- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 28, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-29288
------------------------
GRIFFIN LAND & NURSERIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-0868496
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE ROCKEFELLER PLAZA 10020
NEW YORK, NEW YORK (Zip Code)
(Address of principal
executive offices)
(212) 218-7910
(Registrant's Telephone Number, Including Area Code)
SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:
Title of Each Class Name of Each Exchange on Which Registered
COMMON STOCK $0.01 PAR VALUE NASDAQ NATIONAL MARKET
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/
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in part III of this Form 10-K or any amendment to this
Form 10-K. / /
State the aggregate market value of the voting stock held by
non-affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which the stock was sold, or the
average bid and asked prices of such stock, as of a specified date within 60
days prior to the date of filing: $12,363,000 approximately, based on the
closing sales price on the Nasdaq National Market on September 15, 2000.
Shares of Common Stock held by each executive officer, director, holders of
greater than 10% of the outstanding Common Stock of the Registrant and
persons or entities known to the Registrant to be affiliates of the foregoing
have been excluded in that such persons may be deemed to be affiliates. This
assumption regarding affiliate status is not necessarily a conclusive
determination for other purposes.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: Common Stock:
4,862,704 shares as of September 15, 2000.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Explanatory Note
In its Report on Form 10-Q for the 13 weeks ended May 27, 2000, Griffin
Land & Nurseries, Inc. ("Griffin") stated that it would restate its
consolidated financial statements for the fiscal year ended November 28,
1998, the fiscal year ended November 27, 1999 and the 13 weeks ended
February 26, 2000. This amendment includes in Item 8 such restated
consolidated financial statements for the fiscal year ended November 28, 1998
and other information relating to such restated consolidated financial
statements, including Selected Financial Data (Item 6) and Management's
Discussion and Analysis of Financial Condition and Results of Operations
(Item 7). Information regarding the effect of the restatement on Griffin's
financial condition at November 28, 1998 and its results of operations for
the fiscal year then ended is provided in Note 14 to the consolidated
financial statements included in Item 8 of this amendment. Except for Items
6, 7, and 8, no other information included in Griffin's Annual Report on Form
10-K for the fiscal year ended November 28, 1998 is amended by this
amendment.
PART II
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected statement of operations data for
fiscal years 1994 through 1998 and balance sheet data as of the end of each
fiscal year.
1998 1997 1996 1995 1994
(As Restated)(a)
---------------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Net sales & other revenue.................................. $ 51,231 $ 46,288 $ 46,531 $ 41,756 $ 43,024
Operating profit (loss).................................... 74 (3,236) (1,245) 810 (4,867)
Loss from continuing operations............................ (65) (2,136) (4,063) (4,265) (7,157)
Net loss................................................... (65) (2,136) (4,606) (580) (3,833)
Basic net loss per share (b)............................... (0.01) (0.45)
Diluted net loss per share (b)............................. (0.03) (0.45)
BALANCE SHEET DATA:
Total assets............................................... 104,730 103,736 101,775 165,655 167,421
Working capital............................................ 33,304 41,130 36,698 23,069 28,112
Long-term debt (c)......................................... 2,666 2,830 38,846 72,737 91,614
Stockholders' equity /Culbro Investment (d)................ 91,000 90,523 47,449 61,299 44,426
The Selected Financial Data presented above reflects CMS Gilbreth Packaging
Systems, Inc. as a discontinued operation in 1993 through 1996. This business
was sold in 1996.
(a) The financial data for fiscal 1998 has been restated as described in Item
7 and Note 14 to the consolidated financial statements included in Item 8.
(b) Griffin was a consolidated subsidiary of Culbro through July 3, 1997.
Accordingly, the per share results for 1997 presented above are on a pro
forma basis because the Griffin common stock was not outstanding the entire
period.
(c) Culbro's general long-term debt was included on Griffin's historical balance
sheet through February 27, 1997, when such debt was assumed by Griffin's
former affiliate, General Cigar Holdings, Inc. in connection with the
distribution of Griffin's common stock to Culbro's shareholders.
(d) Prior to July 3, 1997, Griffin was a wholly-owned subsidiary of Culbro.
Accordingly, the retained earnings and intercompany balances with its former
parent are reflected in Culbro Investment prior to July 3, 1997.
2
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESTATEMENT
The consolidated financial statements of Griffin for the fiscal year
ended November 28, 1998 have been restated to adjust the amount previously
reported for equity income from Griffin's 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 14 to Griffin's
consolidated financial statements in Item 8.
OVERVIEW
The consolidated financial statements of Griffin include the accounts of
Griffin's subsidiary in the landscape nursery business, Imperial Nurseries, Inc.
("Imperial"), and Griffin's Connecticut and Massachusetts based real estate
business, Griffin Land. Griffin also has equity interests in Centaur
Communications, Ltd. ("Centaur"), a magazine publishing business, based in the
United Kingdom and Linguaphone Group plc ("Linguaphone"), a distributor of
language learning materials based in the United Kingdom with sales in Europe and
Asia. Prior to July 3, 1997, Griffin was a wholly-owned subsidiary of Culbro
Corporation ("Culbro"). On July 3, 1997, Culbro distributed the common stock of
Griffin to its shareholders in a tax-free distribution (the "Distribution").
Subsequent to the Distribution, Griffin has operated as an independent
stand-alone entity. Prior to March 18, 1997, Griffin was known as Culbro Land
Resources, Inc. As a result of a recapitalization of Linguaphone in early 1999,
Griffin's common equity ownership was reduced and Griffin will account for its
investment in Lingauphone under the cost method of accounting for investments,
prospectively.
The financial statements of Griffin reflect the results of the operations of
Griffin's businesses and investments. Prior to the Distribution in July 1997,
Griffin's results included allocations to Griffin from Culbro for corporate
overhead of $1.0 million and $1.8 million in fiscal 1997 and fiscal 1996,
respectively. Additionally, $0.9 million of a Culbro unusual expense item was
allocated to Griffin in fiscal 1996. These allocations, which may not
necessarily reflect the additional expenses Griffin would have incurred had it
operated as a separate stand-alone entity prior to the Distribution, are deemed
reasonable by Griffin management. Griffin's results of operations in 1997 and
prior years include interest expense on Culbro general corporate debt. The
Culbro debt was included in Griffin's financial statements through the 1997
first quarter, when that debt was assumed by General Cigar Holdings, Inc. ("GC
Holdings") pursuant to the Distribution Agreement. Interest expense on Culbro's
general debt that was included in Griffin's results of operations was $0.7
million and $7.3 million in fiscal 1997 and fiscal 1996, respectively. Such
interest expense has not been part of Griffin's results of operations subsequent
to the Distribution. In 1998, Griffin operated as a stand-alone entity for the
full year. Accordingly, there are no allocations or charges from Culbro
reflected in Griffin's 1998 results.
RESULTS OF OPERATIONS
FISCAL 1998 COMPARED TO FISCAL 1997
In fiscal 1998, Griffin's net sales increased $4.9 million, or 11%, to $51.2
million from $46.3 million in fiscal 1997. The net sales increase was due to net
sales at Imperial, which were $48.2 million in fiscal 1998 as compared to $42.6
million in fiscal 1997. The $5.6 million (13%) net sales increase at Imperial
principally reflected increased volume and higher prices at the wholesale sales
and service centers, which accounted for substantially all of Imperial's net
sales increase.
Net sales in Griffin's real estate business, Griffin Land, decreased from
$3.7 million in fiscal 1997 to $3.1 million in fiscal 1998. Net sales in fiscal
1997 included $0.7 million from sales of remaining residential lots from
developments started in earlier years. There were no land sales in fiscal 1998.
Excluding the residential lot sales, net sales at Griffin Land increased
slightly in fiscal 1998 as compared to fiscal 1997. Rental revenue from Griffin
Land's buildings increased to $2.6 million in fiscal 1998 from $2.1 million in
fiscal 1997. The higher rental revenue principally reflected increased occupancy
as the result of new leases. Occupancy in Griffin Land's properties, excluding
the new warehouse constructed in 1998, increased from 80% at the end of fiscal
1997 to 91% at the end of fiscal 1998. Including new leases that became
effective subsequent to the end of fiscal 1998, Griffin Land's occupancy rate in
its properties was approximately 95%, including full occupancy in its Griffin
Center South development.
3
Griffin's consolidated operating results were substantially break-even in
fiscal 1998 as compared to an operating loss of $3.2 million in fiscal 1997. The
increased operating results principally reflected the effect of the $3.3 million
charge incurred in fiscal 1997 by Imperial to reserve for certain plant
inventories. Operating profit at Imperial increased to $2.3 million in fiscal
1998 as compared to $1.9 million in fiscal 1997, excluding the effect of last
year's inventory charge. Imperial's overall gross profit margins decreased
slightly to 28.8% in fiscal 1998 from 29.4% in fiscal 1997, again excluding the
effect of the inventory charge in 1997. The operating profit increase at
Imperial reflects the effect of higher net sales in fiscal 1998, partially
offset by higher operating expenses. As a percentage of net sales, operating
expenses were 24.1% in fiscal 1998 as compared to 25.0% in fiscal 1997. The
operating expense increase principally reflected higher selling expenses related
to the increased volume at Imperial's wholesale sales and service centers.
