<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 13, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10/A
AMENDMENT NO. 4
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF
THE SECURITIES EXCHANGE ACT OF 1934
---------------------
GRIFFIN LAND & NURSERIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 06-0868496
(State or other (I.R.S. Employer Identification
jurisdiction of No.)
incorporation or
organization)
ONE ROCKEFELLER PLAZA
NEW YORK, NY 10020
(Address of principal (Zip Code)
executive office)
</TABLE>
------------------------
Registrant's telephone number, including area code:
(860) 286-7660
------------------------
Securities to be registered pursuant to Section 12(b) of the Act.
None.
Securities to be registered pursuant to Section 12(g) of the Act.
Common Stock, par value $0.01 per share
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
INFORMATION INCLUDED IN INFORMATION STATEMENT AND
INCORPORATED IN FORM 10 BY REFERENCE.
CROSS-REFERENCE SHEET BETWEEN INFORMATION SHEET AND
ITEMS ON FORM 10.
<TABLE>
<CAPTION>
ITEM NO. ITEM CAPTION LOCATION IN INFORMATION STATEMENT
- --------- ----------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Business............................................. BUSINESS
2. Financial Information................................ SELECTED COMBINED FINANCIAL DATA
3. Properties........................................... BUSINESS
4. Security Ownership of Certain Beneficial Owners and
Management.......................................... PRINCIPAL STOCKHOLDERS
5. Directors and Executive Officers..................... MANAGEMENT; CERTAIN EMPLOYEE BENEFIT MATTERS
6. Executive Compensation............................... MANAGEMENT; CERTAIN EMPLOYEE BENEFIT MATTERS
7. Certain Relationships and Related Transactions....... RELATIONSHIP BETWEEN CULBRO AND GRIFFIN AFTER THE
DISTRIBUTION; CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.
8. Legal Proceedings.................................... BUSINESS
9. Market Price of and Dividends on the Registrant's
Common Equity and Related Stockholder Matters....... DIVIDEND POLICY; SHARES ELIGIBLE FOR FUTURE SALE
10. Recent Sales of Unregistered Securities.............. Part II
11. Description of Registrant's Securities to be
Registered.......................................... DESCRIPTION OF CAPITAL STOCK
12. Indemnification of Directors and Officers............ Part II
13. Financial Statements and Supplementary Data.......... INDEX TO FINANCIAL STATEMENTS
14. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................. N/A
15. Financial Statements and Exhibits
(a) Financial Statements............................. INDEX TO FINANCIAL STATEMENTS
(b) Exhibits......................................... Part II
</TABLE>
<PAGE>
CULBRO CORPORATION
387 PARK AVENUE SOUTH
NEW YORK, NY 10016
June 13, 1997
To the Shareholders of Culbro Corporation:
Culbro Corporation ("Culbro") currently owns all of the outstanding shares
of Common Stock (the "Common Stock") of Griffin Land & Nurseries, Inc.
("Griffin"). Culbro has recently reorganized its subsidiaries so that Griffin
now holds and operates substantially all of Culbro's non-tobacco related
businesses. The enclosed Information Statement contains information regarding
the distribution of the Common Stock of Griffin to the shareholders of Culbro
(the "Distribution"). If you are a holder of Culbro common stock on June 23,
1997, the record date for the Distribution, you will be entitled to receive one
(1) share of Common Stock of Griffin for each share of Culbro common stock you
own on that date. Holders of Culbro common stock on the record date will not be
required to make any payment or take any other action in order to receive
Griffin shares in the Distribution. From the date which is two days prior to the
record date until the time of the Distribution, the Culbro common stock is
expected to trade on the New York Stock Exchange in a manner which transfers to
the buyer the right to receive Common Stock in the Distribution. We expect that
Griffin stock certificates will be mailed beginning on or about July 3, 1997.
The principal effect of the Distribution will be to separate Culbro's
tobacco related business from its other businesses. After the Distribution, each
business will be conducted by a separate, publicly held corporation, and Culbro
will merge (the "Merger") with and into its other subsidiary, General Cigar
Holdings, Inc. ("General Cigar").
The Board of Directors of Culbro, which approved the Distribution on
December 12, 1996, believes that the Distribution will enhance shareholder
values over the long term by allowing General Cigar and Griffin to concentrate
on their respective businesses and providing each company with greater
flexibility in pursuing its independent business objectives. The Culbro Board of
Directors believes that the Distribution, followed by the Merger, will enable
the investment community to analyze more effectively the investment
characteristics, performance and future prospects of each business, enhancing
the likelihood that each will achieve appropriate market recognition of its
value. The Board of Directors of Culbro has unanimously approved the
Distribution and the Merger. Shareholders of Culbro approved the Merger on June
2, 1997.
Details of the Distribution and other important information, including a
description of the business and management of Griffin after the Distribution,
are set forth in the accompanying Information Statement, which should be
reviewed carefully by shareholders. Shareholder approval of the Distribution is
not required, and we are not soliciting your proxy, with respect to the
Distribution.
Shareholders of Culbro with inquiries related to the Distribution should
contact A. Ross Wollen at (212) 448-3800.
Sincerely yours,
[SIGNATURE]
Edgar M. Cullman
CHAIRMAN
<PAGE>
------------------------
INFORMATION STATEMENT
---------------------
GRIFFIN LAND & NURSERIES, INC.
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
This Information Statement is being furnished in connection with a special
distribution (the "Distribution") by Culbro Corporation ("Culbro") of one (1)
share of Common Stock, par value $0.01 per share (the "Common Stock"), of
Griffin Land & Nurseries, Inc. (formerly known as Culbro Land Resources, Inc.)
("Griffin") for each share of Culbro common stock, par value $1 per share (the
"Culbro Common Stock"), held of record as of the close of business on June 23,
1997 (the "Record Date"). The Common Stock initially is expected to trade in the
"over the counter" market as quoted on the automated quotation system Electronic
Bulletin Board of the National Association of Securities Dealers, Inc. ("NASD").
Griffin plans to apply to list the Common Stock on the Nasdaq National Market
("NASDAQ") or another securities exchange or stock market, subject to compliance
with the listing requirements of NASDAQ or such other exchange or market. See
"THE DISTRIBUTION--Listing and Trading of the Common Stock; No Prior Market for
the Common Stock." The Distribution will result in 100% of the outstanding
shares of Common Stock being distributed to the holders of Culbro Common Stock.
On July 3, 1997 (the "Distribution Date"), Culbro will deliver all of the issued
and outstanding shares of Common Stock to Chase Mellon Shareholder Services,
L.L.C., as distribution agent (the "Distribution Agent"), which in turn will
distribute such shares to the holders of Culbro Common Stock as of the Record
Date. It is expected that certificates representing shares of Common Stock will
be mailed by the Distribution Agent on or about July 3, 1997. See "INTRODUCTION"
and "THE DISTRIBUTION--Manner of Effecting the Distribution." Holders of Culbro
Common Stock on the Record Date will not be required to make any payment or take
any other action to receive Common Stock in the Distribution. Following the
Distribution Culbro is expected to merge with and into its subsidiary General
Cigar Holdings, Inc. ("General Cigar").
Griffin owns substantially all of Culbro's non-tobacco related assets and
liabilities, including all of its assets and liabilities relating to its
landscape nursery business and Connecticut- and Massachusetts-based real estate
business, together with Culbro's approximate 25% interest in Centaur
Communications Limited ("Centaur") and its approximate 50% interest in The Eli
Witt Company ("Eli Witt").
------------------------
NO VOTE OF SHAREHOLDERS IS REQUIRED IN CONNECTION WITH THE DISTRIBUTION.
NO PROXIES ARE BEING SOLICITED, AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY OTHER FEDERAL OR STATE AUTHORITY,
NOR HAS SUCH COMMISSION OR OTHER AUTHORITY PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS INFORMATION STATEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
------------------------
The date of this Information Statement is June 13, 1997
<PAGE>
SUMMARY OF CERTAIN INFORMATION
THIS SUMMARY IS QUALIFIED BY THE MORE DETAILED INFORMATION SET FORTH
ELSEWHERE IN THIS INFORMATION STATEMENT, WHICH SHOULD BE READ IN ITS ENTIRETY.
UNLESS THE CONTEXT OTHERWISE REQUIRES, (I) REFERENCES IN THE INFORMATION
STATEMENT TO CULBRO AND GRIFFIN SHALL INCLUDE THEIR RESPECTIVE SUBSIDIARIES AND
(II) REFERENCES TO A FISCAL YEAR ARE TO THE TWELVE-MONTH PERIOD ENDED THE
SATURDAY NEAREST NOVEMBER 30 OF THE YEAR REFERENCED. CERTAIN CAPITALIZED TERMS
USED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS INFORMATION STATEMENT.
<TABLE>
<S> <C>
Distributing Company.............. Culbro Corporation, a New York corporation ("Culbro").
Following the Distribution, Culbro is expected to merge
with and into General Cigar Holdings, Inc., ("General
Cigar"), a Delaware Corporation.
Distributed Company............... Griffin Land & Nurseries, Inc., a Delaware corporation
("Griffin"), which owns substantially all of the
Connecticut- and Massachusetts-based real estate and the
landscape nursery businesses previously operated by
Culbro, the approximate 25% interest in Centaur
Communications Limited ("Centaur") and the approximate
50% interest in The Eli Witt Company ("Eli Witt")
previously owned by Culbro. Griffin was incorporated
under the laws of Delaware on March 10, 1970.
The Distribution.................. On the Distribution Date, all of the outstanding shares
of Common Stock will be delivered to the Distribution
Agent. On or about July 3, 1997, the Distribution Agent
will mail stock certificates representing shares of
Common Stock to holders of record of Culbro Common Stock
as of the Record Date. See "THE DISTRIBUTION--Manner of
Effecting the Distribution."
Record Date....................... June 23, 1997.
Distribution Date................. July 3, 1997.
Distribution Ratio................ Each Culbro shareholder will receive one (1) share of
Common Stock for each share of common stock, $1 par
value, of Culbro (the "Culbro Common Stock") owned on
the Record Date.
Shares to be Distributed.......... The shares to be distributed to Culbro shareholders (the
"Distribution Shares") will constitute all of the shares
of Common Stock outstanding immediately after the
Distribution. The number of Distribution Shares will
equal the number of shares of Culbro Common Stock
outstanding on the Record Date.
Distribution Agent................ Chase Mellon Shareholder Services, L.L.C.
No Payment Required............... Culbro shareholders will not be required to make any
payment or to take any other action to receive their
portion of the Distribution. See "THE
DISTRIBUTION--Manner of Effecting the Distribution."
Conditions to the Distribution.... The Distribution is conditioned upon, among other
things, (1) declaration of the special dividend by the
Board of Directors of Culbro (the "Culbro Board") and
(2) the receipt of a private letter ruling from the
Internal Revenue Service (the "IRS") or
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
an opinion of counsel, in either case, in form and
substance satisfactory to the Culbro Board as to the tax
consequences of the Distribution (see "--Tax
Consequences"). The Culbro Board has reserved the right
to waive any conditions to the Distribution or, even if
the conditions to the Distribution are satisfied, to
abandon, defer or modify the Distribution at any time
prior to the Distribution Date. All of these conditions
have been satisfied. See "INTRODUCTION" and "THE
DISTRIBUTION--Manner of Effecting the Distribution."
The Merger........................ Following the Distribution, but not before August 26,
1997 without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation, Culbro will
merge with and into its subsidiary, General Cigar (the
"Merger").
Reasons for the Distribution...... The Distribution will formally separate Culbro's tobacco
and non-tobacco related businesses. After the
Distribution, each business will be conducted by a
separate, publicly held corporation. The Culbro Board
believes that the Distribution will enable the
management of each company to concentrate its attention
and financial resources on the core businesses of such
company, and enhance stockholder value over the
long-term by allowing the investment community to
analyze more effectively the investment characteristics,
performance and future prospects of the two distinct
business groups. The Culbro Board also believes that the
Distribution will provide each company with greater
flexibility in pursuing its independent business
objectives. See "THE DISTRIBUTION--Background and
Reasons for the Distribution."
Tax Consequences.................. The Culbro Board has conditioned the Distribution on
receipt of a private letter ruling from the IRS or an
opinion of counsel satisfactory to the Culbro Board, in
either case, to the effect, among other things, that
receipt of shares of Class B Common Stock by holders of
Culbro Common Stock will be tax free. See "THE
DISTRIBUTION--Federal Income Tax Aspects of the
Distribution."
Trading Market.................... There is currently no public market for the Common
Stock. The Common Stock initially is expected to trade
in the "over the counter" market as quoted on the NASD's
automated quotation system Electronic Bulletin Board.
Griffin plans to apply to list the Common Stock on
NASDAQ or another securities exchange or stock market,
subject to compliance with the listing requirements of
NASDAQ or such other exchange or market. See "THE
DISTRIBUTION--Listing and Trading of the Common Stock;
No Prior Market for the Common Stock," and "RISK
FACTORS--No Prior Market for Common Stock."
General Cigar..................... General Cigar Holdings, Inc., incorporated under the
laws of Delaware, is a publicly-held corporation which
conducts the tobacco related businesses of Culbro. In
February 1997, General Cigar consummated an initial
public offering (the "Offering") of
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
6,900,000 shares of its Class A Common Stock, par value
$0.01 per share (the "Class A Common Stock").
Principal Office of Griffin....... The principal executive offices of Griffin will be
located at One Rockefeller Center, New York, New York,
10020.
Board of Directors................ Culbro, as the sole stockholder of Griffin, has elected
the following persons to constitute the Board of
Directors of Griffin; Edgar M. Cullman, Frederick M.
Danziger, John L. Ernst and Winston J. Churchill, Jr.
Risk Factors...................... See "RISK FACTORS" for a discussion of factors that
should be considered in connection with the Common Stock
received in the Distribution.
Financing......................... Prior to the Distribution, Griffin expects to establish
facilities for letters of credit and lines of credit.
See "DESCRIPTION OF CERTAIN INDEBTEDNESS."
</TABLE>
4
<PAGE>
INTRODUCTION
The Board of Directors of Culbro has declared a special distribution (the
"Distribution") of one share of Common Stock of Griffin, for each share of
Culbro Common Stock held as of the Record Date. Culbro will effect the
Distribution on the Distribution Date by delivering all of the issued and
outstanding shares of Common Stock to the Distribution Agent for transfer and
distribution to the holders of record of Culbro Common Stock as of the Record
Date. It is expected that certificates representing shares of Common Stock will
be mailed to Culbro shareholders beginning on or about July 3, 1997.
In the summer of 1996, Culbro began considering a major cigar business
acquisition and its financial consequences, including the desirability of making
a public offering of common stock. Culbro reviewed its capital structure with
both its financial advisors and potential underwriters for an offering of common
stock and concluded that the best structure for a public offering was a "pure
play" cigar company with no prior trading history. Culbro believed that this
structure would provide more net dollars than an offering of Culbro shares and,
therefore, was considered to be a more desirable way of raising capital that
would ultimately benefit Culbro shareholders. To achieve this, Culbro created
General Cigar to make the public offering. The underwriters and financial
advisors also agreed that added liquidity, through not having a holding company
structure with both Culbro and General Cigar as public companies traded on the
New York Stock Exchange ("NYSE"), was desirable. To achieve this end and to
reduce ongoing costs, Culbro proposed the Merger following the Distribution so
that the resulting structure would be two public companies, General Cigar and
Griffin, each pursuing its separate business with its separate resources. Culbro
believed that the cigar business thereby would be able to receive substantially
higher proceeds from the Offering because it would be viewed as a "pure play"
cigar company, and would eventually have greater share liquidity as the result
of the issuance of added public shares at the time of the Merger which the
underwriters viewed as desirable. In addition, the probable discount to (i)
Culbro Common Stock associated with holding the cigar business through a holding
company that did not own all of the cigar company stock and (ii) the Class A
Common Stock of General Cigar associated with owning stock of an entity
controlled by a single enterprise with potentially different expansion and
dividend policies, would be eliminated by the Merger.
Culbro declared the Distribution because it believes that it is in the best
interests of Culbro and General Cigar to separate the cigar business from the
unrelated businesses of Culbro. By effecting the Distribution, Culbro believes
that Culbro, General Cigar and their shareholders will benefit by allowing the
cigar business and non-tobacco related businesses to be evaluated on a
stand-alone basis.
After the Distribution, the tobacco business will be conducted by General
Cigar and the non-tobacco businesses will be conducted by Griffin, each as a
separate, publicly held corporation. Effective as of February 27, 1997, Culbro
transferred to Griffin, as a contribution to capital, substantially all of its
assets and liabilities relating to its landscape nursery and Connecticut- and
Massachusetts-based real estate businesses, as well as Culbro's interest in
Centaur and Eli Witt. Griffin will own and operate substantially all of the real
estate and nursery businesses while General Cigar will own and operate the
tobacco related businesses. See "BUSINESS." The Distribution is intended to
enhance shareholder value over the long term by allowing Griffin and Culbro (and
following the Merger, General Cigar) to concentrate on their respective
businesses, and by enabling the investment community to analyze more effectively
the investment characteristics, performance and future prospects of the two
distinct business groups. The Distribution is also intended to provide each
company with greater flexibility in pursuing its independent business
objectives.
For a description of risk factors in connection with the Distribution and
the related transactions described in this Information Statement, see "RISK
FACTORS."
Griffin was formed as a subsidiary of Culbro on March 10, 1970. There has
been no trading market in the Common Stock. The Common Stock initially is
expected to trade in the "over the counter" market as quoted on the NASD's
automated quotation system Electronic Bulletin Board. Griffin plans to apply to
list
5
<PAGE>
the Common Stock on NASDAQ or another securities exchange or stock market,
subject to compliance with the listing requirements of NASDAQ or such other
exchange or market.
The Distribution does not require shareholder approval and the Culbro Board
may abandon, defer or modify the Distribution prior to the Distribution Date.
Culbro shareholders will not be entitled to appraisal rights in connection with
the Distribution.
The principal executive offices of Griffin are located at One Rockefeller
Plaza, New York, New York 10020.
RISK FACTORS
Shareholders should note the following risk factors, as well as the other
information contained in this Information Statement.
COMPETITION
The landscape nursery business is competitive and Griffin competes against a
number of other companies, including local and regional nursery businesses. Some
of Griffin's competitors may be in a stronger financial position than Griffin.
Numerous real estate developers operate in the portion of Connecticut and
Massachusetts in which Griffin's holdings are concentrated. Some of such
businesses compete in each anticipated business of Griffin and may have greater
financial resources than Griffin. See "BUSINESS--Competition."
ASSUMED LIABILITIES; THE ELI WITT COMPANY
Pursuant to the terms of the Distribution Agreement, Tax Sharing Agreement
and Employee Benefits Allocation Agreement, certain liabilities of Culbro are
being assumed by Griffin, including liabilities relating to the real estate
business and the nursery business, certain specified tax liabilities,
liabilities relating to employees of Griffin and all of Culbro's interests
relating to Eli Witt. As a result of the Asset Transfers, Griffin acquired
Culbro's 50.1% interest in Eli Witt. In November 1996, Eli Witt filed for
protection under Chapter 11 of the Federal Bankruptcy Law. Prior to February
1993, Eli Witt was a wholly-owned subsidiary of Culbro and filed consolidated
tax returns with Culbro. Culbro, Eli Witt and other parties engaged in two
complex acquisitions and reorganizations in 1993 and 1994, pursuant to which
Culbro in 1993 received material distributions. The distributions made to Culbro
in February 1993 included approximately $46 million in repayment of
inter-Company liabilities to Culbro and approximately $42 million in repayment
of capital. The Company believes that Eli Witt was adequately capitalized after
the distributions. The Company believes that the bankruptcy of Eli Witt was
caused by a number of other factors which occurred subsequently to the
distributions, including principally an unforeseen reduction in the prices of
cigarettes, which both reduced the ongoing profitability of Eli Witt and
eliminated the profits it had earned from recurrent cigarette price increases.
The integration of a subsequent acquisition was not successful. Culbro
subsequently loaned $5 million to Eli Witt. It is anticipated that these
transactions (including the transfer of funds to Culbro) will be reviewed by Eli
Witt creditors and other parties in interest in connection with the Chapter 11
case. Griffin believes that Eli Witt was solvent at the time of the
distributions to Culbro in 1993, and therefore that such distributions would not
constitute a fraudulent conveyance under applicable federal and state insolvency
laws. Griffin is not entitled to contribution from Culbro or General Cigar for
liabilities assumed by Griffin relating to the Eli Witt matter. Griffin is
obligated to indemnify Culbro and General Cigar for any liability relating to
the Eli Witt matter. To date, one creditor has written to the unsecured
creditors committee proposing an inquiry into this matter and the Company has
submitted documents related to this matter to the creditor's committee. Any
claim based on the foregoing, if asserted and successfully prosecuted, could
have a material adverse effect on Griffin's financial condition. See
"BUSINESS--Legal Matters."
6
<PAGE>
NO OPERATING HISTORY AS AN INDEPENDENT COMPANY
Griffin does not have an operating history as an independent public company.
Griffin also will have a new management team in place at the commencement of its
operation as a public company. The Griffin business has historically relied on
Culbro for various financial and administrative services. After the
Distribution, Griffin will require its own lines of credit, banking
relationships and administrative functions although Culbro (and following the
Merger, General Cigar) will continue to provide Griffin with certain
administrative services for a period of at least one year following the
Distribution Date. There can be no assurance that, following the Distribution,
and particularly following the termination of administrative relations with
Culbro (and following the Merger, General Cigar), Griffin will be able to
operate efficiently as an independent public corporation.
DIVIDEND POLICY
Griffin's dividend policy will be established by the Griffin Board from time
to time based on the results of operations and financial condition of Griffin
and such other business considerations as the Griffin Board considers relevant.
It is not anticipated that dividends will be paid for a substantial period of
time following the Distribution. See "DIVIDEND POLICY" and "--Lack of Cash Flow
from Operations; Need for Additional Cash."
NO PRIOR MARKET FOR COMMON STOCK
There has been no prior trading market for the Common Stock and there can be
no assurance as to the prices at which the Common Stock will trade before or
after the Distribution Date. The Common Stock initially is expected to trade in
the "over the counter" market as quoted on the NASD's automated quotation system
Electronic Bulletin Board. Griffin plans to apply to list the Common Stock on
NASDAQ or another securities exchange or stock market, subject to compliance
with the listing requirements of NASDAQ or such other exchange or market.Until
the Common Stock is fully distributed and an orderly market develops, the prices
at which the Common Stock trades may fluctuate significantly. Prices for the
Common Stock will be determined in the trading markets and may be influenced by
many factors, including the depth and liquidity of the market for the Common
Stock, investor perceptions of Griffin and its business and general economic and
market conditions. See "THE DISTRIBUTION--Listing and Trading of the Common
Stock; No Prior Market for the Common Stock."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Culbro has applied for a Tax Ruling from the IRS to the effect that, among
other things, for United States federal income tax purposes the Distribution
will be tax-free under Section 355 of the Internal Revenue Code of 1986, as
amended (the "Code"). See "THE DISTRIBUTION--Federal Income Tax Aspects of the
Distribution." The continuing validity of any such ruling, if granted, will be
subject to certain factual representations and assumptions. Neither Culbro nor
Griffin is aware of any facts or circumstances which should cause such
representations and assumptions to be untrue. The Distribution Agreement (as
defined below) provides that neither Culbro nor Griffin is to take any action
inconsistent with, nor fail to take any action required by, the request for the
Tax Ruling or the Tax Ruling unless required to do so by law or permitted to do
so by the prior written consent of the other party or, in certain circumstances,
a supplemental ruling or tax opinion. See "RELATIONSHIP BETWEEN CULBRO AND
GRIFFIN AFTER THE DISTRIBUTION--Distribution Agreement."
LACK OF CASH FLOW FROM OPERATIONS; ABSENCE OF FUTURE FUNDING FROM PARENT;
NEED FOR ADDITIONAL CASH
Although neither Griffin nor any of its subsidiaries currently has
outstanding any material indebtedness, Griffin has incurred losses during the
last several years and has operated with little positive net cash
7
<PAGE>
flow. Accordingly, Griffin relied upon Culbro's credit facilities to finance its
operations. Such Culbro credit facilities will not be available to Griffin in
the future. See "--Historical Operating Losses and Net Deficit." In order to
develop its real estate business, Griffin either must sell assets or obtain debt
financing. Griffin intends to consider development opportunities, as well as a
variety of financing options, including the incurrence of one or more forms of
indebtedness. There can be no assurance, however, that any such financing can be
obtained by Griffin on commercially reasonable terms or at all, or that
dispositions of assets, if any, can be made in a sufficiently timely fashion to
meet Griffin's cash needs, or at prices that reflect the fair market value of
such assets at the time of any such dispositions. The inability of Griffin to
generate cash in the future could have an adverse effect on Griffin's ability to
develop its property, financial condition or results of operations.
