SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the 13 Weeks Ended Commission File No.
MAY 27, 2000 0-29288
GRIFFIN LAND & NURSERIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-0868496
(state or other jurisdiction of incorporation (IRS Employer
or organization) Identification Number)
ONE ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE (212) 218-7910
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No |_|
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AT JUNE 30, 2000: 4,862,704
GRIFFIN LAND & NURSERIES, INC.
FORM 10Q
PART I FINANCIAL INFORMATION PAGE
CONSOLIDATED STATEMENT OF OPERATIONS
13 AND 26 WEEKS ENDED MAY 27, 2000 AND MAY 29, 1999 3
CONSOLIDATED BALANCE SHEET
MAY 27, 2000 AND NOVEMBER 27, 1999 4
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
26 WEEKS ENDED MAY 27, 2000 AND MAY 29, 1999 5
CONSOLIDATED STATEMENT OF CASH FLOWS
26 WEEKS ENDED MAY 27, 2000 AND MAY 29, 1999 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12-15
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 15
PART II OTHER INFORMATION 16
SIGNATURES 17
PART I
ITEM 1. FINANCIAL STATEMENTS
GRIFFIN LAND & NURSERIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands, except per share data)
FOR THE 13 WEEKS ENDED, FOR THE 26 WEEKS ENDED,
------------------------- -----------------------
MAY 29, MAY 29,
1999 1999
MAY 27, (As Restated) MAY 27, (As Restated)
2000 (Note 7) 2000 (Note 7)
-------- ------------- ------- ------------
Net sales and other revenue $31,877 $27,293 $37,339 $32,458
Cost and expenses:
Cost of goods sold 22,443 18,977 26,106 22,545
Selling, general and administrative expenses 4,785 4,297 8,959 8,001
-------- ------------ ------- -------
Operating profit 4,649 4,019 2,274 1,912
Interest expense 358 145 570 182
Interest income 3 - 24 25
-------- ------------ ------- -------
Income before income tax provision 4,294 3,874 1,728 1,755
Income tax provision 1,717 1,486 691 702
-------- ------------ ------- -------
Income before equity investment 2,577 2,388 1,037 1,053
Income from equity investment 640 491 476 278
-------- ------------ ------- -------
Net income $ 3,217 $ 2,879 $ 1,513 $ 1,331
======== ============ ======= =======
Basic net income per common share $ 0.66 $ 0.59 $ 0.31 $ 0.27
======== ============ ======= =======
Diluted net income per common share $ 0.65 $ 0.58 $ 0.30 $ 0.26
======== ============ ======= =======
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
PAGE 3
GRIFFIN LAND & NURSERIES, INC.
CONSOLIDATED BALANCE SHEET
(dollars in thousands, except per share data)
NOV. 27,
ASSETS 1999
MAY 27, (As Restated)
2000 (Note 7)
-------- -------------
CURRENT ASSETS
Cash and cash equivalents $ 2,233 $ 2,003
Accounts receivable, less allowance of $674 and $564 16,162 5,966
Inventories 32,876 29,196
Deferred income taxes 2,566 2,566
Other current assets 1,824 2,338
-------- --------
TOTAL CURRENT ASSETS 55,661 42,069
Real estate held for sale or lease, net 34,596 33,766
Investment in Centaur Communications, Ltd. 17,194 16,532
Property and equipment, net 15,576 14,359
Other assets 6,203 6,159
-------- --------
TOTAL ASSETS $129,230 $112,885
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 8,972 $ 5,412
Long-term debt due within one year 353 320
-------- --------
TOTAL CURRENT LIABILITIES 9,325 5,732
Long-term debt 19,060 8,860
Deferred income taxes 2,092 1,401
Other noncurrent liabilities 3,784 3,622
-------- --------
TOTAL LIABILITIES 34,261 19,615
-------- --------
Commitments and contingencies -- --
Common stock, par value $0.01 per share, 10,000,000 shares
authorized, 4,862,704 shares issued and outstanding 49 49
Additional paid in capital 93,584 93,584
Retained earnings (deficit) 1,150 (363)
Accumulated other comprehensive income 186 --
-------- --------
Total stockholders' equity 94,969 93,270
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $129,230 $112,885
======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
PAGE 4
GRIFFIN LAND & NURSERIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
