Share-Based Compensation

6 Months Ended

Jul. 28, 2012

Share-Based Compensation

4. 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 six months of the respective fiscal year based on the following assumptions:

	2012			2011
Dividend yield		2.6	%		1.8	%
Volatility		33.7	%		33.0	%
Risk-free interest rate		1.0	%		2.2	%
Expected life in years		5.5			5.5
Weighted average fair value at grant date	$	11.64		$	14.85

The following table summarizes our stock option activity for the first six months of 2012 and 2011:

	2012					2011
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
	(Shares in Thousands)
Balance at beginning of year		16,564		$	53.41		17,869		$	53.17
Granted		1,135			48.37		909			53.04
Exercised		(519	)		34.57		(1,002	)		43.41
Forfeited/expired		(543	)		59.21		(654	)		62.87
Balance at end of quarter		16,637		$	53.46		17,122		$	53.36

The following table summarizes our nonvested stock activity for the first six months of 2012 and 2011:

	2012					2011
	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
	(Shares in Thousands)
Balance at beginning of year		1,946		$	51.11		1,116		$	49.30
Granted		799			48.36		1,141			52.48
Vested		(409	)		49.57		(266	)		49.31
Forfeited		(104	)		49.30		(17	)		52.84
Balance at end of quarter		2,232		$	50.49		1,974		$	51.11

Share-based compensation expense for both stock options and nonvested stock awards totaled $12 million for the three months ended July 28, 2012, $14 million for the three months ended July 30, 2011, $24 million for the six months ended July 28, 2012 and $29 million for the six months ended July 30, 2011. At July 28, 2012, we had approximately $160 million of unrecognized share-based compensation expense (before forfeitures and capitalization), which is expected to be recognized over a weighted average period of 3.5 years.