POTENTIAL RESTRICTIONS IMPOSED BY THE TERMS OF GRIFFIN'S FUTURE INDEBTEDNESS
The terms and conditions of future debt instruments of Griffin or its
subsidiaries may impose restrictions on Griffin and its subsidiaries that
affect, among other things, their ability to incur debt, pay dividends or make
distributions, make acquisitions, create liens, sell assets, and make certain
investments. The ability of Griffin and its subsidiaries to comply with the
terms of their respective debt instruments can be affected by events beyond
their control, including events such as changes in prevailing economic
conditions, changes in consumer preferences and changes in the competitive
environment, which could impair Griffin's operating performance. There can be no
assurance that the assets or cash flows of Griffin or its subsidiaries would be
sufficient to repay in full borrowings under their respective outstanding debt
instruments, whether upon maturity or in the event of acceleration upon an event
of default, or upon a required repurchase in the event of a change of control,
or that Griffin would be able to refinance or restructure the payments on such
indebtedness. See "DESCRIPTION OF CERTAIN INDEBTEDNESS."
HISTORICAL OPERATING LOSSES AND NET DEFICIT; RECENT FORECLOSURE
Griffin in recent years has experienced net losses before extraordinary
items. In 1996, an office building which had been owned by Griffin and leased to
the State of Connecticut was transferred to the lender to the building in a deed
in lieu of foreclosure. Although Griffin believes, based on the current level of
operations and anticipated growth, that cash flow from operations, cash on hand
and, if needed, borrowings under an anticipated credit facility will be
sufficient to fund its future operations in the near term, there can be no
assurance that Griffin will operate profitability. At present, 5 individual
buildings owned by Griffin are subject to mortgages aggregating $2.6 million.
Each of these buildings experiences net positive cash flow after mortgage
service expenses. There can be no assurance that such net positive cash flow
will continue with respect to all of the properties currently subject to
mortgages. See "--Lack of Cash Flow from Operations; Need for Additional Cash,"
"--Potential Restrictions Imposed by the Terms of Griffin's Future Indebtedness"
and "--General Real Estate Investment Risks; Adverse Impact on Ability to Make
Distributions."
LIMITED GEOGRAPHIC DIVERSIFICATION; DEPENDENCE ON CERTAIN REGIONS
Griffin's properties consist almost exclusively of real estate development
properties in the Hartford-Springfield corridor of Massachusetts and Connecticut
and landscape nursery properties in the New England, Mid-Atlantic and
Mid-Western states. Griffin's performance will therefore be linked to economic
conditions and the market for commercial real estate and landscape nursery
products in these regions.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real estate may be required to investigate and clean up
hazardous or toxic substances or petroleum product releases at such property and
may be held liable to a governmental entity or to third parties for property
8
<PAGE>
damage and for investigation and clean-up costs incurred by such parties in
connection with contamination. The cost of investigation, remediation or removal
of such substances may be substantial, and the presence of such substances, or
the failure to properly remediate such substances, may adversely affect the
owner's ability to sell or rent such property or to borrow using such property
as collateral. In connection with the ownership (direct or indirect), operation,
management and development of real properties, Griffin may be considered an
owner or operator of such properties or as having arranged for the disposal or
treatment of hazardous or toxic substances and, therefore, potentially liable
for removal or remediation costs, as well as certain other related costs,
including governmental fines and injuries to persons and property. In Simsbury,
the value of Griffin's land is affected by the presence of chlordane on a
portion of the land which is intended for residential development. Griffin is
experimenting with means of remediation on such lands. Although Griffin believes
that it will be able to take steps to reduce chlordane contamination to levels
below that which would impede residential development of such properties, there
can be no assurance that Griffin will be able to do so in a timely or economic
fashion or at all. In the event that Griffin is unable adequately to remediate
this property, its ability to develop such property for its intended purposes
would be materially affected. In addition, Griffin is seeking to develop a joint
venture to process bulky waste and build a transfer station and recycling
operation on a portion of its land in East Granby, Connecticut. Although Griffin
intends to conduct such operations in compliance with all applicable
environmental laws, there can be no assurance that Griffin will not incur
incremental additional costs in connection with such operations resulting from
environmental compliance efforts, or as a result of any future noncompliance
with such laws.
Griffin periodically reviews its properties for the purpose of evaluating
such properties' compliance with applicable state and federal environmental
laws. See "BUSINESS--Real Estate Nursery Business" and "BUSINESS--Regulation;
Environmental Matters."
GENERAL REAL ESTATE INVESTMENT RISKS; ADVERSE IMPACT ON ABILITY TO MAKE
DISTRIBUTIONS; DEPRESSED MARKET FOR REAL ESTATE IN HARTFORD AREA
GENERAL. Income from real property investments may be adversely affected by
the general economic climate (particularly the economic climate of the New
England region, where Griffin's properties are located), the attractiveness of
Griffin's commercial development properties to tenants, competition from other
available commercial properties, the ability of Griffin to provide adequate
maintenance and insurance, and increased operating costs (including insurance
premiums and real estate taxes). In addition, the northwest quadrant of the
Hartford area is subject to material zoning and other regulatory restrictions,
which can affect Griffin's ability to develop properties in accordance with
their best use.
DEPRESSED MARKET FOR REAL ESTATE. During the last several years, the real
estate market in the Hartford area, particularly that in the northwest quadrant
where the majority of Griffin's acreage is located, has been depressed by a
number of factors, including the decline of employment in the defense and
insurance industries. There can be no assurance that the condition of the real
estate market in this region will improve in the near future.
UNINSURED LOSS. Griffin carries insurance with respect to its properties
which it deems reasonable. There may be, however, certain types of losses
against which Griffin may not presently be insured.
COSTS OF COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT AND SIMILAR
LAWS. Under the Americans with Disabilities Act of 1990 (the "ADA"), all places
of public accommodation are required to meet certain federal requirements
related to access and use by disabled persons. Although management believes that
its commercial real estate properties are substantially in compliance with
present requirements of the ADA, Griffin has not conducted an audit or
investigation to determine its compliance. There can be no assurance that
Griffin will not incur additional costs of complying with the ADA. A number of
additional federal, state and local laws exist which also may require
modifications to Griffin's commercial real estate properties, or restrict
certain further renovations thereof, with respect to access thereto by disabled
9
<PAGE>
persons. The ultimate amount of the cost of compliance with the ADA or such
legislation is not currently ascertainable, and, while such costs are not
expected to have a material effect on Griffin, such costs could be substantial.
SEASONALITY
Sales in Griffin's landscape nursery business are seasonal, peaking in the
spring, and are affected by commercial and residential building activity as well
as weather conditions. Disruptions in such building activity, due to adverse
weather during the spring season or adverse economic conditions in the regions
in which Griffin conducts its landscape nursery operations, could have an
adverse effect on the results of operations of Griffin, taken as a whole.
INABILITY TO PREDICT DEMAND
Many of the products developed and/or produced by the landscape nursery
business require significant time in order to mature. As a result, the landscape
nursery business is dependent upon the ability to accurately estimate demand
from one to five years in advance of actual demand, making it more difficult for
Griffin to react quickly to sudden changes in demand. A sharp increase in demand
which exceeded Griffin's projections would prevent Griffin from taking full
advantage of such increase and could have an adverse effect on Griffin's
reputation; conversely, a sharp decrease in demand might cause a loss of
inventory value, result in excess inventory and could otherwise have an adverse
effect on Griffin's results of operations.
THE DISTRIBUTION
GENERAL
On the Distribution Date, Culbro intends to distribute all of the
outstanding shares of Common Stock to holders of record on the Record Date of
Culbro Common Stock. Each holder of Culbro Common Stock will receive one (1)
share of Common Stock for each share of Culbro Common Stock held on the Record
Date. Holders of Culbro Common Stock on the Record Date will not be required to
make any payment or to take any other action to receive their portion of the
Distribution.
BACKGROUND AND REASONS FOR THE DISTRIBUTION
In the summer of 1996, Culbro began considering a major cigar business
acquisition and its financial consequences, including the desirability of making
a public offering of common stock. Culbro reviewed its capital structure with
both its financial advisors and potential underwriters for an offering of common
stock and concluded that the best structure for a public offering was a "pure
play" cigar company with no prior trading history. Culbro believed that this
structure would provide more net dollars than an offering of Culbro shares and,
therefore, was considered to be a more desirable way of raising capital that
would ultimately benefit Culbro shareholders. To achieve this, Culbro created
General Cigar to make the public offering. The underwriters and financial
advisors also agreed that added liquidity, through not having a holding company
structure with both Culbro and General Cigar as public companies traded on the
NYSE, was desirable. To achieve this end and to reduce ongoing costs, Culbro
proposed the Merger following the Distribution so that the resulting structure
would be two public companies, General Cigar and Griffin, each pursuing its
separate business with its separate resources. Culbro believed that the cigar
business thereby would be able to receive substantially higher proceeds from the
Offering because it would be viewed as a "pure play" cigar company, and would
eventually have greater share liquidity as the result of the issuance of added
public shares at the time of the Merger which the underwriters viewed as
desirable. In addition, the probable discount to (i) Culbro Common Stock of
General Cigar associated with holding the cigar business through a holding
company that did not own all of the cigar company stock and (ii) the Class A
Common Stock associated with owning stock of an entity controlled by a single
enterprise with potentially different expansion and dividend policies, would be
eliminated by the Merger.
Culbro declared the Distribution because it believes that it is in the best
interests of Culbro and General Cigar to separate the cigar business from the
unrelated businesses of Culbro. By effecting the
10
<PAGE>
Distribution, Culbro believes that Culbro, General Cigar and their shareholders
will benefit by allowing the cigar business and non-tobacco related businesses
to be evaluated on a stand-alone basis.
After the Distribution, the tobacco business will be conducted by General
Cigar and the non-tobacco businesses will be conducted by Griffin, each as a
separate, publicly held corporation. The Culbro Board believes that the
Distribution will enable the management of each company to concentrate its
attention and financial resources on the core businesses of such company, and
enhance stockholder value over the long term by allowing the investment
community to analyze more effectively the investment characteristics,
performance and future prospects of the two distinct business groups. The Culbro
Board also believes that the Distribution will provide each company with greater
flexibility in pursuing its independent business objectives.
MANNER OF EFFECTING THE DISTRIBUTION
On the Distribution Date, all of the outstanding shares of Common Stock will
be delivered to the Distribution Agent for transfer and distribution to the
holders of record of Culbro Common Stock as of the Record Date. It is expected
that certificates representing shares of Common Stock will be mailed by the
Distribution Agent to Culbro shareholders beginning on or about July 3, 1997.
The Board of Directors of Culbro has reserved the right to abandon, defer or
modify the Distribution and the related transactions described in this
Information Statement at any time prior to 11:59 p.m., New York time, on the day
immediately preceding the Distribution Date.
No holder of Culbro Common Stock will be required to pay any cash or other
consideration for the shares of Common Stock received in the Distribution or
surrender or exchange shares of Culbro Common Stock in order to receive Common
Stock. The Distribution will not affect the number of, or the rights attaching
to, outstanding shares of Culbro Common Stock. All shares of Common Stock will
be fully paid and non-assessable and the holders of those shares will not be
entitled to preemptive rights. See "DESCRIPTION OF CAPITAL STOCK--Common Stock."
LISTING AND TRADING OF THE COMMON STOCK; NO PRIOR MARKET FOR THE COMMON STOCK
The Common Stock initially is expected to trade in the "over the counter"
market as quoted on the NASD's automated quotation system Electronic Bulletin
Board. Griffin plans to apply to list the Common Stock on NASDAQ or another
securities exchange or stock market, subject to compliance with the listing
requirements of NASDAQ or such other exchange or market. NASDAQ has informed
Griffin that it expects to amend its listing requirements to provide that a
listed class of equity securities must have a minimum public float of 1.1
million shares, a minimum aggregate market value of $18 million, a minimum price
per share of $5, and a minimum of 400 holders. Griffin initially will have
approximately 830 shareholders of record, which does not include beneficial
owners whose shares are held of record in the names of brokers or nominees,
based upon the number of record shareholders of Culbro Common Stock as of April
23, 1997, and will have more than 1.1 million shares held by the public,
calculated in accordance with the listing requirements of NASDAQ. For certain
information regarding options to purchase Common Stock that will be outstanding
after the Distribution, see "RELATIONSHIP BETWEEN CULBRO AND GRIFFIN AFTER THE
DISTRIBUTION--Related Agreements--Benefits and Employment Matters Allocation
Agreement" and "CERTAIN EMPLOYEE BENEFIT MATTERS."
There is not currently a public market for the Common Stock. Prices at which
the Common Stock may trade cannot be predicted. Until the Common Stock is fully
distributed and an orderly market develops, the prices at which trading in such
Common Stock occurs may fluctuate significantly. The prices at which the Common
Stock trades will be determined by the marketplace and may be influenced by many
factors, including, among others, the depth and liquidity of the market for the
Common Stock, investor perception of Griffin and the industries in which Griffin
participates, Griffin's dividend policy and general economic and market
conditions. See "RISK FACTORS--No Prior Market for Common Stock."
Culbro and Griffin have received an opinion from Latham & Watkins, counsel
to Culbro, to the effect that, among other things, the Distribution does not
constitute a "sale" of the Common Stock to Culbro's shareholders under the
Securities Act. It is Griffin's belief that the Common Stock distributed to
Culbro's
11
<PAGE>
shareholders in the Distribution, and any Common Stock issued upon exercise of
Griffin Options, will be freely transferable, except for securities received by
persons who may be deemed to be "affiliates" of Culbro within the meaning of
Rule 144 of the Securities Act, which persons may not publicly offer or sell
Common Stock received in connection with the Distribution except pursuant to a
registration statement under the Securities Act or pursuant to Rule 144 (without
regard to holding period requirements thereunder). See "SHARES ELIGIBLE FOR
FUTURE SALE."
FEDERAL INCOME TAX ASPECTS OF THE DISTRIBUTION
On December 16, 1996, Culbro filed a request for a ruling from the IRS to
the effect, among other things, that the Distribution will qualify as a tax free
spin-off under Section 355 of the Internal Revenue Code of 1986, as amended (the
"Code"), and that, for Federal income tax purposes:
(1) No gain or loss will be recognized by (and no amount will be
included in the income of) a holder of Culbro Common Stock upon the receipt
of Common Stock in the Distribution.
(2) The aggregate basis of the Culbro Common Stock and the Common Stock
in the hands of the shareholders of Culbro immediately after the
Distribution will be the same as the aggregate basis of the Culbro Common
Stock held immediately before the Distribution, allocated in proportion to
the fair market value of each.
(3) The holding period of the Common Stock received by the shareholders
of Culbro will include the holding period of Culbro Common Stock with
respect to which the Distribution will be made, provided that such
shareholder held the Culbro Common Stock as a capital asset on the
Distribution Date.
(4) No gain or loss will be recognized by Culbro upon the Distribution.
A satisfactory ruling from the IRS has been received.
The summary of federal income tax consequences set forth above does not
purport to cover all federal income tax consequences that may apply to all
categories of shareholders. All shareholders should consult their own tax
advisors regarding the particular federal, foreign, state and local tax
consequences of the Distribution to such shareholders.
For a description of the Tax Sharing Agreement pursuant to which Culbro and
Griffin have provided for various tax matters, see "RELATIONSHIP BETWEEN CULBRO
AND GRIFFIN AFTER THE DISTRIBUTION--Related Agreements--Tax Sharing Agreement."
REASONS FOR FURNISHING THE INFORMATION STATEMENT
This Information Statement is being furnished by Culbro solely to provide
information to Culbro shareholders who will receive Common Stock in the
Distribution. It is not, and is not to be construed as, an inducement or
encouragement to buy or sell any securities of Culbro or Griffin. The
information contained in this Information Statement is believed by Culbro and
Griffin to be accurate as of the date set forth on its cover. Changes may occur
after that date, and neither Culbro nor Griffin will update the information
except in the normal course of their respective public disclosure practices.
12
<PAGE>
RELATIONSHIP BETWEEN CULBRO AND GRIFFIN AFTER THE DISTRIBUTION
For purposes of governing certain relationships between Culbro and Griffin
after the Distribution and providing for an orderly transition, Culbro and
Griffin have entered into various agreements, including those described below.
Copies of certain of the agreements are included as exhibits to Griffin's
Registration Statement on Form 10 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), relating to the Class A Common Stock, and the
following discussions with respect to such agreements are qualified in their
entirety by reference to the agreements as filed.
DISTRIBUTION AGREEMENT
In 1997, Culbro, Griffin and General Cigar entered into a distribution
agreement (the "Distribution Agreement") which provides for the pro rata
distribution by Culbro to the shareholders of Culbro of all issued and
outstanding shares of Common Stock. Pursuant to the Distribution Agreement,
Culbro transferred to General Cigar all of the common stock of General Cigar
Co., Inc., Club Macanudo, Inc., Club Macanudo (Chicago), Inc. and all of
Culbro's interest in the building located at 387 Park Avenue South, New York,
New York. In addition, Culbro transferred to General Cigar Co., Inc.
approximately 1,100 acres of its real estate holdings in the Connecticut River
Valley used to cultivate cigar wrapper tobacco. In connection with these
transfers, General Cigar received all licenses, permits, accounts receivable,
prepaid expenses, reserves and other assets related to the cigar business.
Pursuant to the Distribution Agreement, Culbro also transferred to Griffin
substantially all the non-tobacco related assets of Culbro, including: (i) all
of the common stock of Imperial Nurseries, Inc., a wholly-owned subsidiary of
Culbro; (ii) approximately 5,500 acres of land in Connecticut and Florida, as
well as several nursery wholesale and retail centers; (iii) Culbro's interests
in Eli Witt and assets previously owned by Eli Witt; (iv) Culbro's 25% interest
in Centaur; and (v) all licenses, permits, accounts receivable, prepaid
expenses, reserves and other assets (other than cash) related to the real estate
and nursery business. Culbro also transferred to Griffin $7.0 million in cash.
Griffin continues to operate the real estate business owned by it prior to these
Asset Transfers.
Pursuant to the Distribution Agreement, General Cigar assumed all of
Culbro's liabilities relating to the tobacco business and the assets transferred
to General Cigar and General Cigar Co., Inc., and all of Culbro's retained
indebtedness (other than those liabilities related to the assets transferred to
Griffin), including bank and corporate debt, all expenses related to the Asset
Transfers (as defined), the Offering, the Distribution and the Merger and
certain other contingent liabilities. Similarly, Griffin assumed all liabilities
relating to the real estate business and the nursery business and relating to
the assets transferred to Griffin. These liabilities include all of Griffin's
assumed and retained indebtedness, including bank and corporate debt, other
liabilities relating to the assets transferred to Griffin and certain additional
tax liabilities. Griffin also assumed all liabilities of Culbro related to Eli
Witt, which filed for relief from creditors under Chapter 11 of the Federal
Bankruptcy Code in 1996. See "RISK FACTORS--Assumed Liabilities; The Eli Witt
Company."
The transfer of certain assets and liabilities of Culbro referred to in the
previous two paragraphs are referred to herein as the "Asset Transfers."
As a result of the Asset Transfers, Culbro has become a holding company,
substantially all of the assets of which are the stock of General Cigar and
Griffin. Pursuant to the terms of the Distribution Agreement, General Cigar and
Griffin will operate independently of each other.
The Distribution Agreement also contains general indemnities between Culbro
(or General Cigar, following the Merger) and Griffin and the procedures by which
indemnification may be claimed. The Distribution Agreement provides for, on the
one hand, Culbro and General Cigar to indemnify Griffin for any losses,
liabilities or damages (including attorneys fees) in connection with any claim
or action in respect of any of the liabilities to be assumed or retained by
Culbro and General Cigar and, on the other
13
<PAGE>
hand, Griffin to similarly indemnify Culbro and General Cigar in connection with
any claim or action in respect of any liabilities retained or assumed by
Griffin. In each instance, indemnities are limited by insurance proceeds
recovered by the indemnified party that reduce the amount of the loss, liability
or damage. In addition, the Distribution Agreement contains provisions for the
administration of insurance policies shared by the parties and provisions for
the sharing of information and related services among the parties. Upon
consummation of the Merger, Culbro's obligations with respect to such
indemnities will become the obligations of General Cigar. With respect to
corporate governance, the Distribution Agreement requires the resignation of all
Griffin directors and officers from any positions they previously held with
Culbro, General Cigar or General Cigar Co., Inc., and each of their respective
subsidiaries, and the resignation of all directors of Culbro, General Cigar or
General Cigar Co., Inc., from any positions they previously held with Griffin,
except that Edgar M. Cullman and John L. Ernst will retain their seats on the
Griffin board of directors notwithstanding their positions at Culbro and General
Cigar, and Edgar M. Cullman will be the Chairman of the Board of Griffin.
RELATED AGREEMENTS
TAX SHARING AGREEMENT
Culbro and Griffin have entered into a tax sharing agreement (the "Tax
Sharing Agreement") that defines the parties' rights and obligations with
respect to filing of returns, payments, deficiencies and refunds of federal,
state and other income or franchise taxes relating to Culbro's business for tax
years prior to and including the Distribution. In general, with respect to
periods ending on or before the last day of the taxable year in which the
Distribution occurs, Culbro is responsible for (i) filing both consolidated
federal tax returns for the Culbro affiliated group and combined or consolidated
state tax returns for any group that includes a member of the Culbro affiliated
group, including in each case Griffin and its subsidiaries for the relevant
periods of time that such companies were members of the applicable group and
(ii) paying the taxes relating to such returns. Generally, any subsequent
adjustments resulting from the redetermination of such tax liabilities by the
applicable taxing authorities will be paid by the member or affiliated group to
which the adjustment relates, with Griffin assuming responsibility for all
adjustments relating to Culbro and its affiliates other than General Cigar and
its subsidiaries. Griffin is responsible for filing returns and paying taxes
relating to any member of the Griffin affiliated group for periods that begin
before and end after the Distribution and for periods that begin after the
Distribution. Culbro and Griffin have agreed to cooperate with each other and to
share information in preparing such tax returns and in dealing with other tax
matters.
SERVICES AGREEMENT
Culbro and Griffin have entered into a services agreement (the "Services
Agreement") pursuant to which Culbro has agreed to provide a number of
administrative and other services to Griffin for a period of at least one year.
These services include administration of Griffin's insurance policies, internal
audit, preparation of tax returns, transportation and general in-house legal
services. Griffin will make an annual payment of approximately $550,000 to, and
will reimburse out-of-pocket expenses incurred by, Culbro and its subsidiaries,
in connection with such services. Culbro will make the above services available
to Griffin on an as-needed basis for a period of at least one year following the
Distribution. Pursuant to the Merger, Culbro's obligations under the Services
Agreement will be assumed by General Cigar.
BENEFITS AND EMPLOYMENT MATTERS ALLOCATION AGREEMENT
Culbro and Griffin have entered into the Benefits and Employment Matters
Allocation Agreement (the "Benefits Agreement") which provides generally for the
assumption by General Cigar of certain Culbro employee benefit plans and the
allocation of employee benefits liabilities among Culbro, Griffin and General
Cigar. In addition, the Benefits Agreement provides that upon the Distribution
each option exercisable for shares of Culbro Common Stock will be converted into
an option exercisable for shares of
14
<PAGE>
Culbro Common Stock and an option exercisable for shares of Common Stock of
Griffin. The Benefits Agreement further provides that, following the
Distribution upon consummation of the Merger, options then exercisable for
Culbro Common Stock will be converted into options exercisable for Common Stock
of General Cigar. See "CERTAIN EMPLOYEE BENEFITS MATTERS."
LEASES
Griffin as lessor and General Cigar Co., Inc. as lessee have entered into a
lease for certain agricultural real property in Connecticut and Massachusetts
(the "Agricultural Lease"). The Agricultural Lease is for approximately 500
acres of arable land allocated to Griffin for possible commercial development in
the long-term, but which provides General Cigar with a source of Connecticut
Shade wrapper tobacco. General Cigar Co., Inc.'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 will provide 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 rent payable by General Cigar Co., Inc. under the Agricultural
Lease will be principally equal to the aggregate amount of all taxes and other
assessments payable by Griffin attributable to the land leased. In addition,
Griffin and General Cigar are considering entering into a lease for the use by
General Cigar of certain commercial space in Connecticut (the "Commercial
Lease"). The Commercial Lease, if entered into, would be for approximately
25,000 square feet of office space in the Griffin Center South office complex in
Bloomfield, Connecticut. The Commercial Lease would have an initial term of ten
years and provide for the extension of the lease for additional annual periods
thereafter. The rent payable by General Cigar Co., Inc. under the Commercial
Lease would be at market rates.
