10-Q 1 a2027057z10-q.txt QUARTERLY REPORT 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. August 26, 2000 0-29288 GRIFFIN LAND & NURSERIES, INC. (Exact name of registrant as specified in its charter) Delaware 06-0868496 (state or other jurisdiction of incorporation (IRS Employer or organization) Identification Number) One Rockefeller Plaza, New York, New York 10020 (address of principal executive offices) (Zip Code) Registrant's Telephone Number Including Area Code (212) 218-7910 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Number of Shares of Common Stock Outstanding at September 15, 2000: 4,862,704 GRIFFIN LAND & NURSERIES, INC. FORM 10Q
PART I - Financial Information PAGE Consolidated Statement of Operations 13 and 39 Weeks Ended August 26, 2000 and August 28, 1999 3 Consolidated Balance Sheet August 26, 2000 and November 27, 1999 4 Consolidated Statement of Stockholders' Equity 39 Weeks Ended August 26, 2000 and August 28, 1999 5 Consolidated Statement of Cash Flows 39 Weeks Ended August 26, 2000 and August 28, 1999 6 Notes to Consolidated Financial Statements 7-11 Management's Discussion and Analysis of Financial Condition and Results of Operations 12-14 Quantitative and Qualitative Disclosures About Market Risk 15 PART II - Other Information 16 SIGNATURES 17
PART I ITEM 1. FINANCIAL STATEMENTS GRIFFIN LAND & NURSERIES, INC. CONSOLIDATED STATEMENT OF OPERATIONS (dollars in thousands, except per share data)
FOR THE 13 WEEKS ENDED, FOR THE 39 WEEKS ENDED, ------------------------- ------------------------- AUG. 28, AUG. 28, 1999 1999 AUG. 26, (AS RESTATED) AUG. 26, (AS RESTATED) 2000 (NOTE 7) 2000 (NOTE 7) -------- ------------- -------- -------------- Net sales and other revenue $ 16,767 $ 14,409 $ 54,106 $ 46,867 Cost and expenses: Cost of goods sold 11,573 9,238 37,679 31,783 Selling, general and administrative expenses 4,709 4,206 13,668 12,207 -------- -------- -------- -------- Operating profit 485 965 2,759 2,877 Interest expense 330 233 900 415 Interest income 7 19 31 44 -------- -------- -------- -------- Income before income tax provision 162 751 1,890 2,506 Income tax provision 65 275 756 977 -------- -------- -------- -------- Income before income (loss) from equity investment 97 476 1,134 1,529 Income (loss) from equity investment 431 (247) 907 31 -------- -------- -------- -------- Net income $ 528 $ 229 $ 2,041 $ 1,560 ======== ======== ======== ======== Basic net income per common share $ 0.11 $ 0.05 $ 0.42 $ 0.32 ======== ======== ======== ======== Diluted net income per common share $ 0.10 $ 0.05 $ 0.40 $ 0.31 ======== ======== ======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. PAGE 3 GRIFFIN LAND & NURSERIES, INC. CONSOLIDATED BALANCE SHEET (dollars in thousands, except per share data)
NOV. 27, 1999 ASSETS AUG. 26, (AS RESTATED) 2000 (NOTE 7) --------- ------------- CURRENT ASSETS Cash and cash equivalents $ 1,308 $ 2,003 Accounts receivable, less allowance of $710 and $564 6,652 5,966 Inventories 30,610 29,196 Deferred income taxes 2,566 2,566 Other current assets 2,827 2,338 --------- --------- TOTAL CURRENT ASSETS 43,963 42,069 Real estate held for sale or lease, net 35,809 33,766 Investment in Centaur Communications, Ltd. 17,625 16,532 Property and equipment, net 16,221 14,359 Other assets 6,297 6,159 --------- --------- TOTAL ASSETS $ 119,915 $ 112,885 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $ 4,987 $ 5,412 Long-term debt due within one year 4,034 320 --------- --------- TOTAL CURRENT LIABILITIES 9,021 5,732 Long-term debt 9,080 8,860 Deferred income taxes 2,157 1,401 Other noncurrent liabilities 4,160 3,622 --------- --------- TOTAL LIABILITIES 24,418 19,615 --------- --------- Commitments and contingencies -- -- Common stock, par value $0.01 per share, 10,000,000 shares authorized, 4,862,704 shares issued and outstanding 49 49 Additional paid in capital 93,584 93,584 Retained earnings (deficit) 1,678 (363) Accumulated other comprehensive income 186 -- --------- --------- Total stockholders' equity 95,497 93,270 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 119,915 $ 112,885 ========= =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. PAGE 4 GRIFFIN LAND & NURSERIES, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (dollars in thousands)
