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Share-Based Compensation

9 Months Ended

Oct. 29, 2011

5.	Share-Based Compensation

We currently grant share-based compensation, including options to purchase shares of our common stock and nonvested stock to employees and outside directors, pursuant to the Kohl's Corporation 2010 Long-Term Compensation Plan. Annual grants of stock options and nonvested stock are generally made to eligible employees in the first quarter of the fiscal year. Grants to newly-hired and promoted employees and other discretionary grants are made periodically throughout the remainder of the year. Grants of stock options and nonvested stock are generally made to eligible outside directors upon their initial election to the Board of Directors and annually upon each such director's re-election.

The Black-Scholes option valuation model was used to estimate the fair value of each option award during the first nine months of the respective fiscal year based on the following assumptions:


	2011			2010
Volatility		33.0	%		33.5	%
Risk-free interest rate		2.1	%		2.3	%
Expected life in years		5.5			5.5
Dividend yield		1.8	%		0	%
Weighted-average fair value at grant date	$	14.60		$	19.14

The following table summarizes our stock option activity for the first nine months of 2011 and 2010:


	2011					2010
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
	(Shares in Thousands)
Balance at beginning of year		17,869		$	53.17		19,848		$	52.10
Granted		1,008			52.61		613			54.65
Exercised		(1,098	)		43.20		(1,364	)		38.15
Forfeited/expired		(854	)		62.27		(661	)		56.51

Balance at end of quarter		16,925		$	53.32		18,436		$	53.06

The following table summarizes our nonvested stock activity for the first nine months of 2011 and 2010:


	2011					2010
	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
	(Shares in Thousands)
Balance at beginning of year		1,116		$	49.30		883		$	45.44
Granted (1)		1,175			52.35		483			55.30
Vested		(283	)		49.61		(215	)		47.81
Forfeited		(37	)		51.35		(45	)		47.62

Balance at end of quarter		1,971		$	51.04		1,106		$	49.19

(1)	Includes 578 thousand shares granted in March and May 2011 which include both performance and service vesting conditions.

Total share-based compensation expense was $14 million for the three months ended October 29, 2011, $16 million for the three months ended October 30, 2010, $43 million for the nine months ended October 29, 2011 and $47 million for the nine months ended October 30, 2010.

At October 29, 2011, we had approximately $150 million of unrecognized share-based compensation expense (before forfeitures and capitalization), which is expected to be recognized over a weighted-average period of 3.3 years.

- Definition

Tabular disclosure of components of a stock option or other award plan under which equity-based compensation is awarded to employees, typically comprised of the amount of unearned compensation (deferred compensation cost), compensation expense, and changes in the quantity and fair value of the shares (or other type of equity) granted, exercised, forfeited, and issued and outstanding pertaining to that plan. Disclosure may also include nature and general terms of such arrangements that existed during the period and potential effects of those arrangements on shareholders, effect of compensation cost arising from equity-based payment arrangements on the income statement, method of estimating the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period, cash flow effects resulting from equity-based payment arrangements and, for registrants that accelerate vesting of out of the money share options, reasons for the decision to accelerate.

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