SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10Q
Quarterly Report
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the 13 Weeks Ended Commission File No
March 2, 2002 0-29288
GRIFFIN LAND & NURSERIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-0868496
(state or other jurisdiction of incorporation (IRS Employer
or organization) Identification Number)
One Rockefeller Plaza, New York, New York 10020
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number including Area Code (212) 218-7910
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Number of shares of Common Stock outstanding at March 29, 2002: 4,864,916
GRIFFIN LAND & NURSERIES, INC.
Form 10Q
PART I FINANCIAL INFORMATION Page
Consolidated Statement of Operations
13 Weeks Ended March 2, 2002 and March 3, 2001 3
Consolidated Balance Sheet
March 2, 2002 and December 1, 2001 4
Consolidated Statement of Stockholders' Equity
13 Weeks Ended March 2, 2002 and March 3, 2001 5
Consolidated Statement of Cash Flows
13 Weeks Ended March 2, 2002 and March 3, 2001 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
Quantitative and Qualitative Disclosures About Market Risk 17
PART II OTHER INFORMATION 18
SIGNATURES 19
PART I
Item 1. Financial Statements
Griffin Land & Nurseries, Inc.
Consolidated Statement of Operations
(dollars in thousands, except per share data)
(unaudited)
For the 13 Weeks Ended,
---------------------------
Mar. 2, Mar. 3,
2002 2001
--------- ---------
Net sales and other revenue $ 2,599 $ 3,947
Cost of goods sold 1,856 2,926
Selling, general and administrative expenses 1,914 3,442
--------- ---------
Operating loss (1,171) (2,421)
Gain on sale of Sales and Service Centers - 9,469
Interest expense (359) (136)
Interest income 7 51
--------- ---------
(Loss) income before income tax (benefit) provision (1,523) 6,963
Income tax (benefit) provision (487) 2,750
--------- ---------
(Loss) income before equity investment (1,036) 4,213
Loss from equity investment (429) (144)
--------- ---------
Net (loss) income $ (1,465) $ 4,069
========= =========
Basic net (loss) income per common share $ (0.30) $ 0.84
========= =========
Diluted net (loss) income per common share $ (0.30) $ 0.82
========= =========
See Notes to Consolidated Financial Statements.
Griffin Land & Nurseries, Inc
Consolidated Balance Sheet
(dollars in thousands, except per share data)
(unaudited)
Mar. 2, Dec. 1,
2002 2001
-------- --------
ASSETS
Current Assets
Cash and cash equivalents $ 23 $ 23
Accounts receivable, less allowance of $134 and $132 1,273 2,437
Inventories 34,880 30,449
Deferred income taxes 1,788 1,788
Other current assets 2,612 2,667
-------- --------
Total current assets 40,576 37,364
Real estate held for sale or lease, net 49,038 49,242
Investment in Centaur Communications, Ltd. 16,583 17,012
Property and equipment, net 11,476 11,418
Other assets 9,440 9,139
-------- --------
Total assets $127,113 $124,175
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 5,117 $ 5,761
Long-term debt due within one year 438 508
-------- --------
Total current liabilities 5,555 6,269
Long-term debt 21,510 15,940
Deferred income taxes 970 1,457
Other noncurrent liabilities 3,623 3,593
-------- --------
Total liabilities 31,658 27,259
-------- --------
Commitments and contingencies
Common stock, par value $0.01 per share, 10,000,000 shares
authorized, 4,864,916 shares issued and outstanding 49 49
Additional paid-in capital 93,588 93,584
Retained earnings 1,571 3,036
Accumulated other comprehensive income 247 247
-------- --------
Total stockholders' equity 95,455 96,916
-------- --------
Total liabilities and stockholders' equity $127,113 $124,175
======== ========
See Notes to Consolidated Financial Statements.
Griffin Land & Nurseries, Inc.
Consolidated Statement of Stockholders' Equity
(dollars in thousands)
(unaudited)
Accumulated
Shares of Additional Other
Common Common Paid-in Retained Comprehensive
Stock Stock Capital Earnings Income Total
----------- ----------- -------- ---------- -------------- --------
Balance at December 2, 2000 4,862,704 $ 49 $ 93,584 $ 1,899 $ 186 $95,718
Net income - - - 4,069 - 4,069
----------- ----------- -------- ---------- -------------- --------
Balance at March 3, 2001 4,862,704 $ 49 $ 93,584 $ 5,968 $ 186 $99,787
=========== =========== ======== ========== ============== ========
Balance at December 1, 2001 4,862,704 $ 49 $ 93,584 $ 3,036 $ 247 $96,916
Exercise of employee stock
options 2,212 - 4 - - 4
Net loss - - - (1,465) - (1,465)
----------- ----------- -------- ---------- -------------- --------
Balance at March 2, 2002 4,864,916 $ 49 $ 93,588 $ 1,571 $ 247 $95,455
=========== =========== ======== ========== ============== ========
See Notes to Consolidated Financial Statements.