RETAINED
EARNINGS ACCUMULATED
SHARES OF ADDITIONAL (DEFICIT) OTHER TOTAL
COMMON COMMON PAID-IN (As Restated) COMPREHENSIVE (As Restated)
STOCK STOCK CAPITAL (Note 7) INCOME (Note 7)
--------- --------- --------- ------------- ------------- -------------
Balance at November 28, 1998 4,842,704 $ 48 $ 93,491 $ (2,539) $ -- $ 91,000
Net income -- -- -- 1,331 -- 1,331
--------- --------- --------- --------- --------- ---------
Balance at May 29, 1999 4,842,704 $ 48 $ 93,491 $ (1,208) $ -- $ 92,331
========= ========= ========= ========= ========= =========
Balance at November 27, 1999 4,862,704 $ 49 $ 93,584 $ (363) $ -- $ 93,270
Net income -- -- -- 1,513 -- 1,513
Comprehensive income -- -- -- -- 186 186
--------- --------- --------- --------- --------- ---------
Balance at May 27, 2000 4,862,704 $ 49 $ 93,584 $ 1,150 $ 186 $ 94,969
========= ========= ========= ========= ========= =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
PAGE 5
GRIFFIN LAND & NURSERIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
FOR THE 26 WEEKS ENDED,
---------------------------
MAY 29,
OPERATING ACTIVITIES: 1999
MAY 27, (As Restated)
2000 (Note 7)
-------- -------------
Net income $ 1,513 $ 1,331
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 1,224 1,106
Income from equity investment (476) (278)
Deferred income taxes 691 702
Changes in assets and liabilities:
Accounts receivable (10,306) (9,008)
Inventories (3,680) (1,948)
Other current assets 514 597
Income tax refund received -- 926
Accounts payable and accrued liabilities 3,560 (51)
Other, net 644 11
-------- --------
Net cash used in operating activities (6,316) (6,612)
-------- --------
INVESTING ACTIVITIES:
Additions to property and equipment (1,799) (1,533)
Additions to real estate held for sale or lease (1,558) (2,105)
Other, net -- (377)
-------- --------
Net cash used in investing activities (3,357) (4,015)
-------- --------
FINANCING ACTIVITIES:
Increase in debt 10,075 8,900
Payments of debt (172) (174)
-------- --------
Net cash provided by financing activities 9,903 8,726
-------- --------
Net increase (decrease) in cash and cash equivalents 230 (1,901)
Cash and cash equivalents at beginning of period 2,003 2,059
-------- --------
Cash and cash equivalents at end of period $ 2,233 $ 158
======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
PAGE 6
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
1. BASIS OF PRESENTATION
The unaudited consolidated financial statements of Griffin Land &
Nurseries, Inc. ("Griffin") have been prepared in conformity with the
standards of accounting measurement set forth in Accounting Principles Board
Opinion No. 28 and any amendments thereto adopted by the Financial Accounting
Standards Board ("FASB"). Also, the accompanying financial statements have
been prepared in accordance with the accounting policies stated in Griffin's
audited 1999 Financial Statements included in the Report on Form 10-K as
filed with the Securities and Exchange Commission on February 25, 2000, and
should be read in conjunction with the Notes to Financial Statements
appearing in that report. The consolidated financial statements of Griffin
for periods prior to the thirteen weeks ended May 27, 2000 have been restated
to adjust the amounts previously reported for income from equity investment
(see Note 7). All adjustments, comprising only normal recurring adjustments,
which are, in the opinion of management, necessary for a fair presentation of
results for the interim periods have been reflected.
The results of operations for the thirteen and twenty-six weeks ended May
27, 2000, are not necessarily indicative of the results to be expected for the
full year.
2. INDUSTRY SEGMENT INFORMATION
Griffin's reportable segments are defined by their products and services,
and are comprised of the landscape nursery and real estate segments. Griffin has
no operations outside the United States. Griffin's export sales and transactions
between segments are not material.
