10-K/A 1 a10-ka.txt 10-K/A -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K/A /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 27, 1999 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-29288 ------------------------ GRIFFIN LAND & NURSERIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 06-0868496 (State or other jurisdiction of (IRS Employer Identification No.) incorporation of organization) ONE ROCKEFELLER PLAZA 10020 NEW YORK, NEW YORK (Zip Code) (Address of principal executive offices)
(212) 218-7910 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- Common Stock $0.01 par value Nasdaq National Market
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/ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in part III of this Form 10-K or any amendment to this Form 10-K. / / State the aggregate market value of the voting stock held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing: $12,363,000 approximately, based on the closing sales price on the Nasdaq National Market on September 15, 2000. Shares of Common Stock held by each executive officer, director, holders of greater than 10% of the outstanding Common Stock of the Registrant and persons or entities known to the Registrant to be affiliates of the foregoing have been excluded in that such persons may be deemed to be affiliates. This assumption regarding affiliate status is not necessarily a conclusive determination for other purposes. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: Common Stock: 4,862,704 shares as of September 15, 2000. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Explanatory Note In its Report on Form 10-Q for the thirteen weeks ended May 27, 2000, Griffin Land & Nurseries, Inc. ("Griffin") stated that it would restate its consolidated financial statements for the fiscal year ended November 28, 1998, the fiscal year ended November 27, 1999 and the thirteen weeks ended February 26, 2000. This amendment includes in Item 8 such restated consolidated financial statements for the fiscal year ended November 27, 1999 and other information relating to such restated consolidated financial statements, including Selected Financial Data (Item 6) and Management's Discussion and Analysis of Financial Condition and Results of Operations (Item 7). Information regarding the effect of the restatement on Griffin's financial condition at November 27, 1999 and its results of operations for the fiscal year then ended is provided in Note 13 to the consolidated financial statements included in Item 8 of this amendment. Except for Items 6, 7 and 8, no other information included in Griffin's Annual Report on Form 10-K for the fiscal year ended November 27, 1999 is amended by this amendment. PART II ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected statement of operations data for fiscal years 1995 through 1999 and balance sheet data as of the end of each fiscal year.
1999 1998 (As Restated)(a) (As Restated)(a) 1997 1996 1995 ---------------- ---------------- -------- -------- -------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF OPERATIONS DATA: Net sales & other revenue................. $ 62,944 $ 51,231 $ 46,288 $ 46,531 $ 41,756 Operating profit (loss)................... 3,130 74 (3,236) (1,245) 810 Income (loss) from continuing operations.............................. 2,176 (65) (2,136) (4,063) (4,265) Net income (loss) (b)..................... 2,176 (65) (2,136) (4,606) (580) Basic net income (loss) per share (c)..... 0.45 (0.01) (0.45) Diluted net income (loss) per share (c)... 0.42 (0.03) (0.45) BALANCE SHEET DATA: Total assets.............................. 112,885 104,730 103,736 101,775 165,655 Working capital........................... 36,337 33,304 41,130 36,698 23,069 Long-term debt (d)........................ 8,860 2,666 2,830 38,846 72,737 Stockholders' equity/Culbro Investment (e)..................................... 93,270 91,000 90,523 47,449 61,299
(a) The financial data for fiscal 1999 and fiscal 1998 has been restated as described in Item 7 and Note 13 to the consolidated financial statements included in Item 8. (b) The Selected Financial Data presented above reflects CMS Gilbreth Packaging Systems, Inc., as a discontinued operation in 1995 and 1996. This business was sold in 1996. (c) Griffin was a consolidated subsidiary of Culbro Corporation ("Culbro") through July 3, 1997. Accordingly, the per share results for 1997 presented above are on a pro forma basis because the Griffin common stock was not outstanding the entire period. (d) Culbro's general long-term debt was included on Griffin's historical balance sheet through February 27, 1997, when such debt was assumed by Griffin's former affiliate, General Cigar Holdings, Inc., in connection with the distribution of Griffin's common stock to Culbro's shareholders. (e) Prior to July 3, 1997, Griffin was a wholly-owned subsidiary of Culbro. Accordingly, the retained earnings and intercompany balances with its former parent are reflected in Culbro Investment prior to July 3, 1997. 2 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESTATEMENT The consolidated financial statements of Griffin for the fiscal years ended November 27, 1999 and November 28, 1998 have been restated to adjust the amounts previously reported for equity income from Griffin's 35% investment in Centaur Communications, Ltd. ("Centaur"), a privately owned publisher based in the United Kingdom. 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. See Note 13 to Griffin's consolidated financial statements in Item 8. 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, a magazine publishing business, based in the United Kingdom. On February 27, 1997, Culbro, Griffin, then a wholly-owned subsidiary of Culbro, and General Cigar Holdings, Inc. ("GC Holdings"), also a wholly-owned subsidiary of Culbro at that time, entered into a Distribution Agreement (the "Distribution Agreement") which provided for a tax-free distribution (the "Distribution") of Griffin's common stock to the existing shareholders of Culbro. The Distribution of the Griffin common stock to Culbro shareholders was completed on July 3, 1997. Subsequent to the Distribution, Griffin has operated as an independent stand-alone entity. Prior to March 18, 1997, Griffin was known as Culbro Land Resources, Inc. The financial statements of Griffin reflect the results of the operations of Griffin's businesses and investments. Griffin's 1997 results include an allocation to Griffin from Culbro for corporate overhead of $1.0 million prior to the Distribution in July of that year. This allocation, which may not necessarily reflect the additional expenses Griffin would have incurred had it operated as a separate stand-alone entity prior to the Distribution, is deemed reasonable by Griffin management. Griffin's results of operations in 1997 also include interest expense of $0.7 million on Culbro general corporate debt. The Culbro debt was included in Griffin's financial statements through the 1997 first quarter, when that debt was assumed by GC Holdings pursuant to the Distribution Agreement. Such interest expense has not been part of Griffin's results of operations subsequent to the Distribution. Accordingly, there is no allocation of expenses from Culbro to Griffin reflected in Griffin's results subsequent to fiscal 1997. RESULTS OF OPERATIONS FISCAL 1999 COMPARED TO FISCAL 1998 In fiscal 1999, Griffin's net sales increased $11.7 million, or 23%, to $62.9 million from $51.2 million in fiscal 1998. Net sales increased at both Imperial and Griffin Land. Imperial's net sales increased $9.4 million, or 19%, to $57.6 million in fiscal 1999 from $48.2 million in fiscal 1998. The increased sales at Imperial reflect higher volume at its wholesale sales and service centers, which benefitted from favorable weather conditions in their markets throughout most of the year. Sales of containerized plants from Imperial's farm operations increased in fiscal 1999 as compared to fiscal 1998, more than offsetting the lower sales of field-grown product in fiscal 1999 as compared to fiscal 1998. The decrease in net sales of field-grown product in fiscal 1999 reflects the decision to discontinue a field-grown program. Net sales and other revenue at Griffin Land increased to $5.4 million in fiscal 1999 from $3.1 million in fiscal 1998. The revenue increase at Griffin Land principally reflected a land sale of $1.0 million in fiscal 1999 (there were no land sales in fiscal 1998) and an increase in rental revenue from its commercial properties, including the approximately 98,000 square foot warehouse built and partially leased in fiscal 1998 that became fully leased at the beginning of fiscal 1999. Rental revenue from Griffin Land's commercial properties increased to $3.6 million in fiscal 1999 from $2.6 million in fiscal 1998. Occupancy at Griffin Land's properties (excluding an approximately 100,000 square foot warehouse facility completed in fiscal 1999 and currently not occupied) was 96% as of the 3 end of fiscal 1999 (including full occupancy in its Griffin Center South commercial