RETAINED EARNINGS ACCUMULATED SHARES OF ADDITIONAL (DEFICIT) OTHER TOTAL COMMON COMMON PAID-IN (AS RESTATED) COMPREHENSIVE (AS RESTATED) STOCK STOCK CAPITAL (NOTE 7) INCOME (NOTE 7) --------- ------ ---------- ------------- ------------- -------------- Balance at November 28, 1998 4,842,704 $48 $93,491 $(2,539) $ -- $91,000 Net income -- -- -- 1,560 -- 1,560 --------- --- ------- ------- ---- ------- Balance at August 28, 1999 4,842,704 $48 $93,491 $ (979) $ -- $92,560 ========= === ======= ======= ==== ======= Balance at November 27, 1999 4,862,704 $49 $93,584 $ (363) $ -- $93,270 Net income -- -- -- 2,041 -- 2,041 Comprehensive income -- -- -- -- 186 186 --------- --- ------- ------- ---- ------- Balance at August 26, 2000 4,862,704 $49 $93,584 $ 1,678 $186 $95,497 ========= === ======= ======= ==== =======
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. PAGE 5 GRIFFIN LAND & NURSERIES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (dollars in thousands)
FOR THE 39 WEEKS ENDED, ------------------------- AUG. 28, 1999 AUG. 26, (AS RESTATED) 2000 (NOTE 7) -------- ------------- OPERATING ACTIVITIES: Net income $ 2,041 $ 1,560 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,853 1,740 Income from equity investment (907) (31) Deferred income taxes 756 977 Changes in assets and liabilities: Accounts receivable (832) (424) Inventories (1,414) (1,884) Other current assets (489) (797) Income tax refund received -- 926 Accounts payable and accrued liabilities (425) (1,895) Other, net 1,273 205 ------- ------- Net cash provided by operating activities 1,856 377 ------- ------- INVESTING ACTIVITIES: Additions to real estate held for sale or lease (3,277) (1,845) Additions to property and equipment (2,579) (2,566) Other, net -- (377) ------- ------- Net cash used in investing activities (5,856) (4,788) ------- ------- FINANCING ACTIVITIES: Increase in debt 3,625 8,173 Payments of debt (320) (2,132) Other, net -- (331) ------- ------- Net cash provided by financing activities 3,305 5,710 ------- ------- Net (decrease) increase in cash and cash equivalents (695) 1,299 Cash and cash equivalents at beginning of period 2,003 2,059 ------- ------- Cash and cash equivalents at end of period $ 1,308 $ 3,358 ======= =======
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. PAGE 6 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share data) 1. BASIS OF PRESENTATION The unaudited consolidated financial statements of Griffin Land & Nurseries, Inc. ("Griffin") have been prepared in conformity with the standards of accounting measurement set forth in Accounting Principles Board Opinion No. 28 and any amendments thereto adopted by the Financial Accounting Standards Board ("FASB"). Also, the accompanying financial statements have been prepared in accordance with the accounting policies stated in Griffin's audited 1999 Financial Statements included in the Report on Form 10-K/A as filed with the Securities and Exchange Commission on October 4, 2000, and should be read in conjunction with the Notes to Financial Statements appearing in that report. The consolidated financial statements of Griffin for fiscal 1998, fiscal 1999 and the thirteen weeks ended February 26, 2000 have been restated to adjust the amounts previously reported for income from equity investment (see Note 7). All adjustments, comprising only normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of results for the interim periods, have been reflected. The results of operations for the thirteen and thirty-nine weeks ended August 26, 2000, are not necessarily indicative of the results to be expected for the full year. 2. INDUSTRY SEGMENT INFORMATION Griffin's reportable segments are defined by their products and services, and are comprised of the landscape nursery and real estate segments. Griffin has no operations outside the United States. Griffin's export sales and transactions between segments are not material.