Griffin Land incurred an operating loss of $0.3 million in fiscal 1998
versus an operating loss of $0.2 million in fiscal 1997. Operating results in
fiscal 1998 include the settlement of a litigation initiated by Griffin Land for
reimbursement of certain costs to repair two commercial buildings owned by
Griffin Land. Proceeds from the settlement in excess of repair costs were
approximately $0.2 million and are reflected as a reduction of Griffin Land's
operating expenses. Excluding the effect of the benefit from the litigation
settlement in fiscal 1998, operating results at Griffin Land decreased by $0.3
million, principally reflecting the effect of the residential land sales in
fiscal 1997. Griffin Land's rental properties generated an operating profit,
before depreciation, of $2.1 million in fiscal 1998 versus $1.8 million in
fiscal 1997, reflecting the higher occupancy noted above and corresponding
increase in rental revenue.
The decrease in Griffin's interest expense principally reflects the
inclusion in the 1997 first quarter of interest expense of $0.7 million related
to Culbro's general corporate debt that was assumed by General Cigar Holdings at
the end of the 1997 first quarter. The higher income tax rate principally
reflects the effect of state and local taxes.
Griffin incurred a loss from equity investments in 1998 as compared to
equity income in 1997 as a result of losses at Linguaphone, which more than
offset increased profit at Centaur. Centaur's 1998 results included one-time
expenses aggregating approximately $1.1 million before taxes (approximately
$0.3 million allocable to Griffin's interest), relating to the restructuring
of Centaur's ownership. Additionally, increased operating profit of Centaur's
magazine publishing operations was partially offset by operating losses
incurred by Centaur's subsidiary, Perfect Information, Ltd., which operates a
database service that provides financial information to its customers. During
1998, Griffin's common equity ownership of Centaur increased to approximately
35% (33% fully diluted) as a result of Griffin's purchase of Centaur common
stock and Centaur's repurchase of common stock from other Centaur
stockholders (see Note 10 of the consolidated financial statements included
in Item 8). The equity loss for Linguaphone includes foreign currency
exchange losses incurred by Linguaphone for which Griffin's allocable share
was approximately $0.5 million. Linguaphone recently completed an offering of
its common stock in which Griffin participated to a limited extent. As a
result, Griffin's common equity ownership in Linguaphone was reduced from
approximately 25% to approximately 14% (11% fully diluted). Griffin will
account for its investment in Linguaphone under the cost method of accounting
for investments, prospectively.
4
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales and other revenue of $46.3 million in fiscal 1997 was slightly
lower than fiscal 1996 net sales and other revenue of $46.5 million. Net sales
at Imperial increased 15% to $42.6 million in fiscal 1997 from $37.0 million in
fiscal 1996. The increased sales reflected higher volume and improved pricing at
Imperial's wholesale sales and service centers, which contributed approximately
75% of Imperial's total increase in net sales. The balance of Imperial's sales
increase reflected higher sales volume of containerized plants from its growing
operations in Connecticut and Florida. Net sales and other revenue in Griffin's
real estate business, Griffin Land, were $3.7 million in fiscal 1997 as compared
to $9.5 million in fiscal 1996. The decrease principally reflected the effect of
a 1996 sale, which generated $4.0 million in proceeds, of Griffin's 30% interest
in a joint venture that owned commercial properties.
Griffin incurred a consolidated operating loss of $3.2 million in fiscal
1997 as compared to an operating loss of $1.2 million in fiscal 1996. The higher
operating loss reflected results at Imperial, which incurred a $1.4 million
operating loss in fiscal 1997 as compared to an operating profit of $1.6 million
in fiscal 1996. Imperial's fiscal 1997 results included a $3.3 million charge to
reserve for certain plant inventories. Approximately 75% of the charge related
to field grown plant inventories in which the current carrying cost will not be
recovered as a result of horticultural issues and market conditions. The
remaining portion of the charge related principally to certain container grown
plants originally potted in 1994 which did not mature properly. Excluding
this charge, Imperial's operating results in fiscal 1997 were slightly higher
as compared to fiscal 1996. The effect of Imperial's higher net sales was
substantially offset by higher costs, principally due to increased costs
associated with containerized plants sold from the Connecticut and Florida
operations. As a result, margins on sales declined from 29.9% in 1996 to
29.4% in 1997. Operating expenses at Imperial increased in fiscal 1997 versus
fiscal 1996; however, as a percentage of net sales, operating expenses
decreased to 25.0% of net sales in fiscal 1997 from 25.5% of net sales in
fiscal 1996.
Griffin Land incurred an operating loss of $0.2 million in fiscal 1997 as
compared to an operating loss of $0.3 million in fiscal 1996. Increased results
from sales of property, due principally to the effect of the loss on the sale of
the joint venture last year, were substantially offset by lower income from
joint venture operations and lower property management income.
Griffin's general corporate expense decreased from $2.6 million in fiscal
1996 to $1.6 million in fiscal 1997. The decrease principally reflects the
allocation to Griffin of $0.9 million for its share of a Culbro unusual expense
item principally related to the termination of certain incentive programs. The
other nonoperating income of $1.9 million in fiscal 1996 reflected accrued
dividends and accretion income on the preferred stock of Eli Witt previously
held by Griffin. The accrued dividends and accretion income were equal to
interest on a subordinated note payable that was satisfied by exchange of the
Eli Witt preferred stock in November 1996. Interest on the subordinated note
payable was included in interest expense in fiscal 1996.
Interest expense decreased to $1.0 million in fiscal 1997 from $7.8 million
in fiscal 1996. The decrease reflects the assumption on February 27, 1997, of
Culbro's general corporate debt by GC Holdings in accordance with the
Distribution Agreement. Additionally, the fiscal 1996 fourth quarter reflected
the reduction of Culbro's general corporate debt from the proceeds received on
the sale of CMS Gilbreth Packaging Systems, Inc., and from the exchange of Eli
Witt preferred stock to satisfy a related subordinated note payable.
5
Griffin's income from its equity investments, principally Centaur, was $0.3
million in fiscal 1997 and fiscal 1996. Fiscal 1997 results included an expense
for stock option compensation at Centaur for which the portion attributable to
Griffin was approximately $0.6 million. Excluding that item, Centaur's operating
results were significantly improved over the prior year, reflecting improved
markets in the United Kingdom, where Centaur operates.
The net loss from the discontinued operation in fiscal 1996 reflects
operating results of CMS Gilbreth Packaging Systems, Inc. and the loss on the
sale of that business, which was completed in November 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $0.6 million in fiscal 1998 as
compared to $1.0 million of net cash used in operating activities in fiscal
1997. The improved cash flow from operating activities principally reflects
improved operating results at Imperial, partially offset by an increase in
inventories at Imperial. Net cash used in 1998 financing activities reflected
debt payments partially offset by proceeds from the exercise of stock options.
Net cash provided by financing activities in 1997 principally reflected
borrowings under Culbro's general corporate debt prior to such debt being
assumed by GC Holdings on February 27, 1997.
Net cash used in investing activities was $9.8 million in fiscal 1998 as
compared to $1.9 million in fiscal 1997. The increased use of cash in investing
activities reflects the significant amount of real estate development activity
that took place in fiscal 1998, Griffin's first full year as a stand-alone
company. Additions to real estate of $6.2 million included the completion of an
approximately 98,000 square foot warehouse building, now fully leased, and the
start of another approximately 100,000 square foot warehouse building in the New
England Tradeport. The balance of the additions to real estate reflect building
improvements and tenant improvements related to the new leases entered into in
1998. Investment activities in 1998 also included approximately $3.0 million for
Griffin's additional investment in Centaur (see Note 10 of the consolidated
financial statements included in Item 8), and approximately $1.2 million of
capital expenditures in the landscape nursery business, principally for
improvements at Imperial's container plant production facilities. Net cash used
in Griffin's investing activities in fiscal 1998 was partially offset by
proceeds of $0.5 million from the settlement of a litigation initiated by
Griffin Land for reimbursement of certain costs to repair two commercial
buildings owned by Griffin Land.
On May 6, 1998, Imperial entered into a Revolving Credit Agreement with a
bank which provides a seasonally adjusted line of credit of up to $10 million to
supplement Imperial's cash flow from operations, as required. The Credit
Agreement is collateralized principally by Imperial's accounts receivable and
inventories, and is guaranteed by Griffin. The Credit Agreement contains
financial covenants with respect to Imperial's net worth, fixed charge coverage
(as defined), capital expenditures and cash distributions to Griffin. There were
no borrowings under the Credit Agreement in fiscal 1998.
In early 1999, Imperial purchased land adjacent to one of its wholesale
distribution centers to enable that location to expand. Total expenditures,
including land improvements are estimated to be $1.1 million.