FOR THE 13 WEEKS ENDED, FOR THE 26 WEEKS ENDED,
----------------------- -----------------------
MAY 27, MAY 29, MAY 27, MAY 29,
NET SALES AND OTHER REVENUE 2000 1999 2000 1999
-------- -------- -------- --------
Landscape nursery $ 30,533 $ 26,291 $ 34,663 $ 30,517
Real estate 1,344 1,002 2,676 1,941
-------- -------- -------- --------
$ 31,877 $ 27,293 $ 37,339 $ 32,458
======== ======== ======== ========
OPERATING PROFIT
Landscape nursery $ 5,038 $ 4,341 $ 2,940 $ 2,623
Real estate 11 56 140 10
-------- -------- -------- --------
Industry segment totals 5,049 4,397 3,080 2,633
General corporate expense 400 378 806 721
Interest expense, net 355 145 546 157
-------- -------- -------- --------
Income before income tax provision $ 4,294 $ 3,874 $ 1,728 $ 1,755
======== ======== ======== ========
MAY 27, NOV. 27,
IDENTIFIABLE ASSETS 2000 1999
-------- --------
Landscape nursery $ 67,628 $ 52,564
Real estate 39,116 38,248
-------- --------
Industry segment totals 106,744 90,812
General corporate 22,486 22,073
-------- --------
$129,230 $112,885
======== ========
See Note 3 for information on Griffin's equity investment in Centaur
Communications, Ltd.
PAGE 7
3. EQUITY INVESTMENT
Griffin accounts for its approximately 35% ownership of the outstanding
common stock of Centaur Communications, Ltd. ("Centaur") under the equity
method of accounting for investments. The summarized financial data of
Centaur shown below was derived from Centaur's financial statements which are
prepared in accordance with generally accepted accounting principles in the
United Kingdom. Griffin's equity income from Centaur, including the
restatement referred to in Note 7, reflects adjustments necessary to present
Centaur's results in accordance with generally accepted accounting principles
in the United States.
SIX MONTHS ENDED,
----------------------------
MAY 29,
1999
MAY 27, (As Restated)
2000 (Note 7)
------- -------
Net sales $52,852 $41,540
Costs and expenses 48,109 38,001
------- -------
Operating profit 4,743 3,539
Nonoperating expense, principally interest 1,759 1,051
------- -------
Income before taxes 2,984 2,488
Income tax provision 835 860
------- -------
Net income $ 2,149 $ 1,628
======= =======
NOV. 27,
1999
MAY 27, (As Restated)
2000 (Note 7)
------- --------
Current assets $35,912 $35,957
Intangible assets 22,400 25,002
Other assets 10,539 11,018
------- -------
Total assets $68,851 $71,977
======= =======
Current liabilities $31,764 $31,273
Debt 36,488 42,859
Other liabilities 3,611 3,530
------- -------
Total liabilities 71,863 77,662
Accumulated deficit (3,012) (5,685)
------- -------
Total liabilities and deficit $68,851 $71,977
======= =======
4. STOCK OPTIONS
On January 18, 2000, Griffin's Board of Directors approved the issuance of
20,000 options under the Griffin Land & Nurseries, Inc., 1997 Stock Option Plan
(the "Griffin Stock Option Plan") to certain employees. On May 16, 2000, in
accordance with the Griffin Stock Option Plan, 4,000 options were issued to
Griffin's independent directors. Activity under the Griffin Stock Option Plan is
summarized as follows:
NUMBER OF WEIGHTED AVG.
OPTIONS EXERCISE PRICE
------- --------------
Outstanding at November 27, 1999 601,707 $12.16
Issued after November 27, 1999 24,000 11.35
Cancelled after November 27, 1999 (600) 13.25
------- ------
Outstanding at May 27, 2000 625,107 $12.13
======= ======
Number of option holders at May 27, 2000 37
==
PAGE 8
WEIGHTED AVG.
REMAINING
OUTSTANDING AT WEIGHTED AVG. CONTRACTUAL LIFE
RANGE OF EXERCISE PRICES MAY 27, 2000 EXERCISE PRICE (IN YEARS)
- ------------------------ ------------ -------------- ----------
Under $3.00 34,435 $1.75 3.9
$3.00-$9.00 100,172 7.52 5.8
Over $9.00 490,500 13.80 8.0
-------
625,107
=======
Options granted in 2000 vest in equal installments on the third, fourth
and fifth anniversaries from the date of grant. At May 27, 2000, there were
140,607 vested options outstanding under the Griffin Stock Option Plan with a
weighted average price of $6.39 per share.
