SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10Q
Quarterly Report
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the 13 Weeks Ended Commission File No.
May 29, 1999 0-29288
GRIFFIN LAND & NURSERIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-0868496
(state or other jurisdiction (IRS Employer Identification Number)
of incorporation or organization)
One Rockefeller Plaza, New York, New York 10020
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number including Area Code (212) 218-7910
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No |_|
Number of shares of Common Stock outstanding at June 30, 1999: 4,842,704
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
Form 10Q
PART I - FINANCIAL INFORMATION Page
Consolidated Statement of Operations
13 Weeks Ended May 29, 1999 and May 30, 1998 3
Consolidated Statement of Operations
26 Weeks Ended May 29, 1999 and May 30, 1998 4
Consolidated Balance Sheet
May 29, 1999 and November 28, 1998 5
Consolidated Statement of Cash Flows
26 Weeks Ended May 29, 1999 and May 30, 1998 6
Consolidated Statement of Stockholders' Equity
26 Weeks Ended May 29, 1999 and May 30, 1998 7
Notes to Consolidated Financial Statements 8-12
Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-15
PART II - OTHER INFORMATION 16
SIGNATURES 17
<PAGE>
Part I
Item 1. Financial Statements
GRIFFIN LAND & NURSERIES, INC.
Consolidated Statement of Operations
(dollars in thousands, except per share data)
For the 13 Weeks Ended,
-----------------------
May 29, May 30,
1999 1998
-------- --------
Net sales and other revenue $ 27,293 $ 23,707
Cost and expenses:
Cost of goods sold 18,977 16,800
Selling, general and administrative expenses 4,297 3,966
-------- --------
Operating profit 4,019 2,941
Interest expense 145 36
Interest income -- 54
-------- --------
Income before income tax provision 3,874 2,959
Income tax provision 1,486 1,095
-------- --------
Income before equity investments 2,388 1,864
-------- --------
Income (loss) from equity investments:
Investment in Centaur Communications, Ltd. 553 606
Investment in Linguaphone Group plc -- (32)
-------- --------
Income from equity investments 553 574
-------- --------
Net income $ 2,941 $ 2,438
======== ========
Basic net income per common share $ 0.61 $ 0.51
======== ========
Diluted net income per common share $ 0.59 $ 0.48
======== ========
See Notes to Consolidated Financial Statements.
Page 3
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
Consolidated Statement of Operations
(dollars in thousands, except per share data)
For the 26 Weeks Ended,
-----------------------
May 29, May 30,
1999 1998
-------- --------
Net sales and other revenue $ 32,458 $ 27,221
Cost and expenses:
Cost of goods sold 22,545 19,295
Selling, general and administrative expenses 8,001 7,432
-------- --------
Operating profit 1,912 494
Interest expense 182 82
Interest income 25 187
-------- --------
Income before income tax provision 1,755 599
Income tax provision 702 222
-------- --------
Income before equity investments 1,053 377
-------- --------
Income (loss) from equity investments:
Investment in Centaur Communications, Ltd. 394 668
Investment in Linguaphone Group plc (12) (37)
-------- --------
Income from equity investments 382 631
-------- --------
Net income $ 1,435 $ 1,008
======== ========
Basic net income per common share $ 0.30 $ 0.21
======== ========
Diluted net income per common share $ 0.28 $ 0.19
======== ========
See Notes to Consolidated Financial Statements.
Page 4
<PAGE>
GRIFFIN LAND & NURSERIES, INC
Consolidated Balance Sheet
(dollars in thousands, except per share data)
May 29, Nov. 28,
ASSETS 1999 1998
------------ ------------
Current Assets
Cash and cash equivalents $ 158 $ 2,059
Accounts receivable, less allowance of
$596 and $490 13,556 4,654
Inventories 28,694 26,746
Deferred income taxes 3,220 3,220
Other current assets 1,102 2,625
------------ ------------
Total current assets 46,730 39,304
Real estate held for sale or lease, net 33,221 31,519
Investment in Centaur Communiciations, Ltd. 16,547 16,153
Property and equipment, net 13,554 12,635
Other assets 5,509 5,305
------------ ------------
Total assets $ 115,561 $ 104,916
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 5,442 $ 5,586
Long-term debt due within one year 332 322
Income taxes payable -- 92
------------ ------------
Total current liabilities 5,774 6,000
Long-term debt 11,528 2,666
Deferred income taxes 1,799 1,097
Other noncurrent liabilities 3,839 3,967
------------ ------------
Total liabilities 22,940 13,730
------------ ------------
Commitments and contingencies -- --
Common stock, par value $0.01 per share,
authorized 10,000,000 shares, issued and
outstanding 4,842,704 shares 48 48
Additional paid in capital 93,491 93,491
Accumulated deficit (918) (2,353)
------------ ------------
Total stockholders' equity 92,621 91,186
------------ ------------
Total liabilities and stockholders' equity $ 115,561 $ 104,916
============ ============
See Notes to Consolidated Financial Statements.