6
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
GRIFFIN LAND & NURSERIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE FISCAL YEARS ENDED,
------------------------------
NOV. 28,
1998
(AS RESTATED) NOV. 29, NOV. 30,
(NOTE 14) 1997 1996
------- ---------- --------
Net sales and other revenue.................................................. $51,231 $ 46,288 $ 46,531
Costs and expenses:
Cost of goods sold........................................................... 36,218 35,767 34,210
Selling, general and administrative expenses................................. 14,939 13,757 12,666
Other expense................................................................ -- -- 900
------- ---------- --------
Operating profit (loss)...................................................... 74 (3,236) (1,245)
Other nonoperating income.................................................... -- -- 1,917
Interest expense............................................................. 185 1,002 7,805
Interest income.............................................................. 298 266 --
------- ---------- --------
Income (loss) before income tax provision (benefit).......................... 187 (3,972) (7,133)
Income tax provision (benefit)............................................... 101 (1,470) (2,767)
------- ---------- --------
Income (loss) before equity investments...................................... 86 (2,502) (4,366)
------- ---------- --------
Income (loss) from equity investments:
Investment in Centaur Communications, Ltd.................................. 902 426 303
Investment in Linguaphone Group plc........................................ (1,053) (60) --
------- ---------- --------
(Loss) income from equity investments........................................ (151) 366 303
------- ---------- --------
Loss from continuing operations.............................................. (65) (2,136) (4,063)
------- ---------- --------
Discontinued operation:
Loss on sale of discontinued operation, net of tax benefit and reversal of
deferred taxes of $4,182................................................... -- -- (1,311)
Income from discontinued operation, net of taxes of $527..................... -- -- 768
------- ---------- --------
Net loss from discontinued operation......................................... -- -- (543)
------- ---------- --------
Net loss..................................................................... $ (65) $ (2,136) $ (4,606)
------- ---------- --------
------- ---------- --------
Basic net loss per common share.............................................. $ (0.01) $ (0.45)(a)
------- ----------
------- ----------
Diluted net loss per common share............................................ $ (0.03) $ (0.45)(a)
------- ----------
------- ----------
(a) 1997 per share results are pro forma. See Note 8.
See Notes to Consolidated Financial Statements.
7
GRIFFIN LAND & NURSERIES, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOV. 28,
1998
(AS RESTATED) NOV. 29,
(NOTE 14) 1997
---------- ----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................................................. $ 2,059 $ 11,519
Accounts receivable, less allowance of $490 and $456...................................... 4,654 4,541
Inventories............................................................................... 26,746 25,343
Deferred income taxes..................................................................... 3,220 2,844
Other current assets...................................................................... 2,625 2,107
---------- ----------
TOTAL CURRENT ASSETS...................................................................... 39,304 46,354
Real estate held for sale or lease, net................................................... 31,519 26,429
Investment in Centaur Communications, Ltd................................................. 15,967 12,097
Property and equipment, net............................................................... 12,635 12,524
Investment in Linguaphone Group plc....................................................... 1,911 2,964
Other assets, including investments in real estate joint ventures of $3,128 and $3,261.... 3,394 3,368
---------- ----------
TOTAL ASSETS.............................................................................. $ 104,730 $ 103,736
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities.................................................. $ 5,586 $ 4,980
Long-term debt due within one year........................................................ 322 244
Income tax payable........................................................................ 92 --
---------- ----------
TOTAL CURRENT LIABILITIES................................................................. 6,000 5,224
Long-term debt............................................................................ 2,666 2,830
Deferred income taxes..................................................................... 1,097 986
Other noncurrent liabilities.............................................................. 3,967 4,173
---------- ----------
TOTAL LIABILITIES......................................................................... 13,730 13,213
---------- ----------
COMMITMENTS AND CONTINGENCIES (SEE NOTE 13)............................................... -- --
Common stock, par value $0.01 per share,
authorized 10,000,000 shares, issued and outstanding 4,842,704 shares................... 48 47
Additional paid in capital................................................................ 93,491 92,950
Accumulated deficit....................................................................... (2,539) (2,474)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY................................................................ 91,000 90,523
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................................ $ 104,730 $ 103,736
---------- ----------
---------- ----------
See Notes to Consolidated Financial Statements.
8
GRIFFIN LAND & NURSERIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
FOR THE FISCAL YEARS ENDED,
---------------------------------
NOV. 28,
1998
(AS RESTATED) NOV. 29, NOV. 30,
(NOTE 14) 1997 1996
---------- --------- ----------
OPERATING ACTIVITIES:
Net loss........................................................................ $ (65) $ (2,136) $ (4,606)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization................................................... 2,004 1,921 2,405
Loss from discontinued operation, before tax.................................... -- -- 4,198
Loss (income) from equity investments........................................... 151 (366) (303)
Proceeds from sale of investment in a real estate joint venture................. -- -- 4,042
Deferred income taxes........................................................... 186 (1,085) (7,739)
Increase in inventory deposits.................................................. (188) (108) (71)
Changes in assets and liabilities which increased (decreased) cash:
Accounts receivable............................................................. (147) (829) (232)
Inventories..................................................................... (1,403) 2,187 (1,599)
Accounts payable and accrued liabilities........................................ 606 (579) (1,474)
Other, net...................................................................... (557) 33 3,746
---------- --------- ----------
Net cash provided by (used in) operating activities of continuing operations.... 587 (962) (1,633)
Cash provided by operating activities of discontinued operation................. -- -- 3,547
---------- --------- ----------
Net cash provided by (used in) operating activities............................. 587 (962) 1,914
---------- --------- ----------
INVESTING ACTIVITIES:
Additions to real estate held for sale or lease................................. (6,182) (953) (592)
Additional investment in Centaur Communications, Ltd............................ (2,968) -- --
Additions to property and equipment............................................. (1,164) (936) (1,378)
Proceeds from litigation settlement............................................. 500 -- --
Proceeds from sale of discontinued operation.................................... -- -- 35,030
Investing activities of discontinued operation.................................. -- -- (947)
---------- --------- ----------
Net cash (used in) provided by investing activities............................. (9,814) (1,889) 32,113
---------- --------- ----------
FINANCING ACTIVITIES:
Payments of debt................................................................ (324) (271) (25,099)
Proceeds from exercise of stock options......................................... 91 408 --
Net transactions with Culbro.................................................... -- (560) (9,244)
Increase in debt (prior to Liability Assumption in 1997)........................ -- 7,422 --
---------- --------- ----------
Net cash (used in) provided by financing activities............................. (233) 6,999 (34,343)
---------- --------- ----------
Net (decrease) increase in cash and cash equivalents............................ (9,460) 4,148 (316)
Cash and cash equivalents at beginning of year.................................. 11,519 7,371 7,687
---------- --------- ----------
Cash and cash equivalents at end of year........................................ $ 2,059 $ 11,519 $ 7,371
---------- --------- ----------
---------- --------- ----------
See Notes to Consolidated Financial Statements.
9
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements of Griffin Land &
Nurseries, Inc. ("Griffin") include the accounts of Griffin's real estate
division ("Griffin Land"), Imperial Nurseries, Inc. ("Imperial") and CMS
Gilbreth Packaging Systems, Inc. ("CMS Gilbreth"), which was sold in 1996 (see
Note 2) and is reported as a discontinued operation in these statements. Prior
to July 3, 1997, Griffin was a wholly-owned subsidiary of Culbro Corporation
("Culbro"). On July 3, 1997, as previously approved by Culbro's Board of
Directors, Culbro distributed (the "Distribution") the common stock of Griffin
to Culbro's shareholders on a one-to-one ratio. Prior to March 18, 1997, Griffin
was known as Culbro Land Resources, Inc. The consolidated financial statements
have been presented as if Griffin had operated as an independent stand-alone
entity for all periods presented (see Note 2). Such financial statements may not
necessarily present the financial position, results of operations and cash flows
Griffin would have reported had it actually operated as a stand-alone entity
prior to the Distribution in 1997. All intercompany transactions have been
eliminated.
Griffin accounts for its investments in Centaur Communication, Ltd.
("Centaur"), Linguaphone Group plc ("Linguaphone") and real estate joint
ventures under the equity method. Results of real estate joint ventures are
included in operating profit. As a result of a recapitalization of Linguaphone
in early 1999, Griffin's common equity ownership was reduced and Griffin will
account for its investment in Linguaphone under the cost method of accounting
for investments prospectively (see Note 10).
The consolidated financial statements of Griffin for fiscal 1998 have
been restated to adjust the amounts previously reported for income from
equity investment (see Note 14).
BUSINESS SEGMENTS
Griffin is engaged in the landscape nursery and real estate businesses.
Imperial, Griffin's subsidiary in the landscape nursery segment, is engaged in
growing plants which are sold principally to garden centers, wholesalers and
merchandisers, and operating sales and service centers which sell principally to
landscapers. Griffin's real estate segment, Griffin Land, builds and manages
commercial and industrial properties and develops residential subdivisions on
its land in Connecticut and Massachusetts.
