-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DuvST101B76uYjD2aYqOlIo4c0PmbsNjv3Qx4hmqL9HQRPRZwk9iC7x5YX97Gpag pexgeC2YbpzVdcjKVAIY0g== 0000912057-01-508386.txt : 20010416 0000912057-01-508386.hdr.sgml : 20010416 ACCESSION NUMBER: 0000912057-01-508386 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010303 FILED AS OF DATE: 20010412 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRIFFIN LAND & NURSERIES INC CENTRAL INDEX KEY: 0001037390 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-BUILDING MATERIALS, HARDWARE, GARDEN SUPPLY [5200] IRS NUMBER: 060868486 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12879 FILM NUMBER: 1601357 BUSINESS ADDRESS: STREET 1: ONE ROCKEFELLER PLAZA CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2122187910 MAIL ADDRESS: STREET 1: ONE ROCKEFELLER PLAZA CITY: NEW YORK STATE: NY ZIP: 10020 10-Q 1 a2044853z10-q.txt FORM 10-Q 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 3, 2001 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 30, 2001: 4,862,704 GRIFFIN LAND & NURSERIES, INC. Form 10Q PART I FINANCIAL INFORMATION Page Consolidated Statement of Operations 13 Weeks Ended March 3, 2001 and February 26, 2000 3 Consolidated Balance Sheet March 3, 2001 and December 2, 2000 4 Consolidated Statement of Stockholders' Equity 13 Weeks Ended March 3, 2001 and February 26, 2000 5 Consolidated Statement of Cash Flows 13 Weeks Ended March 3, 2001 and February 26, 2000 6 Notes to Consolidated Financial Statements 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Quantitative and Qualitative Disclosures About Market Risk 16 PART II OTHER INFORMATION 17 SIGNATURES 18 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. 3, Feb. 26, 2001 2000 ------- ------- Net sales and other revenue $ 3,947 $ 5,550 Cost and expenses: Cost of goods sold 2,926 3,758 Selling, general and administrative expenses 3,442 4,167 ------- ------- Operating loss (2,421) (2,375) Gain on sale of Sales and Service Centers 9,469 -- Interest expense 136 212 Interest income 51 21 ------- ------- Income (loss) before income tax provision 6,963 (2,566) Income tax provision (benefit) 2,750 (1,026) ------- ------- Income (loss) before equity investment 4,213 (1,540) Income (loss) from equity investment 153 (164) ------- ------- Net income (loss) $ 4,366 $(1,704) ======= ======= Basic net income (loss) per common share $ 0.90 $ (0.35) ======= ======= Diluted net income (loss) per common share $ 0.88 $ (0.35) ======= =======
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. Page 3 GRIFFIN LAND & NURSERIES, INC. Consolidated Balance Sheeet (dollars in thousands, except per share data) (unaudited)
Mar. 3, Dec. 2, 2001 2000 -------- -------- ASSETS Current Assets Cash and cash equivalents $ 4,329 $ 1,126 Accounts receivable, less allowance of $396 and $580 941 5,920 Inventories 31,507 31,869 Deferred income taxes 2,413 2,967 Other current assets 4,969 3,346 -------- -------- Total current assets 44,159 45,228 Real estate held for sale or lease, net 43,658 41,221 Investment in Centaur Communiciations, Ltd. 16,835 16,682 Property and equipment, net 9,542 17,069 Other assets 11,285 6,456 -------- -------- Total assets $125,479 $126,656 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable and accrued liabilities $ 8,176 $ 8,341 Income taxes payable 2,745 -- Long-term debt due within one year 356 7,694 -------- -------- Total current liabilities 11,277 16,035 Long-term debt 8,906 9,008 Deferred income taxes 2,129 2,729 Other noncurrent liabilities 3,711 3,794 -------- -------- Total liabilities 26,023 31,566 -------- -------- 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 5,637 1,271 Accumulated other comprehensive income 186 186 -------- -------- Total stockholders' equity 99,456 95,090 -------- -------- Total liabilities and stockholders' equity $125,479 $126,656 ======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. Page 4 GRIFFIN LAND & NURSERIES, INC. Consolidated Statement of Stockholders' Equity (dollars in thousands) (unaudited)
Accumulated Shares of Additional Retained Other Common Common Paid-in Earnings Comprehensive Stock Stock Capital (Deficit) Income Total --------- --------- --------- --------- --------- --------- Balance at November 27, 1999 4,862,704 $ 49 $ 93,584 $ (363) $ -- $ 93,270 Net loss -- -- -- (1,704) -- (1,704) --------- --------- --------- --------- --------- --------- Balance at February 26, 2000 4,862,704 $ 49 $ 93,584 $ (2,067) $ -- $ 91,566 ========= ========= ========= ========= ========= ========= Balance at December 2, 2000 4,862,704 $ 49 $ 93,584 $ 1,271 $ 186 $ 95,090 Net income -- -- -- 4,366 -- 4,366 --------- --------- --------- --------- --------- --------- Balance at March 3, 2001 4,862,704 $ 49 $ 93,584 $ 5,637 $ 186 $ 99,456 ========= ========= ========= ========= ========= =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. Page 5 GRIFFIN LAND & NURSERIES, INC. Consolidated Statement of Cash Flows (dollars in thousands) (unaudited)