FOR THE 13 WEEKS ENDED, FOR THE 39 WEEKS ENDED, ----------------------- ------------------------- AUG. 26, AUG. 28, AUG. 26, AUG. 28, 2000 1999 2000 1999 -------- -------- -------- ------- NET SALES AND OTHER REVENUE Landscape nursery $15,256 $12,287 $49,919 $42,804 Real estate 1,511 2,122 4,187 4,063 ------- ------- ------- ------- $16,767 $14,409 $54,106 $46,867 ======= ======= ======= ======= OPERATING PROFIT Landscape nursery $923 $461 $3,863 $ 3,084 Real estate (41) 904 99 914 ------- ------- ------- ------- Industry segment totals 882 1,365 3,962 3,998 General corporate expense 397 400 1,203 1,121 Interest expense, net 323 214 869 371 ------- ------- ------- ------- Income before income tax provision $162 $ 751 $1,890 $2,506 ==== ===== ====== ====== AUG. 26, NOV. 27, 2000 1999 IDENTIFIABLE ASSETS -------- -------- Landscape nursery $55,263 $52,564 Real estate 41,430 38,248 -------- -------- Industry segment totals 96,693 90,812 General corporate 23,222 22,073 -------- -------- $119,915 $112,885 ======== ========
See Note 3 for information on Griffin's equity investment in Centaur Communications, Ltd. PAGE 7 3. EQUITY INVESTMENT Griffin accounts for its approximately 35% ownership of the outstanding common stock of Centaur Communications, Ltd. ("Centaur"), a privately owned publisher based in the United Kingdom, under the equity method of accounting for investments. The summarized financial data of Centaur shown below was derived from Centaur's financial statements which are prepared in accordance with generally accepted accounting principles in the United Kingdom. Griffin's equity income from Centaur, including the restatement referred to in Note 7, reflects adjustments necessary to present Centaur's results in accordance with generally accepted accounting principles in the United States. Griffin's equity income from Centaur included in Griffin's results of operations for the thirteen and thirty-nine weeks ended August 26, 2000 include the results of Centaur through June 30, 2000, its fiscal year end. Results of Centaur through August 26, 2000 are not available. Accordingly, Griffin's results of operations for the thirteen weeks and the thirty-nine weeks ended August 26, 2000 include equity in the income of Centaur for one month and seven months, respectively. Griffin's results of operations for the thirteen and the thirty-nine weeks ended August 28, 1999 include equity in the income of Centaur based on Centaur's results for the three months and nine months ended August 1999, respectively. Griffin's equity income from Centaur for the thirteen and thirty-nine weeks ended August 28, 1999 would have been $275 and $565, respectively, had Griffin reported on the two month time lag in the prior year. Griffin will change its accounting policy prospectively to include results from Centaur based on Centaur's quarterly reporting schedule, which will result in consistently reflecting results of Centaur on a two month time lag.