FISCAL YEAR
Griffin's fiscal year ends on the Saturday nearest November 30. Fiscal years
1998, 1997 and 1996 each contained 52 weeks and ended November 28, 1998,
November 29, 1997 and November 30, 1996, respectively.
INVENTORIES
Griffin's inventories are stated at the lower of cost or market using the
average cost method. Nursery stock includes certain inventories which will not
be sold or used within one year. It is industry practice to include such
inventories in current assets.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is determined on a
straight-line basis over the estimated useful asset lives for financial
reporting purposes and principally on accelerated methods for tax purposes.
10
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REAL ESTATE HELD FOR SALE OR LEASE
Real estate held for sale or lease is carried at cost. Interest is
capitalized during the construction period of major facilities. The capitalized
interest is recorded as part of the asset to which it relates and is amortized
over the asset's useful life. Depreciation is determined on a straight-line
basis over the estimated useful asset lives for financial reporting purposes and
principally on accelerated methods for tax purposes.
REVENUE AND GAIN RECOGNITION
In the landscape nursery business, sales and the related cost of sales are
recognized upon shipment of products. Sales returns are not material. In the
real estate business, gains on real estate sales are recognized in accordance
with SFAS No. 66, "Accounting for Sales of Real Estate."
FAIR VALUE OF FINANCIAL INSTRUMENTS
The amounts included in the financial statements for accounts receivable,
accounts payable and accrued liabilities reflect their fair values because of
the short-term maturity of these instruments. The fair values of Griffin's other
financial instruments are discussed in Note 6.
STOCK OPTIONS
Griffin accounts for stock-based compensation under Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees". In 1997,
Griffin adopted the disclosure provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation" which require disclosing the pro forma effect on
earnings and earnings per share of the fair value method of accounting for
stock-based compensation.
EARNINGS PER SHARE
In the 1998 first quarter, Griffin adopted SFAS No. 128, "Earnings Per
Share". The new standard requires direct presentation of net income per common
share and net income per common share assuming dilution on the face of the
statement of operations.
Prior to July 3, 1997, Griffin was a wholly-owned subsidiary of Culbro.
Accordingly, per share results for 1997 are presented on a pro forma basis.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform with the
current year presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and revenue and expenses during the period reported. Actual results
could differ from those estimates.
11
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. CERTAIN TRANSACTIONS
On February 27, 1997, Griffin, Culbro and General Cigar Holdings, Inc. ("GC
Holdings"), a Culbro subsidiary, entered into a Distribution Agreement (the
"Distribution Agreement"). Pursuant to the Distribution Agreement, Culbro
transferred (the "Asset Transfers") to Griffin substantially all the non-tobacco
related assets of Culbro, including: (i) all of the outstanding common stock of
Imperial Nurseries, Inc., then a wholly-owned subsidiary of Culbro; (ii)
approximately 5,500 acres of land in Connecticut and Florida, as well as nursery
sales and service centers; (iii) Culbro's interests in, and assets previously
owned by, Eli Witt; (iv) Culbro's approximately 25% interest in Centaur; and (v)
all licenses, permits, accounts receivable, prepaid expenses, reserves and other
assets (other than cash) related to the real estate and landscape nursery
businesses. The Distribution Agreement provided for (i) the consummation of the
Asset Transfers described above, (ii) the Distribution of Griffin's common stock
to the existing shareholders of Culbro following the initial public offering
(the "Offering") of GC Holdings Class A Common Stock, and (iii) following the
Distribution, the merger of Culbro, subject to certain conditions, with and into
GC Holdings (the "Merger"). The Merger was completed on August 29, 1997.
The Distribution Agreement also provided for the assumption by Griffin of
all the liabilities related to the businesses and assets transferred to Griffin
from Culbro. Pursuant to the Distribution Agreement, Griffin was also allocated
$7 million in cash. All of the transferred assets and related liabilities are
included in the accompanying consolidated financial statements at Culbro's
historical cost.
Under the terms of the Distribution Agreement, on February 27, 1997, GC
Holdings assumed all of Culbro's general corporate debt and certain other
liabilities, including retirement obligations, which were included in Griffin's
historical financial statements through that date (the "Liability Assumption").
The following consolidated condensed unaudited pro forma statement of operations
for 1997 gives effect to the Liability Assumption by GC Holdings as if it
occurred at the beginning of that fiscal year. The pro forma financial
information presented may not necessarily reflect the results of operations had
this transaction actually taken place on the assumed date.
CONSOLIDATED CONDENSED PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
1997
---------
Net sales.......................................................................... $ 46,288
---------
Operating loss..................................................................... (3,236)
Interest expense, net.............................................................. 6
---------
Loss before income tax benefit..................................................... (3,242)
Income tax benefit................................................................. (1,200)
---------
Loss before equity investments..................................................... (2,042)
Income from equity investments..................................................... 366
---------
Net loss........................................................................... $ (1,676)
---------
---------
Basic net loss per share........................................................... $ (0.35)
---------
---------
Diluted net loss per share......................................................... $ (0.35)
---------
---------
12
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. CERTAIN TRANSACTIONS (CONTINUED)
On November 8, 1996, the sale of Griffin's labeling and packaging systems
business, CMS Gilbreth, was completed. Net proceeds, after sale expenses, were
$35.0 million, and Griffin recorded a pretax loss of $5.5 million on the sale,
net of operating profit of $1.6 million earned during the phase-out period. The
sale proceeds were used to repay debt. CMS Gilbreth is reported as a
discontinued operation in the accompanying financial statements. Net sales of
CMS Gilbreth were $43.6 million in 1996 through the date of sale.
3. INDUSTRY SEGMENT INFORMATION
Griffin has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." Griffin's reportable segments are defined
by their products and services, and are comprised of the landscape nursery and
real estate segments (see Note 1). Griffin has no operations outside the United
States. Griffin's export sales and transactions between segments are not
material.
1998 1997 1996
---------- ---------- ----------
NET SALES AND OTHER REVENUE
Landscape nursery............................................................ $ 48,180 $ 42,618 $ 37,045
Real estate.................................................................. 3,051 3,670 9,486
---------- ---------- ----------
$ 51,231 $ 46,288 $ 46,531
---------- ---------- ----------
---------- ---------- ----------
OPERATING PROFIT (LOSS)
Landscape nursery (a)........................................................ $ 2,277 $ (1,433) $ 1,650
Real estate.................................................................. (320) (202) (300)
---------- ---------- ----------
Industry segment totals...................................................... 1,957 (1,635) 1,350
General corporate expense, net (b)........................................... 1,883 1,601 2,595
Other nonoperating income, net............................................... -- -- 1,917
Interest income (expense), net............................................... 113 (736) (7,805)
---------- ---------- ----------
Income (loss) before income tax provision (benefit).......................... $ 187 $ (3,972) $ (7,133)
---------- ---------- ----------
---------- ---------- ----------
IDENTIFIABLE ASSETS
Landscape nursery............................................................ $ 46,881 $ 46,558 $ 44,113
Real estate.................................................................. 35,480 31,320 31,499
---------- ---------- ----------
Industry segment totals...................................................... 82,361 77,878 75,612
General corporate............................................................ 22,369 25,858 26,163
---------- ---------- ----------
$ 104,730 $ 103,736 $ 101,775
---------- ---------- ----------
---------- ---------- ----------
(a) Results in the landscape nursery segment in 1997 include a charge of $3.3
million to reserve for certain plant inventories. Approximately 75% of the
charge relates to field grown plant inventories in which the carrying cost
will not be recovered as a result of horticultural problems and market
conditions. Imperial is continuing to phase out its field grown program. The
remaining portion of the charge relates principally to certain container
grown plant inventories which did not mature properly.
13
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
3. INDUSTRY SEGMENT INFORMATION (CONTINUED)
(b) General corporate expense in 1996 includes an allocation to Griffin by
Culbro of $0.9 million for the termination of an incentive compensation
plan, severance and other expenses in contemplation of the Distribution (see
Note 2).
CAPITAL EXPENDITURES DEPRECIATION AND AMORTIZATION
------------------------------- -------------------------------
1998 1997 1996 1998 1997 1996
--------- --------- --------- --------- --------- ---------
Landscape nursery............................................... $ 1,144 $ 861 $ 1,258 $ 1,212 $ 1,145 $ 1,116
Real estate..................................................... 6,188 957 712 775 772 889
--------- --------- --------- --------- --------- ---------
Industry segment totals......................................... 7,332 1,818 1,970 1,987 1,917 2,005
General Corporate............................................... 14 71 -- 17 4 400
--------- --------- --------- --------- --------- ---------
$ 7,346 $ 1,889 $ 1,970 $ 2,004 $ 1,921 $ 2,405
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
See Note 10 for information on Griffin's equity investments in Centaur and
Linguaphone.