Page 5
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
Consolidated Statement of Cash Flows
(dollars in thousands)
For the 26 Weeks Ended,
-----------------------
May 29, May 30,
Operating activities: 1999 1998
-------- --------
Net income $ 1,435 $ 1,008
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 1,106 1,027
Income from equity investments (382) (631)
Deferred income taxes 702 222
Changes in assets and liabilities:
Accounts receivable (9,008) (7,196)
Inventories (1,948) (1,059)
Income tax refund received 926 --
Accounts payable and accrued liabilities (51) (176)
Other, net 608 446
-------- --------
Net cash used in operating activities (6,612) (6,359)
-------- --------
Investing activities:
Additions to real estate held for sale or lease (2,105) (1,712)
Additions to property and equipment (1,533) (745)
Additional investment in Linguaphone Group plc (377) --
-------- --------
Net cash used in investing activities (4,015) (2,457)
-------- --------
Financing activities:
Increase in debt 8,900 --
Payments of debt (174) (150)
Proceeds from exercise of stock options -- 53
-------- --------
Net cash provided by (used in) financing activities 8,726 (97)
-------- --------
Net decrease in cash and cash equivalents (1,901) (8,913)
Cash and cash equivalents at beginning of period 2,059 11,519
-------- --------
Cash and cash equivalents at end of period $ 158 $ 2,606
======== ========
See Notes to Consolidated Financial Statements.
Page 6
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
Consolidated Statement of Stockholders' Equity
(dollars in thousands)
<TABLE>
<CAPTION>
Shares of Additional
Common Common Paid-in Accumulated
Stock Stock Capital Deficit Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance at November 29, 1997 4,743,590 $ 47 $ 92,950 $ (2,474) $ 90,523
Net income -- -- -- 1,008 1,008
Exercise of stock options 9,114 1 52 -- 53
--------- --------- --------- --------- ---------
Balance at May 30, 1998 4,752,704 $ 48 $ 93,002 $ (1,466) $ 91,584
========= ========= ========= ========= =========
Balance at November 28, 1998 4,842,704 $ 48 $ 93,491 $ (2,353) $ 91,186
Net income -- -- -- 1,435 1,435
--------- --------- --------- --------- ---------
Balance at May 29, 1999 4,842,704 $ 48 $ 93,491 $ (918) $ 92,621
========= ========= ========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
Page 7
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)
1. Basis of Presentation
The unaudited consolidated financial statements of Griffin Land &
Nurseries, Inc. ("Griffin") have been prepared in conformity with the standards
of accounting measurement set forth in Accounting Principles Board Opinion No.
28 and any amendments thereto adopted by the Financial Accounting Standards
Board ("FASB"). Also, the accompanying financial statements have been prepared
in accordance with the accounting policies stated in Griffin's audited 1998
Financial Statements included in the Report on Form 10-K as filed with the
Securities and Exchange Commission on February 26, 1999, and should be read in
conjunction with the Notes to Financial Statements appearing in that report. All
adjustments, comprising only normal recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of results for the
interim periods have been reflected.
The results of operations for the thirteen and twenty-six weeks ended May
29, 1999, are not necessarily indicative of the results to be expected for the
full year.
Certain amounts from the prior year have been reclassified to conform to
the current presentation.
2. Industry Segment Information
Griffin's reportable segments are defined by their products and services,
and are comprised of the landscape nursery and real estate segments. Griffin has
no operations outside the United States. Griffin's export sales and transactions
between segments are not material.