SEVEN MONTHS NINE MONTHS ENDED, ENDED, ------------ -------------- AUG. 28, 1999 JUNE 30, (AS RESTATED) 2000 (NOTE 7) -------- ------------- Net sales $64,284 $63,025 Costs and expenses 57,388 59,115 ------- -------- Operating profit 6,896 3,910 Nonoperating expense, principally interest 2,017 1,846 ------- -------- Income before taxes 4,879 2,064 Income tax provision 1,384 727 ------- -------- Net income $ 3,495 $ 1,337 ======= ======= NOV. 27, 1999 JUNE 30, (AS RESTATED) 2000 (NOTE 7) -------- ------------- Current assets $36,897 $35,957 Intangible assets 22,340 25,002 Other assets 10,262 11,018 ------- -------- Total assets $69,499 $71,977 ======= ======= Current liabilities $32,126 $31,273 Debt 35,550 42,859 Other liabilities 3,428 3,530 ------- -------- Total liabilities 71,104 77,662 Accumulated deficit (1,605) (5,685) ------- -------- Total liabilities and deficit $69,499 $71,977 ======= =======
PAGE 8 4. STOCK OPTIONS On January 18, 2000, Griffin's Board of Directors approved the issuance of 20,000 options under the Griffin Land & Nurseries, Inc., 1997 Stock Option Plan (the "Griffin Stock Option Plan") to certain employees. In accordance with the Griffin Stock Option Plan, 4,000 options and 3,000 options were issued to Griffin's independent directors on May 16, 2000 and July 18, 2000, respectively. Activity under the Griffin Stock Option Plan is summarized as follows:
NUMBER OF WEIGHTED AVG. OPTIONS EXERCISE PRICE --------- -------------- Outstanding at November 27, 1999 601,707 $12.16 Issued after November 27, 1999 27,000 11.34 Cancelled after November 27, 1999 (900) 13.25 ------- ------ Outstanding at August 26, 2000 627,807 $12.12 ======= ====== Number of option holders at August 26, 2000 36 ======= WEIGHTED AVG. REMAINING OUTSTANDING AT WEIGHTED AVG. CONTRACTUAL LIFE RANGE OF EXERCISE PRICES AUG. 26, 2000 EXERCISE PRICE (IN YEARS) ------------------------ ------------- -------------- ---------------- Under $3.00 34,435 $1.75 3.6 $3.00-$9.00 100,172 7.52 5.5 Over $9.00 493,200 13.78 7.8 ------- 627,807 =======
Of the stock options granted in fiscal 2000, 24,000 options vest in equal installments on the third, fourth and fifth anniversaries from the date of grant and 3,000 options were vested immediately. At August 26, 2000, there were 215,937 vested options outstanding under the Griffin Stock Option Plan with a weighted average exercise price of $9.28 per share. 5. PER SHARE RESULTS Basic and diluted per share results were based on the following:
FOR THE 13 WEEKS ENDED, FOR THE 39 WEEKS ENDED, ------------------------------- -------------------------------- AUG. 28, AUG. 28, 1999 1999 AUG. 26, (AS RESTATED) AUG. 26, (AS RESTATED) 2000 (NOTE 7) 2000 (NOTE 7) ----------- ----------- ----------- ------------ Net income for computation of basic per share results $ 528 $ 229 $ 2,041 $ 1,560 Adjustment to net income for assumed exercise of options of equity investee (Centaur) (51) -- (86) (48) ----------- ----------- ----------- ------------ Adjusted net income for computation of diluted per share results $ 477 $ 229 $ 1,955 $ 1,512 =========== =========== =========== =========== Weighted average shares for computation of basic per share results 4,863,000 4,843,000 4,863,000 4,843,000 Incremental shares from assumed exercise of stock options 67,000 82,000 63,000 82,000 ----------- ----------- ----------- ------------ Adjusted weighted average shares for computation of diluted per share results 4,930,000 4,925,000 4,926,000 4,925,000 =========== =========== =========== ===========
PAGE 9 6. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION COMPREHENSIVE INCOME The Statement of Stockholders' Equity for the period ended August 26, 2000 includes other comprehensive income of $186. This reflects the effect of a translation adjustment related to Griffin's equity investment in Centaur Communications, Ltd. There was no other comprehensive income in the prior fiscal year. INVENTORIES Inventories consist of:
AUG. 26, NOV. 27, 2000 1999 -------- -------- Nursery stock $27,758 $ 26,728 Finished goods 1,674 1,481 Materials and supplies 1,178 987 ------- -------- $30,610 $29,196 ======= ======= PROPERTY AND EQUIPMENT Property and equipment consist of: ESTIMATED USEFUL AUG. 26, NOV. 27, LIVES 2000 1999 ----- -------- -------- Land and improvements $ 7,609 $ 7,402 Buildings 10 to 40 years 5,027 4,198 Machinery and equipment 3 to 20 years 16,306 14,560 -------- -------- 28,942 26,160 Accumulated depreciation (12,721) (11,801) -------- -------- $ 16,221 $ 14,359 ======== ========
Griffin incurred capital lease obligations of $629 and $188, respectively, in the thirty-nine weeks ended August 26, 2000 and August 28, 1999. REAL ESTATE HELD FOR SALE OR LEASE Real estate held for sale or lease consists of:
