- 1. Cameco Corporation
- 2. Significant Accounting Policies
- 3. Explanation of Transition to IFRS
- 4. Accounting Standards
- 5. Determination of Fair Values
- 6. Use of Estimates and Judgments
- 7. Short-Term Investments
- 8. Accounts Receivable
- 9. Inventories
- 10. Property, Plant and Equipment
- 11. Intangible Assets
- 12. Long-Term Receivables, Investments and Other
- 13. Equity-Accounted Investees
- 14. Accounts Payable and Accrued Liabilities
- 15. Short-Term Debt
- 16. Long-Term Debt
- 17. Finance Lease Obligation
- 18. Other Liabilities
- 19. Provisions
- 20. Share Capital
- 21. Employee Benefit Expense
- 22. Finance Costs
- 23. Other Income
- 24. Income Taxes
- 25. Per Share Amounts
- 26. Statements of Cash Flows
- 27. Share-Based Compensation Plans
- 28. Pension and Other Post-Retirement Benefits
- 29. Financial Instruments and Related Risk Management
- 30. Capital Management
- 31. Commitments and Contingencies
- 32. Segmented Information
- 33. Group Entities
- 34. Jointly Controlled Assets
- 35. Jointly Controlled Entities
- 36. Acquisition of Controlling Interest in UFP Investments LLC (“UFP”)
- 37. Related Parties
27. Share-Based Compensation Plans
The Company has the following equity-settled plans:
(a) Stock Option Plan
The Company has established a stock option plan under which options to purchase common shares may be granted to officers and other employees of Cameco. Options granted under the stock option plan have an exercise price of not less than the closing price quoted on the TSX for the common shares of Cameco on the trading day prior to the date on which the option is granted. The options vest over three years and expire eight years from the date granted. Options have not been awarded to directors since 2003 and the plan has been amended to preclude the issue of options to directors.
The aggregate number of common shares that may be issued pursuant to the Cameco stock option plan shall not exceed 43,017,198, of which 26,486,819 shares have been issued.
Stock option transactions for the respective years were as follows:
(Number of Options) 2011 2010 Beginning of period 7,552,379 7,939,833 Options granted 1,630,069 1,515,945 Options forfeited (261,978) (391,089) Options exercised [note 20] (394,380) (1,512,310) End of period 8,526,090 7,552,379 Exercisable 5,556,417 4,814,761
Weighted average exercise prices were as follows
2011 2010 Beginning of period $30.26 $27.42 Options granted 39.10 28.90 Options forfeited 36.88 35.05 Options exercised 14.68 12.75 End of period $32.47 $30.26 Exercisable $32.16 $32.02
Total options outstanding and exercisable at December 31, 2011 were as follows:
Options Outstanding Options Exercisable Option Price Per Share Number Weighted
$10.50 - 26.24 1,733,874 4.5 $16.83 1,269,076 $15.66 26.25 - 55.00 6,792,216 3.5 36.46 4,287,341 37.04 8,526,090 5,556,417
The foregoing options have expiry dates ranging from March 9, 2012 to March 2, 2019
Non-vested stock option transactions for the respective years were as follows:
(Number of Options) 2011 2010 Beginning of period 2,737,618 2,389,685 Options granted 1,630,069 1,515,945 Options forfeited (96,055) (91,439) Options vested (1,301,959) (1,076,573) End of period 2,969,673 2,737,618
For the year ended December 31, 2011, Cameco has recorded a net expense of $14,803,000 (2010 - $8,931,000), related to options that vested during the year.
(b) Executive Performance Share Unit (PSU)
The Company has established a PSU plan whereby it provides each plan participant an annual grant of PSUs in an amount determined by the board. Each PSU represents one phantom common share that entitles the participant to a payment of one Cameco common share purchased on the open market, or cash at the board's discretion, at the end of each three-year period if certain performance and vesting criteria have been met. The final value of the PSUs will be based on the value of Cameco common shares at the end of the three-year period and the number of PSUs that ultimately vest. Vesting of PSUs at the end of the three-year period will be based on total shareholder return over the three years, Cameco's ability to meet its annual cash flow from operations targets and whether the participating executive remains employed by Cameco at the end of the three-year vesting period.
Cameco records compensation expense with an offsetting credit to contributed surplus to reflect the estimated fair value of PSUs granted to employees. For the year ended December 31, 2011, the amount recorded was $4,392,000 (2010 - $3,679,000). As of December 31, 2011, the total PSUs held by the participants after adjusting for forfeitures on retirement was 310,413 (2010 - 395,360).
