares of stock are
issued. For certain plan years, shares of stock issued remain restricted for an additional three years. In other plan
years, shares are immediately vested upon grant. Unvested shares are subject to forfeiture if the executive’s
employment terminates within that period. Plan participants are entitled to cash dividends and to vote their
respective shares. The value of the restricted shares is established by the market price on the date of issuance.
Unearned compensation is 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 service and vesting periods.
Under the LTIP no shares were issued during the year ended May 31, 2003 as performance targets for the plan
year ended May 31, 2002 were not met. A total of 38,000 restricted shares with an average price of $49.50 were
issued during the year ended May 31, 2002 for the plan year ended May 31, 2002, and 115,000 restricted shares
with an average market value of $47.56 were issued during the year ended May 31, 2001. Related to the LTIP,
the Company recognized $9.9 million, $9.0 million and $2.3 million of selling and administrative expense in the
years ending May 31, 2003, 2002 and 2001, respectively, net of forfeitures.
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