15
<PAGE>
SELECTED FINANCIAL DATA
The Selected Combined Financial Data of Griffin for fiscal 1992 and fiscal
1993 have been derived from the unaudited combined financial statements of
Griffin. The Selected Combined Financial Data of Griffin for fiscal 1994, fiscal
1995 and fiscal 1996 have been derived from the audited Combined Financial
Statements of Griffin included elsewhere in this Information Statement. The
Selected Consolidated Financial Data of Griffin for the thirteen weeks ended
March 2, 1996 and March 1, 1997 have been derived from the unaudited
Consolidated Financial Statements of Griffin included elsewhere in this
Information Statement. The following Selected Financial Data should be read in
conjunction with "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" and the Financial Statements of Griffin and Notes
thereto included elsewhere in this Information Statement. The information
presented below reflects CMS Gilbreth Packaging Systems, Inc. ("CMS Gilbreth")
as a discontinued operation. The 1994, 1995, and 1996 information reflects the
deconsolidation of Eli Witt in April 1994 and subsequent accounting for the
investment in Eli Witt under the equity method. See Note 12 to the Combined
Financial Statements for fiscal 1994, fiscal 1995 and fiscal 1996 included
elsewhere in this Information Statement.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
---------------------
MARCH 2, MARCH 1,
1992 1993 1994 1995 1996 1996 1997
------------ ------------ ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA )
STATEMENT OF OPERATIONS DATA:
Net sales and other revenue......... $ 1,028,129 $ 1,239,855 $ 43,024 $ 41,756 $ 46,531 $ 3,352 $ 2,725
Operating profit (loss)............. 10,496 11,336 (4,867) 810 (1,245) (1,624) (2,426)
Loss from continuing operations..... (1,555) (2,632) (7,157) (4,265) (4,063) (1,967) (2,013)
Net income (loss)................... 344 (4,510) (3,833) (580) (4,606) (1,471) (2,013)
BALANCE SHEET DATA:
Total assets........................ 302,728 316,056 167,421 165,655 101,775 162,446 99,873
Working capital..................... 64,602 74,262 28,112 23,069 36,698 20,085 38,231
Long-term debt...................... 141,871 172,068 91,614 72,737 38,846 77,916 2,896
Culbro Investment................... 44,555 32,406 44,426 61,299 47,449 52,270 90,292
</TABLE>
16
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
In 1997, Culbro transferred to Griffin substantially all the non-tobacco
related assets of Culbro, including: (i) all of the common stock of Imperial
Nurseries, Inc., a wholly-owned subsidiary of Culbro; (ii) approximately 5,500
acres of land in Connecticut and Florida, as well as several landscape nursery
wholesale and retail centers; (iii) Culbro's interests in Eli Witt and assets
previously owned by Eli Witt; (iv) Culbro's 25% interest in Centaur; and (v) all
licenses, permits, accounts receivable, prepaid expenses, reserves and other
assets (other than cash) related to the real estate and nursery business. Culbro
also transferred to Griffin $7.0 million in cash. These transactions are
reflected in the Consolidated Financial Statements of Griffin. Griffin continues
to operate the real estate business owned by it prior to the Asset Transfers.
The Unaudited Pro Forma Combined Statement of Operations for fiscal 1996 was
prepared to reflect (i) the use of proceeds from the sale of CMS Gilbreth, (ii)
the exchange of the shares of preferred stock of Eli Witt in satisfaction of the
subordinated note issued by Culbro to a third party, (iii) the assumption of
certain liabilities by General Cigar as part of the Asset Transfers (the
"Liability Assumption") and the elimination of certain nonrecurring expenses
directly related to the Distribution and (iv) the effect of the Distribution on
Griffin's capital structure, as if these transactions had occured at the
beginning of fiscal 1996. The Unaudited Pro Forma Consolidated Statement of
Operations for the thirteen weeks ended March 1, 1997 was prepared to give
effect to the Liability Assumption by General Cigar as if it had been completed
at the beginning of the period. The Unaudited Pro Forma Consolidated Balance
Sheet at March 1, 1997 was prepared to reflect the effect of the Distribution on
Griffin's capital structure as if the Distribution had occurred on March 1,
1997. The column designated Griffin Historical reflects the results of
operations and the assets and liabilities, as appropriate, of Griffin and
Imperial Nurseries on an historical combined basis.
In the opinion of management, all adjustments necessary to fairly present
this pro forma information have been made. The Unaudited Pro Forma Combined
Financial Statements are based upon, and should be read in conjunction with, the
Combined Financial Statements of Griffin and Notes thereto included elsewhere in
this document. The pro forma information does not purport to be indicative of
the results that would have been reported had such events actually occurred on
the dates specified, nor is it indicative of Griffin's future results.
17
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR FISCAL 1996
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS FOR
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITY
ASSUMPTION
EXCHANGE OF ELI AND NON-
GRIFFIN SALE OF CMS WITT PREFERRED RECURRING GRIFFIN
HISTORICAL GILBRETH STOCK EXPENSES DISTRIBUTION PRO FORMA
----------- ------------- --------------- ----------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales and other
revenue.................... $ 46,531 $ 46,531
Costs and expenses:
Cost of goods sold.......... 34,210 34,210
Selling, general and
administrative expenses.... 12,666 12,666
Other nonrecurring
expense.................... 900
----------- ------------- ------- ----------- ----------- ----------
Operating loss.............. (1,245) (1,245)
Income from equity
investment................. 303 303
Other nonoperating income,
net........................ 1,917 (1,917)(3)
Interest expense............ 7,805 (2,859 (1) (2,167 (4) (2,271 (5) 508
----------- ------------- ------- ----------- ----------- ----------
Loss before income tax
benefit.................... (6,830 ) 2,859 250 2,271 (1,450)
Income tax benefit.......... (2,767 ) 1,115 (2) 98 (2) 886 (2) (668)
----------- ------------- ------- ----------- ----------- ----------
Loss from continuing
operations................. $ (4,063 ) $ 1,744 $ 152 $ 1,385 $ (782)
----------- ------------- ------- ----------- ----------- ----------
----------- ------------- ------- ----------- ----------- ----------
Loss per common share from
continuing operations...... $ (0.17)
----------
----------
Weighted average common
shares and equivalents
outstanding................ 4,664 (6) 4,664
----------- ----------
----------- ----------
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements.
18
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED MARCH 1, 1997
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
FOR
------------------------
<S> <C> <C> <C> <C>
LIABILITY
ASSUMPTION
AND NON-
GRIFFIN RECURRING GRIFFIN
HISTORICAL EXPENSES DISTRIBUTION PRO FORMA
----------- ----------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales and other revenue................................ $ 2,725 $ 2,725
Costs and expenses:
Cost of goods sold......................................... 1,943 1,943
Selling, general and administrative expenses............... 3,208 3,208
----------- ----------- ----------- ----------
Operating loss............................................. (2,426) (2,426)
Loss from equity investment................................ (22) (22)
Interest expense........................................... 799 (730)(5) 69
----------- ----------- ----------- ----------
Loss before income tax benefit............................. (3,247 ) 730 (2,517)
Income tax benefit......................................... (1,234 ) 285 (2) (949)
----------- ----------- ----------- ----------
Loss from continuing operations............................ $ (2,013 ) $ 445 $ (1,568)
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
Loss per common share from continuing operations........... $ (0.33)
----------
----------
Weighted average common shares and equivalents
outstanding............................................... 4,803 (6) 4,803
----------- ----------
----------- ----------
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements.
19
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF MARCH 1, 1997
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
GRIFFIIN FOR GRIFFIN PRO
HISTORICAL DISTRIBUTION FORMA
---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............................................... $ 6,498 $ 6,498
Accounts receivable, net................................................ 1,730 1,730
Inventories............................................................. 30,109 30,109
Deferred income taxes................................................... 2,783 2,783
Other current assets.................................................... 801 801
---------- ----------- -----------
Total current assets.................................................... 41,921 41,921
Property and equipment, net............................................. 12,671 12,671
Real estate held for sale or lease, net................................. 27,154 27,154
Investment in Centaur Communications, Ltd............................... 14,673 14,673
Other assets, including investment in real estate joint venture......... 3,454 3,454
---------- ----------- -----------
Total assets............................................................ $ 99,873 $ 99,873
---------- ----------- -----------
---------- ----------- -----------
LIABILITIES AND CULBRO INVESTMENT/STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities................................ $ 3,448 $ 3,448
Long-term debt due within one year...................................... 242 242
---------- ----------- -----------
Total current liabilities............................................... 3,690 3,690
Long-term debt.......................................................... 2,896 2,896
Other noncurrent liabilities............................................ 2,995 2,995
---------- ----------- -----------
Total liabiities........................................................ 9,581 9,581
---------- ----------- -----------
Culbro Investment....................................................... 90,292 (90,292)(6)
Common stock............................................................ 45 (6) 45
Additional paid in capital.............................................. 90,247 (6) 90,247
---------- ----------- -----------
Total Culbro Investment/stockholders' equity............................ 90,292 90,292
---------- ----------- -----------
Total liabilities and Culbro Investment/stockholders' equity............ $ 99,873 $ 99,873
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements.
20
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(1) Reflects reduction of interest expense as a result of using the proceeds
from the sale of CMS Gilbreth Packaging Systems, Inc. to reduce debt. The
net proceeds of approximately $35 million from the sale, which was completed
on November 8, 1996, reduced debt under Culbro's Senior Notes and Credit
Agreement, which had interest rates of 9.9% and 7.0%, respectively.
(2) Reflects Federal income tax (35%) and state income tax (4%), which is net of
Federal tax benefits.
(3) Reflects the elimination of $2.167 million of income from accrued dividends
and accretion on shares of preferred stock of Eli Witt as a result of the
exchange of such preferred stock in satisfaction of a subordinated note
issued by Culbro to a third party, and elimination of other nonoperating
expense of $0.25 million which Griffin incurred in connection with its
investment in Eli Witt.
(4) Reflects the elimination of interest expense on a subordinated note issued
by Culbro to a third party that was satisfied by the exchange of such note
for shares of preferred stock issued by Eli Witt.
(5) Reflects the reduction of interest expense from the assumption by General
Cigar of the Culbro general corporate debt that was included on Griffin's
historical financial statements.
(6) Reflects the Distribution of Griffin's Common Stock to shareholders of
Culbro in a one-for-one ratio. The Common Stock has a par value of $0.01 per
share.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE HISTORICAL FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF GRIFFIN SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND THE RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS INFORMATION
STATEMENT (F-1 TO F-33). THE FOLLOWING DISCUSSION OF THE PRO FORMA FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF GRIFFIN SHOULD BE READ IN CONJUNCTION
WITH THE UNAUDITED PRO FORMA FINANCIAL DATA AND THE RELATED NOTES THERETO
INCLUDED ELSEWHERE IN THIS INFORMATION STATEMENT.
OVERVIEW
Griffin is a wholly owned subsidiary of Culbro. Prior to March 18, 1997,
Griffin was known as Culbro Land Resources, Inc. Griffin principally owns and
operates landscape nursery and Connecticut-and Massachusetts-based real estate
operations, and other non-tobacco related assets and investments, all of which
were held by Griffin or transfered to Griffin in the Asset Transfers effected
under the terms of the Distribution Agreement.
The historical financial statements of Griffin reflect the combined results
of the operations of all of these businesses and assets. Griffin's results in
each of the periods presented also include allocations to Griffin of Culbro
corporate overhead of $0.4 million in the thirteen weeks ended March 1, 1997
(the "1997 first quarter") and $0.4 million in the thirteen weeks ended March 2,
1996 (the "1996 first quarter") and $2.4 million, $2.1 million and $1.8 million
in fiscal 1994, fiscal 1995 and fiscal 1996, respectively. Additionally, $0.9
million of Culbro nonrecurring expense was allocated to Griffin in fiscal 1996.
These allocations, which may not necessarily reflect the additional expenses
Griffin would have incurred as a separate stand-alone entity, are deemed
reasonable by Griffin management. The combined financial statements include
interest expense on debt specifically incurred by Griffin, and interest expense
on Culbro general corporate debt. The Culbro debt is included in Griffin's
historical combined financial statements for the fiscal years ended 1994, 1995
and 1996. Pursuant to the Distribution Agreement entered into on February 27,
1997, between Culbro, Griffin and General Cigar, the Culbro general corporate
debt included in Griffin's historical financial statements was assumed by
General Cigar. This debt is excluded from Griffin's debt structure as of March
1, 1997, however, due to the fact that General Cigar did not assume the debt
until the end of the 1997 first quarter, the interest expense incurred on the
Culbro general corporate debt is included in Griffin's historical consolidated
statement of operations for the thirteen weeks ended March 1, 1997. This
interest expense will not be part of Griffin's results of operations on a
prospective basis. Therefore, Griffin's results of operations should be read in
conjunction with the unaudited combined pro forma results of operations in Note
4 of the Combined Financial Statements and the Unaudited Pro Forma Combined
Financial Statements included elsewhere in this Information Statement.
PRO FORMA 1996 COMPARED TO ACTUAL FISCAL 1996
The following summary financial information and discussion relate to
Griffin's 1996 results of operations on a pro forma basis. The pro forma
operating data is presented as if the Liability Assumption, the exchange of the
preferred stock of Eli Witt for the related subordinated note previously issued
by Culbro and the use of proceeds from the disposition of CMS Gilbreth had all
occurred at the beginning of fiscal 1996. The pro forma balance sheet reflects
the Liability Assumption as if it had occurred at the balance sheet date. The
effect of the sale of CMS Gilbreth and the exchange of the preferred stock are
reflected (eliminated) in Griffin's 1996 Combined Balance Sheet.
22
<PAGE>
1996 SUMMARIZED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
1996 1996
HISTORICAL PRO FORMA
---------- -----------
<S> <C> <C>
Net sales................................................................................. $ 46,531 $ 46,531
---------- -----------
Operating loss............................................................................ (1,245) (1,245)
Other nonoperating income items........................................................... 2,220 303
Interest expense.......................................................................... 7,805 508
---------- -----------
Loss before income tax benefit............................................................ (6,830) (1,450)
Income tax benefit........................................................................ (2,767) (668)
---------- -----------
Loss from continuing operations........................................................... $ (4,063) $ (782)
---------- -----------
---------- -----------
Current assets............................................................................ $ 44,068 $ 42,491
---------- -----------
Total assets.............................................................................. $ 101,775 $ 100,198
---------- -----------
---------- -----------
Current liabilities....................................................................... $ 7,370 $ 5,836
---------- -----------
Long-term debt............................................................................ 38,846 2,846
---------- -----------
Culbro Investment/stockholders' equity.................................................... 47,449 87,854
---------- -----------
Total liabilities and Culbro Investment/stockholders' equity.............................. $ 101,775 $ 100,198
---------- -----------
---------- -----------
</TABLE>
Net sales remain unchanged because CMS Gilbreth was reported as a
discontinued operation in the historical financial statements. The lower
nonoperating income reflects the elimination of the accrued dividend income on
the Eli Witt preferred stock that was exchanged for Culbro's subordinated note
payable (which was assumed by Griffin as part of the Asset Transfers). The
retirement of the subordinated note resulted in a reduction of interest expense
equal to the amount of the dividend income. The disposition of the investment in
Eli Witt also resulted in the elimination of approximately $0.3 million of Eli
Witt related expenses. Griffin's general and administrative expense includes a
charge of $0.9 million principally for the termination of an incentive
compensation plan of Culbro which was terminated in part as a result of the
Distribution. Because of the unusual nature of this item, management does not
expect this charge to recur.
The reduction in debt from the proceeds from the sale of CMS Gilbreth and
the exchange of the preferred stock of Eli Witt is reflected in the historical
balance sheet. The lower debt balance and the increase in capital (Culbro
Investment) in the pro forma balance sheet reflect the assumption by General
Cigar of the allocated Culbro debt, certain of Griffin's employee retirement
obligations and other liabilities.
ACTUAL RESULTS OF OPERATIONS
The discussion set forth below relates to the financial condition and
results of operations of Griffin as of and for the thirteen weeks ended March 1,
1997 and March 2, 1996, fiscal 1996, fiscal 1995 and fiscal 1994.
THIRTEEN WEEKS ENDED MARCH 1, 1997 COMPARED TO THIRTEEN WEEKS ENDED MARCH 2,
1996
Net sales and other revenue decreased $0.6 million, to $2.7 million in the
1997 first quarter from $3.3 million in the 1996 first quarter. The decrease
reflected lower sales in the landscape nursery and real estate segments. In the
landscape nursery segment, net sales and other revenue decreased $0.2 million,
to $2.0 million in the 1997 first quarter from $2.2 million in the 1996 first
quarter. The decrease in the 1997 first quarter reflected lower sales of
hardgoods, including snow and ice removal products, due principally to the
milder weather and lower snowfall in the 1997 first quarter, which contrasted
sharply with the more severe
23
<PAGE>
weather in the 1996 first quarter. Due to the seasonal nature of the business,
first quarter sales of landscape nursery products are typically less than 5% of
annual sales. Net sales and other revenue in the real estate segment decreased
$0.4 million to $0.7 million in the 1997 first quarter as compared to $1.1
million in the 1996 first quarter. The higher net sales and other revenue in the
1996 first quarter included rental revenue from a commercial property and income
related to a real estate joint venture, both of which were disposed of in the
1996 fourth quarter (see below). Additionally, revenue from property management
decreased, due principally to lower revenue from services provided to tenants.
The operating loss in the landscape nursery segment increased $0.3 million
to $1.8 million in the 1997 first quarter from $1.5 million in the 1996 first
quarter. The increased loss reflects higher expenses, due principally to timing,
and the effect of the lower sales. The landscape nursery segment incurs an
operating loss in the first quarter because of the seasonality of its sales. The
real estate segment incurred an operating loss of $0.2 million in the 1997
quarter compared to an operating loss of $0.1 million in the 1996 quarter, due
principally to the lower net sales and other revenue.
Interest expense decreased $1.1 million to $0.8 million in the 1997 first
quarter from $1.9 million in the 1996 first quarter. The lower interest expense
reflects the lower debt level in the 1997 first quarter as a result of several
transactions that took place in the fourth quarter last year. These included the
reduction of debt through proceeds received from the sale of CMS Gilbreth and
the sale of Griffin's interest in a real estate joint venture, the exchange of
preferred stock in Eli Witt and the satisfaction of a nonrecourse mortgage on a
commercial property through the transfer of the property to the mortgage holder.
Other nonoperating income, net, in the 1996 first quarter reflected accrued
dividends and accretion income on the Eli Witt preferred stock, partially offset
by other expenses related to the investment in Eli Witt. As a result of the
exchange of Eli Witt preferred stock, there were no such items in the 1997 first
quarter.
Net loss in the 1996 first quarter included the results of CMS Gilbreth.
Since this company was sold, in the 1996 fourth quarter, its results are not
included in the 1997 first quarter.
FISCAL 1996 COMPARED TO FISCAL 1995
Net sales and other revenue increased 11.4% or $4.7 million, to $46.5
million in fiscal 1996 compared to $41.8 million in fiscal 1995. The increase in
net sales and other revenue was due to higher net sales and other revenue in
both the landscape nursery and real estate segments. In the landscape nursery
segment, net sales increased 6.2% or $2.1 million to $37.0 million in fiscal
1996 from $34.9 million in fiscal 1995. This increase reflected increased sales
at the wholesale landscape nursery sales and service centers. Net sales and
other revenue in the real estate business increased $2.6 million to $9.5 million
in fiscal 1996 from $6.9 million in fiscal 1995. The increase reflected the sale
of Griffin's 30% interest in a joint venture that owns commercial properties in
Griffin Center and Griffin Center South. The joint venture sale generated net
proceeds of $4.0 million and a pretax loss of $0.4 million. Excluding this
transaction, net sales and other revenue decreased by $1.8 million, due to lower
residential lot sales and lower sales of undeveloped commercial land.
Griffin incurred an operating loss of $1.2 million in fiscal 1996 compared
to an operating profit of $0.8 million in fiscal 1995. In the landscape nursery
segment, operating profit was $1.6 million in fiscal 1996 compared to $1.7
million in fiscal 1995, reflecting higher operating expenses, which offset the
effect of the higher sales. An increase in gross margins to 29.7% in fiscal 1996
from 29.1% in fiscal 1995 was due to the effect of a $1.0 million charge in 1995
to reserve for excess field-grown plant inventories offset by product mix and
competitive pricing pressures in fiscal 1996. Operating expenses in the
landscape nursery business increased to 25.7% of net sales in fiscal 1996 from
25.1% of net sales in fiscal 1995. The increase reflected higher selling
expenses, and the operating expenses of a new sales and service center. In the
real estate segment, Griffin incurred an operating loss of $0.3 million in
fiscal 1996 compared to an operating profit of
24
<PAGE>
$1.2 million in fiscal 1995. The lower results reflected the loss of $0.4
million on the joint venture sale and the effect of the lower residential and
commercial land sales.
General corporate expense, net, increased to $2.6 million in fiscal 1996
from $2.2 million in fiscal 1995. The increase in fiscal 1996 reflects Griffin's
allocated share of a Culbro nonrecurring corporate compensation expense item.
Results from Griffin's equity investment in Centaur increased to $0.3
million of equity income in fiscal 1996 from an equity loss of $0.2 million in
fiscal 1995. The increase reflected improved business conditions for Centaur's
publishing business in the United Kingdom. Other nonoperating income of $1.9
million in fiscal 1996 and $0.9 million in fiscal 1995 included principally
accretion and accrued dividend income on the preferred stock of Eli Witt of $2.2
million and $2.3 million in fiscal 1996 and fiscal 1995, respectively. In fiscal
1995 the income was partially offset by expenses incurred in connection with
Griffin's support for the refinancing of Eli Witt. The accretion and accrued
dividend income on the preferred stock equaled the interest expense recorded in
those years on a related exchangeable subordinated note payable. In the 1996
fourth quarter shares of preferred stock were exchanged in satisfaction of a
subordinated note issued by Culbro and all accrued interest thereon.
Interest expense decreased to $7.8 million in fiscal 1996 from $8.2 million
in fiscal 1995 due to lower debt levels, reflecting the proceeds from the sale
of CMS Gilbreth which was used to repay debt.
The results of the discontinued CMS Gilbreth operation in fiscal 1996
reflected a loss of $0.5 million, net of tax, compared to income of $3.7
million, net of tax, in fiscal 1995. The 1996 results included a net loss on the
sale of CMS Gilbreth of $1.3 million partially offset by income from this
business of $0.8 million prior to the sale.
FISCAL 1995 COMPARED TO FISCAL 1994
Net sales and other revenue decreased 2.9% or $1.2 million, to $41.8 million
in fiscal 1995 from $43.0 million in fiscal 1994. The decrease was due to lower
net sales and other revenue in both the nursery products and real estate
business segments. In the landscape nursery segment, net sales decreased 1.2% or
$0.4 million to $34.9 million in fiscal 1995 from $35.3 million in fiscal 1994.
The decrease reflected slightly lower sales at the wholesale sales and service
centers. Net sales and other revenue in the real estate segment decreased $0.8
million to $6.9 million in fiscal 1995 from $7.7 million in fiscal 1994. The
decrease was due to lower residential lot sales in fiscal 1995 partially offset
by increased commercial land sales.
Operating profit in fiscal 1995 was $0.8 million compared to an operating
loss of $4.9 million in fiscal 1994. In the landscape nursery segment, operating
profit was $1.7 million in fiscal 1995 compared to an operating loss of $0.6
million in fiscal 1994. The increased operating profit reflected the effect of
higher margins, which increased to 29.1% in fiscal 1995 from 25.0% in fiscal
1994, and lower operating expenses, which decreased to 25.1% of net sales from
27.7% in fiscal 1994. The higher gross margins reflected improved pricing and
lower costs, partially offset by a $1.0 million charge to reserve for excess
field-grown plant inventories. The decrease in operating expenses reflected
lower selling expenses and improved cost containment measures at the wholesale
sales and service centers. In the real estate segment, operating profit was $1.2
million in fiscal 1995 as compared to an operating loss of $2.2 million in
fiscal 1994. The increase principally reflected the effect of a $3.6 million
charge recorded in 1994 to write off the costs of certain projects that were not
developed as originally planned. Excluding that item, operating results were
substantially unchanged in fiscal 1995 as compared to fiscal 1994. The effect of
lower sales of residential lots in fiscal 1995 was substantially offset by lower
general and administrative expenses, principally reflecting headcount reduction.
General corporate expense, net, which principally reflects general and
administrative expenses allocated to Griffin from Culbro, increased to $2.2
million in fiscal 1995 from $2.0 million in fiscal 1994.
25
<PAGE>
The loss on equity investments was $0.2 million in fiscal 1995 as compared
to a $1.7 million equity loss in fiscal 1994. The change reflected the inclusion
in fiscal 1994 of results of Eli Witt prior to the deconsolidation of that
subsidiary (see Note 12 to the Combined Financial Statements). The investment in
Centaur had an equity loss of $0.2 million in fiscal 1995 compared to equity
income of $0.4 million in fiscal 1994. The lower results from Centaur were
attributed to a downturn in the British economy.
Other nonoperating income, net, decreased to $0.9 million in fiscal 1995
from $1.4 million in fiscal 1994. The decrease reflected expenses in fiscal 1995
related to Griffin's support for the refinancing of Eli Witt, partially offset
by a full year of accretion and accrued dividend income on the Eli Witt
preferred stock in fiscal 1995 versus a partial year of such income in fiscal
1994. The accretion income and accrued dividends equaled the interest expense on
the exchangeable subordinated note payable.
Interest expense increased to $8.2 million in fiscal 1995 from $8.0 million
in fiscal 1994. The increase was due principally to a full year of interest
expense on the exchangeable subordinated note payable in fiscal 1995 versus a
partial year of interest expense on the subordinated note in fiscal 1994.
Income from the discontinued operation was $3.7 million, net of tax, in
fiscal 1995 compared to $3.3 million, net of tax, in fiscal 1994. The increase
reflected improved margins, due to sales mix, partially offset by higher
operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows used in operating activities of continuing operations were
$5.0 million in the 1997 first quarter compared to $0.5 million in the 1996
first quarter. The increased use of cash reflected principally a greater
increase in inventories, a greater reduction of accounts payable and accrued
liabilities, and a decrease in deferred income taxes as compared to an increase
in the 1996 first quarter. The lower net cash used in investing activities in
the 1997 first quarter reflected the effect of the cash used in the discontinued
operation in the 1996 first quarter partially offset by higher capital
expenditures in the landscape nursery business segment in the 1997 first
quarter. Net cash provided by financing activities in the 1997 first quarter
reflected an increase in Culbro's general corporate debt that was included in
Griffin's financial statements through the date that debt was assumed by General
Cigar (see below).
Net cash flows used in operating activities of continuing operations were
$2.2 million in fiscal 1996 compared to $3.9 million used in operating
activities in 1995. The lower use of cash reflected principally the benefit from
proceeds from sale of a real estate joint venture, partially offset by
reductions in liabilities, including $3.5 million of deferred taxes relating to
continuing operations, and reductions in accounts payable and accrued
liabilities. The net cash flows used in operating activities of continuing
operations in 1995 of $3.9 million compared to $11.6 million used in operating
activities in fiscal 1994 reflected the lower loss from continuing operations in
fiscal 1995 compared to fiscal 1994 which also included a noncash gain on sale
of Eli Witt stock.
Cash used in operating activities in each of the fiscal years 1994 through
1996 includes pretax interest expense of $8.0 million, $8.2 million and $7.8
million, respectively, principally on allocated Culbro debt which was used to
fund Griffin's operations including both continuing and discontinued operations.
Effective February 27, 1997, pursuant to the Distribution Agreement, the Culbro
debt allocated to Griffin in the historical Combined Financial Statements was
assumed by General Cigar and is not an obligation of Griffin.
Net cash flow provided by investing activities in 1996 included principally
the proceeds from the sale of CMS Gilbreth. The investing activities of 1995 and
1994 include transactions primarily relating to the investment in Eli Witt. In
February 1997, Eli Witt sold all of its assets in a court supervised bankruptcy
sale. Griffin has no investment related to Eli Witt in its 1996 Combined Balance
Sheet and does not expect to receive any proceeds from the sale. See Notes 12
and 14 to the Combined Financial Statements for fiscal 1994, fiscal 1995 and
fiscal 1996 contained elsewhere in this Information Statement.
26
<PAGE>
Net cash relating to financing activities in each of the fiscal years 1994
through 1996 includes net payments of debt, principally the debt that was
allocated by Culbro to Griffin. As a result of the assumption by General Cigar
on February 27, 1997, such debt will not be part of Griffin's debt structure
prospectively. Financing activities also included net transactions with Culbro,
including operating cash flow transferred to Culbro in fiscal 1996 and cash flow
transferred to Griffin by Culbro in fiscal 1995 and fiscal 1994 to paydown the
allocated debt and fund Griffin's operations.
Through the date of the Distribution Agreement, February 27, 1997, the cash
management and treasury activities of Griffin were integrated with those of
Culbro. Griffin's cash receipts were transferred daily into Culbro's cash
account and Griffin's cash disbursement accounts were reimbursed by Culbro on a
daily basis.
Griffin did not maintain its own separate credit facilities. Culbro
maintained credit facilities which it utilized to finance transactions relating
to Griffin. Borrowings under the Culbro credit facilities are reflected in
Griffin's Financial Statements through the date that this debt was assumed by
General Cigar, which was February 27, 1997. Subsequent to that date, Griffin's
cash flows are segregated from Culbro's other subsidiaries. Griffin maintained
an intercompany account with Culbro in which its net cash flow and other
intercompany transactions with Culbro were recorded. See Note 6 in the Financial
Statements for fiscal 1994, fiscal 1995 and fiscal 1996 and Note 4 in the
Financial Statements for the 1997 first quarter and the 1996 first quarter. The
intercompany account with Culbro and Griffin's retained earnings and capital
accounts are included in the Financial Statements as Culbro Investment.
Historically, Griffin depended on Culbro's credit facilities to fund its
operations. Such Culbro credit facilities will not be available to Griffin in
the future. In accordance with the Distribution Agreement, Griffin received cash
of $7.0 million from General Cigar. Griffin intends to negotiate a line of
credit to fund future real estate projects and for general working capital
purposes. Management believes, based on the current level of operations and
anticipated growth, that the cash flow from operations, cash on hand and, if
needed, borrowings under an anticipated credit facility will be sufficient to
fund its future operations in the next twelve months. Over the long-term,
selective asset sales and additional credit facilities may be required to fund
capital projects. Griffin anticipates based on discussions to date with
potential lenders that it will be able to obtain adequate credit facilities.
Griffin also believes that it will be able adequately to administer its
operations following the Distribution and following the expiration of the
Services Agreement.
27
<PAGE>
BUSINESS
Griffin and its subsidiaries comprise principally a landscape nursery and
real estate business. At the end of its 1996 fiscal year Griffin engaged in two
principal lines of business: (1) landscape nursery products, comprised of
growing container and field-grown landscape nursery products for sale
principally to landscape nursery mass merchandisers, and owning and operating
wholesale sales and service centers; and (2) real estate, comprised of owning,
building and managing commercial and industrial properties and developing
residential subdivisions on real estate owned by Griffin in Connecticut and
Massachusetts.
LANDSCAPE NURSERY BUSINESS
The landscape nursery operations of Griffin are operated by its wholly-owned
subsidiary, Imperial Nurseries, Inc. ("Imperial"). Imperial is a grower,
distributor and broker of wholesale landscape nursery stock. The landscape
nursery industry is extremely fragmented, with the industry leader having less
than 1% of total market share. Imperial believes that its volume places it among
the ten largest landscape nursery companies in the country.
Imperial's growing operations are located on property owned partly by
Griffin and partly by Imperial, in Connecticut (1,000 in-ground acres and 400
acres for containers) and in northern Florida (350 acres for containers). The
largest portion of Imperial's container-grown product consists of broad leaf
evergreens, including azaleas and rhododendron. Container-grown product is held
principally from one to five years prior to its sale by Griffin. Its
field-grown, as opposed to container-grown, product includes principally
evergreen pines, hemlocks, spruce and arborvitae. Imperial also contracts with a
grower in the Mid-Atlantic states to grow field-grown product for Imperial. The
agreement provides for Imperial to purchase such product over a five year
period. This program is part of a program intended to reduce Imperial's
investment in field-grown plants and to shorten its product growing cycles to
increase the profitability of the field-grown business. Imperial is also
reviewing other approaches to increasing its return on assets. Among the
possible approaches are holding some of its containerized production for a
longer period and selling such plants in terra cotta or similar containers for
immediate use by customers and adding a broader selection of perennial flowers
directed at increasing both margin and selling price.
The combined field-grown and container operations serve a market comprised
principally of landscapers, retail chain store garden departments, retail
nurseries and garden centers, and wholesale nurseries and distributors.
Imperial-grown products are also distributed through its own wholesale
horticultural sales and service centers. Imperial's major markets service the
Northeast, Mid-Atlantic, Southeast and Mid-West. Nursery sales are seasonal,
peaking in spring, and are affected by commercial and residential building
activity as well as weather conditions. The largest portion of Imperial's assets
are represented by plant inventories.
Imperial operates eight wholesale horticultural sales and service centers
which sell a wide range of plant material, including a large portion purchased
from growers other than Imperial, and horticultural tools and products to the
trade. The centers owned by Imperial are located in Windsor, Connecticut; Aston,
Pennsylvania; Columbus and Cincinnati, Ohio; White Marsh, Maryland; and
Manassas, Virginia. In addition, Imperial leases centers in Pittsburgh,
Pennsylvania and Monroeville, Pennsylvania.
In 1996, Imperial continued to diversify its customer base in order to
reduce its dependence on a few large customers. Currently Imperial's sales are
made to a large variety of customers, none of whom represents more than 3% of
sales.
Containerized growing and shipping capacity has been increased to meet the
potential volume and quality needs of Imperial's customers and to capitalize on
any growth in the Mid-Atlantic and Mid-West markets.
28
<PAGE>
REAL ESTATE BUSINESS
Griffin is directly engaged in the real estate development business on
portions of its land in Connecticut, with headquarters in Bloomfield,
Connecticut. Griffin develops portions of its properties for commercial,
residential and industrial use.
During the last several years, the real estate market in the Hartford area,
particularly that in the northwest quadrant, where the majority of Griffin's
acreage is located, has been depressed by a number of factors, including the
decline of employment in the defense and insurance industries. There can be no
assurance that the condition of the real estate market in this region will
improve in the near future. The development of Griffin's land was also affected
by land planning issues, particularly in the town of Simsbury. In Simsbury, the
value of Griffin's land is affected by the presence of chlordane on a portion of
the land which is intended for residential development. Griffin is examining
means of remediation on its lands and will seek to subdivide certain of its
Simsbury properties over a reasonable period.
Griffin's most substantial development is Griffin Center in Windsor,
Connecticut and Griffin Center South in Bloomfield, Connecticut. Together these
master planned developments comprise approximately 600 acres, half of which have
been developed with nearly 1,750,000 square feet of office and industrial space.
Griffin Center currently includes nine corporate office buildings built by
Griffin. During the 1980's, Griffin sold 70% interests in five of the buildings
to a bank-managed real estate investment fund. In 1996, these buildings were
sold in a transaction initiated by the successor of that partner. Griffin
recorded a pre-tax loss as a result of this transaction. In the 1980's, Griffin
also sold 70% interests in two other office buildings to an insurance company.
Griffin currently maintains a 30% interest in those two office buildings in the
Griffin Center Office Complex which aggregate 160,000 square feet. One other
office building which had been leased to the State of Connecticut was
transferred to the lender to the building in a deed in lieu of foreclosure in
1996.
Griffin Center South, a 130-acre tract, comprises fifteen buildings of
industrial and research/development space. Nine of these buildings have been
retained by Griffin for rental and are 78% rented. The other buildings have been
built on land sold by Griffin to commercial users who own and occupy the space.
Griffin has a master plan state traffic certificate which allows for the
development of an additional 300,000 square feet of space.
Griffin owns a 600-acre tract of land near Bradley International Airport and
Interstate 91 known as the New England Tradeport. To date, 140,000 square feet
of warehouse and light manufacturing space have been developed and are 95%
occupied and a bottling and distribution plant for Pepsi-Cola has been built. A
state traffic control certificate for the future development of 1.3 million
square feet has been obtained for the New England Tradeport. Griffin intends to
direct its primary efforts at the construction and leasing of light industrial
and warehouse facilities at the New England Tradeport. Development at the New
England Tradeport will require investment in offsite infrastructure on behalf of
Windsor, Connecticut and improvement of some state or town roads.
Two additional Griffin parcels available for development include 28 acres in
the Day Hill Technology Center in Windsor, and 100 acres in the South Windsor
Technology Center. State traffic certificates have been obtained for these
parcels for 500,000 square feet and 200,000 square feet of development,
respectively.
In 1988, a subsidiary of Griffin began infrastructure work at Walden Woods,
a 153-acre site in Windsor, Connecticut which was planned to contain more than
365 residential units. Prior to 1992 Griffin had built and sold 45 homes before
discontinuing its home building operations at Walden Woods. Since then two
third-party home builders have completed an additional 64 homes.
Griffin is seeking to develop a joint venture to process bulky waste and
build a transfer station and recycling operation on a portion of its land in
East Granby, Connecticut. In addition, approximately 500 acres are leased for
tobacco growing to General Cigar at rentals approximating carrying cost. The
lease for
29
<PAGE>
these properties, which extends for 10 years, may be terminated, as to 100
acres, annually on one year's prior notice. Griffin also leases office space to
General Cigar.
EQUITY INVESTMENTS
ELI WITT
Griffin owns 50.1% of Eli Witt, a wholesale distributor of tobacco, sundries
and general merchandise. Griffin deconsolidated Eli Witt as of April 25, 1994
and subsequently has accounted for its investment in Eli Witt under the equity
method. In November 1996 Eli Witt filed for protection under Chapter 11 of the
Federal Bankruptcy Law. In connection with such filing Eli Witt sold all of its
operating assets to another wholesale distributor in March 1997. Shareholders of
Eli Witt are not expected to receive any proceeds from the sale. See "--Legal
Matters."
CENTAUR
Griffin owns approximately 25% of the stock of Centaur, a privately-held
publisher of business magazines in the United Kingdom. After a period of time
when results were adversely affected by a number of factors including adverse
business conditions in the United Kingdom, this business is now profitable. Two
members of Griffin's Board of Directors are on the Board of Directors of
Centaur. Griffin's investment in Centaur is carried at approximately $14.0
million.
FINANCIAL INFORMATION REGARDING INDUSTRY SEGMENTS
See Note 5 to the Combined Financial Statements of Griffin included
elsewhere herein for certain financial information regarding the landscape
nursery business and the real estate business.
PROPERTIES
COMMERCIAL REAL ESTATE
<TABLE>
<CAPTION>
LAND AREA
LOCATION OF PROPERTY (ACRES)
- ---------------------------------------------------------------------------------- -----------
<S> <C>
CONNECTICUT
Bloomfield, CT.................................................................... 220
East Granby, CT................................................................... 920
Simsbury, CT...................................................................... 860
South Windsor, CT................................................................. 103
Suffield, CT...................................................................... 350
Windsor, CT....................................................................... 1,220
MASSACHUSETTS
Southwick, MA..................................................................... 425
FLORIDA
Hillsborough County, Florida...................................................... 9
Leon County, Florida.............................................................. 6
</TABLE>
30
<PAGE>
NURSERY REAL ESTATE
<TABLE>
<CAPTION>
LAND AREA
LOCATION OF PROPERTY (ACRES)
- ---------------------------------------------------------------------------------- -----------
<S> <C>
FLORIDA
Quincy, FL........................................................................ 1,365
PENNSYLVANIA*
Aston, PA......................................................................... 17
Pittsburgh, PA.................................................................... 10
VIRGINIA
Manassas, VA...................................................................... 22
OHIO
Columbus, OH...................................................................... 12
Cincinnati, OH.................................................................... 11
MARYLAND
White Marsh, MD................................................................... 20
</TABLE>
*In addition Griffin leases property in Monroeville, PA.
LEGAL MATTERS
As a result of the Asset Transfers, Griffin has acquired Culbro's 50.1%
interest in Eli Witt. In November 1996, Eli Witt filed for protection under
Chapter 11 of the Federal Bankruptcy Law. Prior to February 1993, Eli Witt was a
wholly-owned subsidiary of Culbro and filed consolidated tax returns with
Culbro. Culbro, Eli Witt and other parties engaged in two complex acquisitions
and reorganizations in 1993 and 1994, pursuant to which Culbro received material
distributions. The distributions made to Culbro in February 1993 included
approximately $46 million in repayment of inter-Company liabilities to Culbro
and approximately $42 million in repayment of capital. The Company believes that
Eli Witt was adequately capitalized after the distributions. The Company
believes that the bankruptcy of Eli Witt was caused by a number of other factors
which occurred subsequently to the distributions, including principally an
unforeseen reduction in the prices of cigarettes, which both reduced the ongoing
profitability of Eli Witt and eliminated the profits it had earned from
recurrent cigarette price increases. The integration of a subsequent acquisition
was not successful. Culbro subsequently loaned $5 million to Eli Witt. It is
anticipated that these transactions (including the transfer of funds to Culbro)
will be reviewed by Eli Witt creditors and other parties in interest in
connection with the Chapter 11 case. Griffin believes that Eli Witt was solvent
at the time of the distributions to Culbro in 1993, and therefore that such
distributions would not constitute a fraudulent conveyance under applicable
federal and state insolvency laws. Griffin is not entitled to contribution from
Culbro or General Cigar for liabilities assumed by Griffin relating to the Eli
Witt matter. Griffin is obligated to indemnify Culbro and General Cigar for any
liability relating to the Eli Witt matter. To date, one creditor has written to
the unsecured creditors committee proposing an inquiry into this matter and the
Company has submitted documents related to this matter to the creditor's
committee. Although Griffin believes that any claim challenging the
distributions described above would be without merit, any such claim, if
asserted and successfully prosecuted, could have a material adverse effect on
Griffin's financial condition. See "RISK FACTORS--Assumed Liabilities; The Eli
Witt Company."
Certain parts of Griffin's property in Simsbury, Connecticut, are affected
by the presence of chlordane. Although the various federal, state and local
agencies may have an interest in the matter, there are no proceedings known by
Griffin to be contemplated by any of these agencies in connection with possible
chlordane exceedences on such properties.
31
<PAGE>
EMPLOYEES
Griffin employs approximately 260 persons, including 11 in its real estate
business and 249 in its landscape nursery business. At present, none of these
employees is represented by a union. Griffin believes that its relations with
its employees are satisfactory.
COMPETITION
The nursery business is competitive and Griffin competes against a number of
other companies, including local and regional nursery businesses. Some of
Griffin's competitors may be in a stronger financial position than Griffin.
Numerous real estate developers operate in the portion of Connecticut and
Massachusetts in which Griffin's holdings are concentrated. Some of such
businesses compete in each anticipated business of Griffin and may have greater
financial resources than Griffin. See "RISK FACTORS--Competition."
REGULATION; ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real estate may be required to investigate and clean up
hazardous or toxic substances or petroleum product releases at such property and
may be held liable to a govermental entity or to third parties for property
damage and for investigation and clean-up costs incurred by such parties in
connection with contamination. The cost of investigation, remediation or removal
of such substances may be substantial, and the presence of such substances, or
the failure to properly remediate such substances, may adversely affect the
owner's ability to sell or rent such property or to borrow using such property
as collateral. In connection with the ownership (direct or indirect), operation,
management and development of real properties, Griffin may be considered an
owner or operator of such properties or as having arranged for the disposal or
treatment of hazardous or toxic substances and, therefore, potentially liable
for removal or remediation costs, as well as certain other related costs,
including governmental fines and injuries to persons and property. In Simsbury,
the value of Griffin's land is affected by the presence of chlordane on a
portion of the land which is intended for residential use. Griffin is
experimenting with means of remediation on such lands. Although Griffin believes
that it will be able to take steps to reduce chlordane contamination to levels
below that which would impede residential development of such properties, there
can be no assurance that Griffin will be able to do so in a timely or economic
fashion or at all. In the event that Griffin is unable adequately to remediate
this property, its ability to develop such property for its intended purposes
would be materially affected. In addition, Griffin is seeking to develop a joint
venture to process bulky waste and build a transfer station and recycling
operation on a portion of its land in East Granby, Connecticut. Although Griffin
intends to conduct such operations in compliance with all applicable
environmental laws, there can be no assurance that Griffin will not incur
incremental additional costs in connection with such operations resulting from
environmental compliance efforts, or as a result of any future noncompliance
with such laws.
Griffin periodically reviews its properties for the purpose of evaluating
such properties' compliance with applicable state and federal environmenal laws.
Griffin does not anticipate experiencing in the immediate future material
expense in complying with such laws. See "RISK FACTORS--Environmental Matters."
32
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to Griffin's
executive officers, directors and certain other key employees.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------ --- ------------------------------------------------
<S> <C> <C>
Edgar M. Cullman................................ 79 Chairman of the Board and Director
Frederick M. Danziger........................... 57 President, Chief Executive Officer and Director
Anthony J. Galici............................... 39 Chief Financial Officer
Richard L. Wyckoff.............................. 36 President of Imperial Nurseries, Inc.
John L. Ernst................................... 56 Director
Winston J. Churchill, Jr........................ 57 Director
</TABLE>
EDGAR M. CULLMAN has been the Chairman of the Board of Griffin since April,
1997. He has been Chairman of the Board of General Cigar since December, 1996.
From 1962 to 1996 he served as Chief Executive Officer of Culbro. Mr. Cullman
has served as a Director of Culbro since 1961 and has been Chairman of Culbro
since 1975. He also is a Director of Centaur Communications Limited,
Bloomingdale Properties, Inc. and Eli Witt. Eli Witt filed for relief from its
creditors under Chapter 11 of the Federal Bankruptcy Code in November 1996.
Edgar M. Cullman is the uncle of John L. Ernst and the father-in-law of
Frederick M. Danziger.
FREDERICK M. DANZIGER has been a Director and the President and Chief
Executive Officer of Griffin since April, 1997, and a director of Culbro since
1975. He was previously involved in the real estate operations of Griffin in the
early 1980s. Mr. Danziger has been Of Counsel to the law firm of Latham &
Watkins since 1995. From 1974 until 1995, Mr. Danziger was a Member of the law
firm of Mudge Rose Guthrie Alexander & Ferdon. Mr. Danziger also is a director
of Monro Muffler/Brake, Inc., Bloomingdale Properties, Inc., First Financial
Caribbean Corporation and Centaur Communications Limited, and is a general
partner of Ryan Instruments, L.P.
ANTHONY J. GALICI has been the Chief Financial Officer of Griffin since
April 1997. Mr. Galici has served as Vice President-Assistant Controller of
Culbro since 1995. Prior to 1995, he was Assistant Controller of Culbro.
RICHARD L. WYCKOFF has been the President of Imperial Nurseries, Inc. since
August 1991. From 1990 until August 1991 he served as Vice President-Corporate
and Business Development of Culbro. Mr. Wyckoff currently holds numerous
positions on industry associations including The American Association of
Nurserymen and Horticulture Research Institute.
JOHN L. ERNST is a Director of Griffin, General Cigar and Culbro. He has
been a Director of Griffin since April 1997, a director of General Cigar since
December 1996 and a Director of Culbro since 1983. He is the Chairman of the
Board and President of Bloomingdale Properties, Inc., an investment and real
estate company. Mr. Ernst also is a director of the First Financial Caribbean
Corporation.
WINSTON J. CHURCHILL, JR. has been a Director of Griffin since April 1997.
Mr. Churchill is also chairman of the board of Central Sprinkler Corporation and
IBAH, Inc. and a member of the board of Geotek Communications, Inc. and Tescorp,
Inc. He is a managing general partner of SCP Private Equity Partners, L.P., a
private equity fund sponsored by Safeguard Scientifics Inc., and is chairman of
Churchill Investment Partners, Inc. and CIP Capital, Inc.
EXECUTIVE COMPENSATION
From the time of its incorporation until the date hereof Griffin has been,
and following the date hereof until the consummation of the Distribution,
Griffin will be a wholly-owned subsidiary of Culbro
33
<PAGE>
whose policy decisions are made by Culbro. Neither the Chief Executive Officer
nor the Chief Financial Officer named above were employees of Griffin prior to
April 1997. Griffin had no Chief Executive Officer prior to April 1997, and no
current executive officer of Griffin received material compensation from Griffin
during the last three years.
COMPENSATION OF DIRECTORS
Directors who do not receive compensation as officers or employees of the
Company or any of its affiliates will be paid an annual retainer fee of $10,000
and a fee of $500 for each meeting of the Board of Directors or any committee
thereof they attend, plus reasonable out-of-pocket expenses. In addition, such
Directors will receive annually options exercisable for 2,000 shares of Common
Stock exercisable at market prices in existence at the time of grant pursuant to
the Griffin Stock Option Plan. See "CERTAIN EMPLOYEE BENEFIT MATTERS--Griffin
Stock Option Plan."
CERTAIN EMPLOYEE BENEFIT MATTERS
Griffin and Culbro have entered into the Benefits Agreement which provides
generally that following the date of the Asset Transfers or the Distribution, as
the case may be, persons employed by Griffin shall cease to be eligible to
participate in Culbro employee benefit plans and arrangements, and shall instead
become eligible to participate in certain employee benefit plans and
arrangements maintained or established by Griffin.
GRIFFIN 401(K) PLAN
In connection with the Distribution, Griffin will establish the Griffin Land
& Nurseries, Inc. 401(k) Savings Plan (the "Griffin 401(k) Plan"). Employees of
Griffin who participated in the Culbro Companies 401(k) Savings Plan immediately
prior to the Distribution will become participants in the Griffin 401(k) Plan
upon the Distribution Date, and as soon as practicable thereafter the account
balances of persons employed by Griffin after the Distribution will be
transferred from the Culbro Companies 401(k) Savings Plan to the Griffin 401(k)
Plan. Following the Distribution, employees of Griffin who are employed in the
United States, are at least age 21 and who have at least one year of service
will be eligible to participate in the Griffin 401(k) Plan. Subject to
applicable Internal Revenue Code limits, each participating employee will be
able to defer any portion of such participating employee's compensation through
salary deferrals. Griffin may in its discretion "match" employee deferrals each
year. Any such matching contributions made by Griffin become fully vested after
five years of service, which includes years of service with Culbro prior to the
Distribution.
GRIFFIN STOCK OPTION PLAN
Effective as of the Distribution Date, Griffin will establish the Griffin
Land & Nurseries, Inc. 1997 Stock Option Plan (the "Griffin Stock Option Plan").
A total of approximately 700,000 shares of Common Stock will be available for
issuance under the Griffin Stock Option Plan. Of such 700,000 shares, 250,000
will be available for issuance with respect to new options that may be granted
to certain officers, employees, consultants and directors of Griffin following
the Distribution. The Griffin Stock Option Plan will be administered by the
Compensation Committee of the Board of Directors of Griffin, and each option
granted under the Griffin Stock Option Plan will be evidenced by a written stock
option agreement that will set forth the material terms of the option, including
the exercise price and vesting schedule. 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.
34
<PAGE>
Immediately prior to the Distribution, Griffin intends to grant options to
the following persons in the amounts set forth below with exercise prices
determined by the mean between the opening representative bid and asked prices
for the Common Stock as quoted on the NASD's automated quotation system
Electronic Bulletin Board on the first trading day immediately following the
Distribution Date.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
Frederick M. Danziger...................................................... 150,000
Anthony J. Galici.......................................................... 15,000
John Fletcher III.......................................................... 15,000
Richard L. Wyckoff......................................................... 20,000
Martha Collier............................................................. 10,000
Jay Fisher................................................................. 7,500
Gregory Schaan............................................................. 7,500
</TABLE>
In addition to the 250,000 shares available for issuance with respect to
post-Distribution stock option grants, approximately 450,000 additional shares
will be available for issuance upon the exercise of Culbro stock options that
are reformed as Griffin Options (as defined below) pursuant to the Benefits
Agreement, and such reformed Griffin Options shall be administered under the
Griffin Stock Option Plan pursuant to the terms governing the original Culbro
options as in effect immediately prior to the Distribution.
The Benefits Agreement provides that as of the Distribution Date, each
current holder of an option to acquire shares of Culbro Common Stock under any
Culbro stock option plan or agreement will receive in exchange therefor two
separately exercisable options, one option to purchase shares of Culbro Common
Stock (a "Culbro Option") and one option to purchase shares of Common Stock (a
"Griffin Option"), each containing terms substantially equivalent in the
aggregate to those of such holder's pre-Distribution option. With respect to
each holder of a nonqualified option, the combined aggregate exercise price of
the Culbro Option and the Griffin Option shall be equal to the aggregate
exercise price of the pre-Distribution option. With respect to each holder of an
incentive stock option, the number of shares with respect to which each Culbro
Option and each Griffin Option are exercisable, and the exercise price for each
Culbro Option and each Griffin Option, will be set so as to preserve the
Exercise Ratio and the Aggregate Spread (both as defined below) attributed to
options currently outstanding, such determination to be based on the respective
trading prices of Culbro common stock and Griffin common stock following the
Distribution. The "Exercise Ratio" of the Culbro Option and the Griffin Option,
respectively, shall be set such that on a share by share basis, the ratio of the
exercise price of the Culbro Option and the Griffin Option to the value of
Culbro common stock or Griffin common stock, respectively, shall be equal to the
ratio of the pre-Distribution exercise price to the pre-Distribution value of
stock subject to the option. The "Aggregate Spread" of an option is an amount
equal to the difference between the exercise price of the option and the price
of a share of Culbro common stock immediately prior to the Distribution
multiplied by the number of shares underlying such option.
MISCELLANEOUS BENEFIT PLANS
Following the Asset Transfer Date, persons employed by Griffin who were
eligible to participate in any of the employee welfare benefit plans or
arrangements providing life, hospitalization, medical and long-term disability
insurance maintained by Culbro for its salaried and certain hourly paid
employees will continue to be eligible to participate in such plans and
arrangements for the remainder of the 1997 fiscal year, and Griffin will
participate in certain fee sharing arrangements with Culbro (or General Cigar,
following the Merger) with respect to such plans. Following the 1997 fiscal
year, Griffin intends to maintain substantially similar welfare benefit plans
and arrangements for the benefit of its eligible employees. Following the
Distribution Date, persons employed by Griffin shall cease to accrue any further
benefits under the Culbro Retirement Plan and Griffin will not assume any
liabilities or obligations with respect to the Culbro Retirement Plan. Griffin
will assume sole responsibility for any payment due to Anthony Galici under any
Culbro Annual Incentive Compensation Plan payable with respect to the 1997
fiscal year.
35
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since December 1, 1995, Frederick M. Danziger, President and Chief Executive
Officer of Griffin and a member of the Cullman & Ernst Group, the son-in-law of
Edgar M. Cullman and the husband of Lucy C. Danziger, has been Of Counsel to the
law firm of Latham & Watkins. During Culbro's 1996 fiscal year, such firm
received fees and disbursements of approximately $1.5 million from Culbro for
services rendered. See "PRINCIPAL STOCKHOLDERS."
Messrs. Cullman, Danziger and Ernst are members of the Board of Directors of
Bloomingdale Properties, Inc. of which Mr. Ernst is Chairman and President and
other members of the Cullman & Ernst Group are associated. Real estate
management and advisory services have been provided to Culbro by an affiliate of
Bloomingdale Properties, Inc. A fee of approximately $200,000 was paid by Culbro
in 1996 for management of Culbro's New York office building and for other real
estate advisory services. John Fletcher, an employee of Bloomingdale Properties,
Inc., was a director of Griffin until April 1997 and is expected to be retained
by Griffin as a consultant. The terms of his consulting arrangement have not yet
been determined.
36
<PAGE>
PRINCIPAL STOCKHOLDERS
Culbro beneficially owns all of the outstanding shares of Common Stock.
Following the Distribution the holders of Culbro Common Stock immediately
preceding the Distribution will own a number of shares of Common Stock equal to
the number of issued and outstanding shares of Culbro Common Stock, constituting
100% of the outstanding Common Stock. For a description of the Common Stock, see
"DESCRIPTION OF CAPITAL STOCK."
The following table sets forth certain information regarding beneficial
ownership of the Culbro Common Stock as of June 3, 1997 and by each person who
is known by Griffin to beneficially own more than 5% of the outstanding shares
of Culbro Common Stock, each director of Griffin and all directors of Griffin as
a group. There are no executive officers of Griffin who received material
compensation for services rendered to Griffin and whose ownership of any shares
of Common Stock would be required to be included in the following table. As of
May 5, 1997, on a pro forma basis after giving effect to the Distribution, the
persons listed below would have held Common Stock in the amounts and percentages
set forth below. Unless otherwise indicated, the address of each person named in
the table below is c/o Culbro Corporation, 387 Park Avenue South, New York, New
York, 10016-8899.
<TABLE>
<CAPTION>
CULBRO COMMON STOCK
PRIOR TO THE
DISTRIBUTION
------------------------
SHARES
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER OWNED(1) TOTAL
- ------------------------------------------------------------------------ ----------- -----------
<S> <C> <C>
Edgar M. Cullman (2).................................................... 974,874 21.4%
Edgar M. Cullman, Jr. (2)............................................... 891,658 19.6
Louise B. Cullman (2)(3)................................................ 834,347 18.3
Susan R. Cullman (2)(3)................................................. 784,529 17.2
Lucy C. Danziger (2)(3)(5).............................................. 1,051,264 23.1
John L. Ernst (2)(5).................................................... 420,271 9.2
Frederick M. Danziger (2)(3)............................................ 164,120 3.6
Anthony J. Galici (4)................................................... 5,673 *
B. Bros. Realty Limited Partnership (5)................................. 233,792 5.1
Gabelli Funds, Inc. (6)................................................. 882,200 19.4
All officers and directors as a group (2 persons)(7).................... 1,564,938 34.3
</TABLE>
- ------------------------
* less than 1%
(1) This information reflects the definition of beneficial ownership adopted by
the Securities and Exchange Commission (the "Commission"). Beneficial
ownership shown reflects sole investment and voting power, except as
reflected in footnote 2. Where more than one person shares investment and
voting power in the same shares such shares may be shown more than once.
Such shares are reflected only once, however, in the total for all directors
and officers. Excluded are shares held by charitable foundations and trusts
of which members of the Cullman and Ernst Group are officers and directors.
As of June 3, 1997, a group consisting of Messrs. Cullman, direct members of
their families and trusts for their benefit, Mr. Ernst, his sister and
direct members of their families and trusts for their benefit, a partnership
in which members of the Cullman and Ernst families hold substantial direct
and indirect interests and charitable foundations and trusts of which
members of the Cullman and Ernst families are directors or trustees, owned
an aggregate of approximately 2,235,020 shares of Culbro Common Stock
(approximately 50% of the outstanding shares of Culbro common stock). Among
others, Messrs. Cullman, Mr. Ernst and to a lesser extent Mr. Danziger (who
is a member of the Cullman & Ernst Group) hold investment and voting power
or shared investment and voting power over such shares. Certain of such
shares are pledged as security for loans payable under standard pledge
37
<PAGE>
arrangements. A form filed with the SEC on behalf of the Cullman & Ernst
Group states that there is no formal agreement governing the group's holding
and voting of such shares but that there is an informal understanding that
the persons and entities included in the group will hold and vote together
the shares owned by each of them in each case subject to any applicable
fiduciary responsibilities. Louise B. Cullman is the wife of Edgar M.
Cullman. Susan R. Cullman and Lucy C. Danziger are the daughters of Edgar M.
Cullman and Louise B. Cullman, and Lucy C. Danziger is the wife of Frederick
M. Danziger. Edgar M. Cullman Jr. is the son of Edgar M. Cullman and Louise
B. Cullman.
(2) Included within the Culbro shares shown as beneficially owned by Edgar M.
Cullman are 863,576 shares in which he holds shared investment and/or voting
power; included within the shares shown as beneficially owned by Mr. Ernst
are 411,321 shares in which he holds shared investment and/or voting power;
included within the shares shown as beneficiary owned by Mr. Danziger are
147,578 shares in which he holds shares investment and/or voting power; and
included within the shares shown as beneficially owned by Edgar M. Cullman,
Jr. are 751,490 shares in which he holds shared investment and/or voting
power. Included within the shares shown as beneficially owned by Louise B.
Cullman are 730,937 shares in which she holds shared investment and/or
voting power; included within the shares shown as beneficially owned by
Susan R. Cullman are 690,042 shares in which she holds shared investment
and/or voting power; included within the shares shown as beneficially owned
by Lucy C. Danziger are 969,422 shares in which she holds shared investment
and/or voting power. Excluded in each case are shares held by charitable
foundations and trusts in which such persons or their families or trusts for
their benefit are officers and directors. Messrs. Cullman, Ernst, Danziger
and Cullman, Jr. disclaim beneficial interest in all shares over which there
is shared investment and/or voting power and in all excluded shares.
(3) The address of each of Louise B. Cullman, Susan R. Cullman, Lucy C. Danziger
and Frederick M. Danziger is c/o 641 Lexington Avenue, New York, New York.
(4) Includes 4,400 shares subject to Culbro Options exercisable within 60 days.
Upon consummation of the Distribution such Culbro Options will be
exercisable for approximately the same number of shares of Class A Common
Stock. See "CERTAIN EMPLOYEE BENEFIT MATTERS--Griffin Stock Option Plan."
(5) The address of B. Bros. Realty Limited Partnership ("B. Bros.") is 641
Lexington Avenue, New York, New York. Lucy C. Danziger and John L. Ernst are
the general partners of B. Bros. The shares owned by B. Bros. are included
in the shares beneficially owned by each of the general partners.
(6) The address of such person is Gabelli Funds, Inc., One Corporate Center,
Rye, New York, NY 10580. A form filed with the SEC in September 1991 by
Gabelli Funds, Inc. as subsequently amended indicates that the securities
have been acquired by Gabelli Funds, Inc. and its wholly-owned subsidiaries
on behalf of their investment advisory clients. Culbro has been informed
that no individual client of Gabelli Funds, Inc. has ownership of more than
5% of Culbro's common stock.
(7) Excluding shares held by certain charitable foundations the officers and/or
directors of which include certain officers and directors of the Company.
DESCRIPTION OF CAPITAL STOCK
Griffin's authorized capital stock consists of 10,000,000 shares of Common
Stock and 5,000,000 shares of preferred stock, par value $0.01 per share (the
"Preferred Stock"). The following summary description of the capital stock of
Griffin is qualified in its entirety by reference to the form of Amended and
Restated Certificate of Incorporation of Griffin (the "Amended Certificate") and
By-Laws of Griffin (the "By-Laws"), a copy of each of which is filed as an
exhibit to the Registration Statement on Form 10 of which this Information
Statement forms a part.
38
<PAGE>
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding Preferred Stock, the holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available for that
purpose. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of the Company, the holders of the Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to prior
distribution rights of Preferred Stock, if any, then outstanding. The Common
Stock has no preemptive or conversion rights or other subscription rights. There
are no redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are fully paid and nonassessable, and the
shares of Common Stock to be issued in the Distribution will be fully paid and
nonassessable.
PREFERRED STOCK
The Board of Directors, without further stockholder authorization, is
authorized to issue, from time to time, Preferred Stock in one or more series,
to establish the number of shares to be included in any such series and to fix
the designations, powers, preferences and rights of the shares of each such
series and any qualifications, limitations or restrictions thereof, including
dividend rights and preferences over dividends on the Common Stock, conversion
rights, voting rights, redemption rights, the terms of any sinking fund therefor
and rights upon liquidation. The ability of the Griffin Board to issue Preferred
Stock, while providing flexibility in connection with financing, acquisitions
and other corporate purposes, could have the effect of discouraging, deferring
or preventing a change in control of Griffin or an unsolicited acquisition
proposal, since the issuance of Preferred Stock could be used to dilute the
share ownership of a person or entity seeking to obtain control of Griffin. In
addition, because the Griffin Board has the power to establish the preferences,
powers and rights of the shares of any such series of Preferred Stock, it may
afford the holders of any Preferred Stock preferences, powers and rights
(including voting rights) senior to the rights of the holders of Common Stock,
which could adversely affect the rights of holders of Common Stock.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 ("Section 203") of the General Corporation Law of the State of
Delaware (the "DGCL") provides, in general, that a stockholder acquiring more
than 15% of the outstanding voting stock of a corporation subject to Section 203
(an "Interested Stockholder") but less than 85% of such stock may not engage in
certain Business Combinations (as defined in Section 203) with the corporation
for a period of three years subsequent to the date on which the stockholder
became an Interested Stockholder unless (i) prior to such date the corporation's
board of directors approved either the Business Combination or the transaction
in which the stockholder became an Interested Stockholder or (ii) the Business
Combination is approved by the corporation's board of directors and authorized
by a vote of at least 66 2/3% of the outstanding voting stock of the corporation
not owned by the Interested Stockholder. The Amended Certificate contains a
provision electing not to be governed by Section 203.
LIMITATIONS ON DIRECTORS' LIABILITY
The Amended Certificate contains a provision which eliminates the personal
liability of a director to Griffin and its stockholders for certain breaches of
his or her fiduciary duty of care as a director.
This provision does not, however, eliminate or limit the personal liability
of a director (i) for any breach of such director's duty of loyalty to Griffin
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Delaware statutory provisions making directors personally liable, under a
negligence standard, for unlawful dividends or unlawful stock repurchases or
redemptions or (iv) for any transaction from which the director derived an
39
<PAGE>
improper personal benefit. This provision offers persons who serve on the Board
of Directors of Griffin protection against awards of monetary damages resulting
from breaches of their duty of care (except as indicated above), including
grossly negligent business decisions made in connection with takeover proposals
for Griffin. As a result of this provision, the ability of Griffin or a
stockholder thereof to successfully prosecute an action against a director for a
breach of his duty of care has been limited. However, the provision does not
affect the availability of equitable remedies such as an injunction or recision
based upon a director's breach of his duty of care. The SEC has taken the
position that the provision will have no effect on claims arising under the
federal securities laws.
In addition, the Amended Certificate and By-Laws provide mandatory
indemnification rights, subject to limited exceptions, to any person who was or
is party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by reason of the fact that such person is
or was a director or officer of Griffin, or is or was serving at the request of
Griffin as a director or officer of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise. Such indemnification
rights include reimbursement for expenses incurred by such person in advance of
the final disposition of such proceeding in accordance with the applicable
provisions of the DGCL.
TRANSFER AGENT AND REGISTRAR
Chase Mellon Shareholder Services, LLC is the transfer agent and registrar
for the Common Stock.
POWER TO ISSUE ADDITIONAL SHARES OF COMMON STOCK AND PREFERRED STOCK
Griffin believes that the power of the Griffin Board to issue additional
authorized but unissued shares of Common Stock and Preferred Stock and to
classify or reclassify unissued shares of Griffin capital stock and thereafter
to cause Griffin to issue such classified or reclassified shares of stock will
provide Griffin with increased flexibility in structuring possible future
financings and acquisitions and in meeting other needs which may arise. The
additional classes or series, as well as the Common Stock and Preferred Stock,
will be available for issuance without further action by Griffin's stockholders,
unless such action is required by applicable law or the rules of any stock
exchange or automated quotation system on which Griffin's securities may be
listed or traded. Although the Griffin Board has no intention at the present
time of doing so, it could authorize Griffin to issue a class or series that
could, depending upon the terms of such class or series, delay, defer or prevent
a transaction or a change in control of Griffin that might involve a premium
price for holders of Common Stock or otherwise be in their best interests.
DIVIDEND POLICY
The payment and amount of cash dividends on the Common Stock after the
Distribution will be subject to the discretion of the Griffin Board. Griffin's
dividend policy will be reviewed by Griffin's Board of Directors from time to
time as may be appropriate and payment of dividends on the Common Stock will
depend upon Griffin's financial position, capital requirements and other factors
as the Griffin Board deems relevant. Subject to the foregoing, Griffin presently
does not intend to pay cash dividends in the foreseeable future.
DESCRIPTION OF CERTAIN INDEBTEDNESS
Griffin presently does not have any material indebtedness. It is expected,
however, that Griffin will explore a variety of financing options, including the
possible establishment of a revolving credit facility, in order to fund future
real estate development opportunities. The terms and conditions of future debt
instruments of Griffin or its subsidiaries may impose restrictions on Griffin
and its subsidiaries that affect, among other things, their ability to incur
debt, pay dividends or make distributions, make acquisitions, create liens, sell
assets, and make certain investments. In addition, the terms and conditions of
such indebtedness may restrict the ability of Griffin to pay dividends except
under certain circumstances.
40
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Immediately after consummation of the Distribution, Griffin will have
outstanding a number shares of Common Stock equal to the number of shares of
Culbro Common Stock outstanding immediately prior to the Distribution. As of
June 2, 1997, there were 4,559,132 shares of Culbro Common Stock outstanding.
Griffin intends to file a registration statement on Form S-8 under the
Securities Act to register the sale of 700,000 shares of Common Stock reserved
for issuance under the Griffin Stock Option Plan, including 450,000 shares of
Common Stock issuable upon exercise of outstanding Culbro Options following the
Distribution and 250,000 shares of Common Stock issuable upon exercise of newly
issued options under the Griffin Stock Option Plan. See "CERTAIN EMPLOYEE
BENEFIT MATTERS--Griffin Stock Option Plan." As a result, any shares of Common
Stock issued upon exercise of such stock options will be available, subject to
special rules for affiliates, for resale in the public market.
In general, under Rule 144, as currently in effect, (i) a person (or persons
whose shares are required to be aggregated) who has beneficially owned shares of
Common Stock as to which at least two years have elapsed since such shares were
sold by Griffin or by an affiliate of Griffin in a transaction or chain of
transactions not involving a public offering ("restricted securities") or (ii)
an affiliate of Griffin who holds shares of Common Stock that are not restricted
securities may sell, within any three-month period, a number of such shares that
does not exceed the greater of 1% of the Common Stock then outstanding or the
average weekly trading volume in the Common Stock during the four calendar weeks
preceding the date on which notice of such sale required under Rule 144 was
filed. Sales under Rule 144 also are subject to certain provisions relating to
the manner and notice of sale and availability of current public information
about Griffin. Affiliates of Griffin must comply with the requirements of Rule
144, including the one-year holding period requirement, to sell shares of Common
Stock that are restricted securities. Furthermore, if a period of at least two
years has elapsed from the date restricted securities were acquired from Griffin
or an affiliate of Griffin, a holder of such restricted securities who is not an
affiliate of Griffin at the time of the sale and has not been an affiliate of
Griffin at any time during the three months prior to such sale would be entitled
to sell such shares without regard to the volume limitation and other conditions
described above.
All shares of Common Stock will be eligible for sale in the public market
immediately after consummation of the Distribution; PROVIDED, that all of such
shares held by the members of the Cullman & Ernst Group may be resold only
pursuant to, and in accordance with, the volume, manner of sale and other
conditions of Rule 144 described above.
Prior to the Distribution, there has been no public market for the Common
Stock. Although Griffin can make no prediction as to the effect, if any, that
sales of shares of Common Stock by the Cullman & Ernst Group or any other person
would have on the market price prevailing from time to time, sales of
substantial amounts of Common Stock (including shares issued upon the exercise
of stock options) or the perception that such sales could occur, could adversely
affect prevailing market prices.
41
<PAGE>
ADDITIONAL INFORMATION
Griffin has filed with the Commission a Registration Statement on Form 10
under the Exchange Act with respect to the Common Stock described herein. This
Information Statement does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. Further
information may be obtained from the Registration Statement and such exhibits
and schedules. Copies of these documents may be inspected at and obtained at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Regional Offices of the Commission at 7
World Trade Center, Suite 1300, New York, New York 10048 and at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Such reports and other documents
may be obtained from the web site that the Commission maintains at
http://www.sec.gov. Copies of such information can also be obtained by mail from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates.
Following the Distribution, Griffin will be required to comply with the
reporting requirements of the Exchange Act and will file annual, quarterly and
other reports with the Commission. Additionally, Griffin will be subject to the
proxy solicitation requirements of the Exchange Act and will furnish annual
reports containing audited financial statements to its stockholders in
connection with its annual meetings of stockholders.
No person is authorized to give any information or to make any
representations other than those contained in this Information Statement. Any
other information or representations given or made must not be relied upon as
having been authorized. This Information Statement does not constitute an offer
to sell or a solicitation of an offer to buy any securities. The delivery of
this Information Statement must not under any circumstances be construed as an
implication that there has been no change in the affairs of Griffin subsequent
to the date of this Information Statement.
42
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
INTERIM FINANCIAL STATEMENTS
Consolidated Statement of Operations for the Thirteen Weeks Ended March 2, 1996 and
March 1, 1997....................................................................... F-2
Consolidated Balance Sheet as of November 30, 1996 and March 1, 1997................. F-3
Consolidated Statement of Cash Flows for the Thirteen Weeks Ended March 2, 1996 and
March 1, 1997....................................................................... F-4
Notes to Consolidated Financial Statements........................................... F-5
ANNUAL FINANCIAL STATEMENTS
Report of Independent Accountants.................................................... F-9
Combined Statement of Operations for the Fiscal Years Ended December 3, 1994,
December 2, 1995 and November 30, 1996.............................................. F-10
Combined Balance Sheet as of December 2, 1995 and November 30, 1996 and Pro Forma
Combined Balance Sheet as of November 30, 1996...................................... F-11
Combined Statement of Cash Flows for the Fiscal Years Ended December 3, 1994,
December 2, 1995 and November 30, 1996.............................................. F-12
Notes to Combined Financial Statements............................................... F-13
</TABLE>
F-1
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE 13 WEEKS ENDED,
----------------------------
MARCH 2, 1996 MARCH 1, 1997
------------- -------------
<S> <C> <C>
Net sales and other revenue........................................................ $ 3,352 $ 2,725
Costs and expenses:
Cost of goods sold............................................................... 2,408 1,943
Selling, general and administrative expenses..................................... 2,568 3,208
------------- -------------
Operating loss..................................................................... (1,624) (2,426)
Loss from equity investments in Centaur............................................ (18) (22)
Other nonoperating income, net..................................................... 337 --
Interest expense................................................................... 1,902 799
------------- -------------
Loss before income tax benefit..................................................... (3,207) (3,247)
Income tax benefit................................................................. (1,240) (1,234)
------------- -------------
Loss from continuing operations.................................................... (1,967) (2,013)
Income from discontinued operation, net of taxes of $321........................... 496 --
------------- -------------
Net loss........................................................................... $ (1,471) $ (2,013)
------------- -------------
------------- -------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NOVEMBER 30, 1996
----------------- MARCH 1, 1997
-------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents...................................................... $ 7,371 $ 6,498
Accounts receivable, less allowance of $302 and $304........................... 3,962 1,730
Inventories.................................................................... 27,530 30,109
Deferred income taxes.......................................................... 4,047 2,783
Other current assets........................................................... 1,158 801
-------- -------------
TOTAL CURRENT ASSETS........................................................... 44,068 41,921
Property and equipment, net.................................................... 12,676 12,671
Real estate held for sale or lease, net........................................ 26,862 27,154
Investment in Centaur Communications, Ltd...................................... 14,695 14,673
Other assets, including investment in real estate joint venture of $3,403 and
$3,348....................................................................... 3,474 3,454
-------- -------------
TOTAL ASSETS................................................................... $ 101,775 $ 99,873
-------- -------------
-------- -------------
LIABILITIES AND CULBRO INVESTMENT
CURRENT LIABILITIES
Accounts payable and accrued liabilities....................................... $ 7,093 $ 3,448
Long-term debt due within one year............................................. 277 242
-------- -------------
TOTAL CURRENT LIABILITIES...................................................... 7,370 3,690
Long-term debt................................................................. 38,846 2,896
Other noncurrent liabilities................................................... 8,110 2,995
-------- -------------
TOTAL LIABILITIES.............................................................. 54,326 9,581
CULBRO INVESTMENT.............................................................. 47,449 90,292
-------- -------------
TOTAL LIABILITIES AND CULBRO INVESTMENT........................................ $ 101,775 $ 99,873
-------- -------------
-------- -------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE 13 WEEKS ENDED,
----------------------------
<S> <C> <C>
MARCH 2, 1996 MARCH 2, 1997
------------- -------------
OPERATING ACTIVITIES:
Net loss........................................................................... $ (1,471) $ (2,013)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization...................................................... 575 504
Income from discontinued operation, before tax..................................... (817) --
Loss from equity investment in Centaur............................................. 18 22
Discount and interest on subordinated note......................................... 587 --
Accretion and dividend income on Series B preferred stock.......................... (587) --
Deferred income taxes.............................................................. 1,276 (313)
Changes in assets and liabilities, net of effect of Liability Assumption:
Accounts receivable.............................................................. 1,875 2,221
Inventories...................................................................... (1,778) (2,579)
Real estate held for sale or lease............................................... 112 (475)
Accounts payable and accrued liabilities......................................... (1,395) (2,111)
Other.............................................................................. 1,103 (252)
------------- -------------
Net cash used in operating activities of continuing operations..................... (502) (4,996)
Cash used in operating activities of discontinued operation........................ (317) --
------------- -------------
Net cash used in operating activities.............................................. (819) (4,996)
------------- -------------
INVESTING ACTIVITIES:
Additions to property and equipment................................................ (143) (327)
Investing activities of discontinued operation..................................... (321) --
------------- -------------
Net cash used in investing activities.............................................. (464) (327)
------------- -------------
FINANCING ACTIVITIES:
Net transactions with Culbro, excluding Liability Assumption....................... (7,558) (2,765)
Payments of debt................................................................... (81) (37)
Increase in debt................................................................... 5,000 7,252
------------- -------------
Net cash (used in) provided by financing activities................................ (2,639) 4,450
------------- -------------
Net decrease in cash and cash equivalents.......................................... (3,922) (873)
Cash and cash equivalents at beginning of period................................... 7,687 7,371
------------- -------------
Cash and cash equivalents at end of period......................................... $ 3,765 $ 6,498
------------- -------------
------------- -------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The unaudited consolidated financial statements of Griffin Land & Nurseries
("Griffin"), a wholly owned subsidiary of Culbro Corporation ("Culbro") 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. Also, the financial
statements have been prepared in accordance with the accounting policies stated
in Griffin's audited 1996 Combined Financial Statements and should be read in
conjunction with the Notes to Combined 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 periods have been reflected.
The results in the 1996 quarter include CMS Gilbreth Packaging Systems, Inc.
("CMS Gilbreth") as a discontinued operation. This business was sold in the 1996
fourth quarter.
The results of operations for the thirteen week period ended March 1, 1997
are not necessarily indicative of the results to be expected for the full year.
2. CERTAIN TRANSACTIONS
Griffin, Culbro and General Cigar Holdings, Inc. ("GC Holdings"), a Culbro
subsidiary, entered into a Distribution Agreement (the "Distribution Agreement")
on February 27, 1997. The Distribution Agreement provided for (i) the
consummation of the Asset Transfers (see below), (ii) the Distribution of
Griffin's common stock to the existing shareholders of Culbro (the
"Distribution") following the initial public offering (the "Offering") of GC
Holdings Class A common stock, and (iii) following the Distribution, the merger
of Culbro, subject to certain conditions, with and into GC Holdings (the
"Merger"). The Offering was completed on February 28, 1997. The Distribution is
principally contingent upon (i) either a favorable tax ruling (which Culbro has
applied for) or an opinion of counsel satisfactory to Culbro that the
Distribution constitutes a tax free organization under Section 355 of the
Internal Revenue Code and (ii) approval of the Merger by the holders of 66 2/3%
of the outstanding Culbro common stock.
Pursuant to the Distribution Agreement, Culbro transferred to Griffin
substantially all the non-tobacco related assets of Culbro, including: (i) all
of the outstanding common stock of Imperial Nurseries, Inc., a wholly owned
subsidiary of Culbro; (ii) approximately 5,500 acres of land in Connecticut and
Florida, as well as nursery wholesale service centers; (iii) Culbro's interests
in Eli Witt and assets previously owned by Eli Witt; (iv) its 25% interest in
Centaur Communications, Ltd. ("Centaur"); and (v) all licenses, permits,
accounts receivable, prepaid expenses, reserves and other assets (other than
cash) related to the real estate and nursery businesses. The Distribution
Agreement also provided for the assumption by Griffin of all of the liabilities
related to the businesses and assets transferred to Griffin from Culbro.
Pursuant to the Distribution Agreement, Griffin was given $7 million in cash.
All of the transferred assets and related liabilities are included in the
accompanying consolidated financial statements at Culbro's historical cost.
The Distribution Agreement also provided that, on February 27, 1997, GC
Holdings assumed all of Culbro general corporate debt and certain other
liabilities, principally retirement obligations, which are included in Griffin's
historical financial statements (the "Liability Assumption"). See Note 3 for the
pro forma effect of the Liability Assumption on Griffin's results of operations.
F-5
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
2. CERTAIN TRANSACTIONS (CONTINUED)
As a result of the transactions described above, Culbro is a holding
company, substantially all of the assets of which are the stock of Griffin and
GC Holdings. Pursuant to the terms of the Distribution Agreement, Griffin and GC
Holdings will operate independently of each other.
The Distribution Agreement also provides that Culbro undertake a pro rata
distribution of Griffin common stock to the shareholders of Culbro.
3. CONSOLIDATED CONDENSED PRO FORMA FINANCIAL INFORMATION
The following consolidated condensed unaudited pro forma statement of
operations of Griffin gives effect to the Liability Assumption by GC Holdings as
if it had been completed at the beginning of the respective periods. The
unaudited pro forma statement of operations for the 1996 first quarter also
gives effect to the use of the proceeds from the sale of CMS Gilbreth and the
exchange of Series B preferred stock of Eli Witt in satisfaction of Griffin's
obligations to a third party on the related subordinated note payable
(transactions which were completed in the 1996 fourth quarter) as if they had
been completed at the beginning of the 1996 first quarter. The Liability
Assumption is already reflected in Griffin's March 1, 1997 balance sheet. The
consolidated condensed unaudited pro forma statement of operations presented
herein may not necessarily reflect the results of operations had these
transactions actually taken place on the assumed dates.
CONSOLIDATED CONDENSED PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE 13 WEEKS ENDED,
----------------------------
<S> <C> <C>
MARCH 2, 1996 MARCH 1, 1997
------------- -------------
Net sales.......................................................................... $ 3,352 $ 2,725
------------- -------------
Operating loss..................................................................... (1,624) (2,426)
Loss from equity investment........................................................ (18) (22)
Interest expense................................................................... 153 69
------------- -------------
Loss before income tax benefit..................................................... (1,795) (2,517)
Income tax benefit................................................................. (689) (949)
------------- -------------
Loss from continuing operations.................................................... $ (1,106) $ (1,568)
------------- -------------
------------- -------------
</TABLE>
4. RELATED PARTY TRANSACTIONS
CULBRO INVESTMENT
Griffin maintained an intercompany account with Culbro in which intercompany
transactions, including cash transfers and the liability for benefit and
insurance costs and allocated general and administrative expenses described
below, were recorded. The balance in the intercompany account at the end of each
period presented has been included in Culbro Investment in the consolidated
balance sheet. The Culbro
F-6
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
4. RELATED PARTY TRANSACTIONS (CONTINUED)
Investment account also includes the cumulative net earnings of Griffin and its
capital stock. The changes in the Culbro Investment account are summarized as
follows:
<TABLE>
<CAPTION>
FOR THE 13 WEEKS ENDED
----------------------------
MARCH 2, 1996 MARCH 1, 1997
------------- -------------
<S> <C> <C>
Balance beginning of period........................................................ $ 61,299 $ 47,449
Net loss........................................................................... (1,471) (2,013)
------------- -------------
59,828 45,436
------------- -------------
Transactions with Culbro:
Liability Assumption............................................................. -- 47,621
Net operating cash flow transferred to Culbro.................................... (7,026) (1,957)
Allocated Culbro general and administrative expenses............................. 387 426
Intercompany income tax benefits................................................. (919) (1,234)
------------- -------------
Total transactions with Culbro, net................................................ (7,558) 44,856
------------- -------------
Balance end of period.............................................................. $ 52,270 $ 90,292
------------- -------------
------------- -------------
</TABLE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
A portion of Culbro management time and resources were related to Griffin's
operations, and Culbro also performed certain specific administrative functions
for Griffin, including legal, tax, treasury, human resources and internal audit.
The consolidated statement of operations reflects general and administrative
expenses of $0.4 million in each of the thirteen-week periods ended March 2,
1996 and March 1, 1997, allocated by Culbro to Griffin for these services. These
charges were based principally on Griffin's proportionate share of expenses
relating to the Culbro corporate activities associated with Griffin's operations
and are considered by management to be reasonable. These amounts may not
necessarily be indicative of the actual general and administrative expenses
Griffin would have incurred had it operated independently during the periods
presented.
5. LONG-TERM DEBT
Long-term debt includes:
<TABLE>
<CAPTION>
NOVEMBER 30, 1996 MARCH 1, 1997
----------------- -------------
<S> <C> <C>
Credit Agreement........................................... $ 36,000 $ --
Mortgages.................................................. 2,644 2,626
Capital leases............................................. 479 512
------- ------
Total...................................................... 39,123 3,138
Less: due within one year.................................. 277 242
------- ------
Total long-term debt....................................... $ 38,846 $ 2,896
------- ------
------- ------
</TABLE>
F-7
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
5. LONG-TERM DEBT (CONTINUED)
On February 27, 1997, pursuant to the Distribution Agreement, Culbro's
general corporate debt that had been included in Griffin's financial statements
was assumed by GC Holdings, and therefore will not be part of Griffin's debt
structure prospectively.
6. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
INVENTORIES
Inventories consists of:
<TABLE>
<CAPTION>
NOVEMBER 30, 1996 MARCH 1, 1997
----------------- -------------
<S> <C> <C>
Raw materials and supplies................................. $ 742 $ 1,126
Work-in-process............................................ 15,112 16,662
Finished goods............................................. 11,676 12,321
------- -------------
$ 27,530 $ 30,109
------- -------------
------- -------------
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment consist of:
<TABLE>
<CAPTION>
ESTIMATED USEFUL LIVES NOVEMBER 30, 1996 MARCH 1, 1997
---------------------- ----------------- -------------
<S> <C> <C> <C>
Land............................... $ 5,982 $ 5,998
Buildings and improvements......... 10 to 40 years 3,807 3,807
Machinery and equipment............ 3 to 20 years 12,337 12,438
------- -------------
22,126 22,243
Accumulated depreciation........... (9,450) (9,572)
------- -------------
$ 12,676 $ 12,671
------- -------------
------- -------------
</TABLE>
F-8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder
of Griffin Land & Nurseries, Inc.
In our opinion, the accompanying combined balance sheet and the related combined
statements of operations and of cash flows present fairly, in all material
respects, the combined financial position of Griffin Land & Nurseries, Inc. (a
wholly-owned subsidiary of Culbro Corporation) at December 2, 1995 and November
30, 1996 and the results of their combined operations and their combined cash
flows for each of the fiscal years ended December 3, 1994, December 2, 1995 and
November 30, 1996 in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards 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 provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
New York, New York
April 7, 1997
F-9
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED,
--------------------------------
DEC. 3, DEC. 2, NOV. 30,
1994 1995 1996
---------- --------- ---------
<S> <C> <C> <C>
Net sales and other revenue..................................................... $ 43,024 $ 41,756 $ 46,531
Costs and expenses:
Cost of goods sold............................................................ 30,034 28,389 34,210
Selling, general and administrative expenses.................................. 14,257 12,557 12,666
Other nonrecurring expense.................................................... 3,600 -- 900
---------- --------- ---------
Operating (loss) profit......................................................... (4,867) 810 (1,245)
Gain on sale of Eli Witt stock.................................................. 2,691 -- --
(Loss) income from equity investments, net...................................... (1,728) (153) 303
Other nonoperating income, net.................................................. 1,446 923 1,917
Interest expense................................................................ 7,978 8,193 7,805
---------- --------- ---------
Loss before income tax benefit.................................................. (10,436) (6,613) (6,830)
Income tax benefit.............................................................. (3,279) (2,348) (2,767)
---------- --------- ---------
Loss from continuing operations................................................. (7,157) (4,265) (4,063)
---------- --------- ---------
Discontinued operation:
Loss on sale of discontinued operation, net of tax benefit and reversal of
deferred taxes of $4,182.................................................... -- -- (1,311)
Income from discontinued operation, net of taxes (1994--$2,273; 1995--$2,580;
1996--$527)................................................................. 3,324 3,685 768
---------- --------- ---------
Net income (loss) from discontinued operation................................... 3,324 3,685 (543)
---------- --------- ---------
Net loss........................................................................ $ (3,833) $ (580) $ (4,606)
---------- --------- ---------
---------- --------- ---------
</TABLE>
See Notes to Combined Financial Statements.
F-10
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
COMBINED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DEC. 2, NOV. 30,
1995 1996
---------- ---------- PRO FORMA FOR
LIABILITY
ASSUMPTION (A)
NOV. 30, 1996
---------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENTS ASSETS
Cash and cash equivalents................................................ $ 7,687 $ 7,371 $ 7,371
Accounts receivable, less allowance of $338 and $302..................... 3,961 3,962 3,962
Inventories.............................................................. 25,931 27,530 27,530
Deferred income taxes.................................................... -- 4,047 2,470
Other current assets..................................................... 1,572 1,158 1,158
---------- ---------- ---------------
TOTAL CURRENT ASSETS..................................................... 39,151 44,068 42,491
Property and equipment, net.............................................. 12,619 12,676 12,676
Real estate held for sale or lease, net.................................. 31,907 26,862 26,862
Investment in preferred stock of Eli Witt................................ 15,122 -- --
Investment in Centaur Communications, Ltd................................ 14,392 14,695 14,695
Other assets, including investments in real estate joint ventures of
$7,964 and $3,403...................................................... 10,356 3,474 3,474
Net assets of discontinued operation..................................... 42,108 -- --
---------- ---------- ---------------
TOTAL ASSETS............................................................. $ 165,655 $ 101,775 $ 100,198
---------- ---------- ---------------
---------- ---------- ---------------
LIABILITIES AND CULBRO INVESTMENT
CURRENT LIABILITIES
Accounts payable and accrued liabilities................................. $ 8,114 $ 7,093 $ 5,559
Long-term debt due within one year....................................... 7,968 277 277
---------- ---------- ---------------
TOTAL CURRENT LIABILITIES................................................ 16,082 7,370 5,836
Long-term debt........................................................... 72,737 38,846 2,846
Deferred income taxes.................................................... 3,692 -- --
Other noncurrent liabilities and deferred credit......................... 11,845 8,110 3,662
---------- ---------- ---------------
TOTAL LIABILITIES........................................................ 104,356 54,326 12,344
COMMITMENTS AND CONTINGENCIES (SEE NOTE 14) -- -- --
CULBRO INVESTMENT........................................................ 61,299 47,449 87,854
---------- ---------- ---------------
TOTAL LIABILITIES AND CULBRO INVESTMENT.................................. $ 165,655 $ 101,775 $ 100,198
---------- ---------- ---------------
---------- ---------- ---------------
</TABLE>
- ------------------------
(a) Reflects the reduction of certain liabilities that were transferred to and
assumed by General Cigar Holdings, Inc. pursuant to a Distribution
Agreement. The liabilities include principally the Culbro debt of $36
million, certain accrued retirement obligations and other items.
See Notes to Combined Financial Statements.
F-11
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
COMBINED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED,
---------------------------------
DEC. 3, DEC. 2, NOV. 30,
1994 1995 1996
---------- --------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss........................................................................ $ (3,833) $ (580) $ (4,606)
Adjustments to reconcile net loss to cash provided by (used in) operating
activities:
Depreciation and amortization................................................... 2,142 2,416 2,405
Loss (income) from discontinued operation, before tax........................... (5,597) (6,265) 4,198
Gain on sale of Eli Witt common stock........................................... (2,691) -- --
Loss (income) from equity investments........................................... 1,728 153 (303)
Discount and interest on subordinated note...................................... 1,446 2,349 2,167
Accretion and dividend income on preferred stock of Eli Witt.................... (1,446) (2,349) (2,167)
Proceeds from sale of investment in real estate joint venture................... -- -- 4,042
Deferred income taxes........................................................... (2,995) 1,533 (7,739)
Changes in assets and liabilities which increased (decreased) cash:
Accounts receivable........................................................... (991) (177) (303)
Inventories................................................................... (554) (1,159) (1,599)
Real estate held for sale or lease............................................ 3,248 611 506
Accounts payable and accrued liabilities...................................... (4,714) 499 (1,474)
Other, net...................................................................... 2,612 (902) 2,648
---------- --------- ----------
Net cash used in operating activities of continuing operations.................. (11,645) (3,871) (2,225)
Cash provided by operating activities of discontinued operation................. 10,235 9,435 3,547
---------- --------- ----------
Net cash (used in) provided by operating activities............................. (1,410) 5,564 1,322
---------- --------- ----------
INVESTING ACTIVITIES:
Proceeds from sale of discontinued operation.................................... -- -- 35,030
Additions to property and equipment............................................. (625) (847) (1,378)
Investment in Eli Witt subordinated note........................................ -- (5,000) --
Proceeds from Eli Witt repayment of a mortgage loan to the Company.............. 8,000 -- --
Proceeds from the sale of Eli Witt common stock................................. 672 -- --
Investing activities of discontinued operation.................................. (2,317) (1,450) (947)
---------- --------- ----------
Net cash provided by (used in) investing activities............................. 5,730 (7,297) 32,705
---------- --------- ----------
FINANCING ACTIVITIES:
Net transactions with Culbro.................................................... 15,854 17,453 (9,244)
Payments of debt................................................................ (27,928) (14,829) (25,099)
Increase in debt................................................................ 11,669 -- --
---------- --------- ----------
Net cash (used in) provided by financing activities............................. (405) 2,624 (34,343)
---------- --------- ----------
Net increase (decrease) in cash and cash equivalents............................ 3,915 891 (316)
Cash and cash equivalents at beginning of year.................................. 2,881 6,796 7,687
---------- --------- ----------
Cash and cash equivalents at end of year........................................ $ 6,796 $ 7,687 $ 7,371
---------- --------- ----------
---------- --------- ----------
</TABLE>
See Notes to Combined Financial Statements.
F-12
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. CERTAIN TRANSACTIONS
The accompanying combined financial statements include the accounts of
Griffin Land & Nurseries, Inc. ("Griffin") and reflect its financial position,
results of operations and cash flows after elimination of intercompany accounts
and transactions. Prior to March 18, 1997, Griffin was known as Culbro Land
Resources, Inc. Griffin is a wholly owned subsidiary of Culbro Corporation
("Culbro").
Griffin, Culbro and General Cigar Holdings, Inc. ("GC Holdings"), a Culbro
subsidiary, entered into a Distribution Agreement (the "Distribution Agreement")
on February 27, 1997. The Distribution Agreement provided for (i) the
consummation of the Asset Transfers (see below), (ii) the distribution of
Griffin's common stock to the existing shareholders of Culbro (the
"Distribution") following the initial public offering (the "Offering") of GC
Holdings Class A common stock, and (iii) following the Distribution, the merger
of Culbro, subject to certain conditions, with and into GC Holdings (the
"Merger"). The Offering was completed on February 28, 1997. The Distribution is
contingent principally upon (i) either a tax ruling (which has been applied for
by Culbro) or an opinion of counsel satisfactory to Culbro that the Distribution
constitutes a tax free organization under Section 355 of the Internal Revenue
Code and (ii) approval of the Merger by the holders of 66 2/3% of the
outstanding Culbro common stock.
Pursuant to the Distribution Agreement, Culbro transferred to Griffin
substantially all the non-tobacco related assets of Culbro, including: (i) all
of the outstanding common stock of Imperial Nurseries, Inc., a wholly owned
subsidiary of Culbro; (ii) approximately 5,500 acres of land in Connecticut and
Florida, as well as nursery wholesale service centers; (iii) Culbro's interests
in Eli Witt and assets previously owned by The Eli Witt Company ("Eli Witt")
(see Note 12); (iv) its 25% interest in Centaur Communications, Ltd.
("Centaur"); and (v) all licenses, permits, accounts receivable, prepaid
expenses, reserves and other current assets (other than cash) related to the
real estate and landscape nursery businesses. The Distribution Agreement also
provided for the assumption by Griffin of all of the liabilities related to the
businesses and assets transferred to Griffin from Culbro. Pursuant to the
Distribution Agreement, $7.0 million in cash was transferred to Griffin and is
reflected on the historical balance sheets. Griffin continues to operate the
real estate business owned prior to the Asset Transfers (see below). All of the
transferred assets and related liabilities are included in the accompanying
combined financial statements at Culbro's historical cost.
The Distribution Agreement also provided for the transfer to and assumption
by GC Holdings of all of Culbro's general corporate debt and certain other
liabilities, principally retirement obligations, which are included in Griffin's
historical financial statements. See Note 4 for the pro forma effect of these
liability transfers on Griffin's financial position and results of operations.
As a result of the transfers described above ( the "Asset Transfers"),
Culbro is a holding company, substantially all of the assets of which are the
stock of Griffin and GC Holdings. Pursuant to the terms of the Distribution
Agreement, Griffin and GC Holdings will operate independently of each other.
Prior to March 18, 1997, Culbro held all 1,000 then, issued and outstanding
shares of common stock, par value $0.01 per share, of Griffin (the "Original
Shares"). On March 18, 1997, pursuant to an amended and restated certificate of
incorporation of Griffin, each Original Share was exchanged for one share of
Class B Common Stock, par value $0.01 per share, of Griffin (the "Class B Common
Stock"). Prior to the Distribution Date, Griffin intends to file an Amended and
Restricted Certificate of Incorporation, the form of which is filed as an
exhibit to the Registration Statement on Form 10 of which this Information
Statement forms a part, pursuant to which each share of Class B Common Stock
will be exchanged for one
F-13
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. CERTAIN TRANSACTIONS (CONTINUED)
share of newly-authorized common stock, par value $0.01 per share (the "Common
Stock"). Prior to the Distribution, Griffin will effect a stock split such that
the number of issued and outstanding shares of Common Stock will equal the
number of then-outstanding shares of common stock, par value $1, of Culbro. The
Distribution Agreement provides for the pro rata distribution by Culbro to the
shareholders of Culbro of the Common Stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying combined financial statements of Griffin include the
accounts of Griffin's real estate operations, Imperial Nurseries, Inc.
("Imperial Nurseries") and CMS Gilbreth Packaging Systems, Inc. ("CMS
Gilbreth"), which was sold in 1996 (see Note 3) and is reported as a
discontinued operation in these statements. The combined financial statements
have been presented as if Griffin had operated as an independent stand-alone
entity for all periods presented. Such financial statements may not necessarily
present the financial position, results of operations and cash flows Griffin
would have reported had it actually operated as a stand-alone entity. See Note 4
for combined condensed unaudited pro forma financial information. All
intercompany transactions have been eliminated.
Griffin accounts for its investments in Centaur, Eli Witt and real estate
joint ventures under the equity method. Prior to April 1994, Eli Witt was a
consolidated subsidiary of Griffin. Results of real estate joint ventures are
included in operating profit.
BUSINESS SEGMENTS
Griffin is engaged in the landscape nursery and real estate businesses.
Imperial Nurseries, 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 builds and manages commercial and industrial
properties and develops residential subdivisions on real estate in Connecticut
and Massachusetts that was previously owned by Culbro and transferred to Griffin
in accordance with the Distribution Agreement.
FISCAL YEAR
Griffin's fiscal year ends on the Saturday nearest November 30. Fiscal years
1994, 1995 and 1996 ended December 3, 1994, December 2, 1995 and November 30,
1996, respectively. Fiscal 1994 included 53 weeks, and fiscal 1995 and fiscal
1996 each contained 52 weeks.
INVENTORIES
Griffin's inventories are stated at the lower of cost or market using the
average cost method. Raw materials and work in process are landscape nursery
stock, a substantial amount of which will not be used or sold within one year.
It is industry practice to include such inventories in current assets.
F-14
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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."
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 8.
EARNINGS PER SHARE
Griffin is a wholly owned subsidiary of Culbro and its historical capital
structure does not permit a meaningful presentation of earnings per share.
Accordingly, earnings per share are not presented herein.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." This Statement requires that long-lived
assets and certain intangibles held and used by a business entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Prior to the issuance of
this Statement, Griffin periodically reviewed its long-lived assets, considering
future performance of those assets and the need for adjustments to their
carrying values. Griffin has adopted this Statement and performs such reviews in
accordance with the methods prescribed by SFAS No. 121.
In October 1995, the FASB issued Statement No. 123, "Accounting for
Stock-Based Compensation." This Statement establishes a fair value method of
accounting for, or disclosing, stock-based compensation plans. Griffin intends
to adopt the disclosure provisions of this statement which require disclosing
the pro forma effect on net income and earnings per share of the fair value
method of accounting for stock-based compensation. The adoption of the
disclosure provisions will not affect combined financial condition, results of
operations, or cash flows.
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 amounts 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.
F-15
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Estimates are used when accounting for allowance for uncollectible accounts
receivable, depreciation and amortization, employee benefit plans, taxes, and
contingencies, among others.
3. BUSINESS DISPOSITION
On November 8, 1996, Griffin completed the sale of its labeling and
packaging systems business, CMS Gilbreth. Net proceeds, after sale expenses,
were $35.0 million, and Griffin recorded a pretax loss of $5.5 million on the
sale, net of operating profit of $1.6 million earned during the phase-out
period. The sale proceeds were used to repay debt.
CMS Gilbreth is reported as a discontinued operation in the accompanying
financial statements. Net sales of CMS Gilbreth were $51.1 million and $51.0
million in 1994 and 1995, respectively, and $43.6 million in 1996 through the
date of sale.
4. COMBINED CONDENSED PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following combined condensed unaudited pro forma statement of operations
of Griffin gives effect to: (i) the assumption by GC Holdings of the liability
portion of the Asset Transfers, (ii) the use of proceeds from the sale of CMS
Gilbreth and (iii) the exchange of preferred stock of Eli Witt in satisfaction
of Griffin's obligations to a third party under an exchangeable subordinated
note. The combined condensed unaudited pro forma statement of operations assumes
that these transactions took place at the beginning of fiscal 1996. The combined
condensed unaudited pro forma balance sheet reflects the assumption by GC
Holdings of the liability portion of the Asset Transfers and its effect on
related deferred taxes as if they occurred at the balance sheet date. The effect
of the sale of CMS Gilbreth and the exchange of preferred stock of Eli Witt are
reflected (eliminated) in Griffin's historical 1996 combined balance sheet. The
combined condensed unaudited pro forma financial information presented herein
may not necessarily reflect the results of operations and financial position had
these transactions actually taken place on the assumed dates.
COMBINED CONDENSED PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
1996
---------
<S> <C>
Net sales.......................................................................... $ 46,531
---------
Operating loss..................................................................... (1,245)
Income from equity investment...................................................... 303
Interest expense................................................................... 508
---------
Loss before income tax benefit..................................................... (1,450)
Income tax benefit................................................................. (668)
---------
Loss from continuing operations.................................................... $ (782)
---------
---------
</TABLE>
F-16
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. COMBINED CONDENSED PRO FORMA FINANCIAL INFORMATION (UNAUDITED) (CONTINUED)
COMBINED CONDENSED PRO FORMA BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
NOV. 30,
1996
----------
<S> <C>
Current assets.................................................................... $ 42,491
Property and equipment, net....................................................... 12,676
Real estate held for sale or lease, net........................................... 26,862
All other assets.................................................................. 18,169
----------
Total assets...................................................................... $ 100,198
----------
----------
Current liabilities............................................................... $ 5,836
Long-term debt.................................................................... 2,846
Other noncurrent liabilities...................................................... 3,662
----------
Total liabilities................................................................. 12,344
Culbro Investment................................................................. 87,854
----------
Total liabilities and Culbro Investment........................................... $ 100,198
----------
----------
</TABLE>
F-17
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5. INDUSTRY SEGMENT INFORMATION
Griffin's businesses operate in two industry segments: landscape nursery and
real estate (see Note 2). Griffin has no operations outside of the United
States, and export sales are not material. Capital expenditures and depreciation
and amortization presented herein include amounts related to capital leases.
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
NET SALES AND OTHER REVENUE
Landscape nursery.................................................. $ 35,315 $ 34,894 $ 37,045
Real estate........................................................ 7,709 6,862 9,486
---------- ---------- ----------
$ 43,024 $ 41,756 $ 46,531
---------- ---------- ----------
---------- ---------- ----------
OPERATING PROFIT (LOSS)
Landscape Nursery.................................................. $ (604) $ 1,732 $ 1,650
Real estate (a).................................................... (2,241) 1,228 (300)
---------- ---------- ----------
Industry segment totals............................................ (2,845) 2,960 1,350
General corporate expense, net (b)................................. 2,022 2,150 2,595
(Loss) income from equity investments, net......................... (1,728) (153) 303
Other nonoperating income, net..................................... 1,446 923 1,917
Gain on sale of Eli Witt common stock.............................. 2,691 -- --
Interest expense................................................... 7,978 8,193 7,805
---------- ---------- ----------
Loss before income tax benefit..................................... $ (10,436) $ (6,613) $ (6,830)
---------- ---------- ----------
---------- ---------- ----------
IDENTIFIABLE ASSETS
Landscape nursery.................................................. 40,636 42,881 43,948
Real estate........................................................ 42,455 41,228 31,664
---------- ---------- ----------
Industry segment totals............................................ 83,091 84,109 75,612
General corporate.................................................. 40,502 39,438 26,163
Net assets of discontinued operation............................... 43,828 42,108 --
---------- ---------- ----------
$ 167,421 $ 165,655 $ 101,775
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
- ------------------------
(a) Real estate segment operating loss in 1994 includes a $3.6 million charge
for the write off of development costs expended in earlier years.
(b) General corporate expense in 1996 includes an allocation to Griffin by
Culbro of $0.9 million for the termination of a compensation plan, severance
and other expenses in contemplation of the Distribution (see Note 1).
F-18
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5. INDUSTRY SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
DEPRECIATION AND AMORTIZATION
CAPITAL EXPENDITURES
------------------------------- -------------------------------
1994 1995 1996 1994 1995 1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Landscape nursery...................... $ 594 $ 789 $ 1,258 $ 912 $ 1,132 $ 1,116
Real estate............................ 31 58 120 912 917 889
--------- --------- --------- --------- --------- ---------
Industry segment totals................ 625 847 1,378 1,824 2,049 2,005
General corporate...................... -- -- -- 318 367 400
--------- --------- --------- --------- --------- ---------
$ 625 $ 847 $ 1,378 $ 2,142 $ 2,416 $ 2,405
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
6. RELATED PARTY TRANSACTIONS
CULBRO INVESTMENT
The Company maintained an intercompany account with Culbro in which
intercompany transactions, including cash transfers and the liability for
benefit and insurance costs and allocated general and administrative expenses
described below, were recorded. The balance in the intercompany account at the
end of each period presented has been included in Culbro Investment in the
combined balance sheet. The Culbro Investment account also includes the
cumulative results of Griffin and its capital stock. The changes in the Culbro
Investment account are summarized as follows:
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED,
-------------------------------
DEC. 3, DEC. 2, NOV. 30,
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Balance beginning of year.............................................. $ 32,406 $ 44,426 $ 61,299
Net loss............................................................... (3,833) (580) (4,606)
--------- --------- ---------
28,573 43,846 56,693
--------- --------- ---------
Transactions with Culbro:
Net operating cash flow transferred from (to) Culbro................. 14,420 15,141 (5,498)
Allocated Culbro general and administrative expenses................. 2,439 2,080 1,776
Allocated Culbro other nonrecurring expense.......................... -- -- 900
Intercompany income taxes (benefits)................................. (1,006) 232 (6,422)
--------- --------- ---------
Total transactions with Culbro, net.................................... 15,853 17,453 (9,244)
--------- --------- ---------
Balance end of year.................................................... $ 44,426 $ 61,299 $ 47,449
--------- --------- ---------
--------- --------- ---------
Average intercompany balance due to Culbro............................. $ 3,961 $ 20,614 $ 24,718
--------- --------- ---------
--------- --------- ---------
</TABLE>
TREASURY
Through February 27, 1997, Griffin's treasury activities were integrated
into Culbro's cash management system. Griffin's cash receipts were transferred
daily into Culbro's cash account and Griffin's cash disbursement accounts were
reimbursed by Culbro on a daily basis. The difference between cash transferred
by Griffin to Culbro and reimbursements by Culbro to Griffin's disbursement
accounts has been reflected in Culbro Investment in the combined balance sheet.
F-19
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
6. RELATED PARTY TRANSACTIONS (CONTINUED)
INTERCOMPANY ACTIVITIES
Griffin's employees participate in certain benefit programs which are
sponsored and administered by Culbro. See Note 9 for discussion of employee
benefit plan costs. Griffin's risk insurance and employee medical coverage are
provided through insurance policies and programs purchased by Culbro on behalf
of Griffin and Culbro's other subsidiaries. The cost of these items was
allocated based on the specific insurance data related to each subsidiary of
Culbro. All direct charges relating to Griffin for these services, and Griffin's
participation in these plans, have been charged to Griffin by Culbro and
included in Griffin's combined financial statements.
A portion of Culbro management time and resources were related to the
operations of Griffin, and Culbro also performed certain specific administrative
functions for Griffin, including legal, tax, treasury, human resources and
internal audit. In addition to the direct charges above for employee benefits
and risk insurance, the combined statement of operations reflects general and
administrative expenses of $2.4 million, $2.1 million and $1.8 million for
fiscal 1994, fiscal 1995 and fiscal 1996, respectively, allocated by Culbro to
Griffin for these services. These charges were based principally on Griffin's
proportionate share of expenses relating to the Culbro corporate activities
associated with Griffin's operations and are considered by management to be
reasonable. These amounts may not necessarily be indicative of the actual
general and administrative expenses Griffin would have incurred had it operated
independently during the years presented.
In lieu of Griffin being charged interest on its intercompany balance with
Culbro, all of the interest on Culbro's general corporate debt is included in
Griffin's statement of operations. All of the general corporate debt of Culbro
is included in Griffin's financial statements because management determined that
this debt related to Culbro's non-tobacco businesses. See Notes 4 and 8.
LEASES
Griffin as lessor and General Cigar Co., Inc. ("General Cigar"), a wholly
owned subsidiary of GC Holdings, as lessee, have entered into a lease for
certain agricultural land in Connecticut and Massachusetts (the "Agricultural
Lease") and, prior to the Distribution, will enter into a lease for certain
commercial space in Connecticut (the "Commercial Lease"). The Agricultural Lease
is for approximately 500 acres of arable land allocated to Griffin for possible
commercial development in the long-term, but which will provide General Cigar
with a source of 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 rent payable by
General Cigar under the Agricultural Lease is approximately equal to the
aggregate amount of all taxes and other assessments payable by Griffin
attributable to the land leased. The Commercial Lease will be for approximately
25,000 square feet of office space in the Griffin Center South office complex in
Bloomfield, Connecticut. The Commercial Lease will have an initial term of ten
years and provides for the extension of the lease for additional annual periods
thereafter. The rent payable by General Cigar under the Commercial Lease will be
at market rates.
F-20
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
7. INTERCOMPANY INCOME TAXES
All tax liabilities were paid by Culbro and accordingly Griffin's tax
liabilities are reflected in the Culbro Investment account.
Historically, the combined results of operations of Griffin were included in
Culbro's consolidated U.S. federal income tax returns, and will be included in
such returns through the date the Distribution is consummated. The income tax
provisions and deferred tax liabilities have been calculated in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109 "Accounting for
Income Taxes" as if Griffin had filed separate tax returns. The income tax
provision (benefit) for fiscal 1994, fiscal 1995 and fiscal 1996 are summarized
as follows:
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Continuing operations:
Current federal............................................. $ (2,229) $ (2,973) $ 1,788
Current state and local..................................... (18) (205) 138
Deferred, principally federal............................... (1,032) 830 (4,693)
--------- --------- ---------
Income tax benefit from continuing operations................. (3,279) (2,348) (2,767)
--------- --------- ---------
Discontinued operation:
Current federal............................................. 2,374 2,057 (553)
Current state and local..................................... 365 292 (277)
Deferred, principally federal............................... (466) 231 (2,825)
--------- --------- ---------
Income tax provision (benefit) from discontinued operation.... 2,273 2,580 (3,655)
--------- --------- ---------
Total income tax (benefit) provision.......................... $ (1,006) $ 232 $ (6,422)
--------- --------- ---------
--------- --------- ---------
</TABLE>
The reasons for the difference between the United States statutory income
tax rate and the effective rates for continuing operations are shown in the
following table:
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Tax benefit at statutory rates................................ $ (3,548) $ (2,315) $ (2,391)
State and local income taxes.................................. (12) (133) 90
Foreign investment............................................ (119) 54 (106)
Subsidiary loss accounted for under the equity method......... 706 -- --
Other......................................................... (306) 46 (360)
--------- --------- ---------
$ (3,279) $ (2,348) $ (2,767)
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-21
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
7. INTERCOMPANY INCOME TAXES (CONTINUED)
The significant components of the net deferred tax asset (liability) are as
follows:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Depreciation and amortization...................................................... $ (2,835) $ (1,390)
Postretirement benefit obligations................................................. 782 604
Pension liabilities................................................................ 754 668
Deferred income attributable to deconsolidated subsidiary.......................... (1,483) --
Inventories........................................................................ 1,751 1,880
Other.............................................................................. (2,661) 2,285
--------- ---------
$ (3,692) $ 4,047
--------- ---------
--------- ---------
</TABLE>
In connection with the Distribution Agreement, Culbro and Griffin entered
into a Tax Sharing Agreement which provides, among other things, for the
allocation between Culbro and Griffin of federal, state, local and foreign tax
liabilities for all periods through the Distribution and Merger. 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 any deficiencies assessed, generally as if it had filed
separate tax returns.
8. LONG-TERM DEBT
Long-term debt includes:
<TABLE>
<CAPTION>
DEC 2, NOV. 30,
1995 1996
----------- -----------
<S> <C> <C>
Credit Agreement.............................................................. $ 40,000 $ 36,000
Senior Notes.................................................................. 21,000 --
Exchangeable Subordinated Note, 10% (face value $15 million).................. 12,700 --
Mortgages..................................................................... 6,525 2,644
Capital leases................................................................ 480 479
----------- -----------
Total......................................................................... 80,705 39,123
Less: due within one year..................................................... 7,968 277
----------- -----------
Total long-term debt.......................................................... $ 72,737 $ 38,846
----------- -----------
----------- -----------
</TABLE>
F-22
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
8. LONG-TERM DEBT (CONTINUED)
As of November 30, 1996, the annual principal payment requirements under the
terms of the mortgages are $0.1 million for each of the years 1997 through 2001.
The mortgages are on two office buildings and three industrial buildings which
had a combined net book value of $4.4 million at November 30, 1996. The interest
rates on these mortgages range from 9.0% to 10.2%.
On June 5, 1996, Culbro and its banks entered into the Second Amended and
Restated Credit Agreement (the "1996 Credit Agreement") which replaced the
previous 1993 Credit Agreement that was scheduled to terminate in December 1996.
The 1996 Credit Agreement provided $65 million to Culbro and its subsidiaries
for general working capital purposes and an additional $20 million which was
used to repay the balance of Culbro's Senior Notes. Amounts borrowed by Culbro
under these credit facilities were used to fund Griffin's operations and are
reflected in the accompanying combined financial statements. As per the terms of
the Distribution Agreement, the entire amount borrowed under the Credit
Agreement as of the date of the Distribution Agreement was assumed by GC
Holdings, and therefore will not be part of Griffin's debt structure
prospectively.
In October 1996, Griffin's real estate business satisfied a nonrecourse
mortgage of approximately $3.8 million on a commercial property by transferring
the property to the lender in satisfaction of the outstanding mortgage. The net
book value of the property was substantially equal to the mortgage balance.
In November 1996, Griffin exchanged shares of preferred stock of Eli Witt in
satisfaction of the principal and accrued interest on a $15 million subordinated
note payable to a third-party originally due August 1998. Interest expense in
fiscal 1994, fiscal 1995 and fiscal 1996 included $0.5 million, $0.9 million and
$0.8 million, respectively, for amortization of the original issue discount on
the subordinated note.
In 1993, Culbro entered into two interest rate swap agreements with major
banks as a hedge against interest rate exposure on its variable rate debt. One
such agreement, to fix the borrowing rate at 4.74% on $30 million of variable
rate debt, expired in March 1996. A similar interest rate swap agreement, that
fixed the borrowing rate at 4.89% on an additional $20 million of variable rate
debt, expired in September 1995. The effect of these swap agreements was to
increase interest expense in fiscal 1994 by $0.4 million, reflecting the excess
of payments made to the banks over payments received. In fiscal 1995 and fiscal
1996, interest expense was reduced by $0.6 million and $0.1 million,
respectively, reflecting payments received from the banks under these
agreements.
Management believes that because the interest rate on the 1996 Credit
Agreement adjusts to current market rates, this debt, as stated on the November
30, 1996 balance sheet, approximated its fair market value. Management also
believes that the amounts reflected on the balance sheet for its other debt
facilities reflected their current market values based on market interest rates
for comparable risks, maturities and collateral.
9. RETIREMENT BENEFITS
PENSION PLAN
Griffin's employees participate in Culbro's noncontributory defined benefit
pension plan, which covers substantially all employees of Culbro and its
subsidiaries. The plan's benefits are based on employees' years of service and
compensation. Contributions to the plan are made in accordance with the
provisions of the Employee Retirement Income Security Act. Pension expense of
$0.2 million, $0.1 million
F-23
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
9. RETIREMENT BENEFITS (CONTINUED)
and $0.1 million for fiscal 1994, fiscal 1995 and fiscal 1996, respectively,
included in the combined statement of operations, reflects Griffin's direct
share of Culbro's consolidated pension expense based on the benefit costs
attributable to its employees, as determined by the plan's actuaries.
As per the terms of the Distribution Agreement, the plan will be assumed by
GC Holdings. Upon completion of the Distribution, Griffin will terminate its
participation in the plan, and Griffin's employees' years of service and
benefits accrued at that time will be frozen at the date of termination. All
vested pension obligations as of the date of the Distribution Agreement for
Griffin's current and former employees will be assumed by GC Holdings. In
connection with the Distribution and Merger, Griffin and GC Holdings entered
into an Employee Benefits Administration Agreement to define the
responsibilities for the administration of the plan.
In connection with the Distribution Griffin will establish the Griffin Land
& Nurseries, Inc. 401(k) Savings Plan. Griffin may at its discretion "match"
employee deferrals each year.
OTHER POSTRETIREMENT BENEFITS
Through the date of the Distribution, Griffin's employees will participate
in Culbro's postretirement benefits program which provides principally health
and life insurance benefits to certain of its retired employees. The annual cost
of such benefits attributable to Griffin's employees under the plan's benefit
formula was $0.1 million in fiscal 1994, fiscal 1995 and fiscal 1996. Griffin
expects that it will continue to provide its employees with the same level of
retiree medical benefits as those provided under the Culbro program.
Griffin's proportionate share of the present value of the liabilities for
accumulated postretirement benefits, as determined by the Plan's actuaries, is
shown below. None of these liabilities have been funded at December 2, 1995 and
November 30, 1996. Under the terms of the Distribution Agreement, the liability
for Griffin's current retirees postretirement benefits will be assumed by GC
Holdings.
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Retirees................................................................... $ 1,276 $ 905
Fully eligible active participants......................................... 416 317
Other active participants.................................................. 245 105
Unrecognized net gain from experience differences and assumption changes... 175 213
--------- ---------
Liability for other postretirement benefits................................ $ 2,112 $ 1,540
--------- ---------
--------- ---------
</TABLE>
Discount rates of 7.50% and 7.75% were used to compute the accumulated
postretirement benefit obligations at December 2, 1995 and November 30, 1996,
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.
F-24
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
10. STOCK OPTION PLANS
Upon consummation of the Distribution and Merger, Culbro will convert all
employee stock options outstanding under Culbro's stock option plans into
options to purchase shares of common stock, par value $0.01 per share, of
Griffin and shares of common stock of Culbro. The number of outstanding options
and exercise prices will be adjusted to preserve the value of the Culbro
options. The combined financial statements of Griffin do not reflect any effects
that these plans have had in Culbro's consolidated financial statements. The
status of, and transactions in, the Culbro employee stock option plans for the
periods presented are summarized below:
EMPLOYEES STOCK OPTION PLANS
The Culbro 1996 Stock Plan (the "1996 Plan"), the 1992 Stock Plan (the "1992
Plan") and the 1991 Employees Incentive Stock Option Plan (the "1991 Plan") for
officers and key employees, made available 500,000, 300,000 and 210,000 shares
of common stock, respectively, for purchase at prices equal to the fair market
value at date of grant. A portion of the options outstanding under these plans
may be exercised as incentive stock options, which under current tax laws do not
provide any tax deductions to Culbro.
Options are not exercisable until three years from the date of grant and may
be exercised over a period ending not later than ten years from the date of
grant. The exercise period for each grant was determined by Culbro's
Compensation Committee.
F-25
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
10. STOCK OPTION PLANS (CONTINUED)
At November 30, 1996, a total of 400,000 and 40,300 shares under the 1996
Plan and 1992 Plan, respectively, were available for future grant. There are no
shares available for future grant under the 1991 Plan. None of the options
outstanding at November 30, 1996 may be exercised as stock appreciation rights.
Transactions under the 1996, 1992 and 1991 Plans are summarized as follows:
<TABLE>
<S> <C>
Options outstanding at November 27, 1993.......................... 280,700
Granted during 1994............................................... 88,300
Expired, canceled and exercised................................... (33,400)
---------
Options outstanding at December 3, 1994........................... 335,600
Granted during 1995............................................... 68,000
Expired, canceled and exercised................................... (92,200)
---------
Options outstanding at December 2, 1995........................... 311,400
Granted during 1996............................................... 134,400
Expired, canceled and exercised................................... (103,286)
---------
Options outstanding at November 30, 1996.......................... 342,514
---------
---------
Option prices range between:...................................... $12.25
and
$80.00
Options exercisable:
December 3, 1994................................................ 109,000
December 2, 1995................................................ 86,100
November 30, 1996............................................... 78,114
Expiration date of the 1991 Plan.................................. 2001
Expiration date of the 1992 Plan.................................. 2002
Expiration date of the 1996 Plan.................................. 2006
Number of option holders at November 30, 1996..................... 13
</TABLE>
CULBRO NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
Options granted under the 1996 Stock Option Plan for Nonemployee Directors
(the "1996 Nonemployee Plan") and the 1992 Stock Option Plan for Nonemployee
Directors (the "1992 Nonemployee Plan") will also be converted into options to
purchase common shares of Griffin and shares of common stock of Culbro. Under
these plans 70,000 options have been made available to purchase shares of Culbro
common stock for purchase at prices equal to the fair market value at date of
grant. Options canceled become available for future grant. Options are not
exercisable until three years from the date of grant and may be exercised over a
period ending not later than eight years from the date of grant. As of November
30, 1996, 18,000 options remained available for future grant under the 1996
Nonemployee Plan and 3,000 options remained available for future grant under the
1992 Nonemployee Plan. None of the
F-26
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
10. STOCK OPTION PLANS (CONTINUED)
options outstanding at November 30, 1996 may be exercised as stock appreciation
rights. Transactions under the 1992 and 1996 Plans for Nonemployee Directors are
as follows:
<TABLE>
<S> <C>
Options outstanding at Nov. 27, 1993................................ 14,000
Granted during 1994................................................. 14,000
---------
Options outstanding at Dec. 3, 1994................................. 28,000
Granted during 1995................................................. 14,000
---------
Options outstanding at Dec. 2, 1995................................. 42,000
Granted during 1996................................................. 7,000
Exercised during 1996............................................... (6,000)
---------
Options outstanding at Nov. 30, 1996................................ 43,000
---------
---------
Options prices range between:....................................... $ 14.38
and
$ 63.81
Number of option holders at Nov. 30, 1996........................... 7
</TABLE>
EMPLOYMENT AGREEMENT
Upon consummation of the Distribution and Merger, stock options of Culbro
issued in accordance with the terms of an employment agreement entered into in
May 1994 between Culbro and an officer of Culbro will become stock options of
both Griffin and GC Holdings. The agreement provided for the issuance of 125,000
Culbro stock options, exercisable at the rate of 25,000 per year from 1995
through 1999 at an option price of $4.00 per share. Through November 30, 1996,
15,000 of these options have been exercised under this agreement. Griffin's
proportionate share of the annual compensation expense for this agreement is
less than $0.1 million, reflecting the difference between the option price and
the quoted market price at the date of grant, is included in the financial
statements for each of the years presented.