4. RELATED PARTY TRANSACTIONS
Prior to the Distribution in 1997, Griffin, as lessor, and General Cigar
Co., Inc. ("General Cigar"), a wholly owned subsidiary of GC Holdings, as
lessee, entered into a lease for certain agricultural land in Connecticut and
Massachusetts (the "Agricultural Lease"). The Agricultural Lease is for
approximately 500 acres of arable land held by Griffin for possible development
in the long term, but which is being used by General Cigar for growing
Connecticut Shade wrapper tobacco. General Cigar's use of the land is limited to
the cultivation of cigar wrapper tobacco. The Agricultural Lease has an initial
term of ten years and provides for the extension of the lease for additional
periods thereafter. In addition, at Griffin's option, the Agricultural Lease may
be terminated with respect to 100 acres of such land annually upon one year's
prior notice. The rent payable by General Cigar under the Agricultural Lease is
approximately equal to the aggregate amount of all taxes and other assessments
payable by Griffin attributable to the land leased.
Also in 1997, Griffin, as lessor, and General Cigar, as lessee, entered into
a lease for approximately 40,000 square feet of office space in the Griffin
Center South office complex in Bloomfield, Connecticut (the "Commercial Lease").
The Commercial Lease has an initial term of ten years and provides for the
extension of the lease for additional annual periods thereafter. Management
believes the rent payable by General Cigar to Griffin under the Commercial Lease
is at market rates.
5. INCOME TAXES
For all periods prior to the Distribution, Griffin's results of operations
were included in Culbro's consolidated U.S. federal income tax returns and all
tax liabilities were paid by Culbro. Subsequent to the Distribution, Griffin has
filed separate tax returns from its former parent company. Griffin's income tax
provisions and deferred tax assets and liabilities in the accompanying financial
statements have been calculated in accordance with SFAS No. 109 "Accounting for
Income Taxes" as if Griffin had filed
14
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5. INCOME TAXES (CONTINUED)
separate tax returns for the periods prior to the Distribution. The income tax
provision (benefit) for 1998, 1997 and 1996 are summarized as follows:
Continuing operations: 1998 1997 1996
--------- --------- ---------
Current federal.................................................. $ (246) $ (680) $ 1,788
Current state and local.......................................... 170 (208) 138
Deferred, principally federal.................................... 177 (582) (4,693)
--------- --------- ---------
Income tax provision (benefit) from continuing operations.......... $ 101 $ (1,470) $ (2,767)
--------- --------- ---------
Discontinued operation:
Current federal.................................................. -- -- (553)
Current state and local.......................................... -- -- (277)
Deferred, principally federal.................................... -- -- (2,825)
--------- --------- ---------
Income tax benefit from discontinued operation..................... -- -- (3,655)
--------- --------- ---------
Total income tax provision (benefit)............................... $ 101 $ (1,470) $ (6,422)
--------- --------- ---------
--------- --------- ---------
The reasons for the difference between the United States statutory income
tax rate and the effective rates for continuing operations are shown in the
following table:
1998 1997 1996
--------- --------- ---------
Tax provision (benefit) at statutory rates.......................................... $ 64 $ (1,350) $ (2,497)
State and local taxes............................................................... 111 (137) 90
Other............................................................................... (74) 17 (360)
--------- --------- ---------
$ 101 $ (1,470) $ (2,767)
--------- --------- ---------
--------- --------- ---------
The significant components of Griffin's deferred tax asset and liability are
as follows:
1998 1997
--------- ---------
Inventory......................................................................... $ 2,532 $ 2,391
Accrued expenses.................................................................. 688 453
--------- ---------
Deferred tax asset................................................................ $ 3,220 $ 2,844
--------- ---------
--------- ---------
1998 1997
--------- ---------
Depreciation...................................................................... $ 2,256 $ 2,250
NOL carryover..................................................................... (1,568) (1,414)
Other............................................................................. 409 150
--------- ---------
Deferred tax liability............................................................ $ 1,097 $ 986
--------- ---------
--------- ---------
15
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5. INCOME TAXES (CONTINUED)
As of November 28, 1998, Griffin has available for income tax purposes
approximately $3.8 million in federal net operating loss carryforwards which may
be used to offset future taxable income. These loss carryforwards begin to
expire in fiscal year 2012.
In connection with the Distribution, Culbro and Griffin entered into a Tax
Sharing Agreement which provided, among other things, for the allocation between
Culbro and Griffin of federal, state, local and foreign tax liabilities for all
periods through the Distribution. With respect to the consolidated tax returns
filed by Culbro, the Tax Sharing Agreement provides that Griffin will be liable
for any amounts that it would have been required to pay with respect to any
deficiencies assessed, generally as if it had filed separate tax returns.
6. LONG-TERM DEBT
Long-term debt includes:
NOV. 28, NOV. 29,
1998 1997
--------- ---------
Mortgages...................................................................................... $ 2,495 $ 2,573
Capital leases................................................................................. 493 501
Credit Agreement............................................................................... -- --
--------- ---------
Total.......................................................................................... 2,988 3,074
Less: due within one year...................................................................... 322 244
--------- ---------
Total long-term debt........................................................................... $ 2,666 $ 2,830
--------- ---------
--------- ---------
As of November 28, 1998, the annual principal payment requirements under the
terms of the mortgages are $0.1 million for each of the years 1999 through 2003.
The mortgages are on two office buildings and three industrial buildings which
had a combined net book value of $3.6 million at November 28, 1998. The interest
rates on these mortgages range from 9.0% to 10.2%.
On May 6, 1998, Imperial entered into a Revolving Credit Agreement (the
"Credit Agreement") with a bank which provides a seasonally adjusted line of
credit up to $10 million to supplement Imperial's cash flow from operations, as
required. Borrowings under the Credit Agreement may be, at Imperial's option, on
an overnight basis or for periods of one, two, three or six months. Overnight
borrowings bear interest at the bank's prime rate. Borrowings of one month and
longer bear interest at the London Interbank Offered Rate plus a margin of
1.75%. The Credit Agreement terminates in June, 1999, and there are no
compensating balance requirements. Imperial pays a commitment fee of
1/4 of 1% per annum on unused borrowing capacity. The Credit Agreement is
collateralized principally by Imperial's accounts receivable and inventories,
and is guaranteed by Griffin. The Credit Agreement contains financial covenants
with respect to Imperial's net worth, fixed charge coverage (as defined),
capital expenditures and cash distributions to Griffin. There were no borrowings
under the Credit Agreement during 1998.
Management believes that the amounts reflected on the balance sheet for its
mortgages reflect their current market values based on market interest rates for
comparable risks, maturities and collateral.
16
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
7. RETIREMENT BENEFITS
SAVINGS PLAN
In connection with the Distribution, Griffin established the Griffin Land &
Nurseries, Inc. 401(k) Savings Plan ("Griffin Savings Plan") for its employees.
Prior to the Distribution, Griffin's employees participated in the Culbro
Corporation 401(k) Savings Plan ("Culbro Savings Plan"). Subsequent to the
Distribution, amounts related to Griffin employees in the Culbro Savings Plan
were transferred to the Griffin Savings Plan. The Griffin Savings Plan is a
defined contribution plan whereby Griffin matches 60% of each employee's
contribution, up to a maximum of 5% of base salary. Griffin's contributions to
the Griffin Savings Plan and, prior to the Distribution, to the Culbro Savings
Plan were $0.2 million in fiscal 1998 and $0.1 million per year in fiscal 1997
and fiscal 1996. The matching percentage by Griffin of each employee's
contribution is greater under the Griffin Savings Plan as compared to the Culbro
Savings Plan.
OTHER POSTRETIREMENT BENEFITS
Through the Distribution, Griffin's employees participated in Culbro's
postretirement benefits program which provides principally health and life
insurance benefits to certain of its retired employees. The annual cost of such
benefits attributable to Griffin's employees under the plan's benefit formula
was approximately $0.1 million per year in fiscal 1998, fiscal 1997 and fiscal
1996. In accordance with the Distribution Agreement, the liabilities for Griffin
employees who had retired prior to the Distribution and the liabilities for
employees related to businesses no longer a part of Griffin were assumed by GC
Holdings. The liability for postretirement benefits for certain of Griffin's
active employees at the time of the Distribution remains with Griffin and is
included in other noncurrent liabilities on the consolidated balance sheet.
The components for Griffin's postretirement benefits expense is as follows:
1998 1997
--------- ---------
Service cost--benefits earned during the year..................................................... $ 18 $ 26
Interest on accumulated post retirement benefit obligation........................................ 22 16
--------- ---------
Total expense..................................................................................... $ 40 $ 42
--------- ---------
--------- ---------
Griffin's liability for postretirement benefits, as determined by the Plan's
actuaries, is shown below. None of these liabilities have been funded at
November 28, 1998 and November 29, 1997.