Griffin Land & Nurseries, Inc.
Consolidated Statement of Cash Flows
(dollars in thousands)
(unaudited)
For the 13 Weeks Ended,
-----------------------
Mar. 2, Mar. 3,
Operating activities: 2002 2001
--------- ---------
Net (loss) income $ (1,465) $ 4,069
Adjustments to reconcile net (loss) income to net cash used in
operating activities:
Depreciation and amortization 787 724
Gain on sale of Sales and Service Centers - (9,469)
Loss from equity investment 429 144
Deferred income taxes (487) (46)
Changes in assets and liabilities:
Accounts receivable 1,162 3,560
Inventories (4,431) (4,091)
Other current assets 55 (2,655)
Accounts payable and accrued liabilities (644) 554
Income taxes payable - 2,745
Other, net (115) (88)
--------- ---------
Net cash used in operating activities (4,709) (4,553)
--------- ---------
Investing activities:
Proceeds from sale of Sales and Service Centers - 18,390
Additions to real estate held for sale or lease (299) (2,937)
Additions to property and equipment (453) (290)
--------- ---------
Net cash (used in) provided by investing activities (752) 15,163
--------- ---------
Financing activities:
Increase in debt 6,000 4,675
Payments of debt (539) (12,082)
--------- ---------
Net cash provided by (used in) financing activities 5,461 (7,407)
--------- ---------
Net increase in cash and cash equivalents - 3,203
Cash and cash equivalents at beginning of period 23 1,126
--------- ---------
Cash and cash equivalents at end of period $ 23 $ 4,329
========= =========
See Notes to Consolidated Financial Statements.
Griffin Land & Nurseries, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)
1. Basis of Presentation
The unaudited consolidated financial statements of Griffin Land &
Nurseries, Inc. ("Griffin") include the accounts of Griffin's real estate
division ("Griffin Land") and Griffin's wholly-owned subsidiary, Imperial
Nurseries, Inc. ("Imperial"), and have been prepared in conformity with the
standards of accounting measurement set forth in Accounting Principles Board
Opinion No. 28 and any amendments thereto adopted by the Financial Accounting
Standards Board ("FASB"). Also, the accompanying financial statements have been
prepared in accordance with the accounting policies stated in Griffin's audited
2001 Financial Statements included in the Report on Form 10-K as filed with the
Securities and Exchange Commission on March 1, 2002, and should be read in
conjunction with the Notes to Financial Statements appearing in that report. All
adjustments, comprising only normal recurring adjustments, which are, in the
opinion of management, necessary for a fair presentation of results for the
interim periods have been reflected.
In Griffin's Form 10-K for the fiscal year ended December 1, 2001, Griffin
reported that it had restated its equity share in Centaur's results for the
thirteen weeks ended March 3, 2001. The effect of the restatement was to
decrease Griffin's equity results from Centaur and net income by $297 and
decrease basic and diluted net income per share by $0.06. The restated results
for the thirteen weeks ended March 3, 2001 are reflected herein.
The results of operations for the thirteen weeks ended March 2, 2002, are
not necessarily indicative of the results to be expected for the full
year.
Certain amounts from the prior year have been reclassified to conform to
the current presentation.
2. Recent Accounting Pronouncements
In June 2001, the FASB issued SFAS No. 142 "Goodwill and Other Intangible
Assets." Under the provisions of SFAS No. 142, goodwill will no longer be
amortized, but will be subject to a periodic test for impairment based upon fair
values. Griffin's results from its equity investment in Centaur for the
thirteen weeks ended March 2, 2002 and the thirteen weeks ended March 3, 2001
would have increased approximately $0.1 million due to the elimination of
goodwill amortization. SFAS No. 142 will be effective for Griffin in fiscal
2003.
In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement
Obligations." This new pronouncement addresses accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS No. 143 will be effective for Griffin
in fiscal 2003. Management is currently assessing the impact, if any, of this
new standard.
