Share-based compensation plans

9 Months Ended

Sep. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-based compensation plans

Share-based compensation plans

Equity awards

No awards were issued in the three months ended September 30, 2012 or in the three months ended September 30, 2011.

Under the 2009 Share Award and Incentive Plan, OEH granted on March 9, 2012:

• share options on 31,700 class A common shares vesting on March 9, 2015 at an exercise price of $9.95 per share,

• deferred shares without performance criteria on 3,300 class A common shares vesting on January 30, 2015 and 104,000 class A common shares vesting on March 9, 2015 at a purchase price of $0.01 per share, and

• deferred shares with performance criteria on up to 386,600 class A common shares vesting on March 9, 2015 at a purchase price of $0.01 per share.

The Black-Scholes option pricing model is used to determine the estimated fair value of share options and the portion of deferred shares with performance criteria related to total shareholder return.  The Monte Carlo valuation model is used to determine the fair value of the portion of deferred shares with performance criteria related to earnings before tax.

The estimated fair value of share options and deferred shares at March 9, 2012 using the Black-Scholes option pricing model was based on the following assumptions:

	Share options			Deferred shares with performance criteria
Expected share price volatility	58		%	59		%
Risk-free interest rate	1.69		%	0.47		%
Expected annual dividends per share	$	0.00		$	0.00
Expected life of awards	8 years			3 years

Under the 2009 Share Award and Incentive Plan, OEH granted on June 7, 2012:

• share options on 330,200 class A common shares vesting on June 7, 2015 at an exercise price of $8.42 per share, and

• deferred shares without performance criteria on 109,000 class A common shares vesting on June 7, 2015 at a purchase price of $0.01 per share.

The estimated fair value of share options at June 7, 2012 using the Black-Scholes option pricing model was based on the following assumptions:

	Share options
Expected share price volatility	58		%
Risk-free interest rate	1.07		%
Expected annual dividends per share	$	0.00
Expected life of share options	8 years

Expected volatilities are based on historical volatility of the Company’s class A common share price and other factors.  The expected life is based on historical data and represents the period of time that options or awards are likely to be outstanding.  The risk-free rate for periods within the expected life is based on the U.S. Treasury yield curve in effect at the time of grant.

The total fair value of share-based compensation awards issued in the three and nine months ended September 30, 2012 and 2011 was $Nil (2011 - $Nil) and $5,223,000 (2011 - $5,784,000), respectively.

The weighted-average fair value of the share options and share-based awards granted under the 2009 plan on the grant date was $Nil per share (2011 - $Nil) and $5.42 per share (2011 - $6.20) for the three and nine months ended September 30, 2012 and 2011, respectively.

The total compensation related to unvested awards outstanding at September 30, 2012, to be recognized over the period October 1, 2012 to September 30, 2015, was $9,461,000. OEH recognized equity compensation expense of $818,000 in the three months ended September 30, 2012 (2011 - $1,184,000) and $4,400,000 (2011 - $4,796,000) in the nine months ended September 30, 2012.

Liability awards

Previously awarded cash-settled stock appreciation rights have been recorded as other liabilities with a fair value of $98,000 at September 30, 2012 (December 31, 2011 - $111,000). See Note 11.