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Stock-based Compensation Plans | 6 Months Ended
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Mar. 31, 2022
Share-based Payment Arrangement, Noncash Expense [Abstract] |
Share-based Payment Arrangement [Text Block] | Stock-based Compensation Plans We grant various forms of stock-based compensation, including market-based restricted stock units (“MRSUs”), restricted stock units, stock options and performance-based restricted stock units (“PRSUs”) under our Amended and Restated 2006 Mueller Water Products, Inc. Stock Incentive Plan (the “2006 Stock Plan”), Phantom Plan instruments under our Mueller Water Products, Inc. 2012 Phantom Plan, and Employee stock purchase plan instruments under our 2006 Employee Stock Purchase Plan. Grants issued during the six months ended March 31, 2022 are as follows:
| Number granted |  | Weighted average grant date fair value per instrument |  | Total grant date fair value (in millions)
Quarter ended December 31, 2021 |  |  |  |  |
MRSUs | 230,089 |  |  | $ | 15.76 |  |  | $ | 3.6 |
Phantom Plan instruments | 199,549 |  |  | 13.64 |  |  | 2.7 |
Restricted stock units | 135,129 |  |  | 13.64 |  |  | 1.8 |
Non-qualified stock options | 457,482 |  |  | 3.43 |  |  | 1.6 |
PRSUs: 2020 award | 57,627 |  |  | 13.81 |  |  | 0.8 |
Employee stock purchase plan instruments | 38,069 |  |  | 3.01 |  |  | 0.1 |
Quarter ended March 31, 2022 |  |  |  |  |
Restricted stock units | 88,250 |  |  | 13.03 |  |  | 1.1 |
Employee stock purchase plan instruments | 38,512 |  |  | 3.39 |  |  | 0.1 |
|  |  |  |  | $ | 11.8 |
An 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 our relative total shareholder return (“TSR”) performance as compared with the TSR of a selected peer group. Settlements, in our common shares, will range from zero to two times the number of MRSUs granted, depending on our TSR performance relative to that of the peer group. Compensation expense attributed to MRSUs is based on the fair value of the awards on their respective grant dates, as determined using a Monte Carlo model. The assumptions used to determine the grant date fair value are indicated below.
|  | November 30, 2021
Variables used in determining grant date fair value: |  |
Dividend yield |  | 1.70 | %
Risk-free rate |  | 0.76 | %
Expected term (in years) |  | 2.83
The expected dividend yield is based on our estimated annual dividend and our stock price history at the grant date. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield in effect at the grant date with a term equal to the expected term. The expected term represents the average period of time the units are expected to be outstanding. At March 31, 2022, the outstanding Phantom Plan instruments had a fair value of $12.92 per instrument and our liability for Phantom Plan instruments was $2.1 million and is included within Other current and Other noncurrent liabilities. Stock options generally vest ratably over three years on each anniversary date. Compensation expense attributed to stock options is based on the fair value of the awards on their respective grant dates, using a Black-Scholes model. The assumptions used to determine the grant date fair value are indicated below.
| November 30, 2021
Dividend yield | 1.62 | %
Risk-free rate | 1.33 | %
Expected term (in years) | 6.00
The expected dividend yield is based on our estimated annual dividend and our stock price history at the grant date. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield in effect at the grant date with a term equal to the expected term. The expected term represents the average period of time the options are expected to be outstanding. A PRSU award consists of a number of units that may be paid out at the end of a three-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 two following years. Settlements, in our common shares, will range from zero to two times the number of PRSUs granted, depending on our financial performance relative to the targets. We did not issue any shares of common stock to settle PRSUs vested during the three months ended March 31, 2022; however, we issued 240,412 shares of common stock to settle PRSUs vested during the six months ended March 31, 2022. Additionally, we issued 104,380 and 235,095 shares of common stock to settle restricted stock units vested during the three and six months ended March 31, 2022, respectively. Finally, we issued no shares of common stock to settle stock options exercised during the three months ended March 31, 2022; however, we issued 24,153 shares of common stock to settle stock options exercised during the six months ended March 31, 2022. Operating income included stock-based compensation expense of $2.5 million in each of the three months ended March 31, 2022 and 2021. Operating income included stock-based compensation expense of $5.1 million and $5.0 million during the six months ended March 31, 2022 and 2021, respectively. At March 31, 2022, there was approximately $13.3 million of unrecognized compensation expense related to stock-based compensation arrangements and there were 58,139 PRSUs that have been awarded for the 2022 performance period for which performance goal achievement cannot yet be determined. We excluded 944,631 and 664,082 stock-based compensation instruments from the calculations of diluted earnings per share in the three months ended March 31, 2022 and 2021, respectively, and 563,299 and 447,086 for the six months ended March 31, 2022 and 2021, respectively, since their inclusion would have been antidilutive.

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