In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets." This new pronouncement retains the
requirements of SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of" to recognize an impairment loss
only if the carrying amount of a long-lived asset is not recoverable from its
undiscounted cash flow and measures an impairment loss as the difference between
the carrying amount and fair value of the asset. This pronouncement also
addresses the accounting for long-lived assets to be disposed of other than by
sale and long-lived assets to be disposed of by sale. SFAS No. 144 will be
effective for Griffin in fiscal 2003. Management is currently assessing the
impact, if any, of this new standard.
3. Sale of Sales and Service Centers
On January 26, 2001, Imperial completed the sale of all of the assets of
its seven wholesale sales and service centers (the "SSCs") to Shemin Nurseries,
Inc. ("Shemin"). Shemin also assumed certain liabilities related to the SSCs.
The SSCs sold a wide variety of plant material and horticultural tools and
products to the landscape trade. A portion of the products sold by the SSCs
were grown by Imperial's farming operations. Imperial's only continuing
involvement in Shemin is an approximately 13.8% ownership interest in Shemin's
parent company (see below) and a three year supply agreement pursuant to which
Shemin is obligated to purchase Imperial grown product for the SSCs. The net
book value of the assets sold and liabilities assumed by Shemin was $13.5
million. Prior to the sale of the SSCs in fiscal 2001, the net sales of the
SSCs were $1.9 million and the SSCs incurred an operating loss, before
Imperial's central overhead expenses, of $0.8 million through the date of the
sale. Imperial will continue in the landscape nursery business with its
container growing operations in Connecticut and northern Florida.
The consideration received by Imperial on the sale of the SSCs included
cash of approximately $18.4 million after expenses. Cash of $11.2 million from
the sale was used to repay all of the amount then outstanding under Griffin's
Revolving Credit Agreement. The remaining cash was used for general corporate
purposes. In addition to the cash payment, Griffin received 20,570 shares of
common stock (representing approximately 13.8% of the outstanding common stock)
of Shemin Acquisition Corporation ("Acquisition"), the parent company of Shemin.
The common stock of Acquisition is valued at $6.1 million and is included in
other assets on the accompanying balance sheet. As a result of Griffin
retaining a common equity ownership interest in Acquisition, $1.5 million of the
gain from the sale of the SSCs has been deferred, and is offset against the
investment in Acquisition on Griffin's balance sheet. Imperial accounts for its
investment in Acquisition under the cost method of accounting for investments.
The sale of the SSCs reflected the disposition of the following assets and
liabilities by Imperial:
Accounts receivable $1,407
Inventories 4,453
Other current assets 1,037
Fixed assets, net 7,393
Other assets 161
-------
14,451
Accounts payable and
accrued liabilities (719)
Capital leases (271)
--------
Net assets disposed $13,461
=======
The following unaudited Pro Forma Condensed Consolidated Statement of
Operations for the thirteen weeks ended March 3, 2001 include pro forma
adjustments to reflect the sale of the SSCs as if it had taken place at the
beginning of fiscal year 2001. Such adjustments include the elimination of
sales, cost of sales and direct operating expenses of the SSCs, the elimination
of salaries and benefits of employees terminated as a result of the sale of the
SSCs, the inclusion of sales from Imperial's growing operations to the SSCs
acquired by Shemin, the effect of the net cash proceeds on Griffin's interest
expense and interest income, and adjustment to Griffin's income tax provision.
In the opinion of management, all adjustments necessary to fairly present
this pro forma information have been made. The pro forma information does not
purport to be indicative of the results that would have been reported had this
transaction actually occurred on the date specified, nor is it indicative of
Griffin's future results.
Pro Forma Condensed Consolidated Statement of Operations (Unaudited)
For the 13 Weeks Ended
Mar. 3, 2001
-------------------------
Net sales and other revenue $ 2,064
Cost of goods sold 1,495
Selling, general and administrative expenses 2,128
-------------------------
Operating loss (1,559)
Gain on sale of Sales and Service Centers 9,469
Nonoperating income, net 75
-------------------------
Income before income tax provision 7,985
Income tax provision 3,154
-------------------------
Income before equity investment 4,831
Loss from equity investment (144)
-------------------------
Net income $ 4,687
=========================
Basic net income per share $ 0.96
=========================
Diluted net income per share $ 0.95
=========================
4. Industry Segment Information
Griffin's reportable segments are defined by their products and services,
and are comprised of the landscape nursery and real estate segments. Management
operates and receives reporting based upon these segments. Griffin has no
operations outside the United States. Griffin's export sales and transactions
between segments are not material.
