Share-Based Compensation

During the first nine months of 2018, we granted share-based compensation in the form of market share units, or MSUs, performance shares, and restricted stock units, or RSUs, to eligible participants under our 2016 Long-Term Incentive Plan. We recognize expense on all share-based grants over the service period, which is the shorter of the period until the employees’ retirement eligibility dates and the service period of the award for awards expected to vest. We record forfeitures as they occur. Awards granted during the first nine months of 2018, weighted average fair value, and assumptions used to determine fair value were as follows:



	MSUs			Performance Shares			RSUs ^(e)
Awards granted	428,574			103,819			44,000
Weighted average fair value ^(a)	$	34.22		$	34.21		$	36.92
Expected volatility ^(b)	32.62		%	32.61		%	N/A
Risk-free rate ^(c)	2.37		%	2.37		%	N/A
Expected term (in years) ^(d)	2.95			2.95			N/A
Expected dividends	—			—			N/A


(a)	Fair value of MSUs and performance shares is estimated on the date of grant using the Monte Carlo simulation utilizing the assumptions outlined above. Fair value of RSUs is equal to the closing price of our common stock on the date of grant.


(b)	The expected volatility rate is based on stock price history immediately prior to grant for a period commensurate with the expected term.


(c)	The risk-free rate is based on zero coupon U.S. government issues at the time of grant.


(d)	The expected term represents the period from the valuation date to the end of the performance period.


(e)	We granted 3,812 dividend equivalents on unvested RSU awards on October 2, 2018 following the adoption of the Merger Agreement by our stockholders on September 26, 2018 and the payment of the conditional special dividend. See Note 15, Merger Agreement. The dividend equivalents are subject to the same terms and conditions as the RSUs to which they are credited.

Terms of the awards granted during the first nine months of 2018 were as follows:



	MSUs	Performance Shares	RSUs
Maximum shares/units earned	Varies from 0% to 150% of the number of MSUs awarded depending on the actual performance of our stock price	Varies from 0% to 200% of the number of performance shares awarded depending on the performance of our total stockholder return relative to the performance of the Dow Jones U.S. Construction and Materials Index ^(a)	100%
Vesting Provisions	Three-year performance period	Three-year performance period	Specified number of years from the grant date
Vesting in the case of termination of employment due to death, disability, retirement or change in control during performance period ^(b)	Pro-rated based on the number of full months employed in 2018 with awards issued at the end of the three-year period	Pro-rated based on the number of full months employed during the performance period with awards issued at the end of the three-year period	Varies
Settlement	Settled in common stock at the end of the performance or vesting period


(a)	Adjustments to the performance of the Dow Jones U.S. Construction and Materials Index may be made to reflect changes in the companies included in the index during the performance period.


(b)	Early vesting for MSUs, performance shares and RSUs in situations where there is a change in control also requires a related loss of employment or diminution of duties in certain circumstances.

OTHER

MSUs, performance shares, RSUs, and stock options that were not included in the computation of diluted earnings per share for those periods because their inclusion would be anti-dilutive were as follows:



	Three months ended September 30,		Nine months ended September 30,
(millions)	2018	2017	2018	2017
MSUs, performance shares, RSUs and stock options	—	0.6	—	0.8