For the 13 Weeks Ended, For the 26 Weeks Ended,
---------------------- ----------------------
May 29, May 30, May 29, May 30,
1999 1998 1999 1998
-------- -------- -------- --------
Net sales and other revenue
Landscape nursery $ 26,291 $ 22,972 $ 30,517 $ 25,830
Real estate 1,002 735 1,941 1,391
-------- -------- -------- --------
$ 27,293 $ 23,707 $ 32,458 $ 27,221
======== ======== ======== ========
Operating profit (loss)
Landscape nursery $ 4,341 $ 3,610 $ 2,623 $ 1,746
Real estate 56 (129) 10 (323)
-------- -------- -------- --------
Industry segment totals 4,397 3,481 2,633 1,423
General corporate expense 378 540 721 929
Interest expense (income), net 145 (18) 157 (105)
-------- -------- -------- --------
Income before income tax provision $ 3,874 $ 2,959 $ 1,755 $ 599
======== ======== ======== ========
May 29, Nov. 28,
1999 1998
Identifiable assets -------- --------
Landscape nursery $ 56,674 $ 46,881
Real estate 36,683 35,480
-------- --------
Industry segment totals 93,357 82,361
General corporate 22,204 22,555
-------- --------
$115,561 $104,916
======== ========
See Note 3 for information on Griffin's equity investment in Centaur
Communications, Ltd.
Page 8
<PAGE>
3. Investments
Investment in Centaur Communications, Ltd.
Griffin accounts for its investment in Centaur Communications, Ltd.
("Centaur") under the equity method of accounting for investments. The
summarized financial data of Centaur shown below was derived from Centaur's
financial statements which are prepared in accordance with generally accepted
accounting principles in the United Kingdom. Griffin's equity income (loss) from
Centaur reflects certain adjustments to reflect Centaur's results in accordance
with generally accepted accounting principles in the United States.
Six Months Ended,
-----------------
May 29, May 30,
1999 1998
-------- --------
Net sales $ 41,963 $ 36,114
Costs and expenses 38,001 30,997
-------- --------
Operating profit 3,962 5,117
Interest expense (income), net 1,051 (182)
-------- --------
Income before taxes 2,911 5,299
Income taxes 990 2,181
-------- --------
Net income $ 1,921 $ 3,118
======== ========
May 29, Nov. 28,
1999 1998
-------- --------
Current assets $ 26,004 $ 20,637
Intangible assets 25,323 8,752
Other noncurrent assets 10,149 8,074
-------- --------
Total assets $ 61,476 $ 37,463
======== ========
Current liabilities $ 23,366 $ 21,897
Debt 40,425 19,800
Noncurrent liabilities 3,528 3,493
-------- --------
Total liabilities 67,319 45,190
Accumulated deficit (5,843) (7,727)
-------- --------
Total liabilities and deficit $ 61,476 $ 37,463
======== ========
On March 31, 1999, Centaur acquired a group of United Kingdom magazines
and trade shows in the engineering field from Miller Freeman UK, Ltd. for
approximately $20 million. Centaur financed this acquisition with debt.
Investment in Linguaphone Group plc
On January 22, 1999, Linguaphone Group plc ("Linguaphone") completed an
offering of its common stock in which Griffin participated to a limited extent.
As a result of the issuance of additional shares of Linguaphone common stock,
Griffin's common equity ownership was reduced to approximately 14% of
Linguaphone's outstanding common stock after the offering. As a result, Griffin
is accounting for its investment in Linguaphone under the cost method of
accounting for investments subsequent to the reduction in its common equity
ownership interest in Linguaphone. Prior to the reduction in its common equity
ownership interest, Griffin accounted for its investment in Linguaphone under
the equity method of accounting for investments.
Griffin's investment in Linguaphone was approximately $2.3 million at May
29, 1999, and is included in other assets on Griffin's consolidated balance
sheet.
Page 9
<PAGE>
4. Long-term Debt
Long-term debt includes:
May 29, Nov. 28,
1999 1998
------- -------
Mortgages $ 2,454 $ 2,495
Credit Agreement 8,900 --
Capital leases 506 493
------- -------
Total 11,860 2,988
Less: due within one year 332 322
------- -------
Total long-term debt $11,528 $ 2,666
======= =======
Griffin's subsidary, Imperial Nurseries, Inc. ("Imperial") entered into a
$10 million Revolving Credit Agreement (the "Imperial Credit Agreement") with a
lender in May 1998. The initial borrowings under the Imperial Credit Agreement
took place in 1999. Griffin has received a commitment from the lender to replace
the Imperial Credit Agreement, which terminates July 30, 1999, with a $20
million parent company borrowing facility to provide working capital, as
required, for Imperial and interim financing for Griffin's real estate business.