development) as compared to 91% at the end of fiscal 1998. Griffin's consolidated operating profit (before interest) increased to $3.1 million in fiscal 1999 from $0.1 million in fiscal 1998. Operating profit at Imperial increased to $3.9 million in fiscal 1999 from $2.3 million in fiscal 1998. The increased operating profit at Imperial principally reflects the sales volume increase, which generated gross profit in 1999 of $17.0 million versus $13.9 million in fiscal 1998. Imperial's overall gross margins on sales increased to 29.5% in fiscal 1999 from 28.8% in fiscal 1998. Imperial's operating expenses increased to $13.1 million in fiscal 1999 from $11.6 million in fiscal 1998. The increased operating expenses were incurred principally to service the additional volume at its wholesale sales and service centers. Imperial's operating expenses were 22.7% of net sales in fiscal 1999 as compared to 24.1% of net sales in fiscal 1998. Total operating profit at Griffin Land was $0.8 million in fiscal 1999 as compared to a total operating loss of $0.3 million incurred in fiscal 1998. The improved operating results principally reflect the profit on the land sale in fiscal 1999 and higher rental revenue, partially offset by higher operating expenses. Griffin Land's rental properties generated an operating profit, before depreciation, of $2.9 million in fiscal 1999 as compared to $2.1 million in fiscal 1998. The increase reflects the higher occupancy rate in fiscal 1999 and an increase in the amount of space being leased. Interest expense at Griffin increased to $0.6 million in fiscal 1999 from $0.2 million in fiscal 1998. The higher interest expense reflects the increased debt in fiscal 1999, including an $8.2 million nonrecourse mortgage entered into by Griffin Land. Interest income was $0.1 million in fiscal 1999 as compared to $0.3 million in fiscal 1998. The lower interest income in the current year reflects the lower cash on hand throughout fiscal 1999 as compared to the prior year. Equity income from Griffin's investee, Centaur, was $0.6 million in fiscal 1999 as compared to $0.9 million in fiscal 1998. The lower results from Centaur reflect higher interest expense in fiscal 1999 due to having outstanding loans for the entire year as compared to a partial year in fiscal 1998, and lower operating profit. As a result of transactions in the third quarter of fiscal 1998, Griffin's equity ownership of Centaur was 35% throughout the entire fiscal 1999 as compared to only part of fiscal 1998. In early fiscal 1999, Griffin's ownership interest in Linguaphone Group plc ("Linguaphone") was reduced and is now accounted for under the cost method of accounting for investments. Accordingly, Griffin did not recognize equity results of Linguaphone throughout most of fiscal 1999. Griffin's results in fiscal 1998 included an equity loss of $1.1 million from Linguaphone. FISCAL 1998 COMPARED TO FISCAL 1997 In fiscal 1998, Griffin's net sales increased $4.9 million, or 11%, to $51.2 million from $46.3 million in fiscal 1997. The net sales increase was due to net sales at Imperial, which were $48.2 million in fiscal 1998 as compared to $42.6 million in fiscal 1997. The $5.6 million (13%) net sales increase at Imperial principally reflected increased volume and higher prices at the wholesale sales and service centers, which accounted for substantially all of Imperial's net sales increase. Net sales in Griffin's real estate business, Griffin Land, decreased from $3.7 million in fiscal 1997 to $3.1 million in fiscal 1998. Net sales in fiscal 1997 included $0.7 million from sales of remaining residential lots from developments started in earlier years. There were no land sales in fiscal 1998. Excluding the residential lot sales, net sales at Griffin Land increased slightly in fiscal 1998 as compared to fiscal 1997. Rental revenue from Griffin Land's buildings increased to $2.6 million in fiscal 1998 from $2.1 million in fiscal 1997. The higher rental revenue principally reflected increased occupancy as the result of new leases. Occupancy in Griffin Land's properties, excluding the new warehouse constructed in 1998, increased from 80% at the end of fiscal 1997 to 91% at the end of fiscal 1998. Including new leases that became effective subsequent to the end of fiscal 1998, Griffin 4 Land's occupancy rate in its properties was approximately 95%, including full occupancy in its Griffin Center South development. Griffin's consolidated operating profit (before interest) was $0.1 million in fiscal 1998 as compared to an operating loss of $3.2 million in fiscal 1997. The increased operating results principally reflected the effect of the $3.3 million charge incurred in fiscal 1997 by Imperial to reserve for certain plant inventories. Operating profit at Imperial increased to $2.3 million in fiscal 1998 as compared to $1.9 million (excluding the effect of the inventory charge) in fiscal 1997. Imperial's overall gross profit margins decreased slightly to 28.8% in fiscal 1998 from 29.4% in fiscal 1997, again excluding the effect of the inventory charge in 1997. The operating profit increase at Imperial reflects the effect of higher net sales in fiscal 1998, partially offset by higher operating expenses. As a percentage of net sales, operating expenses were 24.1% in fiscal 1998 as compared to 25.0% in fiscal 1997. The operating expense increase principally reflected higher selling expenses related to the increased volume at Imperial's wholesale sales and service centers. Griffin Land incurred a total operating loss of $0.3 million in fiscal 1998 versus a total operating loss of $0.2 million in fiscal 1997. Operating results in fiscal 1998 include the settlement of a litigation initiated by Griffin Land for reimbursement of certain costs to repair two commercial buildings owned by Griffin Land. Proceeds from the settlement in excess of repair costs were approximately $0.2 million and are reflected as a reduction of Griffin Land's operating expenses. Excluding the effect of the benefit from the litigation settlement in fiscal 1998, operating results at Griffin Land decreased by $0.3 million, principally reflecting the effect of the residential land sales in fiscal 1997. Griffin Land's rental properties generated an operating profit, before depreciation, of $2.1 million in fiscal 1998 versus $1.8 million in fiscal 1997, reflecting the higher occupancy noted above and corresponding increase in rental revenue. The decrease in Griffin's interest expense principally reflects the inclusion in the 1997 first quarter of interest expense of $0.7 million related to Culbro's general corporate debt that was assumed by GC Holdings at the end of the 1997 first quarter. The higher income tax rate principally reflects the effect of state and local taxes. Griffin incurred a loss from equity investments in 1998 as compared to equity income in 1997 as a result of losses at Linguaphone which more than offset increased profit at Centaur. Centaur's 1998 results included one-time expenses aggregating approximately $0.9 million before taxes (approximately $0.3 million allocable to Griffin's interest) relating to the restructuring of Centaur's ownership. Additionally, increased operating profit of Centaur's magazine publishing operations was partially offset by operating losses incurred by Centaur's subsidiary, Perfect Information, Ltd., which operates a database service that provides financial information to its customers. During 1998, Griffin's common equity ownership of Centaur increased to approximately 35% (33% fully diluted) as a result of Griffin's purchase of Centaur common stock and Centaur's repurchase of common stock from other Centaur stockholders. See Note 9 of the consolidated financial statements included in Item 8. The equity loss for Linguaphone includes foreign currency exchange losses incurred by Linguaphone for which Griffin's allocable share was approximately $0.5 million in fiscal 1998. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities was $0.9 million in fiscal 1999 as compared to $0.6 million in fiscal 1998. The increase in cash provided reflects Griffin's higher net income and an income tax refund of $0.9 million received in the current year, partially offset by higher inventories at Imperial and an increase in Imperial's accounts receivable in the current year. Net cash used in investing activities declined to $6.6 million in fiscal 1999 from $9.8 million in fiscal 1998. The decrease reflects the effect of the $3.0 million additional investment in Centaur in fiscal 1998. In fiscal 1999, lower spending on real estate investments principally offset increased capital expenditures for property 5 and equipment at Imperial. The additional capital spending at Imperial in fiscal 1999 principally reflects the acquisition of land adjacent to Imperial's Cincinnati wholesale sales and service center to expand that operation and the start of several capital projects to expand and improve Imperial's containerized plant production facilities in Florida and Connecticut. Net cash provided by financing activities was $5.6 million in fiscal 1999 as compared to net cash used in financing activities of $0.2 million in fiscal 1998. In fiscal 1999, Griffin entered into an $8.2 million nonrecourse mortgage on several of its buildings in the New England Tradeport. Proceeds were used to reduce the amount then outstanding under the Imperial Credit Agreement and to repay an existing mortgage on certain of those properties. The new warehouse completed in 1999 is not mortgaged. Also in fiscal 1999, Griffin entered into a $20 million revolving credit line (the "Griffin Credit Agreement") to replace the $10 million revolving credit facility with Imperial. The Griffin Credit Agreement is an unsecured facility that terminates in May 2001 and will provide financing for working capital requirements of Griffin's landscape nursery and real estate businesses. In the 1999 third quarter, Imperial started several capital projects to improve and expand its containerized plant production facilities in Florida and Connecticut. This current phase of expansion projects at Imperial is expected to be completed over the next six to twelve months at an estimated cost of approximately $4.0 million. Additionally, Imperial entered into an agreement to purchase 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 required site work are projected to be approximately $3.9 million to be expended in fiscal 2000 and fiscal 2001. Based on the future space requirements of certain of its tenants, Griffin Land has started construction of new buildings in fiscal 2000 to provide additional space for lease. A portion of the new construction is being built on speculation. Additional construction being considered is dependent on the leasing status of the recently constructed 100,000 square foot warehouse in the New England Tradeport, which is being actively marketed but is not yet leased. 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. Over the intermediate and long term, selective mortgage placements or additional bank credit facilities may also be required to fund capital projects. 6 FORWARD-LOOKING INFORMATION The above information in Management's Discussion and Analysis of Financial Condition and Results of Operations includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Although Griffin believes that its plans, intentions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such plans, intentions or expectations will be achieved, particularly with respect to the opening of an additional sales and service center, the leasing of its warehouse constructed in 1999 and possible construction of additional facilities in the real estate business. The forward-looking 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. 7 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA GRIFFIN LAND & NURSERIES, INC. CONSOLIDATED STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE FISCAL YEARS ENDED, --------------------------------------- NOV. 27, NOV. 28, 1999 1998 (AS RESTATED) (AS RESTATED) NOV. 29, (NOTE 13) (NOTE 13) 1997 --------- --------- --------- Net sales and other revenue................................. $62,944 $51,231 $46,288 Costs and expenses: Cost of goods sold.......................................... 43,321 36,218 35,767 Selling, general and administrative expenses................ 16,493 14,939 13,757 ------- ------- ------- Operating profit (loss)..................................... 3,130 74 (3,236) Interest expense............................................ 626 185 1,002 Interest income............................................. 81 298 266 ------- ------- ------- Income (loss) before income tax provision (benefit)......... 2,585 187 (3,972) Income tax provision (benefit).............................. 962 101 (1,470) ------- ------- ------- Income (loss) before equity investments..................... 1,623 86 (2,502) ------- ------- ------- Income (loss) from equity investments: Investment in Centaur Communications, Ltd................. 565 902 426 Investment in Linguaphone Group plc....................... (12) (1,053) (60) ------- ------- ------- Income (loss) from equity investments....................... 553 (151) 366 ------- ------- ------- Net income (loss)........................................... $ 2,176 $ (65) $(2,136) ======= ======= ======= Basic net income (loss) per common share.................... $ 0.45 $ (0.01) $ (0.45)(a) ======= ======= ======= Diluted net income (loss) per common share.................. $ 0.42 $ (0.03) $ (0.45)(a) ======= ======= =======
(a) 1997 per share results are pro forma. See Note 7. See Notes to Consolidated Financial Statements. 8 GRIFFIN LAND & NURSERIES, INC. CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOV. 27, NOV. 28, 1999 1998 (AS RESTATED) (AS RESTATED (NOTE 13) (NOTE 13) --------- --------- ASSETS CURRENT ASSETS Cash and cash equivalents................................... $ 2,003 $ 2,059 Accounts receivable, less allowance of $564 and $490........ 5,966 4,654 Inventories................................................. 29,196 26,746 Deferred income taxes....................................... 2,566 3,220 Other current assets........................................ 2,338 2,625 -------- -------- TOTAL CURRENT ASSETS........................................ 42,069 39,304 Real estate held for sale or lease, net..................... 33,766 31,519 Investment in Centaur Communications, Ltd................... 16,532 15,967 Property and equipment, net................................. 14,359 12,635 Other assets................................................ 6,159 5,305 -------- -------- TOTAL ASSETS................................................ $112,885 $104,730 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities.................... $ 5,412 $ 5,586 Long-term debt due within one year.......................... 320 322 Income tax payable.......................................... -- 92 -------- -------- TOTAL CURRENT LIABILITIES................................... 5,732 6,000 Long-term debt.............................................. 8,860 2,666 Deferred income taxes....................................... 1,401 1,097 Other noncurrent liabilities................................ 3,622 3,967 -------- -------- TOTAL LIABILITIES........................................... 19,615 13,730 -------- -------- COMMITMENTS AND CONTINGENCIES (SEE NOTE 12)................. -- -- Common stock, par value $0.01 per share, 10,000,000 shares authorized, 4,862,704 shares issued and outstanding....... 49 48 Additional paid in capital.................................. 93,584 93,491 Accumulated deficit......................................... (363) (2,539) -------- -------- TOTAL STOCKHOLDERS' EQUITY.................................. 93,270 91,000 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $112,885 $104,730 ======== ========
See Notes to Consolidated Financial Statements. 9 GRIFFIN LAND & NURSERIES, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DOLLARS IN THOUSANDS)
ACCUMULATED SHARES OF ADDITIONAL DEFICIT TOTAL COMMON COMMON PAID-IN (AS RESTATED) (AS RESTATED) STOCK STOCK CAPITAL (NOTE 13) (NOTE 13) --------- -------- ---------- --------- -------- Reclassification of Culbro Investment account on July 3, 1997.................................. 4,559,109 $ 46 $91,722 $ -- $91,768 Exercise of stock options, including $821 income tax benefit...................................... 184,481 1 1,228 -- 1,229 Net loss subsequent to Distribution................ -- -- (2,474) (2,474) --------- ---- ------- ------- ------- Balance at November 27, 1997....................... 4,743,590 47 92,950 (2,474) 90,523 Exercise of stock options, including $451 income tax benefit...................................... 99,114 1 541 -- 542 Net loss........................................... -- -- (65) (65) --------- ---- ------- ------- ------- Balance at November 28, 1998....................... 4,842,704 48 93,491 (2,539) 91,000 Exercise of stock options, including $85 income tax benefit.......................................... 20,000 1 93 -- 94 Net income......................................... -- -- 2,176 2,176 --------- ---- ------- ------- ------- Balance at November 27, 1999....................... 4,862,704 $ 49 $93,584 $ (363) $93,270 ========= ==== ======= ======= =======
See Notes to Consolidated Financial Statements. 10 GRIFFIN LAND & NURSERIES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (DOLLARS IN THOUSANDS)