(c) Executive Restricted Share Unit (RSU)
In 2011, the Company established an RSU plan whereby it provides each plan participant an annual grant of RSUs in an amount determined by the board. Each RSU represents one phantom common share that entitles the participant to a payment of one Cameco common share purchased on the open market, or cash at the board's discretion. The final value of the RSUs will be based on the value of Cameco common shares at the end of the three year vesting period.
Cameco records compensation expense with an offsetting credit to contributed surplus to reflect the estimated fair value of RSUs granted to employees. For the year ended December 31, 2011, the amount recorded was $297,000 (2010 - nil). As of December 31, 2011, the total RSU's held by the participants was 70,000 (2010 – nil).
The Company has the following cash-settled plans:
(a) Deferred Share Unit (DSU)
Cameco offers a deferred share unit plan to non-employee directors. A DSU is a notional unit that reflects the market value of a single common share of Cameco. 60% of each director's annual retainer is paid in DSUs. In addition, on an annual basis, directors can elect to receive 25%, 50%, 75% or 100% of the remaining 40% of their annual retainer and any additional fees in the form of DSUs. If a director meets their ownership requirements, the director may elect to take 25%, 50%, 75% or 100% of their annual retainer and any fees in cash, with the balance, if any, to be paid in DSUs. Each DSU fully vests upon award. The DSUs will be redeemed for cash upon a director leaving the board. The redemption amount will be based upon the weighted average of the closing prices of the common shares of Cameco on the TSX for the last 20 trading days prior to the redemption date multiplied by the number of DSUs held by the director. As of December 31, 2011, the total DSUs held by participating directors was 380,851 (2010 – 354,276).
(b) Phantom Stock Option
Cameco makes annual grants of bonuses to eligible non-North American employees in the form of phantom stock options. Employees receive the equivalent value of shares in cash when exercised. Options granted under the phantom stock option plan have an award value equal to the closing price quoted on the TSX for the common shares of Cameco on the trading day prior to the date on which the option is granted. The options vest over three years and expire eight years from the date granted. As of December 31, 2011, the number of options held by participating employees was 249,227 (2010 - 242,051) with exercise prices ranging from $10.51 to $46.88 per share (2010 - $5.88 to $46.88) and a weighted average exercise price of $31.48 (2010 - $29.97).
The fair value of the units granted through the PSU plan was determined based on Monte Carlo simulation. The fair value of all other share-based payment plans was measured based on the Black-Scholes option-pricing model. Expected volatility is estimated by considering historic average share price volatility.
The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payment plans were as follows:
|Stock Option Plan||PSUs||RSUs|
|Number of options granted||1,630,069||146,450||70,000|
|Average strike price||$39.10||–||–|
|Risk–free interest rate||2.5%||2.2%||2.5%|
|Expected life of option||4.5 years||3 years||3 years|
|Weighted average grant date fair values||$12.57||$42.11||$25.44|
In addition to these inputs, other features of the PSU grant were incorporated into the measurement of fair value. The market condition based on total shareholder return was incorporated by utilizing a Monte Carlo simulation. The non-market criteria relating to realized selling prices, production targets and cost control have been incorporated into the valuation at grant date by reviewing prior history and corporate budgets.
The inputs used in the measurement of the fair values at measurement date of the cash-settled share-based payment plans were as follows:
|DSUs||Phantom Option Plan|
|Number of units outstanding||380,851||249,227|
|Average strike price||–||$31.53|
|Risk-free interest rate||1.1%||1.1%|
|Expected life of option||3.5 years||3.5 years|
|Weighted average measurement date fair values||$18.41||$2.17|
Cameco also has an employee share ownership plan which commenced in 2007, whereby both employee and Company contributions are used to purchase shares on the open market for employees. The Company's contributions are expensed during the year of contribution. Under the plan, employees have the opportunity to participate in the program to a maximum of 6% of eligible earnings each year with Cameco matching the first 3% of employee-paid shares by 50%. Cameco contributes $1,000 of shares annually to each employee that is enrolled in the plan. Shares purchased with Company contributions and with dividends paid on such shares, become unrestricted on January 1 of the second plan year following the date on which such shares were purchased. At December 31, 2011, there were 3,695 participants in the plan (2010 – 3,496). The total number of shares purchased in 2011 on behalf of participants, including the Company contribution, was 257,747 shares (2010 – 214,795). In 2011, the Company's contributions totaled $4,647,000 (2010 - $4,528,000).
Cameco has recognized the following expenses (recoveries) under these plans:
|Deferred share units||$(7,725)||$1,971|
|Phantom stock options||(2,608)||931|
|Employee share ownership plan||4,647||6,608|
At December 31, 2011, a liability of $7,479,000 (2010 - $17,581,000) was included in the statement of financial position to recognize accrued but unpaid expenses for these plans.