5. PER SHARE RESULTS
Basic and diluted per share results were based on the following:
FOR THE 13 WEEKS ENDED, FOR THE 26 WEEKS ENDED,
----------------------- -----------------------
MAY 29, MAY 29,
1999 1999
MAY 27, (As Restated) MAY 27, (As Restated)
2000 (Note 7) 2000 (Note 7)
---------- ----------- ----------- -----------
Net income for computation of basic per
share results $ 3,217 $ 2,879 $ 1,513 $ 1,331
Adjustment to net income for assumed
exercise of options of equity investee
(Centaur) (35) (50) (35) (50)
----------- ----------- ----------- -----------
Adjusted net income for computation of
diluted per share results $ 3,182 $ 2,829 $ 1,478 $ 1,281
=========== =========== =========== ===========
Weighted average shares for computation
of basic per share results 4,863,000 4,843,000 4,863,000 4,843,000
Incremental shares from assumed exercise
of stock options 63,000 77,000 61,000 82,000
----------- ----------- ----------- -----------
Adjusted weighted average shares for
computation of diluted per share results 4,926,000 4,920,000 4,924,000 4,925,000
=========== =========== =========== ===========
6. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
COMPREHENSIVE INCOME
The Statement of Stockholders Equity for the period ended May 27, 2000
includes other comprehensive income of $186. This reflects the effect of a
translation adjustment related to Griffin's equity investment in Centaur.
There was no other comprehensive income in the prior fiscal year.
PAGE 9
INVENTORIES
Inventories consist of:
MAY 27, NOV. 27,
2000 1999
-------- --------
Nursery stock $ 29,219 $ 26,728
Finished goods 1,888 1,481
Materials and supplies 1,769 987
-------- --------
$ 32,876 $ 29,196
======== ========
PROPERTY AND EQUIPMENT
Property and equipment consist of:
ESTIMATED USEFUL MAY 27, NOV. 27,
LIVES 2000 1999
----- -------- --------
Land and improvements $ 7,520 $ 7,402
Buildings 10 to 40 years 4,999 4,198
Machinery and equipment 3 to 20 years 15,460 14,560
-------- --------
27,979 26,160
Accumulated depreciation (12,403) (11,801)
-------- --------
$ 15,576 $ 14,359
======== ========
Griffin incurred capital lease obligations of $330 and $146, respectively,
in the twenty-six weeks ended May 27, 2000 and May 29, 1999.
REAL ESTATE HELD FOR SALE OR LEASE
Real estate held for sale or lease consists of:
ESTIMATED USEFUL MAY 27, NOV. 27,
LIVES 2000 1999
----- -------- --------
Land $ 4,835 $ 4,723
Land improvements 15 years 3,461 3,461
Buildings 40 years 24,286 23,836
Development costs 10,747 10,027
-------- --------
43,329 42,047
Accumulated depreciation (8,733) (8,281)
-------- --------
$ 34,596 $ 33,766
======== ========
PAGE 10
LONG-TERM DEBT
Long-term debt includes:
MAY 27, NOV. 27,
2000 1999
-------- --------
Credit agreement $10,075 $ --
Mortgages 8,650 8,704
Capital leases 688 476
-------- --------
Total 19,413 9,180
Less: due within one year 353 320
-------- --------
Total long-term debt $19,060 $8,860
======== ========
7. RESTATEMENT
The consolidated financial statements of Griffin for periods prior to the
thirteen weeks ended May 27, 2000 have been restated to adjust the amounts
previously reported for equity income from Centaur. The restatement was
required to adjust the timing of the recognition of subscription revenue of
Centaur to comply with generally accepted accounting principles in the United
States. The following summarizes the changes to the previously reported
Consolidated Statement of Operations:
FOR THE 13 FOR THE 26
WEEKS ENDED WEEKS ENDED
MAY 29, 1999 MAY 29, 1999
------------------- -------------------
AS AS AS AS
REPORTED RESTATED REPORTED RESTATED
-------- -------- -------- --------
Income before equity investment $ 2,388 $ 2,388 $ 1,053 $ 1,053
Income from equity investment 553 491 382 278
-------- -------- -------- --------
Net income $ 2,941 $ 2,879 $ 1,435 $ 1,331
======== ======== ======== ========
Basic net income per share $ 0.61 $ 0.59 $ 0.30 $ 0.27
======== ======== ======== ========