FOR THE FISCAL YEARS ENDED, ------------------------------------- NOV. 27, NOV. 28, 1999 1998 (AS RESTATED) (AS RESTATED) NOV. 29, (NOTE 13) (NOTE 13) 1997 --------- --------- -------- OPERATING ACTIVITIES: Net income (loss)........................................... $ 2,176 $ (65) $(2,136) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization............................. 2,204 2,004 1,921 (Income) loss from equity investments..................... (553) 151 (366) Deferred income taxes..................................... 895 186 (1,085) Changes in assets and liabilities which increased (decreased) cash: Accounts receivable....................................... (1,386) (147) (829) Inventories............................................... (2,450) (1,403) 2,187 Income tax refund received................................ 926 -- -- Increase in inventory deposits............................ (225) (188) (108) Accounts payable and accrued liabilities.................. (174) 606 (579) Other, net................................................ (483) (557) 33 ------- ------- ------- Net cash provided by (used in) operating activities......... 930 587 (962) ------- ------- ------- INVESTING ACTIVITIES: Additions to real estate held for sale or lease............. (3,416) (6,182) (953) Additions to property and equipment......................... (2,822) (1,164) (936) Additional investment in Centaur Communications, Ltd........ -- (2,968) -- Other, net.................................................. (377) 500 -- ------- ------- ------- Net cash used in investing activities....................... (6,615) (9,814) (1,889) ------- ------- ------- FINANCING ACTIVITIES: Increase in debt............................................ 8,173 -- 7,422 Payments of debt............................................ (2,220) (324) (271) Other, net.................................................. (324) 91 (152) ------- ------- ------- Net cash provided by (used in) financing activities......... 5,629 (233) 6,999 ------- ------- ------- Net (decrease) increase in cash and cash equivalents........ (56) (9,460) 4,148 Cash and cash equivalents at beginning of year.............. 2,059 11,519 7,371 ------- ------- ------- Cash and cash equivalents at end of year.................... $ 2,003 $ 2,059 $11,519 ======= ======= =======
See Notes to Consolidated Financial Statements. 11 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying consolidated financial statements of Griffin Land & Nurseries, Inc. ("Griffin") include the accounts of Griffin's real estate division ("Griffin Land") and Griffin's wholly-owned subsidiary, Imperial Nurseries, Inc. ("Imperial"). On February 27, 1997, Culbro Corporation ("Culbro"), Griffin, then a wholly-owned subsidiary of Culbro, and General Cigar Holdings, Inc. ("GC Holdings"), also a wholly-owned subsidiary of Culbro at that time, entered into a Distribution Agreement (the "Distribution Agreement") which provided for a tax-free distribution (the "Distribution") of Griffin's common stock to the existing shareholders of Culbro. The Distribution of the Griffin common stock to Culbro shareholders was completed on July 3, 1997. Griffin has operated as an independent stand-alone entity subsequent to the Distribution. All intercompany transactions have been eliminated. Prior to March 18, 1997, Griffin was known as Culbro Land Resources, Inc. Griffin accounts for its investments in Centaur Communications, Ltd. ("Centaur") and real estate joint ventures under the equity method. Results of real estate joint ventures are included in operating profit. As a result of the recapitalization in fiscal 1999 of Linguaphone Group plc ("Linguaphone"), Griffin's common equity ownership was reduced and Griffin now accounts for its investment in Linguaphone under the cost method of accounting for investments. The consolidated financial statements of Griffin for fiscal 1999 and fiscal 1998 have been restated to adjust the amounts previously reported for income from equity investment (see Note 13). BUSINESS SEGMENTS Griffin is engaged in the landscape nursery and real estate businesses. Imperial, Griffin's subsidiary in the landscape nursery segment, is engaged in growing plants which are sold principally to garden centers, wholesalers and merchandisers, and operating sales and service centers which sell principally to landscapers. Griffin's real estate segment, Griffin Land, builds and manages commercial and industrial properties and develops residential subdivisions on its land in Connecticut and Massachusetts. FISCAL YEAR Griffin's fiscal year ends on the Saturday nearest November 30. Fiscal years 1999, 1998, and 1997 each contained 52 weeks and ended November 27, 1999, November 28, 1998 and November 29, 1997, respectively. INVENTORIES Griffin's inventories are stated at the lower of cost (using the average cost method) or market. Nursery stock includes certain inventories which will not be sold or used within one year. It is industry practice to include such inventories in current assets. PROPERTY AND EQUIPMENT Property and equipment are carried at cost. Depreciation is determined on a straight-line basis over the estimated useful asset lives for financial reporting purposes and principally on accelerated methods for tax purposes. 12 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) REAL ESTATE HELD FOR SALE OR LEASE Real estate held for sale or lease is carried at depreciated cost, net of impairment write-downs, if any. Interest is capitalized during the construction period of major facilities. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset's useful life. Depreciation is determined on a straight-line basis over the estimated useful asset lives for financial reporting purposes and principally on accelerated methods for tax purposes. REVENUE AND GAIN RECOGNITION In the landscape nursery business, sales and the related cost of sales are recognized upon shipment of products. Sales returns are not material. In the real estate business, gains on real estate sales are recognized in accordance with SFAS No. 66, "Accounting for Sales of Real Estate", based upon the specific terms of the sale. FAIR VALUE OF FINANCIAL INSTRUMENTS The amounts included in the financial statements for accounts receivable, accounts payable and accrued liabilities reflect their fair values because of the short-term maturity of these instruments. The fair values of Griffin's other financial instruments are discussed in Note 5. STOCK OPTIONS Griffin accounts for stock-based compensation under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". The pro forma effect on earnings and earnings per share using the fair value method of accounting for stock-based compensation is disclosed in Note 7. EARNINGS PER SHARE In the 1998 first quarter, Griffin adopted SFAS No. 128, "Earnings Per Share". The new standard requires direct presentation of net income per common share and net income per common share assuming dilution on the face of the statement of operations. Prior to July 3, 1997, Griffin was a wholly-owned subsidiary of Culbro. Accordingly, per share results for 1997 are presented on a pro forma basis. RECLASSIFICATIONS Certain prior year balances have been reclassified to conform with the current year presentation. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the period reported. Actual results could differ from those estimates. 13 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 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 (see Note 1). Griffin has no operations outside the United States. Griffin's export sales and transactions between segments are not material.
FOR THE FISCAL YEARS ENDED, ------------------------------ NOV. 27, NOV. 28, NOV. 29, 1999 1998 1997 NET SALES AND OTHER REVENUE -------- -------- -------- Landscape nursery........................................... $ 57,570 $ 48,180 $ 42,618 Real estate................................................. 5,374 3,051 3,670 -------- -------- -------- $ 62,944 $ 51,231 $ 46,288 ======== ======== ======== OPERATING PROFIT (LOSS) Landscape nursery(a)........................................ $ 3,938 $ 2,277 $ (1,433) Real estate................................................. 798 (320) (202) -------- -------- -------- Industry segment totals..................................... 4,736 1,957 (1,635) General corporate expense................................... 1,606 1,883 1,601 Interest expense (income), net.............................. 545 (113) 736 -------- -------- -------- Income (loss) before income tax provision (benefit)......... $ 2,585 $ 187 $ (3,972) ======== ======== ======== NOV. 27, NOV. 28, NOV. 29, 1999 1998 1997 IDENTIFIABLE ASSETS -------- -------- -------- Landscape nursery........................................... $ 52,564 $ 46,881 $ 46,558 Real estate................................................. 38,248 35,480 31,320 -------- -------- -------- Industry segment totals..................................... 90,812 82,361 77,878 General corporate........................................... 22,073 22,369 25,858 -------- -------- -------- $112,885 $104,730 $103,736 ======== ======== ========
(A) RESULTS IN THE LANDSCAPE NURSERY SEGMENT IN 1997 INCLUDE A CHARGE OF $3.3 MILLION RELATING TO CERTAIN PLANT INVENTORIES. APPROXIMATELY 75% OF THE CHARGE RELATES TO FIELD-GROWN PLANT INVENTORIES IN WHICH IT WAS ESTIMATED AT THAT TIME THAT THE CARRYING COST WOULD NOT BE RECOVERED AS A RESULT OF HORTICULTURAL PROBLEMS AND MARKET CONDITIONS. AS OF NOVEMBER 27, 1999, IMPERIAL HAS SUBSTANTIALLY COMPLETED THE PHASEOUT OF ITS FIELD-GROWN PROGRAM. THE REMAINING PORTION OF THE CHARGE RELATES PRINCIPALLY TO CERTAIN CONTAINER GROWN PLANT INVENTORIES WHICH DID NOT MATURE PROPERLY.
DEPRECIATION AND CAPITAL EXPENDITURES AMORTIZATION ------------------------------ ------------------------------ FOR THE FISCAL YEARS ENDED, FOR THE FISCAL YEARS ENDED, ------------------------------ ------------------------------ NOV. 27, NOV. 28, NOV. 29, NOV. 27, NOV. 28, NOV. 29, 1999 1998 1997 1999 1998 1997 -------- -------- -------- -------- -------- -------- Landscape nursery........................... $2,795 $1,144 $ 861 $1,268 $1,212 $1,145 Real estate................................. 3,443 6,188 957 920 775 772 ------ ------ ------ ------ ------ ------ Industry segment totals..................... 6,238 7,332 1,818 2,188 1,987 1,917 General corporate........................... -- 14 71 16 17 4 ------ ------ ------ ------ ------ ------ $6,238 $7,346 $1,889 $2,204 $2,004 $1,921 ====== ====== ====== ====== ====== ======
See Note 9 for information on Griffin's equity investment in Centaur. 14 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 3. RELATED PARTY TRANSACTIONS Prior to the Distribution in 1997 (see Note 1), Griffin, as lessor, and General Cigar Co., Inc. ("General Cigar"), as lessee, entered into a lease for certain agricultural land in Connecticut and Massachusetts (the "Agricultural Lease"). At the time the Agricultural Lease was consummated, both Griffin and General Cigar were wholly-owned subsidiaries of Culbro. The Agricultural Lease is for approximately 500 acres of arable land held by Griffin for possible development in the long term, but which is being used by General Cigar for growing Connecticut Shade wrapper tobacco. General Cigar's use of the land is limited to the cultivation of cigar wrapper tobacco. The Agricultural Lease has an initial term of ten years and provides for the extension of the lease for additional periods thereafter. In addition, at Griffin's option, the Agricultural Lease may be terminated with respect to 100 acres of such land annually upon one year's prior notice. The annual rent payable by General Cigar under the Agricultural Lease is approximately equal to the annual aggregate amount of all taxes and other assessments payable by Griffin attributable to the land leased. In fiscal 1999 and fiscal 1998, General Cigar made rental payments of $108 and $80, respectively, to Griffin with respect to the Agricultural Lease. Also prior to the Distribution in 1997, Griffin entered into a Services Agreement (the "Services Agreement") with Culbro. Pursuant to the Services Agreement, Culbro, and its successor GC Holdings, provided Griffin, for a period of one year after the Distribution, with certain administrative services, including internal audit, tax preparation, legal and transportation services. The Services Agreement was terminated with respect to all services provided by GC Holdings as of July 1998, except for certain transportation services, with respect to which the Services Agreement was amended and extended through June 1999. In fiscal 1999 and fiscal 1998, Griffin incurred expenses of $150 and $400, respectively, under the Services Agreement. As of November 27, 1999 and November 28, 1998 amounts due GC Holdings from Griffin with respect to the Services Agreement were $171 and $59, respectively. In late 1997, subsequent to the Distribution, Griffin, as lessor, and General Cigar, as lessee, entered into a lease for approximately 40,000 square feet of office space in the Griffin Center South office complex in Bloomfield, Connecticut (the "Commercial Lease"). The Commercial Lease has an initial term of ten years and provides for the extension of the lease for additional annual periods thereafter. Griffin's rental revenue from the Commercial Lease in fiscal 1999 and fiscal 1998 was $464 and $437, respectively. Management believes the rent payable by General Cigar to Griffin under the Commercial Lease is at market rates. 4. INCOME TAXES Griffin's income tax provisions and deferred tax assets and liabilities in the accompanying financial statements have been calculated in accordance with SFAS No. 109 "Accounting for Income Taxes". For all periods prior to the Distribution (see Note 1), Griffin's results of operations were included in Culbro's consolidated U.S. federal income tax returns, and all tax liabilities were paid by Culbro. 15 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 4. INCOME TAXES (CONTINUED) Subsequent to the Distribution, Griffin has filed separate tax returns from its former parent company. The income tax provision (benefit) for fiscal 1999, fiscal 1998 and fiscal 1997 is summarized as follows:
FOR THE FISCAL YEARS ENDED, ------------------------------ NOV. 27, NOV. 28, NOV. 29, 1999 1998 1997 -------- -------- -------- Current federal.................................... $ 76 $(246) $ (680) Current state and local............................ 76 170 (208) Deferred, principally federal...................... 810 177 (582) ---- ----- ------- Total income tax provision (benefit)............... $962 $ 101 $(1,470) ==== ===== =======
The reasons for the difference between the United States statutory income tax rate and the effective rates are shown in the following table:
FOR THE FISCAL YEARS ENDED, ------------------------------ NOV. 27, NOV. 28, NOV. 29, 1999 1998 1997 -------- -------- -------- Tax provision (benefit) at statutory rates......... $879 $ 64 $(1,350) State and local taxes.............................. 141 111 (137) Other.............................................. (58) (74) 17 ---- ---- ------- Total income tax provision (benefit)............... $962 $101 $(1,470) ==== ==== =======
The significant components of Griffin's deferred tax asset-current and net deferred tax liability-long term are as follows:
NOV. 27, NOV. 28, 1999 1998 -------- -------- Inventory................................... $1,905 $2,532 Other....................................... 661 688 ------ ------ Deferred tax asset.......................... $2,566 $3,220 ====== ======
NOV. 27, NOV. 28, 1999 1998 -------- -------- Depreciation.............................. $ 2,332 $ 2,256 NOL carryover............................. (1,286) (1,568) Other..................................... 355 409 ------- ------- Net deferred tax liability................ $ 1,401 $ 1,097 ======= =======
As of November 27, 1999, Griffin has available for income tax purposes approximately $2.9 million in federal net operating loss carryforwards which may be used to offset future taxable income. These loss carryforwards begin to expire in fiscal year 2012. 16 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 4. INCOME TAXES (CONTINUED) In connection with the Distribution, Culbro and Griffin entered into a Tax Sharing Agreement which provided, among other things, for the allocation between Culbro and Griffin of federal, state, local and foreign tax liabilities for all periods through the Distribution. With respect to the consolidated tax returns filed by Culbro, the Tax Sharing Agreement provides that Griffin will be liable for any amounts that it would have been required to pay with respect to deficiencies assessed, if any, generally as if it had filed separate tax returns. 5. LONG-TERM DEBT Long-term debt includes:
NOV. 27, NOV. 28, 1999 1998 -------- -------- Mortgages................................... $8,704 $2,495 Capital leases.............................. 476 493 Credit Agreement............................ -- -- ------ ------ Total....................................... 9,180 2,988 Less: due within one year................... 320 322 ------ ------ Total long-term debt........................ $8,860 $2,666 ====== ======
The annual principal payment requirements under the terms of the mortgages for the years 2000 through 2004 are $112, $123, $136, $149 and $162, respectively. On June 24, 1999, Griffin entered into a nonrecourse mortgage of $8.2 million on several of its buildings in the New England Tradeport. The mortgage has an interest rate of 8.54% and a ten year term, with payments based on a thirty year amortization schedule. Proceeds were used to reduce amounts then outstanding under the Imperial Nurseries, Inc., Credit Agreement (the "Imperial Credit Agreement") and to repay an existing mortgage on certain of those buildings. The existing mortgage had a balance of $1.9 million at the time of repayment and an interest rate of 8.63%. The book value of buildings under mortgage was $7.5 million at November 27, 1999. On August 3, 1999, Griffin completed a new $20 million revolving Credit Agreement (the "Griffin Credit Agreement") to replace the $10 million Imperial Credit Agreement. The Griffin Credit Agreement is an unsecured facility with the same lender as the Imperial Credit Agreement and terminates in May 2001. Borrowings under the Griffin Credit Agreement may be, at Griffin's option, on an overnight basis or for periods of one, two, three or six months. Overnight borrowings bear interest at the lender's prime rate plus 1/4% per annum. Borrowings of one month and longer bear interest at the London Interbank Offered Rate ("LIBOR") plus 1 3/4% per annum. There are no compensating balance agreements, and Griffin will pay a commitment fee of 1/4 of 1% per annum on unused borrowing capacity. Borrowings under the Griffin Credit Agreement will be used principally to finance working capital requirements at Griffin's landscape nursery and real estate businesses. The Griffin Credit Agreement includes financial covenants with respect to Griffin's debt service coverage (as defined), net worth, operating profit and capital expenditures. There were no borrowings under the Griffin Credit Agreement in 1999. 17 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 5. LONG-TERM DEBT (CONTINUED) Management believes that the amounts reflected on the balance sheet for its mortgages reflect their current fair values based on market interest rates for comparable risks, maturities and collateral. Future minimum lease payments under capital leases for transportation equipment and the present value of such payments as of November 27, 1999 were: 2000........................................................ $232 2001........................................................ 157 2002........................................................ 100 2003........................................................ 35 2004........................................................ 5 ---- Total minimum lease payments................................ 529 Less: amounts representing interest......................... 53 ---- Present value of minimum lease payments (a)................. $476 ====
(A) INCLUDES CURRENT PORTION OF $208 AT NOVEMBER 27, 1999. At November 27, 1999 and November 28, 1998, machinery and equipment included capital leases amounting to $476 and $493, respectively, which is net of accumulated amortization of $1,797 and $1,634, respectively, at November 27, 1999 and November 28, 1998. Amortization expense relating to capital leases in fiscal 1999, fiscal 1998 and fiscal 1997 was $250, $228, and $202, respectively. 6. RETIREMENT BENEFITS SAVINGS PLAN Griffin maintains the Griffin Land & Nurseries, Inc. 401(k) Savings Plan (the "Griffin Savings Plan") for its employees, a defined contribution plan whereby Griffin matches 60% of each employee's contribution, up to a maximum of 5% of base salary. Griffin's contributions to the Griffin Savings Plan and, prior to the Distribution, to the Culbro Corporation 401(k) Savings Plan (the "Culbro Savings Plan") in fiscal 1999, fiscal 1998 and fiscal 1997 were $236, $230 and $116, respectively. The matching percentage by Griffin of each employee's contribution is greater under the Griffin Savings Plan as compared to the Culbro Savings Plan. DEFERRED COMPENSATION PLAN In fiscal 1999, Griffin adopted a non-qualified deferred compensation plan (the "Deferred Compensation Plan") for selected employees who, due to Internal Revenue Service guidelines, cannot take full advantage of the Griffin Savings Plan. Contributions to the Deferred Compensation Plan started in fiscal 2000. Accordingly, there was no liability under the Deferred Compensation Plan at November 27, 1999. It is anticipated that the Deferred Compensation Plan will be unfunded, with benefits to be paid from Griffin's general assets. 18 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 6. RETIREMENT BENEFITS (CONTINUED) POSTRETIREMENT BENEFITS Griffin maintains a postretirement benefits program which provides principally health and life insurance benefits to certain of its retired employees. In accordance with the Distribution Agreement (see Note 1), the liabilities for Griffin employees who had retired prior to the Distribution and the liabilities for employees related to businesses no longer a part of Griffin were assumed in fiscal 1997 by GC Holdings. The liability for postretirement benefits for certain of Griffin's active employees at the time of the Distribution remains with Griffin and is included in other noncurrent liabilities on the consolidated balance sheet. The components for Griffin's postretirement benefits expense is as follows:
FOR THE FISCAL YEARS ENDED, ------------------------------ NOV. 27, NOV. 28, NOV. 29, 1999 1998 1997 -------- -------- -------- Service cost-benefits earned during the year........ $23 $18 $26 Interest on accumulated postretirement benefit obligation........................................ 28 22 16 --- --- --- Total expense....................................... $51 $40 $42 === === ===
Griffin's liability for postretirement benefits, as determined by the Plan's actuaries, is shown below. None of these liabilities were funded at November 27, 1999 and November 28, 1998.
NOV. 27, NOV. 28, 1999 1998 -------- -------- Retirees.................................... $ -- $ -- Fully eligible active participants.......... 105 98 Other active participants................... 288 272 Unrecognized net gain from experience differences and assumption changes........ (28) (56) ---- ---- Liability for postretirement benefits....... $365 $314 ==== ====
Discount rates of 8.00% and 7.15% were used to compute the accumulated postretirement benefit obligations at November 27, 1999 and November 28, 1998, respectively. Because Griffin's obligation for retiree medical benefits is fixed, any increase in the medical cost trend would have no effect on the accumulated postretirement benefit obligation, service cost or interest cost. 19 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 7. STOCKHOLDERS' EQUITY PER SHARE RESULTS Basic and diluted per share results were based on the information below. Per share results for 1997 are pro forma because Griffin was a wholly-owned subsidiary of Culbro during a portion of that year.
FOR THE FISCAL YEARS ENDED, ------------------------------------ NOV. 27, NOV. 28, 1999 1998 (AS RESTATED) (AS RESTATED) NOV. 29, (NOTE 13) (NOTE 13) 1997 ------------- ------------- -------- Net income (loss) as reported for computation of basic per share results............................................. $2,176 $(65) $(2,136) Adjustment to net income (loss) for assumed exercise of options of equity investee (Centaur)...................... (104) (91) (12) ------ ---- ------- Adjusted net income (loss) for computation of diluted per share results............................................. $2,072 $(156) $(2,148) ====== ===== =======
FOR THE FISCAL YEARS ENDED, ----------------------------------- NOV. 27, NOV. 28, NOV. 29, 1999 1998 1997 --------- --------- ----------- (PRO FORMA) Weighted average shares outstanding for computation of basic per share results......................................... 4,847,000 4,776,000 4,730,000 Incremental shares from assumed exercise of Griffin stock options................................................... 77,000 -- -- --------- --------- --------- Adjusted weighted average shares for computation of diluted per share results......................................... 4,924,000 4,776,000 4,730,000 ========= ========= =========
GRIFFIN STOCK OPTION PLAN The Griffin Land & Nurseries, Inc., 1997 Stock Option Plan (the "Griffin Stock Option Plan"), adopted in 1997 and subsequently amended in 1999, makes available a total of 1,000,000 options to purchase shares of Griffin common stock. Options granted under the Griffin Stock Option Plan may be either incentive stock options or non-qualified stock options. Incentive stock options issued under the Griffin Stock Option Plan will satisfy certain Internal Revenue Code requirements applicable thereto. At the time of the Distribution (see Note 1), there were 438,202 Culbro stock options outstanding under various Culbro stock option plans and an employment agreement with an officer of Culbro. Upon completion of the Distribution in 1997, Culbro converted all employee stock options then outstanding under Culbro's stock option plans into options to purchase shares of common stock of Griffin, par value $0.01 per share, and options to purchase shares of common stock of Culbro. The number of outstanding options and exercise prices were adjusted to preserve the value of the Culbro options. A portion of the options outstanding under the Culbro plans were able to be exercised as incentive stock options, which under current tax laws will not provide any tax deductions to Griffin. All Culbro options held by Culbro employees who did not become employees of Griffin were vested as of the Distribution date. None of the options outstanding at November 27, 1999 may be exercised as stock appreciation rights. 20 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 7. STOCKHOLDERS' EQUITY (CONTINUED) The Griffin Stock Option Plan is administered by the Compensation Committee of the Board of Directors of Griffin. A summary of the activity under the Griffin Stock Option Plan is as follows:
NUMBER OF WEIGHTED AVG. OPTIONS EXERCISE PRICE --------- -------------- Culbro options converted to Griffin options at time of Distribution.................................... 438,202 $ 3.01 Granted in 1997...................................... 231,000 14.68 Exercised in 1997.................................... (184,481) 2.21 -------- ------ Outstanding at November 29, 1997..................... 484,721 8.86 Granted in 1998...................................... 4,000 17.00 Exercised in 1998.................................... (99,114) 0.92 Cancelled in 1998.................................... (20,000) 14.68 -------- ------ Outstanding at November 28, 1998..................... 369,607 10.66 Granted in 1999...................................... 252,100 13.25 Exercised in 1999.................................... (20,000) 0.92 -------- ------ Outstanding at November 27, 1999..................... 601,707 $12.16 ======== ====== Number of option holders at November 27, 1999........ 39 ========
WEIGHTED AVG. REMAINING OUTSTANDING AT WEIGHTED AVG. CONTRACTUAL LIFE RANGE OF EXERCISE PRICES NOV. 27, 1999 EXERCISE PRICE (IN YEARS) ------------------------ -------------- -------------- ---------------- Under $3.00......................... 34,435 $ 1.75 4.4 $3.00-$9.00 100,172 7.52 6.3 Over $13.00......................... 467,100 13.92 8.4 ------- 601,707 =======
Options granted by Griffin in 1997, 1998 and 1999 vest in equal installments on the third, fourth and fifth anniversaries from the date of grant. At November 27, 1999, 140,607 options outstanding under the Griffin Stock Option Plan were vested with a weighted average price of $6.39 per share. STOCK-BASED COMPENSATION Griffin accounts for stock options under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and has adopted the disclosure provisions of SFAS No. 123 which require disclosing the pro forma effect on earnings and earnings per share of the fair value method of 21 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 7. STOCKHOLDERS' EQUITY (CONTINUED) accounting for stock-based compensation. Griffin's results would have been the following pro forma amounts under the method prescribed by SFAS No. 123.
FOR THE FISCAL YEARS ENDED, --------------------------------------- NOV. 27, NOV. 28, 1999 1998 (AS RESTATED) (AS RESTATED) NOV. 29, (NOTE 13) (NOTE 13) 1997 ------------- ------------- -------- Net income (loss), as reported.............................. $2,176 $ (65) $(2,136) Net income (loss), pro forma................................ $1,831 $ (245) $(2,228) Basic net income (loss) per common share, as reported....... $ 0.45 $(0.01) $ (0.45) Basic net income (loss) per common share, pro forma......... $ 0.38 $(0.05) $ (0.47) Diluted net income (loss) per common share, as reported..... $ 0.42 $(0.03) $ (0.45) Diluted net income (loss) per common share, pro forma....... $ 0.35 $(0.07) $ (0.47)
The weighted average fair value of each option granted during fiscal 1999, fiscal 1998 and fiscal 1997 was $5.17, $5.57 and $6.10, respectively, estimated as of the date of grant using the Black-Scholes option-pricing model. The following weighted average assumptions were used in the model to calculate the fair value of each option: expected volatility of approximately 35% in all years; risk free interest rates in fiscal 1999, fiscal 1998 and fiscal 1997 of 4.91%, 5.45% and 6.15%, respectively; expected option term of 5 years; and no dividend yield for all options issued. 8. OPERATING LEASES Future minimum rental payments for the next five years under noncancelable leases as of November 27, 1999 were: 2000........................................................ $ 422 2001........................................................ 304 2002........................................................ 229 2003........................................................ 145 2004........................................................ 77 ------ Total minimum lease payments................................ $1,177 ======
Total rental expense for all operating leases in fiscal 1999, fiscal 1998 and fiscal 1997 was $518, $484 and $366, respectively. 22 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 8. OPERATING LEASES (CONTINUED) As lessor, Griffin Land's real estate activities include the leasing of office and industrial space in Connecticut. Future minimum rentals to be received under noncancelable leases as of November 27, 1999 were: 2000........................................................ $ 3,414 2001........................................................ 3,348 2002........................................................ 2,850 2003........................................................ 2,505 2004........................................................ 1,843 Later years................................................. 2,401 ------- Total minimum rental revenue................................ $16,361 =======
Total rental revenue from all leases in fiscal 1999, fiscal 1998 and fiscal 1997 was $3,247, $2,287 and $1,851, respectively. 9. EQUITY INVESTMENTS INVESTMENT IN CENTAUR On August 4, 1998, Griffin purchased 500,000 shares of Centaur common stock from another stockholder of Centaur for approximately $2.9 million. Griffin's purchase was in connection with transactions whereby the stockholder who sold the Centaur common stock to Griffin also sold its remaining Centaur common stock to a third party, and Centaur purchased approximately 4.8 million shares of its common stock from certain of its other stockholders at the same per share price paid by Griffin. As a result of these transactions, Griffin now holds approximately 5.4 million shares of the 15.2 million shares of Centaur common stock outstanding after these transactions. Substantially all of the book value of Griffin's investment in Centaur represents the excess of the cost of Griffin's investment over the book value of its equity in Centaur (representing the value of publishing rights and goodwill) and is being amortized on a straight-line basis over 30 to 40 years, which commenced in 1985. Centaur reports on a June 30 fiscal year. The unaudited summarized financial data presented below was derived from Centaur's audited consolidated financial statements, adjusted to report on a fiscal year consistent with Griffin. Centaur's consolidated financial statements 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 13, reflects adjustments necessary to present Centaur's results in accordance with generally 23 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 9. EQUITY INVESTMENTS (CONTINUED) accepted accounting principles in the United States. Such adjustments include an expense in fiscal 1997 for stock option compensation of which Griffin's allocable share was $0.6 million.
TWELVE MONTHS ENDED, --------------------------------------- NOV. 27, NOV. 28, 1999 1998 (AS RESTATED) (AS RESTATED) NOV. 29, (NOTE 13) (NOTE 13) 1997 ------------- ------------- -------- Net sales................................................... $95,911 $72,315 $85,713 Costs and expenses.......................................... 87,925 63,068 79,981 ------- ------- ------- Operating profit............................................ 7,986 9,247 5,732 Nonoperating expense (income), principally interest......... 2,638 1,322 (33) ------- ------- ------- Pretax income............................................... 5,348 7,925 5,765 Income taxes................................................ 2,141 3,322 3,217 ------- ------- ------- Net income.................................................. $ 3,207 $ 4,603 $ 2,548 ======= ======= =======
NOV. 27, NOV. 28, 1999 1998 (AS RESTATED) (AS RESTATED) (NOTE 13) (NOTE 13) ------------- ------------- Current assets.............................................. $35,957 $20,637 Intangible assets........................................... 25,002 8,752 Other noncurrent assets..................................... 11,018 8,074 ------- ------- Total assets................................................ $71,977 $37,463 ======= ======= Current liabilities......................................... $31,273 $23,186 Debt........................................................ 42,859 19,800 Noncurrent liabilities...................................... 3,530 3,493 ------- ------- Total liabilities........................................... 77,662 46,479 Accumulated deficit......................................... (5,685) (9,016) ------- ------- Total liabilities and accumulated deficit................... $71,977 $37,463 ======= =======
REAL ESTATE JOINT VENTURES Included in other assets at November 27, 1999, and November 28, 1998, is $3,110 and $3,128, respectively, for Griffin's 30% interest in a real estate joint venture that owns commercial properties in Connecticut. Results of this investment in fiscal 1999, fiscal 1998 and fiscal 1997 were $116, $106 and $27, respectively, and are included in operating profit. 24 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 10. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION INVENTORIES Inventories consist of:
NOV. 27, NOV. 28, 1999 1998 -------- -------- Nursery stock............................................. $26,728 $24,329 Finished goods............................................ 1,481 1,420 Materials and supplies.................................... 987 997 ------- ------- $29,196 $26,746 ======= =======
PROPERTY AND EQUIPMENT Property and equipment consist of:
ESTIMATED USEFUL NOV. 27, NOV. 28, LIVES 1999 1998 ---------------- -------- -------- Land and improvements..................... $ 7,402 $ 6,336 Buildings................................. 10 to 40 years 4,198 3,871 Machinery and equipment................... 3 to 20 years 14,560 13,297 -------- -------- 26,160 23,504 Accumulated depreciation.................. (11,801) (10,869) -------- -------- $ 14,359 $ 12,635 ======== ========
Total depreciation expense related to property and equipment in fiscal 1999, fiscal 1998 and fiscal 1997 was $1,323, $1,265 and $1,210, respectively. REAL ESTATE HELD FOR SALE OR LEASE Real estate held for sale or lease consists of:
ESTIMATED USEFUL NOV. 27, NOV. 28, LIVES 1999 1998 ---------------- -------- -------- Land....................................... $ 4,723 $ 4,761 Land improvements.......................... 15 years 13,488 12,716 Buildings.................................. 40 years 23,836 21,498 ------- ------- 42,047 38,975 Accumulated depreciation................... (8,281) (7,456) ------- ------- $33,766 $31,519 ======= =======
Griffin capitalized interest in fiscal 1999 and fiscal 1998 of $103 and $111, respectively. There was no interest capitalized in fiscal 1997. Total depreciation expense related to real estate held for sale or lease in fiscal 1999, fiscal 1998 and fiscal 1997 was $869, $739 and $711, respectively. 25 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 10. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION (CONTINUED) ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consist of:
NOV. 27, NOV. 28, 1999 1998 -------- -------- Trade payables.............................................. $2,741 $3,685 Accrued salaries, wages and other compensation.............. 1,381 781 Other accrued liabilities................................... 1,290 1,120 ------ ------ $5,412 $5,586 ====== ======
SUPPLEMENTAL CASH FLOW INFORMATION Griffin incurred capital lease obligations in fiscal 1999, fiscal 1998 and fiscal 1997 of $239, $238 and $202, respectively. In fiscal 1999 Griffin received a tax refund, net of income tax payments, of $654. In fiscal 1998 tax payments were $132. Interest payments, net of capitalized interest, were $626, $152 and $1,007 in fiscal 1999, fiscal 1998 and fiscal 1997, respectively, including interest payments of $730 in fiscal 1997 under Culbro's general corporate debt facilities that were transferred to GC Holdings pursuant to the Distribution Agreement (see Note 1). Prior to the Distribution in 1997, interest and tax payments were made by Culbro on behalf of Griffin. Griffin was included in Culbro's consolidated federal income tax returns through the Distribution (see Note 4). Accordingly, tax and interest payments made by Culbro through the Distribution are included in other financing activities on the consolidated statement of cash flows for fiscal 1997. 11. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The summarized quarterly financial data for fiscal 1999 and fiscal 1998 presented below have been restated from amounts previously filed in Reports on Form 10-Q as a result of changes to amounts reported as equity income from Centaur. See Note 13.