For the 13 Weeks Ended,
-----------------------
Mar. 2, Mar. 3,
2002 2001
--------- ---------
Net sales and other revenue
Landscape nursery product sales $ 730 $ 2,406
Real estate sales and rental revenue 1,869 1,541
--------- ---------
$ 2,599 $ 3,947
========= =========
Operating (loss) profit
Landscape nursery $ (960) $ (1,885)
Real estate 218 (151)
--------- ---------
Industry segment totals (742) (2,036)
Gain on sale of Sales and Service Centers - 9,469
General corporate expense (429) (385)
Interest expense, net (352) (85)
--------- ---------
(Loss) income before income taxes $ (1,523) $ 6,963
========= =========
Mar. 2, Dec. 1,
Identifiable assets 2002 2001
--------- ---------
Landscape nursery $ 52,248 $ 48,908
Real estate 55,255 55,746
--------- ---------
Industry segment totals 107,503 104,654
General corporate (consists primarily of investments) 19,610 19,521
--------- ---------
$127,113 $124,175
========= =========
5. Equity Investment
Griffin accounts for its approximately 35% ownership of the outstanding
common stock of Centaur Communications, Ltd. ("Centaur") under the equity method
of accounting for investments. Centaur reports on a June 30 fiscal year. The
unaudited summarized financial data of Centaur presented below were derived from
consolidated financial information of Centaur for the three month periods ended
February 28, 2002 and February 28, 2001. Griffin's equity loss from Centaur for
each of the thirteen weeks ended March 2, 2002 and the thirteen weeks ended
March 3, 2001 includes $144 for amortization of the excess cost of Griffin's
investment over the book value of its equity in Centaur (representing publishing
rights and goodwill). Griffin's equity loss from Centaur also reflects
adjustments necessary to present Centaur's results for the three month periods
in accordance with generally accepted accounting principles in the United States
of America.
In Griffin's Form 10-K for the fiscal year ended December 1, 2001, Griffin
reported that it had restated its equity share in Centaur's results for the
thirteen weeks ended March 3, 2001. The effect of the restatement was to
decrease Griffin's equity results from Centaur and net income by $297. The
restated results are reflected herein.
Three Months Ended,
---------------------
Feb. 28, Feb. 28,
2002 2001
-------- -------
Net sales $19,082 $25,758
Costs and expenses 19,561 24,336
-------- -------
Operating (loss) profit (479) 1,422
Nonoperating expenses, principally interest 621 1,170
-------- -------
Pretax (loss) income (1,100) 252
Income tax (benefit) provision (294) 251
-------- -------
Net (loss) income $ (806) $ 1
======== =======
As of,
-------
Feb. 28, Nov. 30,
2002 2001
-------- --------
Current assets $17,963 $23,701
Intangible assets 18,781 19,157
Other noncurrent assets 11,907 11,691
-------- --------
Total assets $48,651 $54,549
======== ========
Current liabilities $24,698 $31,864
Debt 22,720 20,803
Other noncurrent liabilities 3,292 3,135
-------- --------
Total liabilities 50,710 55,802
Accumulated deficit (2,059) (1,253)
-------- --------
Total liabilities and accumulated deficit $48,651 $54,549
======== ========
6. Long-Term Debt
Long-term debt includes:
Mar. 2, Dec. 1,
2002 2001
------- -------
Mortgages $14,307 $14,779
Credit Agreement 7,000 -
Bridge Loan - 1,000
Capital leases 641 669
------- -------
Total 21,948 16,448
Less: due within one year 438 508
------- -------
Total long-term debt $21,510 $15,940
======= =======
On February 8, 2002, Griffin entered into a new $19.4 million revolving
credit agreement (the "2002 Credit Agreement") with Fleet National Bank
("Fleet"). The initial borrowings under the 2002 Credit Agreement were used to
repay the amount then outstanding ($4.5 million) under the Bridge Loan, to repay
a mortgage of $0.4 million on one of Griffin's commercial buildings and for
certain expenses related to the 2002 Credit Agreement. The 2002 Credit
Agreement will be used to finance working capital at Griffin's landscape nursery
and real estate businesses and for investment in Griffin's real estate assets.