ESTIMATED USEFUL AUG. 26, NOV. 27, LIVES 2000 1999 ----- -------- -------- Land $ 4,744 $ 4,723 Land improvements 15 years 3,704 3,461 Buildings 40 years 23,959 23,836 Development costs 12,367 10,027 ------- ------- 44,774 42,047 Accumulated depreciation (8,965) (8,281) ------- ------- $35,809 $33,766 ======= =======
PAGE 10 LONG-TERM DEBT Long-term debt includes:
AUG. 26, NOV. 27, 2000 1999 --------- -------- Credit agreement $ 3,625 $ -- Mortgages 8,620 8,704 Capital leases 869 476 ------- ------ Total 13,114 9,180 Less: due within one year 4,034 320 ------- ------ Total long-term debt $ 9,080 $8,860 ======= ======
Amounts outstanding under the Griffin Land & Nurseries, Inc. Credit Agreement (the "Griffin Credit Agreement") are classified as due within one year because the Griffin Credit Agreement will terminate on May 31, 2001. 7. RESTATEMENT The consolidated financial statements of Griffin for the thirteen and thirty-nine weeks ended August 28, 1999 have been restated to adjust the amounts previously reported for equity income from Centaur. The restatement was required to adjust the timing of the recognition of subscription revenue of Centaur to comply with generally accepted accounting principles in the United States. The following summarizes the changes to the previously reported consolidated statement of operations:
FOR THE 13 WEEKS ENDED, FOR THE 39 WEEKS ENDED, AUG. 28, 1999 AUG. 28, 1999 ------------------------ ------------------------ AS AS AS AS REPORTED RESTATED REPORTED RESTATED -------- -------- -------- -------- Income before equity investment $ 476 $ 476 $1,529 $1,529 Income (loss) from equity investment (167) (247) 215 31 ----- ----- ------ ------ Net income $ 309 $ 229 $1,744 $1,560 ===== ===== ====== ====== Basic net income per share $0.06 $0.05 $ 0.36 $ 0.32 ===== ===== ====== ====== Diluted net income per share $0.06 $0.05 $ 0.34 $ 0.31 ===== ===== ====== ======
PAGE 11 ITEM 2 GRIFFIN LAND & NURSERIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Griffin's operations are comprised of two segments: the landscape nursery business and the real estate business. The following discussion contains information relating to the consolidated operations of Griffin and, where appropriate, separate information regarding each of these segments. As used in this discussion the term "Imperial" refers to Griffin's landscape nursery operations (conducted by Griffin's wholly-owned subsidiary, Imperial Nurseries, Inc.) and the term "Griffin Land" refers to Griffin's real estate operations. RESULTS OF OPERATIONS Thirteen Weeks Ended August 26, 2000 Compared to the Thirteen Weeks Ended August 28, 1999 Griffin's net sales and other revenue were $16.8 million in the thirteen weeks ended August 26, 2000 (the "2000 third quarter") as compared to net sales and other revenue of $14.4 million in the thirteen weeks ended August 28, 1999 (the "1999 third quarter"). The increase of $2.4 million reflects higher net sales and other revenue at Imperial, partially offset by lower net sales and other revenue at Griffin Land. Imperial's net sales and other revenue increased $3.0 million to $15.3 million in the 2000 third quarter from $12.3 million in the 1999 third quarter, reflecting higher volume at Imperial's wholesale sales and service centers, which accounted for $2.0 million of Imperial's net sales and other revenue increase, and an increase of $1.0 million in net sales of container plants from Imperial's farming operations. Net sales and other revenue at Griffin Land decreased $0.6 million to $1.5 million in the 2000 third quarter as compared to $2.1 million in the 1999 third quarter. The lower net sales and other revenue at Griffin Land principally reflects the 1999 third quarter land sale that generated proceeds of $1.0 million and a pretax gain of $0.9 million. Total land sales in the 2000 third quarter were $0.3 million. Partially offsetting the decrease in revenue from land sales was an increase of $0.2 million in rental revenue from Griffin Land's properties, principally reflecting new leases in place in the current year. Griffin's operating profit (before interest) was $0.5 million in the 2000 third quarter as compared to $1.0 million in the 1999 third quarter. Operating profit at Imperial increased to $0.9 million in the 2000 third quarter from $0.5 million in the 1999 third quarter. The increase in Imperial's operating profit reflects a $0.7 million increase in gross profit as a result of the increased net sales, partially offset by higher operating expenses. Imperial's gross margin on sales was 30.3% in the 2000 third quarter as