Share-Based Compensation

3 Months Ended

Mar. 31, 2013

Share-Based Compensation [Abstract]

Share-Based Compensation

Note 21.  Share-Based Compensation

Compensation and benefits expense included $1.8 million and $3.9 million for the three month periods ended March 31, 2013 and 2012, respectively, for share-based compensation expense principally relating to our senior executive warrant plan and grants previously made under our fixed stock option plan.  

As mentioned above, each restricted share of Jefferies common stock and each restricted stock unit of Jefferies common stock was converted at the Exchange Ratio into an award of restricted shares or restricted stock units of Leucadia, with all such awards subject to the same terms and conditions, including, without limitation, vesting and, in the case of performance-based restricted stock units, performance being measured at existing targets. Jefferies historically sponsored the following share-based compensation plans: incentive compensation plan, director plan and the deferred compensation plan. In connection with the Jefferies acquisition, these plans now allow for awards to be issued in our common shares.

As of March 31, 2013, we had $280.2 million of unrecognized compensation cost related to nonvested share-based awards, which is expected to be recognized over a remaining weighted average required service or vesting period of approximately 2.8 years.

Incentive Compensation Plan.Jefferies Incentive Compensation Plan ("Incentive Plan") allows awards in the form of incentive stock options (within the meaning of Section 422 of the Internal Revenue Code), nonqualified stock options, stock appreciation rights, restricted stock, unrestricted stock, performance awards, RSUs, dividend equivalents or other share-based awards.

The Incentive Plan allows for grants of restricted stock awards, whereby employees are granted restricted shares of common stock subject to forfeiture. The Incentive Plan also allows for grants of restricted stock units. RSUs give a participant the right to receive fully vested shares at the end of a specified deferral period allowing a participant to hold an interest tied to common stock on a tax deferred basis. Prior to settlement, RSUs carry no voting or dividend rights associated with the stock ownership, but dividend equivalents are accrued to the extent there are dividends declared on our common stock.

Jefferies may grant restricted stock and RSUs 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 upon a four year service requirement 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 both performance and service conditions. These awards granted to senior executives will be amortized over the service period if we have determined it is probable that the performance condition will be achieved.

At March 31, 2013, there were 6,723,998 shares of restricted stock outstanding, 4,983,415 restricted stock units outstanding with future service required, 9,557,611 restricted stock units outstanding with no future service requirements and 1,122,429 shares issuable under other Jefferies plans. The maximum potential increase to common shares outstanding resulting from these outstanding awards is 15,663,455.

At March 31, 2013, there were 2,616,933 stock options outstanding with a weighted-average exercise price of $25.70 per share, of which 982,286 were exercisable (weighted-average exercise price of $27.42 per share). In addition, there were 4,000,000 warrants outstanding, of which 2,400,000 were currently exercisable, all at an exercise price of $33.33 per warrant.

Restricted Cash Awards.  Jefferies provides compensation to new and existing employees in the form of loans and/or other cash awards which are subject to ratable vesting terms with service requirements ranging from one to ten years, with an approximate average term of two years. These awards are amortized to compensation expense over the relevant service period. At March 31, 2013, the remaining unamortized amount of these awards was $271.8 million and is included within Other assets on the Consolidated Statements of Financial Condition.