Borrowings under the 2002 Credit Agreement may be, at Griffin's option, on an
overnight basis or for periods of one, two, three or six months. Overnight
borrowings bear interest at Fleet's prime rate plus a margin of 0.5% per annum.
Borrowings of one month and longer bear interest at the London Interbank Offered
Rate ("LIBOR") plus a margin of 2.5% per annum. The margins can be reduced if
Griffin achieves certain debt service coverage ratios (as defined). At March 2,
2002, Griffin's borrowing under the 2002 Credit Agreement had a weighted average
interest rate of 4.39%. There are no compensating balance requirements and
Griffin pays a commitment fee of 0.25% per annum on unused borrowing capacity.
The 2002 Credit Agreement is secured by certain of Griffin's real estate assets
and includes financial covenants with respect to Griffin's fixed charge coverage
(as defined), net worth and leverage.
7. Stock Options
Activity under the Griffin Land & Nurseries, Inc. 1997 Stock Option Plan
(the "Griffin Stock Option Plan") is summarized as follows:
Number of Weighted Avg.
Shares Exercise Price
---------- ---------------
Outstanding at December 1, 2001 629,307 $ 12.18
Exercised after December 1, 2001 (2,212) 1.79
---------- ---------------
Outstanding at March 2, 2002 627,095 $ 12.22
========== ===============
Number of option holders at March 2, 2002 28
==========
Weighted Avg.
Remaining
Outstanding at Weighted Avg. Contractual Life
Range of Exercise Prices Mar. 2, 2002 Exercise Price (in years)
- -------------------------------- --------------- --------------- -----------------
Under $3.00 32,223 $ 1.75 2.2
$3.00-$9.00 100,172 7.52 4.0
Over $9.00 494,700 13.85 6.5
---------------
627,095
===============
At March 2, 2002, there were vested options exercisable for 346,728 shares
outstanding under the Griffin Stock Option Plan with a weighted average price of
$11.08 per share.
8. Per Share Results
Basic and diluted per share results were based on the following:
For the 13 Weeks Ended,
-----------------------
Mar. 2, Mar. 3,
2002 2001
----------- ----------
Net (loss) income as reported for computation of basic and
diluted per share results $ (1,465) $ 4,069
=========== ==========
Weighted average shares outstanding for computation of basic
per share results 4,863,000 4,863,000
Incremental shares from assumed exercise of Griffin
stock options - 72,000
----------- ----------
Adjusted weighted average shares for computation of diluted
per share results 4,863,000 4,935,000
=========== ==========
9. Supplemental Financial Statement Information
Inventories
Inventories consist of:
Mar. 2, Dec. 1,
2002 2001
------- -------
Nursery stock $33,092 $29,514
Materials and supplies 1,788 935
------- -------
$34,880 $30,449
======= =======
Property and Equipment
Property and equipment consist of:
Estimated Mar. 2, Dec. 1,
Useful Lives 2002 2001
- -------------------------------- --------------- -------- --------
Land and improvements $ 4,185 $ 4,175
Buildings 10 to 40 years 2,969 2,960
Machinery and equipment 3 to 20 years 14,995 15,093
--------- -------
22,149 22,228
Accumulated depreciation (10,673) (10,810)
---------- --------
$ 11,476 $11,418
========= =======
Griffin incurred capital lease obligations of $39 and $238, respectively,
in the thirteen weeks ended March 2, 2002 and March 3, 2001.
Real Estate Held for Sale or Lease
Real estate held for sale or lease consists of:
March 2, 2002
-------------
Estimated Held for Held for
Useful Lives Sale Lease Total
------------- ---------- ---------- -------
Land $ 1,341 $ 3,097 $ 4,438
Land improvements 15 years - 3,948 3,948
Buildings 40 years - 40,798 40,798
Development costs 5,979 4,808 10,787
---------- ---------- --------
7,320 52,651 59,971
Accumulated depreciation - (10,933) (10,933)
---------- ---------- --------
$ 7,320 $ 41,718 $49,038
========== ========== ========
December 1, 2001
----------------
Estimated Held for Held for
Useful Lives Sale Lease Total
------------- ---------- ---------- -------
Land $ 1,342 $ 3,097 $ 4,439
Land improvements 15 years - 3,948 3,948
Buildings 40 years - 40,613 40,613
Development costs 5,991 4,744 10,735
--------- ---------- --------
7,333 52,402 59,735
Accumulated depreciation - (10,493) (10,493)
--------- ---------- --------
$ 7,333 $ 41,909 $49,242
========= ========== =======
Income Taxes
Griffin's effective rate for the income tax benefit in the thirteen weeks
ended March 2, 2002 is approximately 32%, reflecting a benefit of 34% at the
federal statutory rate partially offset by the effect of state and local taxes.