compared to 31.0% in the 1999 third quarter. Imperial's operating expenses increased from $3.4 million in the 1999 third quarter to $3.7 million in the 2000 third quarter. The higher expenses were driven by the increased volume at Imperial's wholesale sales and service centers. As a percentage of net sales, Imperial's operating expenses were 24.3% of net sales in the 2000 third quarter as compared to 27.3% of net sales in the 1999 third quarter. Griffin Land's operating results (before interest) were substantially break even in the 2000 third quarter as compared to an operating profit (before interest) of $0.9 million in the 1999 third quarter. The lower operating profit principally reflects the inclusion of a $0.9 million gain on the sale of undeveloped land in the 1999 third quarter. Griffin Land's operating results in the 2000 third quarter would have been substantially unchanged from the 1999 third quarter results after excluding the effect of the $0.9 million gain from the land sale in the 1999 third quarter. Griffin's interest expense increased to $0.3 million in the 2000 third quarter from $0.2 million in the 1999 third quarter. The higher interest expense reflects increased borrowing levels under Griffin's Credit Agreement in the 2000 third quarter, as compared to the 1999 third quarter, to support Imperial's seasonal working capital requirements and to fund capital projects at Imperial and Griffin Land. Griffin's equity income from Centaur was higher in the 2000 third quarter as compared to the 1999 third quarter. Griffin's equity income in the 2000 third quarter reflects results of Centaur for the month of June only, because Centaur's results through the end of Griffin's third quarter are not available. In the 1999 third quarter, Griffin's equity loss from Centaur included results of Centaur through August of that year. The increase in Centaur's results reflects, in part, the effect of the seasonality of Centaur's business on the difference in the reporting periods. Had Griffin's 1999 third quarter included Centaur's results on a comparable period with the 2000 third quarter, income from Griffin's equity investment in Centaur would have increased from $0.3 million to $0.4 million principally as a result of increased revenue at Centaur. PAGE 12 Thirty-nine Weeks Ended August 26, 2000 Compared to the Thirty-nine Weeks Ended August 28, 1999 Griffin's net sales and other revenue was $54.1 million in the thirty-nine weeks ended August 26, 2000 (the "2000 nine month period") as compared to net sales and other revenue of $46.9 million in the thirty-nine weeks ended August 28, 1999 (the "1999 nine month period"). The increase of $7.2 million principally reflects higher net sales and other revenue at Imperial. Imperial's net sales increased $7.1 million to $49.9 million in the 2000 nine month period from $42.8 million in the 1999 nine month period. The higher net sales at Imperial reflect increased volume at its wholesale sales and service centers, which accounted for $4.4 million of Imperial's net sales increase, and an increase of $2.7 million in net sales of containerized plants from its farming operations. Net sales and other revenue at Griffin Land was $4.2 million in the 2000 nine month period as compared to $4.1 million in the 1999 nine month period. The increase reflected an increase of $0.4 million of revenue from its leasing operation partially offset by a decrease in property sale revenue. Griffin's operating profit (before interest) in the 2000 nine month period was $2.8 million as compared to $2.9 million in the 1999 nine month period. Operating profit at Imperial increased $0.8 million to $3.9 million in the 2000 nine month period as compared to $3.1 million in the 1999 nine month period. Imperial's higher operating profit principally reflects higher gross profit, which increased to $14.8 million in the 2000 nine month period from $12.9 million in the 1999 nine month period, partially offset by higher operating expenses. Imperial's overall gross margin on net sales was 29.4% in the 2000 nine month period as compared to 30.1% in the 1999 nine month period. The lower margin reflects pricing pressures and includes the effect of additional costs resulting from changes in Imperial's product mix at its Florida container farm. Imperial's operating expenses were $10.9 million in the 2000 nine month period as compared to $9.8 million in the 1999 nine month period. As a percentage of net sales, operating expenses decreased to 21.7% in the 2000 nine month period from 22.9% in the 1999 nine month period. In the 2000 nine month period, Griffin Land had operating profit (before interest) of $0.1 million as compared