Diluted net income per share $ 0.59 $ 0.58 $ 0.28 $ 0.26
======== ======== ======== ========
FOR THE 13
WEEKS ENDED
FEB. 26, 2000
-------------------
AS AS
REPORTED RESTATED
-------- --------
Loss before equity investment $(1,540) $(1,540)
Loss from equity investment (147) (164)
------- -------
Net loss $(1,687) $(1,704)
======= ======
Basic net loss per share $(0.35) $(0.35)
======= ======
Diluted net loss per share $(0.35) $(0.35)
======= ======
The restatement will effect Griffin's previously reported financial
statements for fiscal 1998 and fiscal 1999. Griffin intends to file amended
reports with the Securities and Exchange Commission as soon as practicable
which will include detailed information regarding the restatement. The
amended filings are expected to have the effect of reducing income from
equity investment and net income by $300 in fiscal 1999 and $186 in fiscal
1998.
PAGE 11
ITEM 2
GRIFFIN LAND & NURSERIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESTATEMENT
The consolidated financial statements of Griffin for the periods prior to
the thirteen weeks ended May 27, 2000 have been restated to adjust the
amounts previously reported for equity income from Griffin's 35% investment
in Centaur Communications, Ltd. ("Centaur"), a privately owned publisher
based in the United Kingdom. Restatement was required to adjust the timing of
the recognition of subscription revenue of Centaur to comply with generally
accepted accounting principles in the United States. See Note 7 to Griffin's
consolidated financial statements contained in Item 1.
OVERVIEW
Griffin's operations are comprised of two segments: the landscape nursery
business and the real estate business. The following discussion contains
information relating to the consolidated operations of Griffin and, where
appropriate, separate information regarding each of these segments. As used in
this discussion the term "Imperial" refers to Griffin's landscape nursery
operations (conducted by Griffin's wholly-owned subsidiary, Imperial Nurseries,
Inc.) and the term "Griffin Land" refers to Griffin's real estate operations.
RESULTS OF OPERATIONS
Thirteen Weeks Ended May 27, 2000 Compared to the Thirteen Weeks Ended
May 29, 1999
Griffin's net sales and other revenue were $31.9 million in the
thirteen weeks ended May 27, 2000 (the "2000 second quarter") as compared to
net sales and other revenue of $27.3 million in the thirteen weeks ended May
29, 1999 (the "1999 second quarter"). The increase of $4.6 million reflects
higher net sales at both Imperial and Griffin Land. Imperial's net sales
increased $4.2 million to $30.5 million in the 2000 second quarter from $26.3
million in the 1999 second quarter, reflecting higher volume at Imperial's
wholesale sales and service centers, which accounted for $2.6 million of
Imperial's net sales increase, and an increase of $1.6 million in net sales
of container plants from Imperial's farming operations. The increase in sales
of container plants from Imperial's farms reflects the first substantial
increase in salable units from production increases over the past three
years. The increased sales of container plants more than offset a decrease in
sales of Imperial's field grown product in the 2000 second quarter as
compared to the 1999 second quarter. Imperial discontinued its field growing
operations several years ago and has substantially completed the liquidation
of its remaining field grown inventory.
Net sales and other revenue at Griffin Land increased $0.3 million to
$1.3 million in the 2000 second quarter as compared to $1.0 million in the
1999 second quarter. The increased net sales and other revenue at Griffin
Land principally reflects sales of $0.2 million from residential lots in the
2000 second quarter. There were no land sales in the 1999 second quarter.
Additionally, rental revenue increased by $0.1 million over the 1999 second
quarter due principally to new leases in place this year.
