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.
February 28, 1998 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 31, 1998: 4,743,590
Page 1 of 11
GRIFFIN LAND & NURSERIES, INC.
Form 10Q
PART I - FINANCIAL INFORMATION Page
Consolidated Statement of Operations
13 Weeks Ended
February 28, 1998 and March 1, 1997 3
Consolidated Balance Sheet
February 28, 1998 and November 29, 1997 4
Consolidated Statement of Cash Flows
13 Weeks Ended
February 28, 1998 and March 1, 1997 5
Notes to Consolidated Financial Statements 6-8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-10
PART II - OTHER INFORMATION 10
SIGNATURES 11
Page 2 of 11
GRIFFIN LAND & NURSERIES, INC.
Consolidated Statement of Operations
(dollars in thousands, except per share data)
(unaudited)
For the 13 Weeks Ended,
-----------------------------
Feb. 28, 1998 March 1, 1997
------------- -------------
Net sales and other revenue $ 3,514 $ 2,725
Cost and expenses:
Cost of goods sold 2,495 1,943
Selling, general and administrative expenses 3,466 3,208
------- -------
Operating loss (2,447) (2,426)
Interest income 133 --
Interest expense 46 799
------- -------
Loss before income tax benefit (2,360) (3,225)
Income tax benefit (873) (1,234)
------- -------
Loss before equity investments (1,487) (1,991)
Income (loss) from equity investments 57 (22)
------- -------
Net loss $(1,430) $(2,013)
------- -------
------- -------
Basic net loss per common share $ (0.30) $(0.43) (a)
------- -------
------- -------
Diluted net loss per common share $ (0.30) $(0.43) (a)
------- -------
------- -------
(a) Per share results for the prior year are pro forma. See Note 5.
See Notes to Consolidated Financial Statements.
Page 3 of 11
GRIFFIN LAND & NURSERIES, INC.
Consolidated Balance Sheet
(dollars in thousands, except per share data)
Feb. 28, 1998 Nov. 29, 1997
------------- --------------
ASSETS (Unaudited)
Current Assets
Cash and cash equivalents $ 7,260 $ 11,519
Accounts receivable, less allowance of $460 and $456 1,576 4,745
Inventories 28,495 25,343
Deferred income taxes 2,731 1,858
Other current assets 1,679 1,903
------------ ----------
Total current assets 41,741 45,368
Real estate held for sale or lease, net 27,193 26,429
Equity investments 15,118 15,061
Property and equipment, net 12,446 12,524
Other assets, including investment in real estate joint venture
of $3,258 and $3,261 3,398 3,368
------------ ----------
Total assets $99,896 $102,750
------------ ----------
------------ ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 3,801 $ 4,980
Long-term debt due within one year 241 244
------------ ----------
Total current liabilities 4,042 5,224
Long-term debt 2,799 2,830
Other noncurrent liabilities 3,962 4,173
------------ ----------
Total liabilities 10,803 12,227
------------ ----------
Common stock, par value $0.01 per share,
authorized 10,000,000 shares, issued and
outstanding 4,743,590 shares 47 47
Additional paid in capital 92,950 92,950
Accumulated deficit (3,904) (2,474)
------------ ----------
Total stockholders' equity 89,093 90,523
------------ ----------
Total liabilities and stockholders' equity $99,896 $102,750
------------ ----------
------------ ----------
See Notes to Consolidated Financial Statements.
Page 4 of 11
GRIFFIN LAND & NURSERIES, INC.
Consolidated Statement of Cash Flows
(dollars in thousands)
(unaudited)
For the 13 Weeks Ended,
-----------------------------
OPERATING ACTIVITIES Feb. 28, 1998 Mar. 1, 1997
------------- ------------
Net loss $ (1,430) $ (2,013)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization 513 504
(Income) loss from equity investments (57) 22
Deferred income taxes (873) (313)
Additions to real estate held for sale or lease (940) (475)
Changes in assets and liabilities, net of effect of Liability Assumption in
1997:
Accounts receivable 3,165 2,221
Inventories (3,152) (2,579)
Accounts payable and accrued liabilities (1,179) (2,111)
Other, net (11) (252)
----------- -----------
Net cash used in operating activities (3,964) (4,996)
----------- -----------
INVESTING ACTIVITIES
Additions to property and equipment (261) (327)
----------- -----------
Net cash used in investing activities (261) (327)
----------- -----------
FINANCING ACTIVITIES
Payments of debt (74) (37)
Increases in debt 40 7,252
Net transactions with Culbro, excluding Liability Assumption in 1997 - (2,765)
----------- -----------
Net cash (used in) provided by financing activities (34) 4,450
----------- -----------
Net decrease in cash and cash equivalents (4,259) (873)
Cash and cash equivalents at beginning of period 11,519 7,371
----------- -----------
Cash and cash equivalents at end of period $ 7,260 $ 6,498
----------- -----------
----------- -----------
See Notes to Consolidated Financial Statements.
Page 5 of 11
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") 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 1997
Financial Statements included in Form 10K as filed with the Securities and
Exchange Commission on February 27, 1998, 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 period
have been reflected.
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.
The results of operations for the three-month period ended February 28,
1998, are not necessarily indicative of the results to be expected for the full
year.
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"), which provided for the transfer of certain assets
from Culbro to Griffin and the Distribution of Griffin's common stock to the
existing shareholders of Culbro. The Distribution Agreement also provided for
the assumption by Griffin of all of 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 were recorded by Griffin 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, principally retirement obligations, which were included in
Griffin's historical financial statements through that date (the "Liability
Assumption"). Griffin's 1997 first quarter results include interest expense of
approximately $0.7 million related to debt that was assumed by GC Holdings as
part of the Liability Assumption. Such debt was not part of Griffin's capital
structure subsequent to February 27, 1997.
As Griffin was a wholly-owned subsidiary of Culbro in the 1997 first
quarter, a portion of Culbro management time and resources were related to
Griffin's operations, and Culbro also performed certain specific administrative
functions for Griffin, including legal, tax, treasury, human resources and
internal audit. Griffin's 1997 first quarter results of operations include
general and administrative expenses of $0.4 million allocated by Culbro to
Griffin for these services. These charges were based principally on Griffin's
proportionate share of expenses relating to the Culbro corporate activities that
were associated with Griffin's operations and are considered by management to be
reasonable.
Page 6 of 11
3. Supplemental Financial Statement Information
Inventories
Inventories consist of:
Feb. 28, 1998 Nov. 29, 1997
------------- --------------
Nursery stock $ 25,684 $ 23,224
Finished goods 1,716 1,255
Materials and supplies 1,095 864
--------- ------------
$28,495 $25,343
--------- ------------
--------- ------------
Property and Equipment
Property and equipment consist of:
Feb. 28, 1998 Nov. 29, 1997
------------- --------------
Land and improvements $ 6,268 $ 6,205
Buildings 3,836 3,824
Machinery and equipment 12,844 12,714
--------- ------------
22,948 22,743
Accumulated depreciation (10,502) (10,219)
--------- ------------
$12,446 $12,524
--------- ------------
--------- ------------
Real Estate Held for Sale or Lease
Real estate held for sale or lease consists of:
Feb. 28, 1998 Nov. 29, 1997
------------- -------------
Land $ 4,806 $ 4,808
Land improvements 11,040 10,967
Buildings 18,305 17,438
--------- ---------
34,151 33,213
Accumulated depreciation (6,958) (6,784)
--------- ---------
$27,193 $26,429
--------- ---------
--------- ---------
Page 7 of 11
4. Long-term Debt
Griffin received a commitment from a commercial bank for a $10 million
revolving line of credit to be used for general working capital purposes in its
landscape nursery business, Imperial Nurseries, Inc. ("Imperial"), to supplement
cash flow from operations, as required. The line of credit will be secured
principally by Imperial's accounts receivable and certain inventories, and is
subject to completion of a definitive loan agreement.
5. Per Share Results
Per share results for the 1997 first quarter are pro forma, because
Griffin was a wholly-owned subsidiary of Culbro during that period, 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 approximately 4,744,000 shares outstanding in the
1998 first quarter and 4,700,000 shares outstanding (pro forma) in the 1997
first quarter. The pro forma shares outstanding were based on the outstanding
shares of Culbro Corporation, Griffin's former parent company.
Page 8 of 11
GRIFFIN LAND & NURSERIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales and other revenue were $3.5 million in the 1998 first quarter
as compared to net sales and other revenue of $2.7 million in the 1997 first
quarter. Net sales at Imperial increased $0.9 million to $2.9 million in the
1998 first quarter from $2.0 million in the 1997 first quarter. Imperial's
increased sales reflected higher volume due principally to the relatively
moderate winter weather experienced in Imperial's markets. Net sales and other
revenue at Griffin's real estate division, Griffin Land, were $0.6 million in
the 1998 first quarter as compared to $0.7 million in the prior year's first
quarter. The decrease was due to $0.1 million of revenue in the 1997 first
quarter from the remaining lot sales of a residential development which was sold
principally in 1996.
Griffin's operating loss (before interest) of $2.4 million in the 1998
first quarter was substantially unchanged from its 1997 first quarter operating
loss. Imperial incurred an operating loss of $1.9 million in the 1998 first
quarter, which was substantially unchanged from last year. Imperial historically
incurs a first quarter operating loss because of the highly seasonal nature of
the nursery business, in which sales are minimal during the winter months
(December through February) which comprise Griffin's first quarter. The effect
of higher first quarter sales at Imperial was offset by higher operating
expenses. Griffin Land incurred an operating loss of $0.2 million in the 1998
first quarter, which was substantially unchanged from last year's first quarter.
Interest expense decreased from $0.8 million in the 1997 first quarter
to less than $0.1 million in the 1998 first quarter because of the assumption,
at the end of the 1997 first quarter, of the general Culbro debt that had been
included in Griffin's financial statements through that time. Interest expense
incurred by Griffin in the 1997 first quarter related to such debt was $0.7
million. Excluding this item, Griffin's interest expense was substantially the
same in the 1998 first quarter as compared to the 1997 first quarter. Interest
income in the 1998 first quarter reflects proceeds from the investment of
Griffin's cash on hand.
Results from Griffin's equity investments in the 1998 first quarter
increased over the 1997 first quarter due principally to higher income from
Centaur's magazine publishing business. Centaur's results reflect improved
conditions in the British economy.
Liquidity and Capital Resources
Net cash flow used in operating activities was $4.0 million in the 1998
first quarter as compared to net cash flow used in operating activities of $5.0
million in the 1997 first quarter. The reduced use of cash reflects net
favorable changes in working capital items, principally increased cash generated
from collection of accounts receivable and a smaller decrease in accounts
payable as compared to last year, partially offset by a greater increase in
inventories in the 1998 first quarter as compared to last year's first quarter.
Additionally, the net loss incurred by Griffin in the 1998 first quarter was
lower than the 1997 first quarter net loss. The effects on cash of the net
favorable working capital changes and increased operating results were partially
offset by an increase in additions to real estate held for sale, due principally
to the construction of a new warehouse facility by Griffin Land.
Net cash flow used in investing activities reflected capital
expenditures in the nursery business, which were lower than the comparable
period last year, due to timing of purchases. Net cash used in financing
activities reflects the payment of debt under Griffin Land's mortgages and
capital leases for equipment used in the nursery business, partially offset by
increases in debt for new equipment purchased by capital lease. Net cash
provided by financing activities in the 1997 first quarter principally reflected
borrowings under Culbro's general corporate debt prior to such debt being
assumed by GC Holdings on February 27, 1997.
Griffin received a commitment from a commercial bank for a $10 million
revolving line of credit to be used for general working capital purposes in its
landscape nursery business to supplement cash flow from operations, as
Page 9 of 11
required. The line of credit will be secured principally by Imperial's accounts
receivable and certain inventories. The line of credit is subject to completion
of a definitive loan agreement.
In the 1997 fourth quarter, Griffin Land started construction on an
approximately 98,000 square foot warehouse facility in the New England
Tradeport, Griffin's industrial park located near Bradley International Airport
in the Hartford-Springfield corridor. Completion is anticipated near the end of
the 1998 second quarter. Construction costs, which will include investment in
off-site infrastructure on behalf of Windsor, Connecticut, are estimated to be
approximately $4.5 million, which are being financed from cash on hand.
Management believes, based on the current level of operations and
anticipated growth, that cash flow from operations, cash on hand and, if needed,
borrowings under the landscape nursery credit facility or real estate mortgage
placements will be sufficient to finance its landscape nursery business and fund
future real estate projects.
The information in Management's Discussion and Analysis of Financial
Condition and Results of Operations includes forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Although Griffin believes that its plans, intentions and expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such plans, intentions or expectations will be achieved,
particularly with respect to the construction of the new warehouse. 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.
PART II OTHER INFORMATION
Items 1 through 6 are not applicable.
Page 10 of 11
SIGNATURES
PURSUANT to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GRIFFIN LAND & NURSERIES, INC.
/s/ Frederick M. Danziger
------------------------------------------
DATE: April 9, 1998 Frederick M. Danziger
PRESIDENT
/s/ Anthony J. Galici
-----------------------------------------
DATE: April 9, 1998 Anthony J. Galici
VICE PRESIDENT, FINANCE
Page 11 of 11