Subsequent to May 29, 1999, the amount outstanding under the Imperial Credit
Agreement was repaid with the proceeds from a mortgage (see below) and cash flow
from operations. The proposed parent company facility is subject to completion
of a definitive loan agreement.
On June 24, 1999, Griffin entered into a nonrecourse mortgage of $8.2
million on several of its buildings in the New England Tradeport. The mortgage
has an interest rate of 8.5% and has a ten year term with payments based on a
thirty year amortization schedule. Proceeds were used to repay an existing
mortgage on certain of those properties with the balance used to reduce amounts
outstanding under the Imperial Credit Agreement, which has been classified as
long-term on Griffin's balance sheet.
5. Stock Options
On January 11, 1999, Griffin's Board of Directors approved an amendment to
Griffin's 1997 Stock Option Plan which made available an additional 300,000
shares for grant. On May 10, 1999, Griffin's stockholders approved the 1997
Griffin Stock Option Plan, as amended. The Board also approved a total of
248,100 options to be granted at $13.25 per share, the market price of Griffin's
common stock at the time of grant. The options granted have a ten year life and
vest in equal installments on the third, fourth and fifth anniversaries from the
date of grant. Under the terms of Griffin's 1997 Stock Option Plan, the
Independent Directors were granted non-qualified stock options upon their
reelection to the Board of Directors at Griffin's 1999 Annual Meeting. A total
of 4,000 options were granted to the Independent Directors at $13.00 per share,
the market price of Griffin's common stock at the time of grant. Activity under
Griffin's 1997 Stock Option Plan is summarized as follows:
Number of Weighted Avg.
Shares Exercise Price
--------- --------------
Options outstanding at November 28, 1998 369,607 $ 10.79
Options issued after November 28, 1998 252,100 $ 13.25
-------
Options outstanding at May 29, 1999 621,707 $ 11.78
=======
Number of option holders as of May 29, 1999 39
=======
At May 29, 1999, 160,607 options outstanding under the Griffin Stock
Option Plan were vested with a weighted average price of $5.65 per share.
Page 10
<PAGE>
6. Per Share Results
Basic and diluted per share results were based on the following:
<TABLE>
<CAPTION>
For the 13 Weeks Ended, For the 26 Weeks Ended,
----------------------- -----------------------
May 29, May 30, May 29, May 30,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income as reported for
computation of basic per share results $ 2,941 $ 2,438 $ 1,435 $ 1,008
Adjustment to net income for assumed
exercise of options of equity investee
(Centaur) (51) (41) (50) (49)
--------- --------- --------- ---------
Adjusted net income for computation
of diluted per share results $ 2,890 $ 2,397 $ 1,385 $ 959
========= ========= ========= =========
Weighted average shares outstanding
for computation of basic per share results 4,843,000 4,747,000 4,843,000 4,745,000
Incremental shares from assumed
exercise of stock options 77,000 201,000 82,000 196,000
--------- --------- --------- ---------
Adjusted weighted average shares for
computation of diluted per share results 4,920,000 4,948,000 4,925,000 4,941,000
========= ========= ========= =========
</TABLE>
7. Supplemental Financial Statement Information
Inventories
Inventories consist of:
May 29, Nov. 28,
1999 1998
-------- --------
Nursery stock $ 25,587 $ 24,329
Finished goods 1,778 1,420
Materials and supplies 1,329 997
-------- --------
$ 28,694 $ 26,746
======== ========
Property and Equipment
Property and equipment consist of:
May 29, Nov. 28,
1999 1998
-------- --------
Land and improvements $ 7,260 $ 6,336
Buildings 3,935 3,871
Machinery and equipment 13,734 13,297
-------- --------
24,929 23,504
Accumulated depreciation (11,375) (10,869)
-------- --------
$ 13,554 $ 12,635
======== ========
Griffin incurred capital lease obligations of $146 and $133, respectively,
in the twenty-six weeks ended May 29, 1999 and May 30, 1998.
Page 11
<PAGE>
Real Estate Held for Sale or Lease
Real estate held for sale or lease consists of:
May 29, Nov. 28,
1999 1998
-------- --------
Land $ 4,761 $ 4,761
Land improvements 12,950 12,716
Buildings 23,325 21,498
-------- --------
41,036 38,975
Accumulated depreciation (7,815) (7,456)
-------- --------
$ 33,221 $ 31,519
======== ========
Page 12
<PAGE>
Item 2
GRIFFIN LAND & NURSERIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Griffin's operations are comprised of two segments: the landscape nursery
business and the real estate business. The following discussion contains
information relating to the consolidated operations of Griffin and, where
appropriate, separate information regarding each of these segments. As used in
this discussion the term "Imperial" refers to Griffin's landscape nursery
operations (conducted by Griffin's wholly-owned subsidiary, Imperial Nurseries,
Inc.) and the term "Griffin Land" refers to Griffin's real estate operations.
Results of Operations
Thirteen Weeks Ended May 29, 1999 Compared to the Thirteen Weeks Ended May
30, 1998
Griffin's net sales and other revenue were $27.3 million in the thireen
weeks ended May 29, 1999 (the "1999 second quarter") as compared to net sales
and other revenue of $23.7 million in the thireen weeks ended May 30, 1998 (the
"1998 second quarter"). The increase of $3.6 million reflects higher net sales
at both Imperial and Griffin Land. Imperial's net sales increased $3.3 million
to $26.3 million in the 1999 second quarter from $23.0 million in the 1998
second quarter. The increase principally reflects higher volume at Imperial's
wholesale sales and service centers. Imperial's landscape nursery business is
highly seasonal, with the second quarter generally having the highest sales
activity. Net sales and other revenue at Griffin Land increased $0.3 million to
$1.0 million in the 1999 second quarter from $0.7 million in the 1998 second
quarter. The increase at Griffin Land principally reflects higher rental revenue
due to new leases entered into during 1998, including the approximately 98,000
square foot warehouse facility completed in mid-1998 that became fully leased at
the beginning of 1999.
Griffin's operating profit (before interest) was $4.0 million in the 1999
second quarter as compared to $2.9 million in the 1998 second quarter. Operating
profit at Imperial increased to $4.3 million in the 1999 second quarter from
$3.6 million in the 1998 second quarter. The increase in Imperial's operating
profit reflects a $1.2 million increase in gross profit, partially offset by
higher operating expenses. The higher gross profit reflected the increased sales
volume principally at Imperial's wholesale sales and service centers. Imperial's
operating expenses increased from $3.0 million in the 1998 second quarter to
$3.5 million in the 1999 second quarter, primarily due to the volume increase at
its wholesale centers.
Griffin Land had an operating profit of $0.1 million in the 1999 second
quarter as compared to an operating loss of $0.1 million in the 1998 second
quarter. The increased results principally reflect the higher rental revenue in
the current quarter.
Griffin's interest expense increased to $0.1 million in the 1999 second
quarter as compared to less than $0.1 million in the 1998 second quarter. The
higher interest expense reflects borrowings during the 1999 second quarter to
meet Imperial's seasonal working capital requirements. In the 1998 second
quarter, cash on hand was used to meet Imperial's working capital requirements.
Income from Griffin's equity investment in Centaur decreased in the 1999
second quarter as compared to last year's second quarter. Higher operating
expenses and higher interest expense at Centaur more than offset increased
revenue at Centaur.
Twenty-six Weeks Ended May 29, 1999 Compared to the Twenty-six Weeks Ended
May 30, 1998
Griffin's net sales and other revenue were $32.4 million in the twenty six
weeks ended May 29, 1999 (the "1999 six month period") as compared to net sales
and other revenue of $27.2 million in the twenty six weeks ended May 30, 1998
(the "1998 six month period"). The increase of $5.2 million reflects higher net
sales at both Imperial and Griffin Land. Imperial's net sales increased $4.7
million to $30.5 million in the 1999 six month period from $25.8 million in the
1998 six month period. The higher net sales at Imperial principally reflects
increased volume at its wholesale sales and service centers, which benefitted
from favorable weather conditions during Imperial's peak spring selling season.
Net sales and other revenue at Griffin Land increased to $1.9 million in the
1999 six month period from $1.4 million in the 1998 six month period. The
increase reflected rental revenue in the 1999 six month period from new leases,
including the approximately 98,000 square foot warehouse in the New England
Tradeport, which was completed in mid-1998 and was fully leased for the 1999 six
month period.
Griffin's operating profit (before interest) in the 1999 six month period
increased $1.4 million to $1.9 million as compared to $0.5 million in the 1998
six month period. Operating profit at Imperial increased $0.9
Page 13
<PAGE>
million to $2.6 million in the 1999 six month period as compared to $1.7 million
in the 1998 six month period. Imperial's higher operating profit principally
reflects increased gross profit on the higher sales at its wholesale centers.
Imperial's gross profit increased to $9.1 million in the 1999 six month period
from $7.5 million in the 1998 six month period. In addition to the higher
volume, Imperial's overall margins also increased to 29.7% in the 1999 six month
period from 28.9% in the 1998 six month period. Imperial's operating expenses
were $6.4 million in the 1999 six month period as compared to $5.7 million in
the 1998 six month period. As a percentage of net sales, operating expenses
decreased to 21.1% of net sales in the 1999 six month period from 22.1% in the
1998 six month period.
In the 1999 six month period Griffin Land was substantially break even at
the operating profit level as compared to an operating loss of $0.3 million in
the 1998 six month period. The improved results principally reflect Griffin
Land's higher rental revenue in the 1999 six month period. Griffin Land's rental
properties generated an operating profit, before depreciation, of $1.4 million
in the 1999 six month period as compared to $0.9 million in the 1998 six month
period. The increase reflects a higher occupancy rate and the increase in
available space as a result of completely leasing, effective at the beginning of
1999, the warehouse completed in mid-1998.
Griffin's interest expense increased to $0.2 million in the 1999 six month
period as compared to $0.1 million in the 1998 six month period. The higher
interest expense principally reflects borrowings in the current year to meet
Imperial's seasonal working capital requirements. In the 1998 six month period,
Imperial's working capital needs were financed from cash on hand.
Income from Griffin's equity investment in Centaur decreased in the 1999
six month period as compared to last year's comparable period. Higher operating
expenses and higher interest expense at Centaur more than offset Centaur's
increased revenue.
Liquidity and Capital Resources
Griffin's net cash used in operating activities increased slightly to $6.6
million in the 1999 six month period from $6.4 million used in operating
activities in the 1998 six month period. The increase principally reflects the
effect of higher inventories and accounts receivable at Imperial, offset by
increased operating results and an income tax refund of $0.9 million received in
the current year. Net cash used in investing activities was $4.0 million in the
1999 six month period as compared to $2.5 million in the 1998 six month period.
The increased spending reflected a $0.8 million increase in additions to
property and equipment as compared to the 1998 six month period, due principally
to the expansion of Imperial's Cincinnati wholesale sales and service center in
the 1999 six month period. Additions by Griffin Land to real estate held for
sale or lease were $2.1 million in the 1999 six month period as compared to $1.7
million in the 1998 six month period. Expenditures in 1999 were principally for
construction of the approximately 100,000 square foot warehouse in the New
England Tradeport. The shell of this new warehouse was substantially completed
at the end of the 1999 second quarter. There are no leases on this new building.
Additionally, Griffin took part, to a limited extent, in a share offering by
Linguaphone (see Note 3).
Griffin's financing activities reflected proceeds from borrowings under
Imperial's $10 million Revolving Credit Agreement ("Imperial Credit Agreement").
The proceeds from those borrowings along with cash on hand were used to fund
Imperial's seasonal working capital requirements and Griffin Land's real estate
development activity during the first six months of 1999. Griffin has received a
commitment from the lender to replace the Imperial Credit Agreement, which
terminates July 30, 1999, with a $20 million parent company borrowing facility
to provide working capital, as required, for Imperial and interim financing for
Griffin Land's real estate development activities. Subsequent to May 29, 1999,
the amount outstanding under the Imperial Credit Agreement was repaid with the
proceeds from a mortgage (see below) and cash flow from operations. The proposed
parent company facility is subject to completion of a definitive loan agreement.
On June 24, 1999, Griffin entered into an $8.2 million nonrecourse
mortgage on several of its buildings in the New England Tradeport. Proceeds were
used to repay an existing mortgage on certain of those properties with the
balance used to reduce the amount then outstanding under the Imperial Credit
Agreement.
