Stock-based Compensation Plans

3 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement, Noncash Expense [Abstract]

Share-based Payment Arrangement [Text Block]

Stock-based Compensation Plans

We have granted various forms of stock-based compensation, including stock options, restricted stock units, performance-based restricted stock units (“PRSUs”) and market-based restricted stock units (“MRSUs”) under our Amended and Restated 2006 Mueller Water Products, Inc. Stock Incentive Plan (the “2006 Stock Plan”).

A PRSU award consists of a number of units that may be paid out at the end of a multi-year award cycle consisting of a series of annual performance periods coinciding with our fiscal years. After we establish the financial performance targets related to PRSUs for a given performance period, typically during the first quarter of that fiscal year, we consider that portion of a PRSU award to be granted. Thus, each award consists of a grant in the year of award and grants in the designated following years. Settlements, in our common shares, will range from zero to two times the number of PRSUs granted, depending on our financial performance against the targets.

A MRSU award represents a target number of units that may be paid out at the end of a three year award cycle based on a calculation of the Company's relative total shareholder return (“TSR”) performance as compared with a selected peer group's total shareholder return. Settlements, in our common shares, will range from zero to two times the number of MRSUs granted, depending on our TSR performance versus the peer group.

The per-unit fair value of the MRSU award was $14.94, as determined using a Monte Carlo simulation with the following inputs:

	December 31, 2019
Dividend yield	1.87	%
Risk-free rate	1.53	%
Expected term (in years)	2.83

We awarded 196,284 stock-settled PRSUs and 147,213 MRSUs in the three months ended December 31, 2019 that are scheduled to settle in 3 years.

We issued 93,647 shares and 181,065 shares of common stock during the three months ended December 31, 2019 and 2018, respectively, to settle PRSUs that vested during the periods.

In addition to the PRSU activity, 132,303 restricted stock units vested during the three months ended December 31, 2019, respectively.

We have granted cash-settled Phantom Plan instruments under the Mueller Water Products, Inc. Phantom Plan (“Phantom Plan”). At December 31, 2019, the outstanding Phantom Plan instruments had a fair value of $11.98 per instrument and our liability for Phantom Plan instruments was $1.0 million.

We granted stock-based compensation awards under the 2006 Stock Plan, the Mueller Water Products, Inc. 2006 Employee Stock Purchase Plan, and the Phantom Plan during the three months ended December 31, 2019 as follows.

	Number granted	Weighted average grant date fair value per instrument		Total grant date fair value (in millions)
Restricted stock units	162,433	$	11.26	$	1.8
Employee stock purchase plan instruments	39,492	1.97		0.1
Phantom Plan awards	188,973	11.26		2.1
PRSUs: 2020 award	58,040	11.26		0.7
2019 award	102,203	11.26		1.2
2018 award	44,451	11.26		0.5
MRSUs	147,213	14.94		2.2
				$	8.6

Operating income included stock-based compensation expense of $1.9 million and $1.7 million during the three months ended December 31, 2019 and 2018, respectively. At December 31, 2019, there was approximately $11.8 million of unrecognized compensation expense related to stock-based compensation arrangements and there were 218,292 PRSUs that have been awarded for the 2021 and 2022 performance periods for which performance goals have not been set.

We excluded 108,976 and 165,467 of stock-based compensation instruments from the calculations of diluted earnings per share for the quarters ended December 31, 2019 and 2018, respectively, since their inclusion would have been antidilutive.