GRIFFIN STOCK OPTION PLAN
Effective as of the Distribution Date, Griffin will establish the Griffin
Land & Nurseries, Inc. 1997 Stock Option Plan (the "Griffin Stock Option Plan").
A total of approximately 700,000 shares of common stock will be available for
issuance under the Griffin Stock Option Plan. Of such 700,000 shares, 250,000
will be available for issuance with respect to new options that may be granted
to certain officers, employees, consultants and directors of Griffin following
the Distribution. The Griffin Stock Option Plan will be administered by the
Compensation Committee of the Board of Directors of Griffin. 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.
F-27
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
11. LEASES
CAPITAL LEASES
Future minimum lease payments under capital leases for transportation
equipment and the present value of such payments as of November 30, 1996 were:
<TABLE>
<S> <C>
1997................................................................. $ 220
1998................................................................. 156
1999................................................................. 113
2000................................................................. 43
---------
Total minimum lease payments......................................... 532
Less: Amounts representing interest.................................. 53
---------
Present value of minimum lease payments (a).......................... $ 479
---------
---------
</TABLE>
- ------------------------
(a) Includes current portion of $0.2 million at November 30, 1996.
At December 2, 1995 and November 30, 1996, machinery and equipment included
capital leases amounting to $0.5 million, which is net of accumulated
depreciation at December 2, 1995 and November 30, 1996 of $1.6 million and $1.5
million, respectively. Depreciation expense relating to capital leases was $0.3
million, $0.2 million and $0.2 million in fiscal 1994, fiscal 1995 and fiscal
1996, respectively.
OPERATING LEASES
Future minimum rental payments under noncancellable leases as of November
30, 1996 were:
<TABLE>
<S> <C>
1997................................................................. $ 263
1998................................................................. 241
1999................................................................. 216
2000................................................................. 105
2001................................................................. 25
---------
Total minimum lease payments......................................... $ 850
---------
---------
</TABLE>
Total rental expense for all operating leases in fiscal 1994, fiscal 1995
and fiscal 1996 was $0.2 million, $0.3 million and $0.3 million, respectively.
F-28
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
11. LEASES (CONTINUED)
As lessor, Griffin's real estate activities consist of the leasing of office
and industrial space in Connecticut. Future minimum rentals to be received under
noncancellable leases as of November 30, 1996 were:
<TABLE>
<S> <C>
1997................................................................ $ 1,593
1998................................................................ 1,338
1999................................................................ 1,055
2000................................................................ 981
2001................................................................ 905
Later years......................................................... 1,546
---------
Total minimum rental revenue........................................ $ 7,418
---------
---------
</TABLE>
Total rental revenue from all leases in 1996 were $2.8 million, $2.8 million
and $2.5 million in fiscal 1994, fiscal 1995 and fiscal 1996, respectively.
12. INVESTMENTS
INVESTMENT IN CENTAUR
Griffin owns approximately 25% of the outstanding common stock of Centaur, a
publishing business in the United Kingdom. Approximately $6.6 million of the
book value of Griffin's investment, which was $14.7 million at November 30,
1996, represents the excess of the cost of Griffin's investment over the book
value of its equity in Centaur and is being amortized on a straight-line basis
over 40 years, which commenced in 1985. Griffin's equity income (loss) from the
investment in Centaur of $0.4 million, $(0.2) million and $0.3 million in fiscal
1994, fiscal 1995 and fiscal 1996, respectively, is included in the income
(loss) from equity investments on the combined statement of operations.
F-29
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
12. INVESTMENTS (CONTINUED)
Centaur's unaudited summarized statement of operations and balance sheet are
as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
-------------------------------
NOV. 30, NOV. 30, NOV. 30,
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Net sales.................................................... $ 55,929 $ 61,227 $ 69,450
Costs and expenses........................................... 52,790 60,816 65,932
--------- --------- ---------
Income before taxes.......................................... 3,139 411 3,518
Income taxes................................................. 1,071 387 1,544
--------- --------- ---------
Net income................................................... $ 2,068 $ 24 $ 1,974
--------- --------- ---------
--------- --------- ---------
<CAPTION>
NOV. 30, NOV. 30,
1995 1996
--------- ---------
<S> <C> <C> <C>
Current assets............................................... $ 18,480 $ 27,514
Publishing rights............................................ 20,529 21,278
Other noncurrent assets...................................... 5,014 6,270
--------- ---------
Total assets................................................. $ 44,023 $ 55,062
--------- ---------
--------- ---------
Current liabilities.......................................... $ 7,796 $ 15,246
Other noncurrent liabilities................................. 5,850 5,404
--------- ---------
Total liabilities............................................ 13,646 20,650
Shareholders' equity......................................... 30,377 34,412
--------- ---------
Total liabilities and shareholders' equity................... $ 44,023 $ 55,062
--------- ---------
--------- ---------
</TABLE>
INVESTMENT IN REAL ESTATE JOINT VENTURES
Included in other assets at December 2, 1995 and November 30, 1996 is $8.0
million and $3.4 million, respectively, for Griffin's 30% interest in a real
estate joint venture that owns commercial properties in Connecticut. Results of
these investments are included in operating profit. In 1996, all of the assets
of one of the real estate joint ventures were sold. Griffin received net
proceeds of $4.0 million from the sale and recorded a pretax loss on sale of
$0.4 million.
INVESTMENT IN ELI WITT
Griffin owns 50.1% of the outstanding common stock of Eli Witt, a wholesale
distribution company. Prior to 1994, Eli Witt was a consolidated subsidiary. In
April 1994, as a result of transactions related to an Eli Witt acquisition,
Griffin no longer had unilateral control of Eli Witt. Accordingly, Griffin
deconsolidated Eli Witt and accounted for its investment in the common stock of
Eli Witt under the equity method. Through November 30, 1996, Eli Witt was in a
common deficit position, and as such, Griffin has a negative basis in its common
equity investment in Eli Witt. Accordingly, Griffin has not recognized the
results of Eli Witt subsequent to its deconsolidation in April 1994. The equity
loss of $2.1 million through the deconsolidation date is included in net income
(loss) from equity investments in the 1994 combined statement of operations.
F-30
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
12. INVESTMENTS (CONTINUED)
In 1995, Griffin invested an additional $5 million in Eli Witt in the form
of a subordinated note receivable due August 1, 1998. Griffin applied this
additional investment to reduce the negative basis in its common equity
investment in Eli Witt from approximately $6.5 million to approximately $1.5
million.
In November 1996, Eli Witt filed for protection under Chapter 11 of the
Federal Bankruptcy Law. In connection with such filing Eli Witt sold all of its
operating assets to another wholesale distributor in March 1997. Shareholders of
Eli Witt are not expected to receive any proceeds from the sale. Griffin has no
investment related to Eli Witt on its 1996 combined balance sheet. See Note 14.
13. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
OTHER NONRECURRING EXPENSE
Other nonrecurring expense in 1996 includes the allocation to Griffin of
charges recorded by Culbro in connection with the termination of a management
long-term incentive compensation plan which was based on Culbro's stock price,
and the acceleration of the vesting of benefits under the plan and accurals for
severance and related expenses in connection with a headcount reduction at the
Culbro corporate office in anticipation of the Distribution. Griffin's allocable
share of these expenses was determined substantially on the same basis as the
allocation of Culbro's general and administrative expenses referred to in Note 6
and is considered by management to be reasonable.
The other nonrecurring expense of $3.6 million in the 1994 combined
statement of operations reflects a charge in the real estate business to write
off development costs expended in earlier years for certain discontinued
projects which management decided not to proceed with as originally planned.
OTHER NONOPERATING INCOME, NET
Included in other nonoperating income, net, in each of the three fiscal
years presented is the accrual of dividend and accretion income on the preferred
stock of Eli Witt held by Griffin, which is equal to the interest expense on the
subordinated note, that was satisfied by the exchange of the preferred stock in
1996. In 1995, other nonoperating income, net, also included expenses related to
Griffin's support of the refinancing of Eli Witt.
INVENTORIES
Inventories consists of:
<TABLE>
<CAPTION>
DEC. 2, NOV. 30,
1995 1996
--------- ---------
<S> <C> <C>
Raw materials and supplies.............................................. $ 523 $ 742
Work-in-process......................................................... 11,603 15,112
Finished goods.......................................................... 13,805 11,676
--------- ---------
$ 25,931 $ 27,530
--------- ---------
--------- ---------
</TABLE>
F-31
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
13. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment consist of:
<TABLE>
<CAPTION>
ESTIMATED USEFUL DEC. 2, NOV. 30,
LIVES 1995 1996
---------------- --------- ---------
<S> <C> <C> <C>
Land.................................................. $ 6,029 $ 5,982
Buildings and improvements............................ 10 to 40 years 3,912 3,807
Machinery and equipment............................... 3 to 20 years 11,901 12,337
--------- ---------
21,842 22,126
Accumulated depreciation.............................. (9,223) (9,450)
--------- ---------
$ 12,619 $ 12,676
--------- ---------
--------- ---------
</TABLE>
Total depreciation expense was $1.0 million, $1.2 million and $1.2 million
for fiscal 1994, fiscal 1995, and fiscal 1996, respectively.
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses include trade payables of $1.7 million
and $2.0 million at December 2, 1995 and November 30, 1996, respectively,
accrued salaries, wages and other compensation of $0.9 million and $1.2 million
at December 2, 1995 and November 30, 1996, respectively, and other accrued
liabilities, primarily accrued worker's compensation and general liability
insurance, of $5.5 million and $3.9 million at December 2, 1995 and November 30,
1996, respectively.
SUPPLEMENTAL CASH FLOW INFORMATION
Interest and tax payments were made by Culbro on behalf of Griffin. Griffin
has been included in Culbro's consolidated federal income tax returns (see Note
7). Accordingly, tax and interest payments made by Culbro are reflected in Net
transactions with Culbro on the combined statement of cash flows. Interest
payments were $7.3 million, $6.0 million and $5.9 million in fiscal 1994, fiscal
1995 and fiscal 1996, respectively, including payments of $6.8 million, $5.4
million and $5.4 million in fiscal 1994, fiscal 1995 and fiscal 1996,
respectively under Culbro's general corporate debt facilities that were either
repaid by Griffin or transferred to GC Holdings pursuant to the Distribution
Agreement.
In 1996, Griffin's real estate business exchanged a commercial property in
satisfaction of the outstanding nonrecourse mortgage on that property. Also in
1996, Griffin exchanged preferred stock of Eli Witt that it held in satisfaction
of a subordinated note payable and all accrued interest thereon. There was no
cash paid or received in either of these transactions.
14. COMMITMENTS AND CONTINGENCIES
Culbro (or GC Holding's following the Merger) and Griffin entered into a
services agreement (the "Services Agreement") pursuant to which Culbro agreed to
provide a number of administrative and other services to Griffin for a period of
at least one year. These services include administration of Griffin's insurance
policies, internal audit, preparation of tax returns, transportation and general
in-house legal
F-32
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
14. COMMITMENTS AND CONTINGENCIES (CONTINUED)
services. Griffin will make an annual payment of approximately $0.6 million to,
and will reimburse out-of-pocket expenses incurred by, Culbro, in connection
with such services. Culbro will make the above services available to Griffin on
an as-needed basis for a period of at least one year following the Distribution.
As a result of the Asset Transfers described in Note 1, Griffin acquired
50.1% interest in Eli Witt. Culbro, Eli Witt and other parties engaged in two
complex acquisitions and reorganizations in 1993 and 1994, pursuant to which
Culbro received significant distributions from Eli Witt to repay debt, including
substantial amounts Culbro had previously borrowed from unaffiliated third
parties to fund Eli Witt's business. Culbro subsequently loaned $5 million to
Eli Witt. It is anticipated that these transactions (including the transfer of
funds to Culbro) will be reviewed by Eli Witt creditors and other parties in
interest in connection with Eli Witt's Chapter 11 filing. To date, one creditor
has written to the unsecured creditors committee proposing an inquiry into this
matter.
Management does not believe that the above referenced matter will have a
material adverse effect upon the financial condition of Griffin.
F-33
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
ADDITIONAL FINANCIAL DATA
The following additional financial data should be read in conjunction with
the financial statements included elsewhere herein.
<TABLE>
<CAPTION>
SCHEDULES PAGE
- --------------- ---------
<C> <S> <C>
II Valuation and Qualifying Accounts and Reserves........................................... S-2
III Real Estate and Accumulated Depreciation................................................. S-3/S-4
</TABLE>
S-1
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING COSTS AND CHARGED TO DEDUCTIONS BALANCE AT
DESCRIPTION OF YEAR EXPENSES OTHER ACCOUNTS FROM RESERVES END OF YEAR
- ---------------------------------------------------- ----------- ------------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1996
Reserves:
Uncollectible accounts--Trade..................... 338 70 22 128(1) 302
----- ----- --- --- -----
Inventories....................................... 1,000 16 300 351(2) 965
----- ----- --- --- -----
FOR THE FISCAL YEAR ENDED DECEMBER 2, 1995
Reserves:
Uncollectible accounts--Trade..................... 351 147 3 163(1) 338
----- ----- --- --- -----
Inventories....................................... 743 1,007 -- 750(2) 1,000
----- ----- --- --- -----
FOR THE FISCAL YEAR ENDED DECEMBER 3, 1994
Reserves:
Uncollectible accounts--Trade..................... 365 141 22 177(1) 351
----- ----- --- --- -----
Inventories....................................... 250 493 -- -- 743
----- ----- --- --- -----
</TABLE>
NOTES:
(1) Accounts receivable written off.
(2) Inventories disposed.
S-2
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COST CAPITALIZED
GROSS AMOUNT AT
SUBSEQUENT TO
INITIAL COST ACQUISITION NOVEMBER 30, 1996
---------------------- ------------------------ ----------------------
ENCUM- BLDG & CARRYING BLDG &
DESCRIPTION BRANCES LAND IMPROVE IMPROVE COSTS LAND IMPROVE
- ----------------------------------------- ----------- --------- ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Land - CT................................ $ $ 4,611 $ -- $ 6,976 $ 80 $ 4,691 $ 6,976
Restaurant
1936 Blue Hills Avenue
Bloomfield, CT........................... 1 -- 1,266 -- 1 1,266
Residential Develpment
Meadow Park
Culbro Homes
Windsor, CT.............................. 88 -- 1,518 2,156 88 3,674
Commercial Buildings
29 & 35 Griffin Road South
Bloomfield, CT........................... 696 47 -- 2,486 -- 47 2,486
Commercial Building
55 Griffin Road South
Bloomfield, CT........................... 3 -- 1,815 -- 3 1,815
Commercial Building
204 West Newberry
Bloomfield, CT........................... 1 -- 1,540 24 1 1,564
Commercial Building
206 West Newberry
Bloomfield, CT........................... 1 -- 1,452 23 1 1,475
Commercial Building
210 West Newberry
Bloomfield, CT........................... -- -- 666 -- -- 666
Commercial Building
310, 320, 330 West Newberry
Bloomfield, CT........................... 5 -- 2,938 40 5 2,978
Industrial Buildings
14, 15 & 16 International Drive
East Granby, CT.......................... 1,948 106 1,723 3,367 -- 106 5,090
----------- --------- ----------- ----------- ----------- --------- -----------
$ 2,644 $ 4,863 $ 1,723 $ 24,024 $ 2,323 $ 4,943 $ 27,990
----------- --------- ----------- ----------- ----------- --------- -----------
----------- --------- ----------- ----------- ----------- --------- -----------
<CAPTION>
ACCUM DATE OF
DESCRIPTION TOTAL DEPR CONSTR DATE OF ACQ DEPR LIFE
- ----------------------------------------- --------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Land - CT................................ 11,667 (361)
Restaurant
1936 Blue Hills Avenue
Bloomfield, CT........................... 1,267 (510) 1983 40 yrs
Residential Develpment
Meadow Park
Culbro Homes
Windsor, CT.............................. 3,762 --
Commercial Buildings
29 & 35 Griffin Road South
Bloomfield, CT........................... 2,533 (1,156) 1977 40 yrs
Commercial Building
55 Griffin Road South
Bloomfield, CT........................... 1,818 (553) 1985 40 yrs
Commercial Building
204 West Newberry
Bloomfield, CT........................... 1,565 (314) 1988 40 yrs
Commercial Building
206 West Newberry
Bloomfield, CT........................... 1,476 (332) 1988 40 yrs
Commercial Building
210 West Newberry
Bloomfield, CT........................... 666 (161) 1988 40 yrs
Commercial Building
310, 320, 330 West Newberry
Bloomfield, CT........................... 2,983 (477) 1991 40 yrs
Industrial Buildings
14, 15 & 16 International Drive
East Granby, CT.......................... 5,196 (2,207) 1978 1989 40 yrs
--------- ---------
$ 32,933 $ (6,071)
--------- ---------
--------- ---------
</TABLE>
S-3
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NOVEMBER 30, 1996 COST RESERVE
- --------------------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Balance at beginning of period............................................................... $ 38,086 $ (6,179)
Changes during the period:
Improvements............................................................................. 592
Additions to reserve charged to costs and expenses....................................... (822)
Disposals & retirements.................................................................. (4,648) 930
Cost of sales............................................................................ (1,097)
--------- ---------
Balance at end of period..................................................................... $ 32,933 $ (6,071)
--------- ---------
--------- ---------
<CAPTION>
FISCAL YEAR ENDED DECEMBER 2, 1995 COST RESERVE
- --------------------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Balance at beginning of period............................................................... $ 38,450 $ (5,118)
Changes during the period:
Improvements............................................................................. 802
Additions to reserve charged to costs and expenses....................................... (814)
Reclassification......................................................................... (247)
Cost of sales............................................................................ (1,166)
--------- ---------
Balance at end of period..................................................................... $ 38,086 $ (6,179)
--------- ---------
--------- ---------
<CAPTION>
FISCAL YEAR ENDED DECEMBER 3, 1994 COST RESERVE
- --------------------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Balance at beginning of period............................................................... $ 41,698 $ (4,338)
Changes during the period:
Improvements............................................................................. 1,624
Additions to reserve charged to costs and expenses....................................... (780)
Cost of sales............................................................................ (4,872)
--------- ---------
Balance at end of period..................................................................... $ 38,450 $ (5,118)
--------- ---------
--------- ---------
</TABLE>
S-4
<PAGE>
PART II
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
Prior to March 18, 1997, Culbro Corporation held all 1,000 then-issued and
outstanding shares of common stock, par value $0.01 per share, of Griffin (the
"Original Shares"). On March 18, 1997, pursuant to an amended and restated
certificate of incorporation of Griffin, each Original Share was exchanged for
one share of Class B Common Stock, par value $0.01 per share (the "Class B
Common Stock"). Prior to the Distribution Date, Griffin intends to file an
Amended and Restated Certificate of Incorporation, the form of which is filed as
an exhibit to this Registration Statement, pursuant to which each share of Class
B Common Stock will be exchanged for one share of newly-authorized common stock,
par value $0.01 per share (the "Common Stock"). Prior to the Distribution,
Griffin will effect a stock split such that the number of issued and outstanding
shares of Common Stock will equal the number of then-outstanding shares of
common stock, par value $0.01, of Culbro Corporation.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Griffin Land & Nurseries, Inc. is a Delaware corporation. Reference is made
to Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL"), which
enables a corporation in its original certificate of incorporation or an
amendment thereto to eliminate or limit the personal liability of a director for
violations of the director's fiduciary duty, except (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the DGCL (providing
for liability of directors for unlawful payments of dividends of unlawful stock
purchase or redemptions) or (iv) for any transaction from which a director
derived an improper personal benefit.
Reference is also made to Section 145 of the DGCL, which provides that a
corporation may indemnify any person, including an officer or director, who is,
or is threatened to be made, party to any threatened, pending or completed legal
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person was an officer, director, employee or agent
of such corporation or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such officer,
director, employee or agent acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the corporation's best interest and, for
criminal proceeding, had no reasonable cause to believe that his conduct was
unlawful. A Delaware corporation may indemnify any officer or director in any
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses that
such officer or director actually and reasonably incurred.
Article VII of the Bylaws of Griffin Land & Nurseries, Inc. (filed as
Exhibit 3.2) provides for indemnification of the officers and directors to the
full extent permitted by applicable law.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements--see pages F-1 and S-1
(b) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------
<C> <S>
2.1 Form of Distribution Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. and General
Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of
General Cigar Holdings, Inc., filed December 24, 1996, as amended)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------
<C> <S>
*3.1 Form of Amended and Restated Certificate of Incorporation of Griffin Land & Nurseries, Inc.
*3.2 Form of Bylaws of Griffin Land & Nurseries, Inc.
10.1 Form of Tax Sharing Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. and General
Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of
General Cigar Holdings, Inc., filed December 24, 1996, amended)
10.2 Form of Benefits and Employment Matters Allocation Agreement among Culbro Corporation, Griffin Land
& Nurseries, Inc. and General Cigar Holdings, Inc. (incorporated by reference to the Registration
Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended)
10.3 Form of Services Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. and General
Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of
General Cigar Holdings, Inc., filed December 24, 1996, amended)
10.4 Form of Agricultural Lease between Griffin Land & Nurseries, Inc. and General Cigar Holdings, Inc.
(incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings,
Inc., filed December 24, 1996, amended)
10.5 Employment Agreement between Culbro Corporation and Jay M. Green, dated as of April 8, 1994 and as
amended on January 11, 1997 (incorporated by reference to the Registration Statement on Form S-1
of General Cigar Holdings, Inc., filed December 24, 1996, amended)
*10.6 Form of 1997 Stock Option Plan of Griffin Land & Nurseries, Inc.
*10.7 Form of 401(k) Plan of Griffin Land & Nurseries, Inc.
10.8 1996 Stock Plan of Culbro Corporation, dated as of March 15, 1996 (incorporated by reference to the
definitive proxy statement of Culbro Corporation, dated March 15, 1996, for its Annual Meeting of
Shareholders held on April 11, 1996)
10.9 1992 Stock Plan of Culbro Corporation, dated December 10, 1993 (incorporated by reference to the
definitive proxy statement of Culbro Corporation, dated March 3, 1993, for its Annual Meeting of
Shareholders held on April 8, 1993)
10.10 Stock Option Plan for Non-employee Directors of Culbro Corporation, dated December 10, 1993
(incorporated by reference to the definitive proxy statement of Culbro Corporation, dated March 3,
1993, for its Annual Meeting of Shareholders held on April 8, 1993)
10.11 1991 Employees Incentive Stock Option Plan of Culbro Corporation, dated as of January 31, 1991 and
as amended on February 12, 1985 (incorporated by reference to the definitive proxy statement of
Culbro Corporation, dated April 9, 1991, for its Annual Meeting of Shareholders held on May 9,
1993)
10.12 Annual Incentive Compensation Plan of Culbro Corporation, dated as of December 7, 1995 (incorporated
by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed
December 24, 1996, amended)
10.13 Annual Incentive Compensation Plan of General Cigar Co., Inc., dated as of December 7, 1995
(incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings,
Inc., filed December 24, 1996, amended)
10.14 Long Term Performance Plan of Culbro Corporation for the three-year period 1995-1997 (incorporated
by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed
December 24, 1996, amended)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------
<C> <S>
10.15 Deferred Incentive Compensation Plan of Culbro Corporation, dated as of December 13, 1982 and as
amended on February 12, 1985 (incorporated by reference to the Registration Statement on Form S-1
of General Cigar Holdings, Inc., filed December 24, 1996, amended)
*21.1 Subsidiaries of Griffin Land & Nurseries, Inc.
</TABLE>
- ------------------------
* Previously filed.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the County of New
York, State of New York on June 13, 1997.
GRIFFIN LAND & NURSERIES, INC.
By: /s/ FREDERICK M. DANZIGER
-----------------------------------------
Frederick M. Danziger
PRESIDENT
II-4