Griffin's operating profit (before interest) was $4.6 million in the 2000
second quarter as compared to $4.0 million in the 1999 second quarter. Operating
profit at Imperial increased to $5.0 million in the 2000 second quarter from
$4.3 million in the 1999 second quarter. The increase in Imperial's operating
profit reflects a $1.0 million increase in gross profit as a result of the
increased net sales. Imperial's gross margin on sales was 29.2% in the 2000
second quarter as compared to 29.9% in the 1999 second quarter. The lower margin
reflected a charge of $0.2 million included in cost of goods sold in the 2000
second quarter to reflect the disposal of certain propagated units that will not
be grown to salable size plants due to changes in product mix at Imperial's
Florida container farm. Imperial's operating expenses increased from $3.5
million in the 1999 second quarter to $3.9 million in the 2000 second quarter.
The higher expenses were incurred to support the growth of Imperial's wholesale
sales and service centers. As a percentage of net sales, Imperial's operating
expenses were 12.8% of net sales in the 2000 second quarter as compared to 13.4%
of net sales in the 1999 second quarter.
Griffin Land's operating results (before interest) were break even in
the 2000 second quarter as compared to an operating profit (before interest)
of $0.1 million in the 1999 second quarter. The slight decrease in operating
results principally reflects higher operating expenses at Griffin Land. The
increased revenue in the 2000 second quarter from sales of residential land
at Griffin Land did not have an impact on operating results because the
residential lot sales completed in the 2000 second quarter were substantially
break even.
Griffin's interest expense increased to $0.4 million in the 2000 second
quarter from $0.1 million in the 1999 second quarter. The higher interest
expense reflects increased borrowing levels in the 2000 second quarter as
compared to the 1999 second quarter to support Imperial's seasonal working
capital requirements and to fund capital projects at Imperial and Griffin
Land.
PAGE 12
Income from Griffin's equity investment in Centaur Communications, Ltd.
("Centaur") was higher in the 2000 second quarter as compared to the 1999
second quarter. The increase in equity income reflects higher revenue at
Centaur, partially offset by an increase in operating expenses. The higher
expenses include a pretax charge of $1.1 million, of which Griffin's
allocable share is $0.4 million, for accruals under long-term compensation
plans based on the growth and increased profitability of certain of Centaur's
businesses that primarily are brand extensions of Centaur's core business.
Twenty-six Weeks Ended May 27, 2000 Compared to the Twenty-six Weeks
Ended May 29, 1999
Griffin's net sales and other revenue were $37.3 million in the
twenty-six weeks ended May 27, 2000 (the "2000 six month period") as compared
to net sales and other revenue of $32.5 million in the twenty-six weeks ended
May 29, 1999 (the "1999 six month period"). The increase of $4.8 million
reflects higher net sales at both Imperial and Griffin Land. Imperial's net
sales increased $4.2 million to $34.7 million in the 2000 six month period
from $30.5 million in the 1999 six month period. The higher net sales at
Imperial reflects increased volume at its wholesale sales and service
centers, which accounted for $2.5 million of Imperial's net sales increase,
and an increase of $1.7 million in net sales of containerized plants from its
farming operations. Net sales and other revenue at Griffin Land increased to
$2.7 million in the 2000 six month period from $1.9 million in the 1999 six
month period. The increase reflected sales of $0.5 million from residential
lots in the current year. There were no land sales in the 1999 six month
period. Additionally, rental revenue increased $0.3 million over the 1999 six
month period principally from new leases in place in the current year.
Griffin's operating profit (before interest) in the 2000 six month period
increased $0.4 million to $2.3 million as compared to $1.9 million in the 1999
six month period. Operating profit at Imperial increased $0.3 million to $2.9
million in the 2000 six month period as compared to $2.6 million in the 1999 six
month period. Imperial's higher operating profit principally reflects higher
gross profit, which increased to $10.0 million in the 2000 six month period from
$9.1 million in the 1999 six month period. Imperial's overall gross margin on
net sales was 29.0% in the 2000 six month period as compared to 29.7% in the
1999 six month period. The lower margin reflects pricing pressures and includes
the effect of additional costs resulting from changes in Imperial's product mix
at its Florida container farm. Imperial's operating expenses were $7.1 million
in the 2000 six month period as compared to $6.4 million in the 1999 six month
period. As a percentage of net sales, operating expenses decreased to 20.6% in
the 2000 six month period from 21.1% in the 1999 six month period.
