6. Stockholders’ Equity

Per Share Results

Basic and diluted per share results were based on the following:


	For the Three Months Ended				For the Six Months Ended
	May 31, 2018		May 31, 2017		May 31, 2018		May 31, 2017
Net income (loss)	$	331	$	4,727	$	(1,392)	$	3,788

Weighted average shares outstanding for computation of basic per share results		5,006,000		5,001,000		5,003,000		5,020,000
Incremental shares from assumed exercise of Griffin stock options (a)		57,000		22,000		—		23,000
Adjusted weighted average shares for computation of diluted per share results		5,063,000		5,023,000		5,003,000		5,043,000

(a)

Incremental shares from the assumed exercise of Griffin stock options are not included in periods where the inclusion of such shares would be anti-dilutive. The incremental shares from the assumed exercise of stock options for the 2018 six month period would have been 53,000.

Universal Shelf Filing/At-the-Market Equity Offering Program

On April 11, 2018, Griffin filed a universal shelf registration statement on Form S-3 (the “Universal Shelf”) with the SEC. Under the Universal Shelf, Griffin may offer and sell up to $50,000 of a variety of securities including common stock, preferred stock, warrants, depositary shares, debt securities, units or any combination of such securities during the three year period that commenced upon the Universal Shelf becoming effective on April 25, 2018. Under the Universal Shelf, Griffin may periodically offer one or more types of securities in amounts, at prices and on terms announced, if and when the securities are ever offered. On May 10, 2018, Griffin filed a prospectus supplement with the SEC under which it may issue and sell, from time to time, up to an aggregate of $30,000 of its common stock (“Common Stock”) under an “at-the-market” equity offering program (the “ATM Program”) through Robert W. Baird & Co. Incorporated (“Baird”), as sales agent. Under a sales agreement with Baird, Griffin will set the parameters for the sales of its Common Stock under the ATM Program, including the number of shares to be issued, the time period during which sales are requested to be made, limitations on the number of shares that may be sold in any one trading day and any minimum price below which sales of shares may not be made. Sales of Common Stock, if any, under the ATM Program would be made in offerings as defined in Rule 415 of the Securities Act of 1933, as amended. In addition, with the prior consent of Griffin, Baird may also sell shares in privately negotiated transactions. Griffin expects to use net proceeds, if any, from the ATM Program over time for acquisitions of target properties consistent with Griffin’s investment strategies, repayment of debt and general corporate purposes. If Griffin obtains additional capital by issuing equity, the interests of its existing stockholders will be diluted. If Griffin incurs additional indebtedness, that indebtedness may impose financial and other covenants that may significantly restrict Griffin’s operations. Griffin currently does not expect to issue Common Stock under the ATM Program or issue other securities under the Universal Shelf in the near term.

Griffin Stock Option Plan

Stock options are granted by Griffin under the Griffin Industrial Realty, Inc. 2009 Stock Option Plan (the “2009 Stock Option Plan”). Options granted under the 2009 Stock Option Plan may be either incentive stock options or non-qualified stock options issued at an exercise price not less than fair market value on the date approved by Griffin’s Compensation Committee. Vesting of all of Griffin's stock options is solely based upon service requirements and does not contain market or performance conditions.

Stock options issued expire ten years from the grant date. In accordance with the 2009 Stock Option Plan, stock options issued to non-employee directors upon their initial election to the board of directors are fully exercisable immediately upon the date of the option grant. Stock options issued to non-employee directors upon their re-election to the board of directors vest on the second anniversary from the date of grant. Stock options issued to employees vest in equal installments on the third, fourth and fifth anniversaries from the date of grant. None of the stock options outstanding at May 31, 2018 may be exercised as stock appreciation rights.

The following options were granted by Griffin under the 2009 Stock Option Plan to Griffin directors and employees:


	For the Six Months Ended
	May 31, 2018			May 31, 2017
		Fair Value per			Fair Value per
	Number of	Option at		Number of	Option at
	Shares	Grant Date		Shares	Grant Date
Non-employee directors	5,195	$	14.41	6,570	$	13.49
Employees	-	$	-	5,000	$	11.13
	5,195			11,570

The fair values of all options granted were estimated as of the grant date using the Black-Scholes option-pricing model. Assumptions used in determining the fair value of the stock options granted were as follows:


	For the Six Months Ended
	May 31, 2018		May 31, 2017
Expected volatility	30.5	%	32.7 to 39.6	%
Risk free interest rates	3.0	%	2.1 to 2.2	%
Expected option term (in years)	8.5		7.5 to 8.5
Annual dividend yield	1.1	%	0.8 to 0.9	%


Number of option holders at May 31, 2018		29

Compensation expense and related tax benefits for stock options were as follows:


	For the Three Months Ended				For the Six Months Ended
	May 31, 2018		May 31, 2017		May 31, 2018		May 31, 2017
Compensation expense	$	88	$	88	$	178	$	170

Related tax benefit	$	13	$	20	$	26	$	40

For all periods presented, the forfeiture rate for directors was 0%, the forfeiture rate for executives was 17.9% and the forfeiture rate for employees was 38.3%. The rates utilized were based on the historical activity of the grantees.

