6. Stockholders’ Equity

Per Share Results

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


	For the Three Months Ended				For the Nine Months Ended
	Aug. 31, 2019		Aug. 31, 2018		Aug. 31, 2019		Aug. 31, 2018
Net income (loss)	$	1,017	$	(122)	$	6,250	$	(1,514)

Weighted average shares outstanding for computation of basic per share results		5,073,000		5,031,000		5,068,000		5,013,000
Incremental shares from assumed exercise of Griffin stock options (a)		40,000		—		34,000		—
Adjusted weighted average shares for computation of diluted per share results		5,113,000		5,031,000		5,102,000		5,013,000

(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 third quarter and 2018 nine month period would have been 76,000 and 60,000, respectively.

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 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 (as amended, 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 August 31, 2019 may be exercised as stock appreciation rights.

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


	For the Nine Months Ended
	Aug. 31, 2019			Aug. 31, 2018
		Fair Value per			Fair Value per
	Number of	Option at		Number of	Option at
	Shares	Grant Date		Shares	Grant Date
Non-employee directors	5,946	$	12.87	5,195	$	14.41

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 Nine Months Ended
	Aug. 31, 2019		Aug. 31, 2018
Expected volatility	30.9	%	30.5	%
Risk free interest rates	2.3	%	3.0	%
Expected option term (in years)	8.5		8.5
Annual dividend yield	1.2	%	1.1	%


Number of option holders at August 31, 2019		26

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


	For the Three Months Ended				For the Nine Months Ended
	Aug. 31, 2019		Aug. 31, 2018		Aug. 31, 2019		Aug. 31, 2018
Compensation expense	$	21	$	83	$	205	$	261

Related tax benefit	$	9	$	14	$	35	$	40

For all periods presented, the forfeiture rate for directors ranged from 0% to 2%, 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 August 31, 2019, the unrecognized compensation expense related to nonvested stock options that will be recognized during future periods is as follows:


Balance of Fiscal 2019	$	57
Fiscal 2020	$	149
Fiscal 2021	$	39

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


	For the Nine Months Ended
	August 31, 2019			August 31, 2018
	Number of		Weighted Avg.	Number of		Weighted Avg.
	Shares		Exercise Price	Shares		Exercise Price
Outstanding at beginning of period	224,001	$	28.20	333,762	$	29.22
Granted	5,946	$	36.99	5,195	$	38.48
Exercised	(29,838)	$	28.71	(74,554)	$	31.97
Forfeited	(7,788)	$	32.62	(20,279)	$	33.78
Outstanding at end of period	192,321	$	28.21	244,124	$	28.20


				Weighted Avg.
				Remaining
Range of Exercise Prices for	Outstanding at	Weighted Avg.		Contractual Life	Total Intrinsic
Vested and Nonvested Options	August 31, 2019	Exercise Price		(in years)	Value
$23.00 - $28.00	115,137	$	26.76	6.5	$	1,063
$28.00 - $32.00	65,212	$	29.21	2.8		442
$32.00 - $39.00	11,972	$	36.74	8.3		7
	192,321	$	28.21	5.3	$	1,512

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss), net of tax, comprised of unrealized gains on cash flow hedges is as follows:


	For the Nine Months Ended
	Aug. 31, 2019		Aug. 31, 2018
Balance at beginning of period	$	2,395	$	(284)
Other comprehensive (loss) income before reclassifications		(6,899)		2,088
Amounts reclassified		74		435
Adoption of ASU No. 2018-02 - reclassification of deferred taxes to retained earnings		—		(36)
Net activity for other comprehensive (loss) income		(6,825)		2,487
Balance at end of period	$	(4,430)	$	2,203

Changes in accumulated other comprehensive income (loss) are as follows:


	For the Three Months Ended
	August 31, 2019						August 31, 2018
			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)	$	8	$	(2)	$	6	$	126	$	(29)	$	97

Change in other comprehensive (loss) income:
(Decrease) increase in fair value adjustments on Griffin’s cash flow hedges		(3,443)		798		(2,645)		168		(36)		132

Other comprehensive (loss) income	$	(3,435)	$	796	$	(2,639)	$	294	$	(65)	$	229


	For the Nine Months Ended
	August 31, 2019						August 31, 2018
			Tax						Tax
			(Expense)		Net-of				(Expense)		Net-of
	Pre-Tax		Benefit		Tax		Pre-Tax		Benefit		Tax
Reclassification included in net income (loss):
Loss on cash flow hedges (interest expense)	$	96	$	(22)	$	74	$	557	$	(122)	$	435

Change in other comprehensive (loss) income:
(Decrease) increase in fair value adjustments on Griffin’s cash flow hedges		(8,896)		1,997		(6,899)		2,679		(591)		2,088

Other comprehensive (loss) income	$	(8,800)	$	1,975	$	(6,825)	$	3,236	$	(713)	$	2,523

Cash Dividend

Griffin did not declare a cash dividend in either the 2019 nine month period or the 2018 nine month period. During the 2019 nine month period, Griffin paid $2,279 for the cash dividend declared in the 2018 fourth quarter. During the 2018 nine month period, Griffin paid $2,000 for the cash dividend declared in the 2017 fourth quarter.