10. Contingencies
Griffin is involved, as a defendant, in various litigation matters arising
in the ordinary course of business. In the opinion of management, based on the
advice of counsel, the ultimate liability, if any, with respect to these matters
will not be material to Griffin's financial position, results of operations or
cash flows.
Item 2
Griffin Land & Nurseries, Inc.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Overview
The consolidated financial statements of Griffin include the accounts of
Griffin's subsidiary in the landscape nursery business, Imperial, and Griffin's
Connecticut and Massachusetts based real estate business ("Griffin Land").
Griffin also has an equity investment in Centaur Communications, Ltd.
("Centaur"), a magazine publishing business, based in the United Kingdom. On
January 26, 2001, Imperial completed the sale of its wholesale sales and service
centers (the "SSCs") to Shemin Nurseries, Inc. and its parent company, Shemin
Acquisition Corporation. Imperial has continued in the landscape nursery
business with its container growing operations in Connecticut and northern
Florida. Griffin's statement of operations for the thirteen weeks ended March
3, 2001 includes the results of the SSCs through the sale.
In Griffin's Form 10-K for the fiscal year ended December 1, 2001, Griffin
reported that it had restated its equity share in Centaur's results for the
thirteen weeks ended March 3, 2001. The effect of the restatement was to
decrease Griffin's equity results from Centaur and net income by $297,000, and
decrease basic and diluted net income per share by $0.06. The restated results
for the thirteen weeks ended March 3, 2001 are reflected herein.
Results of Operations
Thirteen Weeks Ended March 2, 2002 Compared to the Thirteen Weeks Ended
March 3, 2001
Griffin's net sales and other revenue decreased from $3.9 million in the
thirteen weeks ended March 3, 2001 (the "2001 first quarter") to $2.6 million
for the thirteen weeks ended March 2, 2002 (the "2002 first quarter"). The
lower net sales and other revenue reflects a decrease in net sales and other
revenue at Imperial from $2.4 million in the 2001 first quarter to $0.7 million
in the 2002 first quarter. The decrease of $1.7 million at Imperial reflects
the effect of the 2001 first quarter sale of Imperial's SSCs, which had net
sales of $1.9 million before they were sold. Excluding the effect of the SSC
net sales in the 2001 first quarter, net sales of Imperial's farming operations
increased by $0.2 million in the 2002 first quarter as compared to the 2001
first quarter. The net sales increase was due principally to relatively mild
winter weather in the current year. Net sales at Imperial are highly seasonal,
peaking in the Spring, and net sales during the Winter months that comprise
Griffin's first quarter (December through February) are not material to
Imperial's full year net sales.
Net sales and other revenue at Griffin Land increased from $1.5 million in
the 2001 first quarter to $1.9 million in the 2002 first quarter. The increase
principally reflects higher rental revenue from Griffin Land's buildings.
Revenue from Griffin's buildings increased from $1.3 million in the 2001 first
quarter to $1.8 million in the 2002 first quarter. This increase principally
reflected both leases on new buildings that were leased after the 2001 first
quarter and a net increase in square feet under lease in existing buildings. In
the 2002 first quarter, including two properties in which Griffin has a 30%
interest, Griffin Land had leases on approximately 825,000 square feet of space
as compared to leases on 550,000 square feet of space in the 2001 first quarter.
The higher rental revenue at Griffin Land was partially offset by lower revenue
from sales of residential land, which decreased by $0.2 million in the 2002
first quarter as compared to the 2001 first quarter.
Griffin incurred an operating loss of $1.2 million in the 2002 first
quarter as compared to an operating loss of $2.4 million in the 2001 first
quarter. At Imperial, the 2002 first quarter operating loss was $1.0 million as
compared to a $1.9 million operating loss in the 2001 first quarter. Imperial's
2001 first quarter operating loss included a $0.8 million operating loss
incurred by the SSCs prior to their sale. Excluding the SSCs, Imperial's
operating loss declined by $0.1 million in the 2002 first quarter as compared to
the 2001 first quarter principally as a result of lower operating expenses.