As of May 31, 2018, the unrecognized compensation expense related to nonvested stock options that will be recognized during future periods is as follows:


Balance of Fiscal 2018	$	181
Fiscal 2019	$	270
Fiscal 2020	$	128
Fiscal 2021	$	34

A summary of the activity under the 2009 Griffin Stock Option Plan is as follows:


	For the Six Months Ended
	May 31, 2018			May 31, 2017
			Weighted			Weighted
			Avg.			Avg.
	Number of		Exercise	Number of		Exercise
	Shares		Price	Shares		Price
Outstanding at beginning of period	333,762	$	29.22	324,546	$	29.23
Granted	5,195	$	38.48	11,570	$	30.59
Exercised	(36,823)	$	32.81	—	$	—
Forfeited	(20,279)	$	33.78	(2,104)	$	38.00
Outstanding at end of period	281,855	$	28.60	334,012	$	29.22


				Weighted Avg.
				Remaining
Range of Exercise Prices for	Outstanding at	Weighted Avg.		Contractual Life	Total Intrinsic
Vested and Nonvested Options	May 31, 2018	Exercise Price		(in years)	Value
$23.00 - $28.00	123,793	$	26.67	7.4	$	1,817
$28.00 - $32.00	124,248	$	29.08	3.6		1,524
$32.00 - $39.00	33,814	$	33.91	2.3		251
	281,855	$	28.60	5.1	$	3,592

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss), net of tax, is comprised of the following:


	For the Six Months Ended May 31, 2018
			Unrealized gain
	Unrealized gain on		on investment in
	cash flow hedges		Centaur Media		Total
Balance November 30, 2017	$	(284)	$	—	$	(284)
Other comprehensive income before reclassifications		1,956		—		1,956
Amounts reclassified		338		—		338
Adoption of ASU 2018-02 - reclassification to retained earnings		(36)		—		(36)
Net activity for other comprehensive income		2,258		—		2,258
Balance May 31, 2018	$	1,974	$	—	$	1,974


	For the Six Months Ended May 31, 2017
			Unrealized gain
	Unrealized loss on		on investment in
	cash flow hedges		Centaur Media		Total
Balance November 30, 2016	$	(1,062)	$	13	$	(1,049)
Other comprehensive loss before reclassifications		(625)		192		(433)
Amounts reclassified		427		—		427
Net activity for other comprehensive loss		(198)		192		(6)
Balance May 31, 2017	$	(1,260)	$	205	$	(1,055)

The components of other comprehensive income are as follows:


	For the Three Months Ended
	May 31, 2018						May 31, 2017
			Tax						Tax
			(Expense)		Net-of				(Expense)		Net-of
	Pre-Tax		Benefit		Tax		Pre-Tax		Benefit		Tax
Reclassification included in net income:
Loss on cash flow hedges (interest expense)	$	187	$	(41)	$	146	$	342	$	(124)	$	218

Increase (decrease) in fair value adjustments on Griffin’s cash flow hedges		9		(2)		7		(1,297)		468		(829)
Mark to market adjustment on Centaur Media for an increase in the foreign currency exchange rate		—		—		—		48		(16)		32
Mark to market adjustment on Centaur Media for an increase in fair value		—		—		—		52		(19)		33
Total change in other comprehensive income (loss)		9		(2)		7		(1,197)		433		(764)

Other comprehensive income (loss)	$	196	$	(43)	$	153	$	(855)	$	309	$	(546)


	For the Six Months Ended
	May 31, 2018						May 31, 2017
			Tax						Tax
			(Expense)		Net-of				(Expense)		Net-of
	Pre-Tax		Benefit		Tax		Pre-Tax		Benefit		Tax
Reclassification included in net (loss) income:
Loss on cash flow hedges (interest expense)	$	431	$	(93)	$	338	$	681	$	(254)	$	427

Increase (decrease) in fair value adjustments on Griffin’s cash flow hedges		2,511		(555)		1,956		(965)		340		(625)
Mark to market adjustment on Centaur Media for an increase in the foreign currency exchange rate		—		—		—		36		(12)		24
Mark to market adjustment on Centaur Media for an increase in fair value		—		—		—		259		(91)		168
Total change in other comprehensive income (loss)		2,511		(555)		1,956		(670)		237		(433)

Other comprehensive income (loss)	$	2,942	$	(648)	$	2,294	$	11	$	(17)	$	(6)

Stock Repurchases

In fiscal 2016, Griffin’s Board of Directors authorized a stock repurchase program whereby Griffin could repurchase up to $5,000 of its outstanding Common Stock over a twelve month period in privately negotiated transactions. The stock repurchase program expired on May 10, 2017. In fiscal 2017, prior to its expiration, Griffin repurchased 47,173 shares of its outstanding Common Stock for $1,474. Under this repurchase program, Griffin repurchased a total of 152,173 shares of its Common Stock for $4,828.

See Supplemental Cash Flow Information in Note 9 for information on Common Stock received in connection with the exercise of stock options.

Cash Dividend

Griffin did not declare a cash dividend in the 2018 or 2017 six month periods. During the 2018 first quarter, Griffin paid $2,000 for the cash dividend declared in the 2017 fourth quarter. During the 2017 first quarter, Griffin paid $1,514 for the cash dividend declared in the 2016 fourth quarter.