In the 2000 six month period, Griffin Land had operating profit (before
interest) of $0.1 million as compared to being substantially break even at the
operating profit level in the 1999 six month period. The improved results
principally reflect the increased rental revenue and profit from certain of its
land sales in the 2000 six month period. Griffin Land's rental properties
generated an operating profit, before interest and depreciation, of $1.6 million
in the 2000 six month period as compared to $1.4 million in the 1999 six month
period. This increase reflects new leases in place in the 2000 six month period
and the effect of increases in rental rates on existing leases.
Griffin's interest expense increased to $0.5 million in the 2000 six
month period from $0.2 million in the 1999 six month period. The increase is
due to increased borrowing levels in the 2000 six month period as compared to
the 1999 six month period to support Imperial's seasonal working capital
requirements and to fund capital projects at Imperial and Griffin Land.
Income from Griffin's equity investment in Centaur increased in the
2000 six month period as compared to the 1999 six month period. The increased
results principally reflect higher advertising revenue at Centaur in the
current year, partially offset by higher expenses, including the long-term
compensation expense discussed above, and higher interest expense. The higher
interest expense reflects a full six months of interest in the 2000 six month
period on debt of approximately $20 million related to an acquisition by
Centaur in the 1999 second quarter.
PAGE 13
LIQUIDITY AND CAPITAL RESOURCES
Griffin's net cash used in operating activities was $6.3 million in the
2000 six month period as compared to net cash used in operating activities of
$6.6 million in the 1999 six month period. Cash used in operating activities
during the first six months of the fiscal year principally reflects the seasonal
increases in accounts receivable and inventories at Imperial. Partially
offsetting the increased inventory in the 2000 six month period was an increase
in accounts payable and accrued liabilities of $3.6 million.
Net cash used in investing activities was $3.4 million in the 2000 six
month period as compared to $4.0 million in the 1999 six month period. The
decrease reflected a lower amount of additions to Griffin's real estate
holdings, partially offset by increased capital expenditures at Imperial
Nurseries. The increase in additions to property and equipment at Imperial in
the 2000 six month period, as compared to the 1999 six month period, principally
reflects several capital projects, started in fiscal 1999, to improve and expand
Imperial's containerized plant production facilities in Florida and Connecticut.
These projects are expected to be completed over the next six to twelve months
at a projected total cost of approximately $3.5 million. In fiscal 1999,
Imperial entered into an agreement to acquire land in central New Jersey for a
new wholesale sales and service center. Completion of the land purchase is
contingent upon receiving all required regulatory approvals to operate a
wholesale sales and service center on that site. If such approval is received,
expenditures for the land acquisition and site work are projected to be
approximately $3.9 million over the next nine months. Sites for additional sales
and service centers are also being considered.
The lower amount of additions to real estate in the 2000 six month
period, as compared to the 1999 six month period, reflects the completion of
construction in the 1999 six month period of the shell building of a 100,000
square foot warehouse in the New England Tradeport. This new warehouse is
being actively marketed but is not yet leased. A significant portion of
Griffin's additions to its real estate holdings in the 2000 six month period
reflect subdivision activities related to a proposed residential development.
Griffin is considering construction of new buildings this year to provide
additional space for lease. Some of this construction being considered is
dependent on future space requirements of certain of Griffin's current
tenants while a portion of the contemplated construction will be built on
speculation.
Net cash provided by financing activities in the 2000 six month period
reflects Griffin's borrowings under its $20 million revolving credit loan (the
"Griffin Credit Agreement").
Management believes that in the near term, based on the current level
of operations and anticipated growth, its cash on hand, cash flow from
operations and borrowings under the Griffin Credit Agreement will be
sufficient to finance the working capital requirements and expected capital
expenditures of its landscape nursery business and to fund development of its
real estate assets. Over the intermediate and long term, selective mortgage
placements or additional bank credit facilities may also be required to fund
capital projects.