FOR THE 13 WEEKS ENDED, ---------------------- Mar. 3, Feb. 26, 2001 2000 -------- -------- Operating activities: Net income (loss) $ 4,366 $ (1,704) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 724 624 Gain on sale of Sales and Service Centers (9,469) -- (Income) loss from equity investment (153) 164 Deferred income taxes (46) (1,026) Changes in assets and liabilities, net of effect of the sale of the Sales and Service Centers: Accounts receivable 3,560 4,166 Inventories (4,091) (4,257) Other current assets (2,655) (134) Accounts payable and accrued liabilities 554 37 Income taxes payable 2,745 -- Other, net (88) 575 -------- -------- Net cash used in operating activities (4,553) (1,555) -------- -------- Investing activities: Proceeds from sale of the Sales and Service Centers 18,390 -- Additions to real estate held for sale or lease (2,937) (629) Additions to property and equipment (290) (631) -------- -------- Net cash provided by (used in) investing activities 15,163 (1,260) -------- -------- Financing activities: Payments of debt (12,082) (87) Increase in debt 4,675 1,235 -------- -------- Net cash (used in) provided by financing activities (7,407) 1,148 -------- -------- Net increase (decrease) in cash and cash equivalents 3,203 (1,667) Cash and cash equivalents at beginning of period 1,126 2,003 -------- -------- Cash and cash equivalents at end of period $ 4,329 $ 336 ======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. Page 6 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 subsidiary in the landscape nursery business, Imperial Nurseries, Inc. ("Imperial"), and Griffin's Connecticut and Massachusetts based real estate business ("Griffin Land"), 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 2000 Financial Statements included in the Report on Form 10-K as filed with the Securities and Exchange Commission on March 2, 2001, 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. In 2000, the Financial Accounting Standards Board's Emerging Issues Task Force ("EITF") issued EITF 00-10, "Accounting for Shipping and Handling Fees and Costs", which Griffin adopted at the beginning of fiscal 2001. EITF 00-10 stated that all amounts billed to customers for shipping and handling should be included in net sales and the cost of shipping and handling should be included in cost of sales. To reflect the adoption of EITF 00-10, net sales and cost of sales for the thirteen weeks ended February 26, 2000 have been increased by $88 and $95, respectively, and selling, general and administrative expenses for the thirteen weeks ended February 26, 2000 have been reduced by $7. There is no effect on operating results as a result of the adoption of EITF 00-10. The results of operations for the thirteen weeks ended March 3, 2001, 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. 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, and were located in Windsor, Connecticut; Aston and Pittsburgh, Pennsylvania; Columbus and Cincinnati, Ohio; White Marsh, Maryland; and Manassas, Virginia. A portion of the products sold by the SSCs were grown by Imperial's farming operations. Imperial's only continuing involvement in Shemin is 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. For the thirteen weeks ended March 3, 2001, the net sales of the SSCs were $1.9 million and the SSCs incurred an operating loss of $0.8 million through the date of the sale. For the thirteen weeks ended February 26, 2000, net sales of the SSCs were $3.7 million and the SSCs incurred an operating loss of $0.9 million. 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 $18.4 million, after expenses. Cash of $11.2 million from the sale was used to repay all of the amounts outstanding under Griffin's Revolving Credit Agreement. The remaining cash is being held 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 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, net $ 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 =======
Page 7 The following unaudited Pro Forma Condensed Consolidated Statement of Operations for the thirteen weeks ended March 3, 2001 and February 26, 2000 include pro forma adjustments to reflect the sale of the SSCs as if it had taken place at the beginning of the respective fiscal periods. 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 dates specified, nor is it indicative of Griffin's future results. Pro Forma Condensed Consolidated Statement of Operations
FOR THE 13 WEEKS ENDED, ----------------------- Mar. 3, Feb. 26, 2001 2000 ------- ------- Net sales and other revenue $ 2,064 $ 2,114 Costs and expenses: Cost of goods sold 1,495 1,357 Selling, general and administrative expenses 2,128 2,114 ------- ------- Operating loss (1,559) (1,357) Gain on sale of Sales and Service Centers 9,469 9,469 Interest income, net 75 112 ------- ------- Income before income tax provision 7,985 8,224 Income tax provision 3,154 3,228 ------- ------- Income before equity investment 4,831 4,996 Income (loss) from equity investment 153 (164) ------- ------- Net income $ 4,984 $ 4,832 ======= ======= Basic net income per share $ 1.02 $ 0.99 ======= ======= Diluted net income per share $ 1.01 $ 0.98 ======= =======
3. 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. Page 8
FOR THE 13 WEEKS ENDED, -------------------------- Mar. 3, Feb. 26, 2001 2000 --------- --------- Net sales and other revenue Landscape nursery $ 2,406 $ 4,218 Real estate 1,541 1,332 --------- --------- $ 3,947 $ 5,550 ========= ========= Operating loss Landscape nursery $ (1,885) $ (2,098) Real estate (151) 129 --------- --------- Industry segment totals (2,036) (1,969) General corporate expense 385 406 Interest expense, net 85 191 Gain on sale of Sales and Service Centers 9,469 -- --------- --------- Income (loss) before income taxes $ 6,963 $ (2,566) ========= ========= Mar. 3, Dec. 2, 2001 2000 --------- --------- Identifiable assets Landscape nursery $ 47,201 $ 56,336 Real estate 51,673 46,814 --------- --------- Industry segment totals 98,874 103,150 General corporate 26,605 23,506 --------- --------- $ 125,479 $ 126,656 ========= =========
See Note 4 for information on Griffin's equity investment in Centaur Communications, Ltd. 4. 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 presented below was derived from consolidated financial statements of Centaur for the six month period ended December 31, 2000 which were prepared in accordance with generally accepted accounting principles in the United Kingdom. Griffin's equity income reflects adjustments necessary to present Centaur's results in accordance with generally accepted accounting principles in the United States of America. Griffin's equity results from Centaur for the thirteen weeks ended March 3, 2001 reflect Centaur's results for the three months ended December 31, 2000.
THREE MONTHS ENDED, ----------------------- Dec. 31, Feb. 26, 2000 2000 -------- -------- Net sales $ 28,005 $ 22,874 Costs and expenses 25,467 22,009 -------- -------- Operating profit 2,538 865 Nonoperating expense, principally interest 1,073 871 -------- -------- Income (loss) before taxes 1,465 (6) Income tax provision 627 48 -------- -------- Net income (loss) $ 838 $ (54) ======== ========
Page 9
Dec. 31, Sept. 30, 2000 2000 -------- -------- Current assets $ 31,881 $ 30,980 Intangible assets 20,615 20,994 Other assets 11,314 10,845 -------- -------- Total assets $ 63,810 $ 62,819 ======== ======== Current liabilities $ 35,198 $ 30,108 Debt 27,867 33,320 Other liabilities 3,939 3,419 -------- -------- Total liabilities 67,004 66,847 Accumulated deficit (3,194) (4,028) -------- -------- Total liabilities and deficit $ 63,810 $ 62,819 ======== ========
5. Long-Term Debt Long-term debt includes:
Mar. 3, Dec. 2, 2001 2000 -------- -------- Mortgages $ 8,558 $ 8,590 Griffin Credit Agreement -- 7,300 Capital Leases 704 812 -------- -------- Total 9,262 16,702 Less: due within one year 356 7,694 -------- -------- Total long-term debt $ 8,906 $ 9,008 ======== ========
Cash received from the sale of the SSCs was used to repay all of the amounts outstanding under the Griffin Credit Agreement. On March 12, 2001, Griffin entered into a nonrecourse mortgage of $6.4 million on a building currently under construction by Griffin Land. The mortgage has an interest rate of 8.125% and a term of fifteen years with payments based on a twenty year amortization period. 6. Stock Options On December 19, 2000, Griffin's Board of Directors authorized the issuance of an additional 40,300 options under the Griffin Land and Nurseries, Inc. 1997 Stock Option Plan (the "Griffin Stock Option Plan"). These options were issued at the market value of Griffin stock on the date they were authorized and vest in equal installments on the third, fourth and fifth anniversaries from the date of grant. In the thirteen weeks ended March 3, 2001, 10,200 stock options were cancelled principally as a result of the sale of the SSCs on January 26, 2001. Page 10 Activity under the Griffin Stock Option Plan is summarized as follows:
Number of Weighted Avg. Options Exercise Price -------- -------------- Outstanding at December 2, 2000 627,807 $12.12 Issued after December 2, 2000 40,300 13.00 Cancelled after December 2, 2000 (10,200) 13.25 -------- ------ Outstanding at March 3, 2001 657,907 $12.16 ======== ====== Number of option holders at March 3, 2001 28 ========
Weighted Avg. Remaining Outstanding at Weighted Avg. Contractual Life Range of Exercise Prices Mar. 3, 2001 Exercise Price (in years) - ------------------------ ------------ -------------- ---------------- Under $3.00 34,435 $ 1.75 3.1 $3.00-$9.00 100,172 7.52 5.0 Over $9.00 523,300 13.73 7.4 ------- 657,907 =======
At March 3, 2001, there were 215,937 vested options outstanding under the Griffin Stock Option Plan with a weighted average price of $9.28 per share. 7. Per Share Results Basic and diluted per share results were based on the following:
FOR THE 13 WEEKS ENDED, ------------------------------ Mar. 3, Feb. 26, 2001 2000 ----------- ----------- Net income (loss) as reported for computation of basic per share results $ 4,366 $ (1,704) Adjustment to net income (loss) for assumed exercise of options of equity investee (Centaur) (20) -- ----------- ----------- Adjusted net income (loss) for computation of diluted per share results $ 4,346 $ (1,704) =========== =========== Weighted average shares 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 4,935,000 4,863,000 =========== ===========
Page 11 8. Supplemental Financial Statement Information INVENTORIES Inventories consist of:
Mar. 3, Dec. 2, 2001 2000 ------- ------- Nursery stock $30,363 $29,488 Other 1,144 2,381 ------- ------- $31,507 $31,869 ======= =======
PROPERTY AND EQUIPMENT Property and equipment consist of:
Estimated Useful Mar. 3, Dec. 2, Lives 2001 2000 ----- -------- -------- Land and improvements $ 2,834 $ 7,904 Buildings 10 to 40 years 2,890 5,145 Machinery and equipment 3 to 20 years 14,590 16,985 -------- -------- 20,314 30,034 Accumulated depreciation (10,772) (12,965) -------- -------- $ 9,542 $ 17,069 ======== ========
Griffin incurred capital lease obligations of $238 and $25, respectively, in the thirteen weeks ended March 3, 2001 and February 26, 2000. REAL ESTATE HELD FOR SALE OR LEASE Real estate held for sale or lease consists of:
Estimated Useful Mar. 3, Dec. 2, Lives 2001 2000 ----- -------- -------- Land $4,609 $ 4,686 Land improvements 15 years 3,753 3,753 Buildings 40 years 33,010 30,919 Development costs 11,756 11,081 ------ ------ 53,128 50,439 Accumulated depreciation (9,470) (9,218) ------- ------- $43,658 $41,221 ======= =======
9. Contingencies Griffin is involved, as a defendent, in various litigation matters arising in the ordinary course of business. In the opinion of management, based on the advice of legal counsel, the ultimate liability, if any, with respect to these matters will not be material to financial position, results of operations or cash flows. Page 12 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 will continue in the landscape nursery business with its container growing operations in Connecticut and northern Florida. Imperial is currently expanding both of these operations. Griffin's statement of operations for the thirteen weeks ended March 3, 2001 includes the results of the SSCs through the sale. As a result of Griffin's adoption of EITF 00-10, "Accounting for Shipping and Handling Fees and Costs", Griffin has restated its net sales, cost of sales and selling, general and administrative expenses for the thirteen weeks ended February 26, 2000 to conform to the current year's presentation of shipping revenue and related costs. The adoption of EITF 00-10 had no effect on Griffin's operating results (see Note 1). Results of Operations Thirteen Weeks Ended March 3, 2001 Compared to the Thirteen Weeks Ended February 26, 2001 Griffin's net sales and other revenue were $3.9 million in the thirteen weeks ended March 3, 2001 (the "2001 first quarter") as compared to net sales and other revenue of $5.6 million in the thirteen weeks ended February 26, 2000 (the "2000 first quarter"). Net sales and other revenue at Imperial was $2.4 million in the 2001 first quarter as compared to $4.2 million in the 2000 first quarter. The decrease in net sales and other revenue at Imperial principally reflects the sale of the SSCs by Imperial in the 2001 first quarter. Net sales of container-grown plants from Imperial's farming operations were $0.5 million in the 2001 first quarter as compared to $0.7 million in the 2000 first quarter. Sales of container-grown plants are highly seasonal, peaking in the spring, and because Griffin's first quarter includes December through February, sales of container-grown plants are minimal during this quarter. At Griffin Land, net sales and other revenue increased to $1.5 million in the 2001 first quarter from $1.3 million in the 2000 first quarter. This increase principally reflects an increase of $0.2 million of revenue from property management services and an increase of $0.1 million in rental revenue from increases in rental rates and new tenants, partially offset by lower revenue from sales of residential land, which declined by $0.1 million in the 2001 first quarter as compared to the 2000 first quarter. Griffin incurred an operating loss of $2.4 million in the 2001 first quarter and the 2000 first quarter. The operating loss at Imperial was $1.9 million in the 2001 first quarter as compared to an operating loss of $2.1 million in the 2000 first quarter. The landscape nursery business historically incurs a first quarter operating loss because of the low volume of plant sales during this period. Griffin Land incurred an operating loss of $0.1 million in the 2001 first quarter as compared to an operating profit of $0.1 million in the 2000 first quarter. The lower results in the real estate business were due to lower profit on the residential land sales in the 2001 first quarter as compared to the 2000 first quarter. This reflected the mix of land sales in the 2001 first quarter, which were sold at substantially break even results as compared to the residential land sales in the 2000 first quarter, which were sold at a profit. The lower profit on residential land sales and higher operating expenses in the 2001 first quarter as compared to the 2000 first quarter more than offset increased profit generated from Griffin Land's commercial properties. Profit, before depreciation, at Griffin Land's commercial properties increased to $0.9 million in the 2001 first quarter from $0.8 million in the 2000 first quarter. Page 13 The 2001 first quarter included a pretax gain of $9.5 million on the sale of Imperial's SSCs. The proceeds from the transaction included cash of $18.4 million and an approximate 14% equity ownership in Shemin Acquistion Corporation (see Note 2). There were no comparable transactions in the 2000 first quarter. The SSCs had been the principal contributor to the operating profit of Imperial over the past three fiscal years. Interest expense decreased from $0.2 million in the 2000 first quarter to $0.1 million in the 2001 first quarter. The lower interest expense reflects an increased amount of interest capitalized at Griffin Land in the 2001 first quarter as compared to the 2000 first quarter, partially offset by the effect of increased borrowing levels under Griffin's Credit Agreement prior to the sale of the SSCs. Griffin reported equity income from its investment in Centaur of $0.2 million in the 2001 first quarter as compared to an equity loss of $0.2 million in the 2000 first quarter. The higher equity results reflect increased revenue and operating profit at Centaur. Griffin's 2001 first quarter equity income reflects the change in the reporting periods, effective last year, whereby Griffin now reflects Centaur's results on a two month lag. Had the 2000 first quarter reflected the comparable months as the 2001 first quarter, Griffin's equity results would have been substantially break-even in the 2000 first quarter. Liquidity and Capital Resources Griffin's net cash used in operating activities was $4.6 million in the 2001 first quarter as compared to $1.6 million in the 2000 first quarter. The increased use of cash principally reflects an increase of $2.5 million in other current assets principally for amounts due from JDS Corporation ("JDS") for reimbursement for tenant improvements in the building under construction by Griffin Land that is leased to JDS. Net income was $4.4 million in the 2001 first quarter as compared to a net loss of $1.7 million in the 2000 first quarter, with the increase in earnings due to the gain on the sale of Imperial's SSCs. Changes in income tax payable, deferred taxes and results of Griffin's equity investment substantially offset the effect of the higher net income. The increase in net cash provided by investing activities reflects the $18.4 million of net cash proceeds from the sale of the SSCs, partially offset by an increase in additions to Griffin Land's real estate assets. Additions to real estate assets were $2.9 million in the 2001 first quarter as compared to $0.6 million in the 2000 first quarter. The additions in the 2001 first quarter reflect principally the construction of the shell of a 165,000 square foot commercial building in Windsor, Connecticut after entering into a long-term lease with JDS. The shell will be completed in the 2001 second quarter at a total cost of approximately $7.7 million. The agreement with JDS provides JDS options to have Griffin Land construct two additional buildings of approximately 150,000 square feet each on land adjacent to the current building that is under construction. Additions to real estate in the 2001 first quarter also included construction, started in fiscal 2000, of a 40,000 square foot building in Bloomfield, Connecticut. This building is partially leased, with the balance verbally committed to be occupied. The cost of construction of this building is expected to be approximately $3.3 million and it is scheduled to be completed in the 2001 second quarter. Additions to Griffin Land's real estate assets in the 2001 first quarter also included work on the completion of the interior of an approximately 100,000 square foot warehouse in the New England Tradeport, the shell of which was completed in fiscal 1999. The interior is being completed as a result of leasing this space in the 2000 fourth quarter with occupancy expected in the 2001 second quarter. Capital expenditures in the 2001 first quarter were $0.3 million as compared to $0.6 million in the 2000 first quarter. The expenditures in the 2001 first quarter were principally to improve and expand Imperial's containerized plant growing facilities in northern Florida and Connecticut. The current phase of expansion projects at Imperial is expected to be completed over the next nine to twelve months at a projected total cost of $6.7 million, of which approximately $3.4 million had been expended through February 2001. Cash used in financing activities was $7.4 million in the 2001 first quarter as compared to cash provided by financing activities of $1.1 million in the 2000 first quarter. The cash used in the 2001 first quarter reflected the repayment of the entire amount of the Griffin Credit Agreement then outstanding ($11.2 million) with the net Page 14 cash proceeds from the sale of the SSCs. The balance of the net cash proceeds from the sale of the SSCs is being held for general corporate purposes. The Griffin Credit Agreement expires on May 31, 2001 and management intends to obtain a successor credit agreement with the lender. On March 12, 2001 Griffin closed a nonrecourse mortgage of $6.4 million on the 165,000 square foot building that is currently under construction and is leased to JDS. The mortgage loan bears interest at 8.125% and has a term of fifteen years, with payments based on a twenty year amortization period. In fiscal 2001, Griffin Land is completing the two buildings that were under construction at the end of fiscal 2000 and anticipates additional construction activity that may include a new warehouse facility in the New England Tradeport, an additional building to be located in either Griffin Center in Windsor, Connecticut or Griffin Center South in Bloomfield, Connecticut and an additional building in Griffin Center to be leased to JDS, if JDS exercises its option for Griffin to construct a second building for it in Griffin Center. Additionally, Griffin Land intends to proceed with its proposed residential subdivision if regulatory approval is obtained (this matter is currently in litigation) and Griffin Land will examine certain of its other land holdings for potential residential subdivisions. Management believes that in the near term, based on the current level of operations and anticipated growth, the cash generated from the sale of Imperial's SSCs, the mortgage proceeds received on March 12, 2001 and borrowings under the Griffin Credit Agreement and a successor 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. Over the intermediate and long term, selective mortgage placements or additional bank credit facilities may also 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 the improvements and expansion of Imperial's farm operations and the ability of Imperial's farm operations to achieve break-even results in fiscal 2001, construction of additional facilities in the real estate business, obtaining a successor credit agreement to its current credit agreement and approval of a proposed residential subdivision. 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 15 Item 3. Quantitative and Qualitative Disclosures About Market Risk Market risk represents the risk of changes in value of a financial instrument, derivative or non-derivative, caused by fluctuations in interest rates, foreign exchange rates and equity prices. Changes in these factors could cause fluctuations in earnings and cash flows. For fixed rate debt, changes in interest rates generally affect the fair market value of the debt instrument, but not earnings or cash flows. Griffin does not have an obligation to prepay any fixed rate debt prior to maturity, and therefore, interest rate risk and changes in the fair market value of fixed rate debt should not have a significant impact on earnings or cash flows until such debt is refinanced, if necessary. For variable rate debt, changes in interest rates generally do not impact the fair market value of the debt instrument, but do affect future earnings and cash flows. Griffin had no variable rate debt outstanding at March 3, 2001. 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 statement of operations, and the ultimate liquidation of those investments and conversion of proceeds into United States currency is subject to future foreign currency exchange rates. Page 16 PART II OTHER INFORMATION Items 1 - 5 not applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (none) (b) On February 12, 2001 Griffin filed Form 8-K dated January 26, 2001 to report the sale of the Sales and Service Centers of Imperial. Page 17 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 12, 2001 Frederick M. Danziger PRESIDENT AND CHIEF EXECUTIVE OFFICER /s/ Anthony J. Galici --------------------------------------- DATE: April 12, 2001 Anthony J. Galici VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY Page 18 -----END PRIVACY-ENHANCED MESSAGE-----