to operating profit of $0.9 million in the 1999 nine month period. The lower operating profit principally reflects the gain of $0.9 million on a land sale in the 1999 nine month period. Griffin Land's rental properties generated an operating profit, before interest and depreciation, of $2.4 million in the 2000 nine month period as compared to $2.1 million in the 1999 nine month period. This increase principally reflects new leases in place in the 2000 nine month period. Griffin's interest expense increased to $0.9 million in the 2000 nine month period from $0.4 million in the 1999 nine month period. The increase is due to increased borrowing levels in the current year to support Imperial's seasonal working capital requirements and to fund capital projects at Imperial and Griffin Land. Griffin's equity income from Centaur was higher in the 2000 nine month period as compared to the 1999 nine month period. Griffin's equity income in the 2000 nine month period reflected Centaur's results for the seven months through June. In the 1999 nine month period, Griffin's equity income included the nine month results of Centaur through August of that year. The higher equity income from Centaur reported in the 2000 nine month period reflects, in part, the effect of the seasonality of Centaur's business on the change in reporting periods. Had Griffin's 1999 nine month period included Centaur's results on a comparable period with the 2000 nine month period, Griffin's equity income from Centaur would reflect an increase to $0.9 million in the 2000 nine month period as compared to $0.6 million in the 1999 nine month period due principally to higher revenue at Centaur. LIQUIDITY AND CAPITAL RESOURCES Griffin's net cash provided by operating activities was $1.9 million in the 2000 nine month period as compared to net cash provided by operating activities of $0.4 million in the 1999 nine month period. The increase in cash generated by operating activities during the first nine months of the fiscal year principally reflects net favorable changes in working capital items. Net cash used in investing activities was $5.9 million in the 2000 nine month period as compared to $4.8 million in the 1999 nine month period. The increase reflects an increase in additions to Griffin's real estate holdings. Capital expenditures at Imperial in the 2000 nine month period were substantially equal to Imperial's capital expenditures in the 1999 nine month period. Included in Imperial's 1999 capital expenditures was the purchase of land to expand its Cincinnati sales and service center. In the 2000 capital expenditures for Imperial are several capital projects, some started in the 1999 fourth quarter, to improve and expand Imperial's containerized plant production facilities in Florida and Connecticut. The current phase of expansion projects at Imperial is expected to be completed over the next six to twelve months at a projected total cost of approximately $4.0 million. Additional expansion of Imperial's container production facilities is planned. In fiscal 1999, Imperial entered into an agreement to acquire land in central New Jersey for a new wholesale sales and service center. Completion of the land purchase is contingent upon receiving all required regulatory approvals to operate a wholesale sales and service center on that site. If such approval is received, expenditures for the land acquisition and site work are projected to be approximately $3.9 million over the next nine months. PAGE 13 The increase in additions to real estate in the 2000 nine month period reflects investment in subdivision activities for a proposed residential development of certain of Griffin Land's undeveloped land. Additionally, in the 2000 third quarter, Griffin Land started construction on the shell of a 165,000 square foot commercial building in Windsor, Connecticut after entering into a long-term lease for the entire building with JDS Uniphase Corporation. The estimated cost of the shell of this new building is in excess of $7.0 million (of which approximately $6.5 million will be incurred after the 2000 third quarter), with construction anticipated to be completed early next year. The cost of the building improvements, other than the shell, will be borne by the new tenant. Griffin will finance the construction of this new building under its own credit facilities, but anticipates obtaining a nonrecourse mortgage upon completion. Griffin Land has also started construction on a 40,000 square foot building in Bloomfield, Connecticut which is being built on speculation. In the 1999 nine month period, Griffin Land completed construction of the shell building of a 100,000 square