PAGE 14
FORWARD-LOOKING INFORMATION
The information in Management's Discussion and Analysis of Financial
Condition and Results of Operations includes forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Although Griffin believes that its plans, intentions and expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such plans, intentions or expectations will be achieved,
particularly with respect to leasing of its new warehouse completed in 1999 and
possible construction of additional facilities in the real estate business,
subdivision approvals, the improvements and expansion of Imperial's farm
operations, and the opening of a wholesale sales and service center in central
New Jersey. The projected information disclosed herein is based on assumptions
and estimates that, while considered reasonable by Griffin as of the date
hereof, are inherently subject to significant business, economic, competitive
and regulatory uncertainties and contingencies, many of which are beyond the
control of Griffin.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of changes in value of a financial
instrument, derivative or non-derivative, caused by fluctuations in interest
rates, foreign exchange rates and equity prices. Changes in these factors could
cause fluctuations in earnings and cash flows.
For fixed rate debt, changes in interest rates generally affect the fair
market value of the debt instrument, but not earnings or cash flows. Griffin
does not have an obligation to prepay any fixed rate debt prior to maturity, and
therefore, interest rate risk and changes in the fair market value of fixed rate
debt should not have a significant impact on earnings or cash flows until such
debt is refinanced, if necessary. For variable rate debt, changes in interest
rates generally do not impact the fair market value of the debt instrument, but
do affect future earnings and cash flows. Griffin had $10.1 million of variable
rate debt outstanding at May 27, 2000.
Griffin is exposed to market risks from fluctuations in interest rates and
the effects of those fluctuations on market values of Griffin's cash equivalent
short-term investments. These investments generally consist of overnight
investments that are not significantly exposed to interest rate risk, except to
the extent that changes in interest rates will ultimately affect the amount of
interest income earned and cash flow from these investments.
Griffin does not currently have any derivative financial instruments in
place to manage interest costs, but that does not mean that Griffin will not use
them as a means to manage interest rate risk in the future.
Griffin does not use foreign currency exchange forward contracts or
commodity contracts and does not have foreign currency exposure in its
operations. Griffin does have investments in companies based in the United
Kingdom, and changes in foreign exchange rates could affect the results of
equity investments in Griffin's financial statements, and the ultimate
liquidation of those investments and conversion of proceeds into United States
currency.
PAGE 15
PART II OTHER INFORMATION
Items 1 - 3 not applicable
Item 4. Submission of Matters to a Vote of Security Holders
(a) Annual Meeting of Stockholders: May 16, 2000
(b) The following were elected as Directors at the Annual meeting:
(c)(i) 1) Mr. Winston J. Churchill, Jr. was elected a Director for 2000
with 4,605,754 votes in favor, 28,544 withheld and 228,406 not
voting.
2) Mr. Edgar M. Cullman was elected a Director for 2000 with
4,601,881 votes in favor, 32,417 withheld and 228,406 not
voting.
3) Mr. Frederick M. Danziger was elected a Director for 2000 with
4,605,854 votes in favor, 28,444 withheld and 228,406 not
voting.
4) Mr. John L. Ernst was elected a Director for 2000 with
4,605,754 votes in favor, 28,544 withheld and 228,406 not
voting.
5) Mr. David F. Stein was elected a Director for 2000 with
4,605,554 votes in favor, 28,744 withheld and 228,406 not
voting.
(ii) The selection of PricewaterhouseCoopers LLP as independent
accountants for 2000 was approved with 4,628,301 votes in favor and 1,414
opposed with 4,583 abstentions and 228,406 not voting.
Item 5 is not applicable
Item 6. Exhibits and Reports on Form 8K
(a) Exhibits
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
(b) There were no reports filed on Form 8K by the Registrant
during the 2000 second quarter.
PAGE 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GRIFFIN LAND & NURSERIES, INC.
/s/ FREDERICK M. DANZIGER
-------------------------------------
DATE: July 17, 2000 FREDERICK M. DANZIGER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
/s/ ANTHONY J. GALICI
-------------------------------------
DATE: July 17, 2000 ANTHONY J. GALICI
VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AND SECRETARY
PAGE 17