Stock-based Compensation Plans

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

A PRSU award represents a target 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 determine 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. Settlement will range from zero to two times the number of PRSUs granted, depending on our financial performance against the targets. As determined at the date of award, PRSUs may settle in cash-value equivalent of, or directly in, shares of our common stock.

We awarded 171,288 stock-settled PRSUs in the nine months ended June 30, 2018 scheduled to settle in three years.

We issued 146,061 shares and 263,410 shares of common stock during the nine months ended June 30, 2018 and 2017, respectively, to settle PRSUs.

In addition to the PRSU activity, 3,333 and 342,038 restricted stock units vested during the three and nine months ended June 30, 2018, respectively.

We have granted cash-settled Phantom Plan instruments under the Mueller Water Products, Inc. Phantom Plan (“Phantom Plan”). At June 30, 2018, the outstanding Phantom Plan instruments had a fair value of $11.72 per instrument and our liability for Phantom Plan instruments was $1.7 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 nine months ended June 30, 2018 as follows.



	Number granted	Weighted average grant date fair value per instrument		Total grant date fair value (in millions)
Quarter ended December 31, 2017:
Restricted stock units	171,288	$	12.41	$	2.1
Employee stock purchase plan instruments	35,099	2.28		0.1
Phantom Plan awards	160,672	12.41		2.0
PRSUs: 2018 award	57,092	12.41		0.7
2017 award	71,070	12.41		0.9
2016 award	71,072	12.41		0.9
Quarter ended March 31, 2018:
Restricted stock units	63,389	11.67		0.7
Employee stock purchase plan instruments	32,702	2.49		0.1
Phantom Plan awards	2,527	10.95		—
Quarter ended June 30, 2018:
Employee stock purchase plan instruments	37,939	2.16		0.1
				$	7.6

Income from continuing operations included stock-based compensation expense of $1.2 million and $0.4 million during the three months ended June 30, 2018 and 2017, respectively, and $5.3 million and $5.1 million during the nine months ended June 30, 2018 and 2017, respectively. At June 30, 2018, there was approximately $6.6 million of unrecognized compensation expense related to stock-based compensation arrangements, and 178,105 PRSUs that have been awarded for the 2019 and 2020 performance periods, for which performance goals have not been set.

We excluded 213,599 and 165,186 of stock-based compensation instruments from the calculations of diluted earnings per share for the quarters ended June 30, 2018 and 2017, respectively, and 245,033 and 208,868 for the nine months ended June 30, 2018 and 2017, respectively, since their inclusion would have been antidilutive.