foot warehouse in the New England Tradeport. This new warehouse is being actively marketed but is not yet leased. Additional construction in the New England Tradeport will be considered when this new warehouse is leased. Net cash provided by financing activities in the 2000 nine month period reflects Griffin's additional borrowings under its $20 million revolving credit facility (the "Griffin Credit Agreement"), net of scheduled principal payments. Management believes that in the near term, based on the current level of operations and anticipated growth, its cash on hand, cash flow from operations and borrowings under the Griffin Credit Agreement will be sufficient to finance the working capital requirements and expected capital expenditures of its landscape nursery business and fund development of its real estate assets. Next year, selective mortgage placements or additional bank credit facilities may be required to fund capital projects. FORWARD-LOOKING INFORMATION The information in Management's Discussion and Analysis of Financial Condition and Results of Operations includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Although Griffin believes that its plans, intentions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such plans, intentions or expectations will be achieved, particularly with respect to leasing of its new warehouse completed in 1999 and construction of additional facilities in the real estate business, subdivision approvals, the improvements and expansion of Imperial's farm operations, and the opening of a wholesale sales and service center in central New Jersey. The projected information disclosed herein is based on assumptions and estimates that, while considered reasonable by Griffin as of the date hereof, are inherently subject to significant business, economic, competitive and regulatory uncertainties and contingencies, many of which are beyond the control of Griffin. PAGE 14 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk represents the risk of changes in the value of a financial instrument, derivative or non-derivative, caused by fluctuations in interest rates, foreign exchange rates and equity prices. Changes in these factors could cause fluctuations in earnings and cash flows. For fixed rate debt, changes in interest rates generally affect the fair market value of the debt instrument, but not earnings or cash flows. Griffin does not have an obligation to prepay any fixed rate debt prior to maturity, and therefore, interest rate risk and changes in the fair market value of fixed rate debt should not have a significant impact on earnings or cash flows until such debt is refinanced, if necessary. For variable rate debt, changes in interest rates generally do not impact the fair market value of the debt instrument, but do affect future earnings and cash flows. Griffin had $3.6 million of variable rate debt outstanding at August 26, 2000. Griffin is exposed to market risks from fluctuations in interest rates and the effects of those fluctuations on market values of Griffin's cash equivalent short-term investments. These investments generally consist of overnight investments that are not significantly exposed to interest rate risk, except to the extent that changes in interest rates will ultimately affect the amount of interest income earned and cash flow from these investments. Griffin does not currently have any derivative financial instruments in place to manage interest costs, but that does not mean that Griffin will not use them as a means to manage interest rate risk in the future. Griffin does not use foreign currency exchange forward contracts or commodity contracts and does not have foreign currency exposure in its operations. Griffin does have investments in companies based in the United Kingdom, and changes in foreign exchange rates could affect the results of equity investments in Griffin's financial statements, and the ultimate liquidation of those investments and conversion of proceeds into United States currency. PAGE 15 PART II OTHER INFORMATION Items 1 - 5 are not applicable Item 6. Exhibits and Reports on Form 8K (a) Exhibits Exhibit No. Description ----------- ----------- 27 Financial Data Schedule (b) There were no reports filed on Form 8K by the Registrant during the 2000 third quarter. PAGE 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GRIFFIN LAND & NURSERIES, INC. /s/ FREDERICK M. DANZIGER DATE: October 6, 2000 ------------------------------ FREDERICK M. DANZIGER PRESIDENT AND CHIEF EXECUTIVE OFFICER /s/ ANTHONY J. GALICI DATE: October 6, 2000 ------------------------------ ANTHONY J. GALICI VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY