Discontinued Operation

9 Months Ended

Aug. 31, 2014

Discontinued Operation

Discontinued Operation

2.    Discontinued Operation

Effective January 8, 2014, in accordance with the terms of the Imperial Sale (see Notes 1, 4 and 10), Imperial sold its inventory and certain assets for $732 in cash and a non-interest bearing note receivable of $4,250 (the “Promissory Note”).  Net cash of $732 was received from Monrovia in the 2014 nine month period and Griffin paid $563 in severance and other expenses.  The Promissory Note is due in two installments: $2,750 was due on June 1, 2014 and $1,500 is due on June 1, 2015. The Promissory Note was discounted at 7% to its present value of $4,036 at inception and is secured by an irrevocable letter of credit.  In the 2014 third quarter, Griffin received payment of the $2,750 installment from Monrovia.  Under the terms of the Imperial Sale, Griffin and Imperial agreed to indemnify Monrovia for any potential environmental liabilities relating to periods prior to the effective date of the Imperial Sale and also agreed to certain non-competition restrictions for a four-year period.

Concurrent with the Imperial Sale, Imperial and River Bend Holdings, LLC, a wholly-owned subsidiary of Griffin, entered into a Lease and Option Agreement and an Addendum to such agreement (the “Imperial Lease”, and together with the Imperial Sale, the “Imperial Transaction”) with Monrovia, pursuant to which Monrovia is leasing Imperial’s Connecticut production nursery for a ten-year period, with options to extend for up to an additional fifteen years exercisable by Monrovia. The Imperial Lease provides for net annual rent payable to Griffin of $500 for each of the first five years with rent for subsequent years determined in accordance with the Imperial Lease. The Imperial Lease also grants Monrovia an option to purchase most of the land, land improvements and other operating assets that were used by Imperial in its Connecticut growing operations during the first thirteen years of the lease period for $10,500, or $7,000 if only a certain portion of the land is purchased, subject in each case to certain adjustments as provided for in the Imperial Lease.  Accordingly, the operating results of Imperial’s growing operations are reflected as a discontinued operation in Griffin’s consolidated statements of operations for all periods presented and the assets and liabilities of the growing operations of Imperial (excluding those assets that are part of the Imperial Lease) are shown as assets and liabilities of the discontinued operation on Griffin’s consolidated balance sheets.  The property and equipment previously used by Imperial and currently leased to Monrovia was reclassified on January 8, 2014 from property and equipment to real estate assets on Griffin’s consolidated balance sheet. The property and equipment had a cost of $11,485 and accumulated depreciation of $9,850 at the time it was reclassified (see Notes 4 and 6).

Revenue and the pretax income (loss) from Imperial’s growing operations, reflected as a discontinued operation in Griffin’s consolidated statements of operations, were as follows:

	For the Three Months Ended,					For the Nine Months Ended,
	August 31, 2014		August 31, 2013			August 31, 2014		August 31, 2013
Net sales and other revenue	$	79	$	2,727		$	159	$	11,667
Pretax income (loss)	$	62	$	(627	)	$	306	$	(832	)

The pretax income of Imperial’s discontinued operation in the 2014 nine month period includes $451 for the reclassification of actuarial gains related to Griffin’s postretirement benefits program from other comprehensive income into pretax income as a result of the termination of Griffin’s postretirement benefits program (see Note 10).

In the thirteen weeks ended November 30, 2013 (the “2013 fourth quarter”), a charge of $10,400 was included in cost of landscape nursery sales to reduce Imperial’s nursery inventories to fair value, which was the net realizable value based on the terms of the Imperial Sale.  The pretax loss from the Imperial Sale in the 2014 nine month period was as follows:

Consideration received from Monrovia, reflecting cash of $732 and note receivable of $4,036	$	4,768
Carrying value of assets sold, principally inventory	(4,561		)
Curtailment of employee benefit plan (see Note 10)	309
Severance and other expenses	(563		)
Pretax loss	$	(47	)

The assets and liabilities of Imperial’s growing operation, reflected as a discontinued operation, are as follows:

	August 31, 2014		November 30, 2013
Assets:
Accounts receivable	$	4	$	1,151
Inventories	—		4,116
Other	238		360
	$	242	$	5,627
Liabilities:
Accounts payable and accrued liabilities	$	44	$	768