Stock-Based Compensation

9 Months Ended

Sep. 30, 2011

Stock-Based Compensation [Abstract]

Stock-Based Compensation

9. Stock-based Compensation

The Company has an Omnibus Incentive and Equity Plan (the "Plan") under which officers, employees, directors and consultants may be granted equity-based awards, including restricted stock units ("RSUs"), stock options and unrestricted shares of common stock. At September 30, 2011, 1,800,000 shares of common stock were authorized for issuance under the Plan, of which 637,234 remain available for issuance. Each RSU entitles the holder to one share of Virtus common stock when the restriction expires. RSUs generally have a term of two to three years and may be time-vested, performance-contingent or have a combination of both time and performance vesting features. Stock options generally vest over three years and have a contractual life of ten years. Stock options are granted with an exercise price equal to the fair market value of the shares at the date of grant.

Board of Director Grants

During the nine months ended September 30, 2011 and 2010, 6,988 shares and 16,719 shares, respectively, of common stock were granted to those non-employee members of the Company's Board of Directors who receive compensation for his or her Board services as part of their annual retainer. The Company recognized $0.4 million and $0.4 million in stock-based compensation expense for the nine months ended September 30, 2011 and 2010 in connection with these grants.

Restricted Stock Units

RSU activity for the nine months ended September 30, 2011 is summarized as follows:

	Number of shares			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2010		460,633		$	13.39
Granted		163,941		$	52.43
Forfeited		(7,996	)	$	36.75
Settled		(42,736	)	$	22.26
Outstanding at September 30, 2011		573,842		$	23.41

Stock Options

Stock option activity for the nine months ended September 30, 2011 is summarized as follows:

	Number of shares			Weighted Average Exercise Price
Outstanding at December 31, 2010		386,190		$	20.83
Granted		10,454		$	55.30
Exercised		(16,646	)	$	40.25
Forfeited		(5,120	)	$	12.21
Outstanding at September 30, 2011		374,878		$	21.05
Vested and exercisable at September 30, 2011		136,452		$	36.14
Options expected to vest at September 30, 2011		226,505		$	12.41

The weighted-average fair value of options granted during the nine months ended September 30, 2011 estimated as of the grant date using the Black-Scholes option valuation model was $27.56 per common share. At September 30, 2011, outstanding stock options have an intrinsic value of $12.2 million.

The fair value of stock options granted under the Company's stock plan was estimated on the grant date using the Black-Scholes option valuation model with the following assumptions:

	2011			2010
Expected dividend yield		0.0	%		0.0	%
Expected volatility		47.2	%		53.6	%
Risk-free interest rate		2.5	%		3.0	%
Expected life		6.5 years			6.5 years

The Company estimates volatility based on the historical volatility of a peer group of publicly traded companies, which includes companies that are in the asset management industry, including competitors, because of the Company's limited history as an independent public company. The Company determines the expected life using the "simplified method" as allowed under generally accepted accounting principles.

During the three months ended September 30, 2011 and 2010, the Company recognized $1.5 million and $1.0 million, respectively, in total stock-based compensation expense. During the nine months ended September 30, 2011 and 2010, the Company recognized $4.0 million and $3.0 million, respectively, in total stock-based compensation expense. As of September 30, 2011, unamortized stock-based compensation expense for unvested RSUs and stock options was $7.8 million and $0.6 million, respectively, with weighted average remaining amortization periods of 1.1 years and 0.7 years, respectively.

The Company granted 73,310 performance contingent RSUs during the nine months ended September 30, 2011. During the three months ended September 30, 2011 and 2010, total stock-based compensation expense includes $0.4 million and $0.2 million, respectively, for performance-based awards as part of annual and long-term incentive compensation plans. During the nine months ended September 30, 2011 and 2010, total stock-based compensation expense includes $0.7 million and $0.3 million, respectively, for performance-based awards as part of annual and long-term incentive compensation plans.