1998 1997
--------- ---------
Retirees.......................................................................................... $ -- $ --
Fully eligible active participants................................................................ 98 78
Other active participants......................................................................... 272 201
Unrecognized net gain from experience differences and assumption changes.......................... (58) (7)
--------- ---------
Liability for other postretirement benefits....................................................... $ 312 $ 272
--------- ---------
--------- ---------
Discount rates of 7.15% and 7.50% were used to compute the accumulated
postretirement benefit obligations at November 28, 1998 and November 29, 1997,
respectively. Because Griffin's obligation for
17
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
7. RETIREMENT BENEFITS (CONTINUED)
retiree medical benefits is fixed, any increase in the medical cost trend would
have no effect on the accumulated postretirement benefit obligation, service
cost or interest cost.
PENSION PLAN
Through the Distribution, Griffin's employees participated in Culbro's
noncontributory defined benefit pension plan. Pension expense of $0.1 million
per year for fiscal 1997 through the Distribution and fiscal 1996 is included in
the consolidated statement of operations, and reflects Griffin's direct share of
Culbro's consolidated pension expense based on the benefit costs attributable to
Griffin's employees, as determined by the plan's actuaries.
In accordance with the Distribution Agreement, the pension plan was assumed
by GC Holdings. Effective at the time of the Distribution, Griffin terminated
its participation in the plan, and Griffin's employees' years of service and
benefits accrued at that time were frozen at the date of termination.
Accordingly, Griffin has not incurred pension expense subsequent to the
Distribution. All vested pension obligations as of the date of the Distribution
Agreement for Griffin's current and former employees were assumed by GC
Holdings.
8. STOCKHOLDERS' EQUITY
Activity in Griffin's stockholders' equity accounts subsequent to the
Distribution was as follows:
ADDITIONAL
COMMON PAID ACCUMULATED
STOCK IN CAPITAL DEFICIT
----------- -------------- ------------
Reclassification of Culbro Investment account on July 3, 1997............ $ 46 $ 91,722 $ --
Exercise of stock options, including $821 income tax benefit............. 1 1,228 --
Net loss subsequent to Distribution...................................... -- -- (2,474)
----- ------- ------------
Balance at November 29, 1997............................................. $ 47 $ 92,950 $ (2,474)
Exercise of stock options, including $451 income tax benefit............. 1 541 --
Net loss (as Restated, see Note 14)...................................... -- -- (65)
----- ------- ------------
Balance at November 28, 1998 (as Restated, see Note 14).................. $ 48 $ 93,491 $ (2,539)
----- ------- ------------
----- ------- ------------
PER SHARE RESULTS
Per share results for 1997 are pro forma because Griffin was a wholly-owned
subsidiary of Culbro during a portion of that year, and have been restated to
present basic and diluted per share results consistent with Griffin's required
adoption of Statement of Financial Accounting Standard No. 128, "Earnings per
Share" at the beginning of fiscal 1998. Basic and diluted per share results were
based on the following information:
18
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
8. STOCKHOLDERS' EQUITY (CONTINUED)
1998
(As Restated)
(Note 14) 1997
---------- -----------
Net loss as reported for computation of basic per share results........................ $ (65) $ (2,136)
Adjustment to net loss for assumed exercise of options of equity investee
(Centaur)............................................................................ (91) (12)
---------- -----------
Adjusted net loss for computation of diluted per share results......................... $ (156) $ (2,148)
---------- -----------
---------- -----------
1997
1998 (PRO FORMA)
---------- -----------
Weighted average shares outstanding for computation of basic and diluted
per share results.................................................................... 4,776,000 4,730,000
---------- -----------
---------- -----------
GRIFFIN STOCK OPTION PLAN
In 1997, Griffin established the Griffin Land & Nurseries, Inc. 1997 Stock
Option Plan (the "Griffin Stock Option Plan"), which made available a total of
700,000 options to purchase shares of Griffin common stock. Options granted
under the Griffin Stock Option Plan may be either incentive stock options or
non-qualified stock options. Incentive stock options issued under the Griffin
Stock Option Plan will satisfy certain Internal Revenue Code requirements
applicable thereto. Of such 700,000 options, 250,000 were made available for
issuance with respect to new options that may be granted to certain officers,
employees, consultants and directors of Griffin following the Distribution. The
remaining options were made available for the conversion of the Culbro options
to Griffin options at the time of the Distribution. Upon completion of the
Distribution, Culbro converted all employee stock options then outstanding under
Culbro's stock option plans into options to purchase shares of common stock of
Griffin, par value $0.01 per share, and options to purchase shares of common
stock of Culbro. The number of outstanding options and exercise prices were
adjusted to preserve the value of the Culbro options. At the time of the
Distribution, there were 438,202 Culbro stock options outstanding under various
Culbro stock option plans and an employment agreement with an officer of Culbro.
A portion of the options outstanding under the Culbro plans were able to be
exercised as incentive stock options, which under current tax laws will not
provide any tax deductions to Griffin. All Culbro options held by Culbro
employees who did not become employees of Griffin were vested as of the
Distribution date. None of the options outstanding at November 28, 1998 may be
exercised as stock appreciation rights.
The Griffin Stock Option Plan is administered by the Compensation Committee
of the Board of Directors of Griffin. A summary of the activity under the
Griffin Stock Option Plan is as follows:
19
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
8. STOCKHOLDERS' EQUITY (CONTINUED)
WEIGHTED AVG
NUMBER OF EXERCISE
SHARES PRICE
----------- -------------
Culbro options converted to Griffin options at time of Distribution.................... 438,202 $3.01
Options granted by Griffin............................................................. 229,000 14.68
Exercised in 1997...................................................................... (184,481) 2.21
----------- -------------
Outstanding at November 29, 1997....................................................... 482,721 8.86
Exercised in 1998...................................................................... (99,114) 0.92
Cancelled in 1998...................................................................... (20,000) 14.68
----------- -------------
Outstanding at November 28, 1998....................................................... 363,607 $10.66
----------- -------------
----------- -------------
Number of option holders at November 28, 1998.......................................... 16
-----------
-----------
WEIGHTED AVG.
OUTSTANDING AT EXERCISE
RANGE OF EXERCISE PRICES NOV. 28, 1998 PRICE
- --------------------------------------------------------------- -------------- -------------
Under $3.00.................................................... 54,435 $ 1.01
$3.00-$9.00.................................................... 100,172 $ 7.52
Over $13.00.................................................... 209,000 $ 14.68
-------
363,607
-------
-------
Options granted by Griffin in 1997 vest in equal installments on the third,
fourth and fifth anniversaries from the date of grant. At November 28, 1998,
153,401 options outstanding under the Griffin Stock Option Plan were vested with
a weighted average price of $5.32 per share.
In January 1999, Griffin's Board of Directors approved an amendment which
made available an additional 300,000 shares for grant under the Griffin Stock
Option Plan. The Board approved a total of 248,100 options to be granted at
the market price at time of grant. Such amendment was approved by Griffin's
stockholders.
STOCK-BASED COMPENSATION
Griffin accounts for stock options under Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees," and has adopted the
disclosure provisions of SFAS No. 123 which require disclosing the pro forma
effect on earnings and earnings per share of the fair value method of accounting
for stock-based compensation. Griffin's results would have been the following
pro forma amounts under the method prescribed by SFAS No. 123.
1998
(As Restated)
(Note 14) 1997
--------- ---------
Net loss as reported.......................................................................... $ (65) $ (2,136)
Net loss, pro forma (unaudited)............................................................... $ (245) $ (2,228)
Basic net loss per common share, as reported.................................................. $ (0.01) $ (0.45)
Basic net loss per common share, pro forma (unaudited)........................................ $ (0.05) $ (0.47)
Diluted net loss per common share, as reported................................................ $ (0.03) $ (0.45)
Diluted net loss per common share, pro forma (unaudited)...................................... $ (0.07) $ (0.47)
20
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
8. STOCKHOLDERS' EQUITY (CONTINUED)
The weighted average fair value of each option granted during 1997 was
$6.10, estimated as of the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions; expected volatility of
approximately 35%; risk free interest rate of 6.15%; expected option term of 5
years and no dividend yield for all options issued. Because the options were
granted in 1997 immediately after the Distribution of Griffin common stock by
Culbro, the expected option term was developed using Culbro's historical grant
and exercise information.
9. LEASES
CAPITAL LEASES
Future minimum lease payments under capital leases for transportation
equipment and the present value of such payments as of November 28, 1998 were:
1999................................................................. $ 260
2000................................................................. 162
2001................................................................. 87
2002................................................................. 37
---------
Total minimum lease payments......................................... 546
Less: amounts representing interest.................................. 53
---------
Present value of minimum lease payments (a).......................... $ 493
---------
---------
(a) Includes current portion of $0.2 million at November 28, 1998.
At November 28, 1998 and November 29, 1997, machinery and equipment included
capital leases amounting to $0.5 million, which is net of accumulated
amortization of $1.6 million at both November 28, 1998 and November 29, 1997.
Amortization expense relating to capital leases was $0.2 million per year in
fiscal 1998, fiscal 1997 and fiscal 1996.
OPERATING LEASES
Future minimum rental payments for the next five years under noncancelable
leases as of November 28, 1998 were:
1999................................................................ $ 493
2000................................................................ 368
2001................................................................ 257
2002................................................................ 187
2003................................................................ 87
---------
Total minimum lease payments........................................ $ 1,392
---------
---------
Total rental expense for all operating leases was $0.5 million, $0.4 million
and $0.3 million in fiscal 1998, fiscal 1997 and fiscal 1996, respectively.
21
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
9. LEASES (CONTINUED)
As lessor, Griffin Land's real estate activities include the leasing of
office and industrial space in Connecticut. Future minimum rentals to be
received under noncancelable leases as of November 28, 1998 were:
1999............................................................... $ 2,553
2000............................................................... 2,354
2001............................................................... 2,299
2002............................................................... 1,535
2003............................................................... 1,058
Later years........................................................ 1,981
---------
Total minimum rental revenue....................................... $ 11,780
---------
---------
Total rental revenue from all leases was $2.3 million, $1.9 million and $2.5
million in fiscal 1998, fiscal 1997 and fiscal 1996, respectively.
10. EQUITY INVESTMENTS
INVESTMENT IN CENTAUR
In accordance with the Asset Transfers (see Note 2), Culbro transferred to
Griffin its ownership of approximately 25% of the outstanding common stock of
Centaur, which is primarily engaged in the publishing business in the United
Kingdom.
On August 4, 1998, Griffin purchased 500,000 shares of Centaur common stock
from another stockholder of Centaur for approximately $2.9 million. Griffin's
purchase was in connection with transactions whereby the stockholder who sold
the Centaur common stock to Griffin also sold its remaining Centaur common stock
to a third party, and Centaur purchased approximately 4.8 million shares of its
common stock from certain of its other stockholders at the same per share price
paid by Griffin. As a result of these transactions, Griffin now holds
approximately 5.4 million shares of the 15.2 million shares of Centaur common
stock outstanding after these transactions.
Substantially all of the book value of Griffin's investment in Centaur
represents the excess of the cost of Griffin's investment over the book value of
its equity in Centaur (representing the value of publishing rights and goodwill)
and is being amortized on a straight-line basis over 30 to 40 years, which
commenced in 1985.
Centaur reports on a June 30 fiscal year. The unaudited summarized
financial data presented below was derived from Centaur's audited
consolidated financial statements, adjusted to report on a fiscal year
consistent with Griffin. Centaur's consolidated financial statements 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 14, reflects adjustments to reflect Centaur's
results in accordance with generally accepted accounting principles in the
United States. Such adjustments included an expense in fiscal 1997 for stock
option compensation of which Griffin's allocable share was $0.6 million.
Centaur's consolidated
22
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
10. EQUITY INVESTMENTS (CONTINUED)
results of operations presented below include the results of Linguaphone prior
to the distribution, in September 1997, of Linguaphone's common stock to
Centaur's stockholders (see below).
TWELVE MONTHS ENDED,
-------------------------------
NOV. 28,
1998
(As Restated) NOV. 29, NOV. 30,
(Note 14 1997 1996
--------- --------- ---------
Net sales........................................................................ $ 72,315 $ 85,713 $ 69,450
Costs and expenses............................................................... 64,390 79,948 65,932
--------- --------- ---------
Income before taxes.............................................................. 7,925 5,765 3,518
Income taxes..................................................................... 3,322 3,217 1,544
--------- --------- ---------
Net income....................................................................... $ 4,603 $ 2,548 $ 1,974
--------- --------- ---------
--------- --------- ---------
NOV. 28,
1998
(As Restated) NOV. 29,
(Note 14) 1997
--------- ---------
Current assets................................................................... $ 20,637 $ 27,345
Intangible assets................................................................ 8,752 7,510
Other noncurrent assets.......................................................... 8,074 7,015
--------- ---------
Total assets..................................................................... $ 37,463 $ 41,870
--------- ---------
--------- ---------
Current liabilities.............................................................. $ 23,186 $ 18,844
Debt............................................................................. 19,800 --
Noncurrent liabilities........................................................... 3,493 6,549
--------- ---------
Total liabilities................................................................ 46,479 25,393
Shareholders' equity (deficit)................................................... (9,016) 16,477
--------- ---------
Total liabilities and shareholders' equity (deficit)............................. $ 37,463 $ 41,870
--------- ---------
--------- ---------
INVESTMENT IN LINGUAPHONE
Prior to September 1997, Linguaphone was a wholly-owned subsidiary of
Centaur. In September 1997, the common stock of Linguaphone was distributed to
the Centaur stockholders. At the time the Linguaphone common stock was
distributed to Centaur's stockholders, Griffin held approximately 25% of the
outstanding common stock of Centaur. Accordingly, Griffin held approximately 25%
of the Linguaphone common stock outstanding after its distribution by Centaur.
Linguaphone reports on a June 30 fiscal year. The unaudited summarized
financial data presented below was derived from Linguaphone's audited financial
statements adjusted to report on a fiscal year consistent with Griffin.
Linguaphone's financial statements are prepared in accordance with generally
accepted accounting principles in the United Kingdom. Griffin's equity loss
reflects certain adjustments
23
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
10. EQUITY INVESTMENTS (CONTINUED)
to reflect Linguaphone's results in accordance with generally accepted
accounting principles in the United States.
TWELVE MONTHS ENDED
--------------------
NOV. 28, NOV. 29,
1998 1997
--------- ---------
Net sales................................................................................... $ 23,935 $ 25,781
Costs and expenses.......................................................................... 28,035 25,145
--------- ---------
(Loss) income before tax.................................................................... (4,100) 636
Income taxes................................................................................ 180 586
--------- ---------
Net (loss) income........................................................................... $ (4,280) $ 50
--------- ---------
--------- ---------
NOV. 28, NOV. 29,
1998 1997
--------- ---------
Current assets.............................................................................. $ 14,050 $ 18,460
Intangible assets........................................................................... 3,090 3,001
Noncurrent assets........................................................................... 995 1,393
--------- ---------
Total assets................................................................................ $ 18,135 $ 22,854
--------- ---------
--------- ---------
Current liabilities......................................................................... $ 10,342 $ 10,449
Noncurrent liabilities...................................................................... 25 228
--------- ---------
Total liabilities........................................................................... 10,367 10,677
Shareholders' equity........................................................................ 7,768 12,177
--------- ---------
Total liabilities and shareholders' equity.................................................. $ 18,135 $ 22,854
--------- ---------
--------- ---------
Subsequent to the end of fiscal 1998, Linguaphone completed a share offering
in which Griffin participated to a limited extent. As a result of the issuance
of additional shares of Linguaphone common stock, Griffin's common equity
ownership was reduced to approximately 14% of Linguaphone's outstanding common
stock after the offering. As a result, Griffin will account for its investment
in Linguaphone under the cost method of accounting for investments subsequent to
this reduction in its common equity ownership interest in Linguaphone.
REAL ESTATE JOINT VENTURES
Included in other assets at November 28, 1998 and November 29, 1997, is $3.1
million and $3.3 million, respectively, for Griffin's 30% interest in a real
estate joint venture that owns commercial properties in Connecticut. Results of
this investment are included in operating profit. In 1996, all of the assets of
another real estate joint venture were sold. Griffin received net proceeds of
approximately $4.0 million from the sale and recorded a pretax loss on the sale
of approximately $0.4 million in 1996.
24
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
11. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
OTHER NONOPERATING INCOME, NET
Included in other nonoperating income, net, in fiscal 1996, was the accrual
of dividend and accretion income on the preferred stock of Eli Witt that was
held by Griffin, which was equal to the interest expense on the subordinated
note, that was satisfied by the exchange of the preferred stock in 1996.
INVENTORIES
NOV. 28, NOV. 29,
Inventories consist of: 1998 1997
--------- ---------
Nursery stock................................................. $ 24,329 $ 23,224
Finished goods................................................ 1,420 1,255
Materials and supplies........................................ 997 864
--------- ---------
$ 26,746 $ 25,343
--------- ---------
--------- ---------
PROPERTY AND EQUIPMENT
Property and equipment consist of:
ESTIMATED USEFUL NOV. 28, NOV. 29,
LIVES 1998 1997
---------------- ---------- ----------
Land and improvements............................... $ 6,336 $ 6,205
Buildings........................................... 10 to 40 years 3,871 3,824
Machinery and equipment............................. 3 to 20 years 13,297 12,714
---------- ----------
23,504 22,743
Accumulated depreciation............................ (10,869) (10,219)
---------- ----------
$ 12,635 $ 12,524
---------- ----------
---------- ----------
Total depreciation expense related to property and equipment was $1.2
million per year in fiscal 1998, fiscal 1997 and fiscal 1996.
25
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
11. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION (CONTINUED)
REAL ESTATE HELD FOR SALE OR LEASE
Real estate held for sale or lease consists of:
ESTIMATED USEFUL NOV. 28, NOV. 29,
LIVES 1998 1997
---------------- ---------- ----------
Land................................................ $ 4,808 $ 4,808
Land improvements................................... 14,480 10,967
Buildings........................................... 40 years 19,687 17,438
---------- ----------
38,975 33,213
Accumulated depreciation............................ (7,456) (6,784)
---------- ----------
$ 31,519 $ 26,429
---------- ----------
---------- ----------
In fiscal 1998, Griffin capitalized interest of approximately $0.1 million.
