Compensation Plans

6 Months Ended

May 31, 2019

Share-based Compensation [Abstract]

Compensation Plans

Compensation Plans

Restricted Stock and Restricted Stock Units. Restricted stock and restricted stock units ("RSUs") may be granted to new employees as "sign-on" awards, to existing employees as "retention" awards and to certain executive officers as awards for multiple years. Sign-on and retention awards are generally subject to annual ratable vesting over a four year service period and are amortized as compensation expense on a straight-line basis over the related four years. Restricted stock and RSUs are granted to certain senior executives with market, performance and service conditions. Market conditions are incorporated into the grant-date fair value of senior executive awards using a Monte Carlo valuation model. Compensation expense for awards with market conditions is recognized over the service period and is not reversed if the market condition is not met. Awards with performance conditions are amortized over the service period if it is determined that it is probable that the performance condition will be achieved.

Stock-Based Compensation Expense. Compensation and benefits expense included $13.1 million and $12.8 million for the three months ended May 31, 2019 and June 30, 2018, respectively, and $24.9 million and $25.2 million for the six months ended May 31, 2019 and June 30, 2018, respectively, for share-based compensation expense relating to grants made under our share-based compensation plans. Total compensation cost includes the amortization of sign-on, retention and senior executive awards, less forfeitures and clawbacks. The total tax benefit recognized in results of operations related to share-based compensation expenses was $3.4 million and $3.1 million for the three months ended May 31, 2019 and June 30, 2018, respectively, and $6.3 million and $6.0 million for the six months ended May 31, 2019 and June 30, 2018, respectively. At May 31, 2019, total unrecognized compensation cost related to nonvested share-based compensation plans was $99.4 million; this cost is expected to be recognized over a weighted average period of three years.

At May 31, 2019, there were 1,883,000 shares of restricted stock outstanding with future service required, 6,010,000 RSUs outstanding with future service required (including target RSUs issuable under the senior executive compensation plan), 14,565,000 RSUs outstanding with no future service required and 909,000 shares issuable under other plans. The maximum potential increase to common shares outstanding resulting from these outstanding awards is 21,484,000.

Restricted Cash Awards. Jefferies Group provides compensation to certain new and existing employees in the form of loans and/or other cash awards which are subject to ratable vesting terms with service requirements. These awards are amortized to compensation expense over the relevant service period, which is generally considered to start at the beginning of the annual compensation year. At May 31, 2019, the remaining unamortized amount of the restricted cash awards was $550.9 million and is included within Other assets in the Consolidated Statement of Financial Condition; this cost is expected to be recognized over a weighted average period of three years.