Imperial historically incurs an operating loss in the first quarter due to the
highly seasonal nature of its business.
Griffin Land had an operating profit of $0.2 million in the 2002 first
quarter as compared to an operating loss of $0.2 million in the 2001 first
quarter. The improved results from Griffin's real estate business principally
reflect the increased rental revenue in the current period. Griffin Land's
operating profit, before depreciation, from its rental properties was $1.2
million in the 2002 first quarter as compared to $0.8 million in the 2001 first
quarter. Lower general and administrative expenses at Griffin Land in the
current year's quarter, due principally to temporarily lower headcount, was
substantially offset by higher depreciation expense, due to depreciation on
buildings that were placed in service after the 2001 first quarter. Although
revenue from sales of residential land was lower in the 2002 first quarter as
compared to the 2001 first quarter, operating results were not affected, because
in both periods, the properties sold had high cost bases and did not generate
any significant profit.
Griffin's interest expense was $0.4 million in the 2002 first quarter as
compared to $0.1 million in the 2001 first quarter. The higher interest expense
principally reflects the capitalization of approximately $0.2 million of
interest in the 2001 first quarter as compared to substantially no interest
capitalized in the 2002 first quarter. This reflects the higher level of
construction activity that took place in the 2001 first quarter. Additionally,
the 2001 first quarter had a lower amount of borrowings outstanding due to a
portion of the proceeds received in that quarter from the sale of the SSCs being
used to reduce outstanding borrowings.
In the 2002 first quarter, the effective rate for Griffin's income tax
benefit was 32% as compared to an effective tax provision rate of 40% in the
2001 first quarter. The lower effective rate in the current year principally
reflects the effect of state taxes.
Griffin's equity loss related to its investment in Centaur was $0.4 million
in the 2002 first quarter as compared to an equity loss of $0.1 million in the
2001 first quarter. The lower equity results reflect lower revenue and lower
operating results at Centaur's magazine publishing business, attributed
principally to a weakened economy in the United Kingdom.
Liquidity and Capital Resources
In the 2002 first quarter, cash used in operating activities was $4.7
million as compared to $4.6 million used in operating activities in the 2001
first quarter. Investing activities provided cash of $15.2 million in the 2001
first quarter as compared to a cash usage of $0.8 million in the 2002 first
quarter. The 2001 first quarter included $18.4 million provided by the proceeds
from the sale of the SSCs, partially offset by investments in real estate and
fixed assets. Additions to real estate held for sale or lease were $0.3
million in the 2002 first quarter as compared to $2.9 million in the 2001 first
quarter. The higher level of construction activity in the 2001 first quarter
included a 165,000 square foot building in Griffin Center in Windsor,
Connecticut and a 40,000 square foot building in Griffin Center South in
Bloomfield, Connecticut. Both of these buildings were completed in the 2001
second quarter and are now leased. Capital expenditures of $0.5 million in the
2002 first quarter were principally for the ongoing expansion of Imperial's
farming operation in northern Florida.
On February 8, 2002, Griffin entered into a new $19.4 million revolving
credit agreement (the "2002 Credit Agreement") with Fleet National Bank
("Fleet"). The initial borrowing of $5.0 million under the 2002 Credit
Agreement was used to repay the amount then outstanding under a Bridge Loan, to
repay a mortgage on one of Griffin's commercial buildings and for certain
expenses related to the 2002 Credit Agreement. There was $7.0 million
outstanding on the 2002 Credit Agreement at the end of the 2002 first quarter.
The 2002 Credit Agreement has a three year term and is collateralized by certain
of Griffin's real estate assets.
In fiscal 2002, Griffin Land expects to complete the interior of its new
57,000 square foot industrial building in the New England Tradeport. The shell
of this building was built on speculation last year, and a lease for the entire
building was recently completed. Additional development in the New England
Tradeport is anticipated for later this year. Griffin Land also expects to
start construction, in the near future, on a new 50,000 square foot office
building in Griffin Center. This new building will be built on speculation.
Griffin Land also has an agreement for the sale of the remaining development
rights at its Walden Woods residential development in Windsor, Connecticut. The
completion of the sale is subject to the purchaser receiving approval from the
town's commissions for their development plans and, based on such plans, we
expect to generate approximately $3.0 million in proceeds. Approvals from the
town's commission on wetlands was recently obtained, but a suit has been filed
challenging that approval.
