(ii) Compensation expense related to SARs and TSARs:
Compensation expense for SARs and TSARs is measured based on their fair value and is recognized over the vesting period. Changes in fair value each period are recognized in net income for the proportion of the service that has been rendered at each reporting date. The fair value at March 31, 2013 was $43.0 million compared with the recorded liability of $32.0 million. The difference between the fair value and the recorded liability of $11.0 million will be recognized over the weighted average remaining vesting period of approximately 2.0 years. The weighted average fair value of the vested SARs and TSARs was estimated at March 31, 2013 using the Black-Scholes option pricing model.
For the three months ended March 31, 2013, compensation expense related to SARs and TSARs included an expense in cost of sales and operating expenses of $17.0 million (2012 - $10.7 million). This included an expense of $15.0 million (2012 - expense of $7.8 million) related to the effect of the change in the Company's share price for the three months ended March 31, 2013.
(iii) Compensation expense related to stock options:
For the three months ended March 31, 2013, compensation expense related to stock options included in cost of sales and operating expenses was $0.2 million (2012 - $0.2 million). The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option pricing model.
b) Deferred, restricted and performance share units:
Deferred, restricted and performance share units outstanding at March 31, 2013 are as follows:
Number of Number of Number of Deferred Restricted Performance Share Units Share Units Share Units--------------------------------------------------------------------------------------------------------------------------------------------------------Outstanding at January 1, 2012 597,911 48,588 1,103,049 Granted 21,649 20,400 358,330 Granted in-lieu of dividends 13,821 1,502 25,339 Redeemed (66,531) (31,607) (413,138) Cancelled - - (19,711)----------------------------------------------------------------------------Outstanding at December 31, 2012 566,850 38,883 1,053,869---------------------------------------------------------------------------- Granted 9,725 22,500 304,600 Granted in-lieu of dividends 2,391 280 4,305 Redeemed (49,432) - (410,177) Cancelled - - (5,810)----------------------------------------------------------------------------Outstanding at March 31, 2013 529,534 61,663 946,787----------------------------------------------------------------------------
Compensation expense for deferred, restricted and performance share units is measured at fair value based on the market value of the Company's common shares and is recognized over the vesting period. Changes in fair value are recognized in earnings for the proportion of the service that has been rendered at each reporting date. The fair value of deferred, restricted and performance share units at March 31, 2013 was $65.4 million compared with the recorded liability of $48.5 million. The difference between the fair value and the recorded liability of $16.9 million will be recognized over the weighted average remaining vesting period of approximately 2.1 years.