Management believes that in the near term, based on the current level of
operations and anticipated growth, cash flow from operations and borrowings
under the Imperial Credit Agreement and a successor parent company revolving
credit facility will be sufficient to finance its landscape nursery business and
fund
Page 14
<PAGE>
development of its real estate assets. Over the intermediate and long term,
selective mortgage placements may also be required to fund capital projects.
Year 2000
Griffin is continuing to address its year 2000 ("Y2K") issue and has
identified its critical computer applications that are not Y2K compliant. A
portion of the applications not Y2K compliant have been modified, successfully
tested and are now Y2K compliant. Modification of the balance of the computer
applications originally identified as not Y2K compliant is currently under way,
with all applications anticipated to be Y2K compliant in the 1999 third quarter.
The modification on the applications that are already Y2K compliant and the work
currently in process is being performed by Griffin employees. Costs attributed
to such work are expected to be less than $0.1 million in the aggregate.
Griffin has initiated a company-wide review of major customers, vendors
and other third parties to determine the extent, if any, to which Griffin would
be vulnerable to those third parties' failure to remedy their own Y2K issues.
Those third parties contacted have indicated that they have Y2K readiness
programs in place or they anticipate being Y2K compliant on or before December
31, 1999. We will continue to assess the progress of our critical business
partners in reaching Y2K readiness.
Griffin believes that its efforts to address the Y2K issue will be
successful. However, failure of critical third parties adequately to address
their respective Y2K issues could have a material adverse effect on Griffin's
business, financial condition and results of operations. Therefore, Griffin's
program for Y2K compliance includes the development of contingency plans for
continuing operations in the event such problems arise. However, there can be no
assurance that such contingency plans will be adequate to handle all problems
which may arise.
Forward-Looking Information
The information in Management's Discussion and Analysis of Financial
Condition and Results of Operations includes forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Although Griffin believes that its plans, intentions and expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such plans, intentions or expectations will be achieved,
particularly with respect to leasing of its recently constructed warehouse,
completing a new parent company revolving credit agreement and becoming Y2K
compliant in a timely manner. The projected information disclosed herein is
based on assumptions and estimates that, while considered reasonable by Griffin
as of the date hereof, are inherently subject to significant business, economic,
competitive and regulatory uncertainties and contingencies, many of which are
beyond the control of Griffin.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Page 15
<PAGE>
PART II OTHER INFORMATION
Items 1 - 3 not applicable
Item 4 Submission of Matters to a Vote of Security Holders
(a) Annual Meeting of Stockholders: May 10, 1999
(b) The following were elected as Directors at the Annual meeting:
(c)(i) 1) Mr. Winston J. Churchill, Jr. was elected a Director for
1999 with 4,492,820 votes in favor, 167,547 withheld and
182,337 not voting.
2) Mr. Edgar M. Cullman was elected a Director for 1999
with 4,484,097 votes in favor, 176,270 withheld and
182,337 not voting.
3) Mr. Frederick M. Danziger was elected a Director for
1999 with 4,484,920 votes in favor, 175,447 withheld and
182,337 not voting.
4) Mr. John L. Ernst was elected a Director for 1999 with
4,492,720 votes in favor, 167,647 withheld and 182,337
not voting.
5) Mr. David F. Stein was elected a Director for 1999 with
4,486,120 votes in favor, 174,247 withheld and 182,337
not voting.
(ii) The Griffin 1997 Stock Option Plan, as amended, was approved with
2,686,540 votes in favor, 1,609,137 opposed with 5,159 abstentions
and 541,868 not voting.
(iii) The selection of PricewaterhouseCoopers LLP as independent
accountants for 1999 was approved with 4,652,362 votes in favor and
5,642 opposed with 2,363 abstentions and 182,337 not voting.
Item 5 is not applicable
Item 6 Exhibits and Reports on Form 8K
(a) Exhibits
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
(b) There were no reports filed on Form 8K by the Registrant
during the 1999 second quarter.
Page 16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GRIFFIN LAND & NURSERIES, INC.
/s/ Frederick M. Danziger
----------------------------------------
DATE: July 12, 1999 Frederick M. Danziger
PRESIDENT AND CHIEF EXECUTIVE OFFICER
/s/ Anthony J. Galici
----------------------------------------
DATE: July 12, 1999 Anthony J. Galici
VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AND SECRETARY
Page 17
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