Griffin recently received an unfavorable court ruling on one of its suits
related to its proposed residential development in Simsbury, Connecticut. The
ruling upheld the denial by one of Simsbury's land use commissions of Griffin's
application for a wetlands activity permit in connection with its proposed
residential development in Simsbury. Griffin is evaluating the implications of
this decision, and will proceed with the other litigation related to its
development plans in Simsbury. Griffin intends to proceed with its other
residential development plans on other of its land that are also appropriate for
that use.
Griffin's operating results and cash flows in fiscal 2002 may be adversely
affected if drought conditions currently affecting the East Coast continue
through the Spring, which could affect net sales at Imperial. Management
believes that in the near term, based on the current level of operations and
anticipated growth, borrowings under the 2002 Credit Agreement and cash
generated from operations will be sufficient to finance Griffin's working
capital requirements, expected capital expenditures of the landscape nursery
business and development of its real estate assets. Over the intermediate and
long term, additional mortgage placements or additional bank credit facilities
may also be required to fund capital projects.
Forward-Looking Information
The above information in Management's Discussion and Analysis of Financial
Condition and Results of Operations includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Although Griffin believes that its plans, intentions and expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such plans, intentions or expectations will be achieved,
particularly with respect to the improvements and expansion of Imperial's farm
operations, construction of additional facilities in the real estate business,
completion of the sale of the development rights of Walden Woods and approval of
proposed residential subdivisions. The projected information disclosed herein
is based on assumptions and estimates that, while considered reasonable by
Griffin as of the date hereof, are inherently subject to significant business,
economic, competitive and regulatory uncertainties and contingencies, many of
which are beyond the control of Griffin.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of changes in value of a financial
instrument, derivative or non-derivative, caused by fluctuations in interest
rates, foreign exchange rates and equity prices. Changes in these factors could
cause fluctuations in earnings and cash flows.
For fixed rate debt, changes in interest rates generally affect the fair
market value of the debt instrument, but not earnings or cash flows. Griffin
does not have an obligation to prepay any fixed rate debt prior to maturity, and
therefore, interest rate risk and changes in the fair market value of fixed rate
debt should not have a significant impact on earnings or cash flows until such
debt is refinanced, it necessary. For variable rate debt, changes in interest
rates generally do not impact the fair market value of the debt instrument, but
do affect future earnings and cash flows. Griffin had $7.0 million of variable
rate debt outstanding at March 2, 2002.
Griffin is exposed to market risks from fluctuations in interest rates and
the effects of those fluctuations on market values of Griffin's cash equivalent
short-term investments. These investments generally consist of overnight
investments that are not significantly exposed to interest rate risk, except to
the extent that changes in interest rates will ultimately affect the amount of
interest income earned and cash flow from these investments.
Griffin does not currently have any derivative financial instruments in
place to manage interest costs, but that does not mean that Griffin will not use
them as a means to manage interest rate risk in the future.
Griffin does not use foreign currency exchange forward contracts or
commodity contracts and does not have foreign currency exposure in operations.
Griffin does have investments in companies based in the United Kingdom, and
changes in foreign currency exchange rates could affect the results of an equity
investment in Griffin's financial statements, and the ultimate liquidation of
those investments and conversion of proceeds into United States currency is
subject to future foreign currency exchange rates.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
On March 27, 2002, the Superior Court of the Judicial District of Hartford
(the "Court") dismissed Griffin's appeal of the decision by the Conservation
Commission/Inland Wetlands and Watercourses Agency of Simsbury, Connecticut (the
"Commission") to deny Griffin's application for a wetlands activity permit in
connection with a proposed residential development in Simsbury. This appeal by
Griffin of the Commission's denial of its application was one of several
separate, but related, actions brought by Griffin to appeal the denials of
Griffin's proposed residential development issued by Simsbury's land use
commissions. Griffin is reviewing the Court's decision to determine an
appropriate course of action regarding this decision. Griffin intends to
continue with its other suits related to its proposed residential development in
Simsbury.
Items 2 - 5 not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - none
(b) There were no reports filed on Form 8-K by the Registrant during the
2002 first quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GRIFFIN LAND & NURSERIES, INC.
/s/ Frederick M. Danziger
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Date: April 12, 2002 Frederick M. Danziger
President and Chief Executive Officer
/s/ Anthony J. Galici
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Date: April 12, 2002 Anthony J. Galici
Vice President, Chief Financial Officer
and Secretary