There was no interest capitalized in fiscal 1997 and fiscal 1996. Total
depreciation expense related to real estate held for sale or lease was $0.7
million per year in fiscal 1998 and fiscal 1997 and $0.8 million per year in
fiscal 1996.
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses include trade payables of $3.7 million
and $3.0 million at November 28, 1998 and November 29, 1997, respectively;
accrued salaries, wages and other compensation of $0.8 million and $0.6 million
at November 28, 1998 and November 29, 1997, respectively; and other accrued
liabilities of $1.1 million and $1.3 million at November 28, 1998 and November
29, 1997, respectively.
SUPPLEMENTAL CASH FLOW INFORMATION
Griffin incurred capital lease obligations of $0.2 million per year in
fiscal 1998, fiscal 1997 and fiscal 1996.
Prior to the Distribution in 1997, interest and tax payments were made by
Culbro on behalf of Griffin. Griffin was included in Culbro's consolidated
federal income tax returns through the Distribution (see Note 5). Accordingly,
tax and interest payments made by Culbro through the Distribution are reflected
in Net Transactions with Culbro on the consolidated statement of cash flows. Tax
payments were approximately $0.1 million in fiscal 1998. Interest payments, net
of capitalized interest in 1998, were $0.2 million, $1.0 million and $5.9
million in fiscal 1998, fiscal 1997 and fiscal 1996, respectively, including
payments of $0.7 million and $5.4 million in fiscal 1997 and fiscal 1996,
respectively, under Culbro's general corporate debt facilities that were either
repaid by Griffin or transferred to GC Holdings pursuant to the Distribution
Agreement.
In 1996, Griffin Land exchanged a commercial property in satisfaction of the
outstanding nonrecourse mortgage on that property. Also in 1996, Griffin
exchanged preferred stock of Eli Witt that it held in satisfaction of a
subordinated note payable and all accrued interest thereon. There was no cash
paid or received in either of these transactions.
26
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Summarized quarterly financial data for fiscal 1998 presented below has
been restated from amounts previously filed in Reports on Form 10-Q as a
result of changes to amounts reported as equity income from Centaur. See
Note 14.
1998 QUARTERS 1ST 2ND 3RD 4TH TOTAL
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Net sales and other revenue................................. $ 3,514 $ 23,707 $ 11,019 $ 12,991 $ 51,231
Gross profit................................................ 1,019 6,907 3,595 3,492 15,013
Net income (loss)........................................... (1,482) 2,387 (749) (221) (65)
Basic net income (loss) per share........................... (0.31) 0.50 (0.16) (0.05) (0.01)
Diluted net income (loss) per share......................... (0.31) 0.47 (0.16) (0.05) (0.03)
1997 QUARTERS 1ST 2ND 3RD 4TH TOTAL
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Net sales and other revenue................................. $ 2,725 $ 20,905 $ 10,878 $ 11,780 $ 46,288
Gross profit................................................ 782 6,336 313 3,090 10,521
Net income (loss)........................................... (2,013) 1,989 (1,651) (461) (2,136)
Pro forma basic net income (loss) per share................. (0.43) 0.42 (0.35) (0.10) (0.45)
Pro forma diluted net income (loss) per share............... (0.43) 0.41 (0.35) (0.10) (0.45)
13. COMMITMENTS AND CONTINGENCIES
As a result of the Asset Transfers described in Note 2, Griffin acquired the
50.1% interest in Eli Witt previously held by Culbro. In 1993 and 1994, Culbro,
Eli Witt and other parties engaged in two complex acquisitions and
reorganizations, pursuant to which Culbro received significant distributions
from Eli Witt to repay debt, including substantial amounts Culbro had previously
borrowed from unaffiliated third parties to fund Eli Witt's business. Culbro
subsequently loaned $5 million to Eli Witt. In 1996, Eli Witt filed for
protection under Chapter 11 of the Federal Bankruptcy Law. In connection with
such filing, Eli Witt sold all of its operating assets to another wholesale
distributor in March 1997. Shareholders of Eli Witt did not receive any proceeds
from the sale. These transactions (including the transfer of funds to Culbro)
were reviewed by Eli Witt's creditors and other parties in interest in
connection with Eli Witt's Chapter 11 filing. On May 21, 1998, the United States
Bankruptcy Court approved a motion whereby Griffin released all of its remaining
claims against Eli Witt in exchange for the creditors of Eli Witt releasing
Griffin from any liability in connection with the Chapter 11 filing by Eli Witt
in 1996. The claims that Griffin released had been fully reserved for by Griffin
in previous years, therefore there was no effect on Griffin's 1998 financial
statements as a result of the Bankruptcy Court ruling.
Imperial has entered into contract growing agreements with suppliers of
field grown plants. In accordance with these agreements, Imperial has agreed to
purchase inventory as it becomes available with an aggregate purchase price of
approximately $2.9 million over the next four years.
14. RESTATEMENT
The consolidated financial statements of Griffin for the fiscal year
ended November 28, 1998 have been restated to adjust the amount reported for
equity income from Centaur. The restatement was required to adjust the timing
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 financial statements:
FOR THE FISCAL YEAR ENDED,
NOVEMBER 28, 1998
--------------------------
AS AS
REPORTED RESTATED
--------- ---------
Income before equity investments $ 86 $ 86
Income (loss) from equity investments 35 (151)
--------- ---------
Net Income (loss) $ 121 $ (65)
========= =========
Basic net income (loss) per share $ 0.03 $ (0.01)
========= =========
Diluted net income (loss) per share $ 0.01 $ (0.03)
========= =========
NOVEMBER 28, 1998
--------------------------
AS AS
REPORTED RESTATED
--------- ---------
Total assets $ 104,916 $ 104,730
========= =========
Stockholders' equity $ 91,186 $ 91,000
========= =========
27
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Directors of
Griffin Land & Nurseries, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations and of cash flows present
fairly, after the restatement referred to in Note 14, in all material
respects, the financial position of Griffin Land & Nurseries, Inc. and its
subsidiaries at November 28, 1998 and November 29, 1997, and the results of
their operations and their cash flows for the fiscal years ended November 28,
1998, November 29, 1997 and November 30, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the management of Griffin Land & Nurseries, Inc.; our
responsibility is to express an opinion on these financial statements based
on our audits. We did not audit the fiscal 1998 and fiscal 1997 financial
statements of Centaur Communications, Ltd., after the restatement referred to
in Note 14, an investment which is carried at equity in the consolidated
financial statements (see Notes 8, 10 and 14) and represents approximately
15.2% and 11.7%, respectively, of consolidated assets. Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for Centaur
Communications, Ltd. included in the consolidated financial statements for
the years ended November 28, 1998 and November 29, 1997, is based on the
report of the other auditors. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
February 8, 1999 except Notes 8, 10, 12 and 14 for which the date is
August 3, 2000
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-30639) of Griffin Land & Nurseries, Inc. of
our report dated February 8, 1999 except Notes 8, 10, 12 and 14 for which the
date is August 3, 2000 which appears above in this Form 10-K/A of Griffin
Land & Nurseries, Inc. for the fiscal year ended November 28, 1998. We also
consent to the incorporation by reference of our report on the financial
statement schedules, which also appears in this Form 10-K/A of Griffin Land &
Nurseries, Inc. for the fiscal year ended November 28, 1998.
/s/ PricewaterhouseCoopers LLP
August 3, 2000
28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Corporation has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.
GRIFFIN LAND & NURSERIES, INC.
By: /s/ FREDERICK M. DANZIGER
-----------------------------------------
Frederick M. Danziger
CHIEF EXECUTIVE OFFICER
By: /s/ ANTHONY J. GALICI
-----------------------------------------
Anthony J. Galici
VICE PRESIDENT, CHIEF FINANCIAL
OFFICER AND SECRETARY
Pursuant to the requirements of the Securities Exchange Act of 1934, this
annual report has been signed by the following persons on behalf of the
Corporation and in the capacities indicated as of September 15, 2000.
NAME TITLE
- ------------------------------ --------------------------
/s/ WINSTON J. CHURCHILL,
JR.
- ------------------------------ Director
Winston J. Churchill, Jr.
/s/ EDGAR M. CULLMAN
- ------------------------------ Chairman of the Board and
Edgar M. Cullman Director
/s/ FREDERICK M. DANZIGER
- ------------------------------ President, Director and
Frederick M. Danziger Chief Executive Officer
/s/ JOHN L. ERNST
- ------------------------------ Director
John L. Ernst
/s/ ANTHONY J. GALICI Vice President, Chief
- ------------------------------ Financial Officer and
Anthony J. Galici Secretary
/s/ THOMAS C. ISRAEL
- ------------------------------ Director
Thomas C. Israel
/s/ DAVID F. STEIN
- ------------------------------ Director
David F. Stein
29