1999 QUARTERS 1ST 2ND 3RD 4TH TOTAL ------------- -------- -------- -------- -------- -------- Net sales and other revenue.................... $ 5,165 $27,293 $14,409 $16,077 $62,944 Gross profit................................... 1,597 8,316 5,171 4,539 19,623 Net income (loss).............................. (1,548) 2,879 229 616 2,176 Basic net income (loss) per share.............. (0.32) 0.59 0.05 0.13 0.45 Diluted net income (loss) per share............ (0.32) 0.58 0.05 0.11 0.42
1998 QUARTERS 1ST 2ND 3RD 4TH TOTAL ------------- -------- -------- -------- -------- -------- Net sales and other revenue.................... $ 3,514 $23,707 $11,019 $12,991 $51,231 Gross profit................................... 1,019 6,907 3,595 3,492 15,013 Net income (loss).............................. (1,482) 2,387 (749) (221) (65) Pro forma basic net income (loss) per share.... (0.31) 0.50 (0.16) (0.05) (0.01) Pro forma diluted net income (loss) per share........................................ (0.31) 0.47 (0.16) (0.05) (0.03)
26 GRIFFIN LAND & NURSERIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 12. COMMITMENTS AND CONTINGENCIES Imperial has entered into contract growing agreements with suppliers of field-grown plants. In accordance with these agreements, Imperial has agreed to purchase inventory as it becomes available with an aggregate purchase price of approximately $3.6 million over the next four years. In 1999, Imperial entered into an agreement to purchase land for a new wholesale sales and service center. Completion of the land purchase is contingent upon receiving all required regulatory approvals to operate a sales and service center on that site. If such approval is received, expenditures for the land acquisition and required site work are expected to be approximately $3.9 million in fiscal 2000. The Company is involved, as a defendant, in various litigation matters arising in the ordinary course of business. In the opinion of management, based on the advice of legal counsel, the ultimate liability, if any, with respect to these matters will not be material. 13. RESTATEMENT The consolidated financial statements of Griffin for the fiscal years ended November 27, 1999 and November 28, 1998 have been restated to adjust the amounts reported for equity income from Centaur. The restatement was required to adjust the timing 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 financial statements:
FOR THE FISCAL YEARS ENDED, -------------------------------------- NOVEMBER 27, 1999 NOVEMBER 28, 1998 ----------------- ----------------- AS AS AS AS REPORTED RESTATED REPORTED RESTATED -------- -------- -------- -------- Income before equity investments $ 1,623 $ 1,623 $ 86 $ 86 Income (loss) from equity investments 853 553 35 (151) -------- -------- -------- --------- Net income (loss) $ 2,476 $ 2,176 $ 121 $ (65) ======== ======== ======== ========= Basic net income (loss) per share $ 0.51 $ 0.45 $ 0.03 $ ($0.01) ======== ======== ======== ========= Diluted net income (loss) per share $ 0.48 $ 0.42 $ 0.01 $ ($0.03) ======== ======== ======== ========= NOVEMBER 27, 1999 NOVEMBER 28, 1998 ----------------- ----------------- AS AS AS AS REPORTED RESTATED REPORTED RESTATED -------- -------- -------- -------- Total assets $113,371 $112,885 $104,916 $104,730 ======== ======== ======== ========= Stockholders' equity $ 93,756 $ 93,270 $ 91,186 $ 91,000 ======== ======== ======== =========
27 REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders and Directors of Griffin Land & Nurseries, Inc. In our opinion, based on our audits and the report of other auditors, the accompanying consolidated balance sheets and the related consolidated statements of operations, stockholders' equity and of cash flows present fairly, after the restatement referred to in Note 13, in all material respects, the financial position of Griffin Land & Nurseries, Inc. and its subsidiaries at November 27, 1999 and November 28, 1998, and the results of their operations and their cash flows for the fiscal years ended November 27, 1999, November 28, 1998 and November 29, 1997, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the management of Griffin Land & Nurseries, Inc.; our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the fiscal 1999 and fiscal 1998 financial statements of Centaur Communications, Ltd., after the restatement referred to in Note 13, an investment which is carried at equity in the consolidated financial statements (see Notes 7, 9 and 13) and represents approximately 14.6% and 15.2%, respectively, of consolidated assets. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Centaur Communications, Ltd. in the consolidated financial statements for the years ended November 27, 1999, November 28, 1998 and November 29, 1997, is based on the report of the other auditors. We conducted our audits of these consolidated financial statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP February 9, 2000 except Notes 7, 9, 11 and 13 for which the date is August 3, 2000 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-30639) of Griffin Land & Nurseries, Inc. of our report dated February 9, 2000, except Notes 7, 9, 11 and 13 for which the date is August 3, 2000, which appears above in this Form 10-K/A of Griffin Land & Nurseries, Inc. for the fiscal year ended November 27, 1999. We also consent to the incorporation by reference of our report on the financial statement schedules, which also appears in this Form 10-K/A of Griffin Land & Nurseries, Inc. for the fiscal year ended November 27, 1999. /s/ PricewaterhouseCoopers LLP August 3, 2000 28 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Corporation has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.
GRIFFIN LAND & NURSERIES, INC. By: /s/ FREDERICK M. DANZIGER ----------------------------------------- Frederick M. Danziger CHIEF EXECUTIVE OFFICER By: /s/ ANTHONY J. GALICI ----------------------------------------- Anthony J. Galici VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY
Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed by the following persons on behalf of the Corporation and in the capacities indicated as of September 15, 2000.
NAME TITLE ---- ----- /s/ WINSTON J. CHURCHILL, JR. -------------------------------------------- Director Winston J. Churchill, Jr. /s/ EDGAR M. CULLMAN -------------------------------------------- Chairman of the Board and Director Edgar M. Cullman /s/ FREDERICK M. DANZIGER -------------------------------------------- President, Director and Chief Executive Frederick M. Danziger Officer /s/ JOHN L. ERNST -------------------------------------------- Director John L. Ernst /s/ ANTHONY J. GALICI -------------------------------------------- Vice President, Chief Financial Officer and Anthony J. Galici Secretary /s/ THOMAS C. ISRAEL -------------------------------------------- Director Thomas C. Israel /s/ DAVID F. STEIN -------------------------------------------- Director David F. Stein
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