XNAS:GRIF Griffin Land & Nurseries Inc Quarterly Report 10-Q Filing - 9/1/2012

Effective Date 9/1/2012

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Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED September 1, 2012

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE TRANSITION PERIOD FROM              TO            

 

Commission File No. 1-12879

 

GRIFFIN LAND & NURSERIES, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

06-0868496

(State or other jurisdiction of incorporation or organization)

 

(IRS Employer Identification Number)

 

One Rockefeller Plaza, New York, New York

 

10020

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s Telephone Number including Area Code  (212) 218-7910

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

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 o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x  No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of  “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o

 

Accelerated filer x

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨  No  x

 

Number of shares of Common Stock outstanding at October 1, 2012:  5,139,526

 

 

 



Table of Contents

 

GRIFFIN LAND & NURSERIES, INC.

FORM 10-Q

Index

 

PART I -

 

FINANCIAL INFORMATION

 

 

 

 

 

 

ITEM 1

Financial Statements

 

 

 

 

 

 

 

Consolidated Balance Sheets (unaudited)
September 1, 2012 and December 3, 2011

3

 

 

 

 

 

 

Consolidated Statements of Operations (unaudited)
13 and 39 Weeks Ended September 1, 2012 and August 27, 2011

4

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (Loss) (unaudited)
13 and 39 Weeks Ended September 1, 2012 and August 27, 2011

5

 

 

 

 

 

 

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)
39 Weeks Ended September 1, 2012 and August 27, 2011

6

 

 

 

 

 

 

Consolidated Statements of Cash Flows (unaudited)
39 Weeks Ended September 1, 2012 and August 27, 2011

7

 

 

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

8-24

 

 

 

 

 

ITEM 2

Management’s Discussion and Analysis of
Financial Condition and Results of Operations

25-37

 

 

 

 

 

ITEM 3

Quantitative and Qualitative Disclosures About Market Risk

37

 

 

 

 

 

ITEM 4

Controls and Procedures

37-38

 

 

 

 

PART II -

 

OTHER INFORMATION

 

 

 

 

 

 

ITEM 1

Not Applicable

 

 

 

 

 

 

ITEM 1A

Risk Factors

39

 

 

 

 

 

ITEMS 2-5

Not Applicable

 

 

 

 

 

 

ITEM 6

Exhibits

39-42

 

 

 

 

 

 

SIGNATURES

43

 

2



Table of Contents

 

PART I                                         FINANCIAL INFORMATION

ITEM 1.                                       FINANCIAL STATEMENTS

 

GRIFFIN LAND & NURSERIES, INC.

Consolidated Balance Sheets

(dollars in thousands, except per share data)

(unaudited)

 

 

 

September 1, 2012

 

December 3, 2011

 

ASSETS

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

10,667

 

$

7,431

 

Accounts receivable, less allowance of $125 and $131

 

2,464

 

1,717

 

Inventories, net

 

13,542

 

13,695

 

Deferred income taxes

 

431

 

614

 

Other current assets

 

4,860

 

4,932

 

Total current assets

 

31,964

 

28,389

 

Real estate assets, net

 

124,141

 

116,295

 

Proceeds held in escrow

 

6,931

 

 

Available for sale securities - Investment in Centaur Media plc

 

3,098

 

3,005

 

Deferred income taxes

 

2,370

 

3,045

 

Property and equipment, net

 

2,153

 

2,248

 

Real estate held for sale, net

 

1,326

 

12,989

 

Other assets

 

8,624

 

10,704

 

Total assets

 

$

180,607

 

$

176,675

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Current portion of long-term debt

 

$

1,860

 

$

1,700

 

Accounts payable and accrued liabilities

 

4,137

 

3,954

 

Deferred revenue

 

3,327

 

1,296

 

Total current liabilities

 

9,324

 

6,950

 

Long-term debt

 

58,142

 

59,481

 

Other noncurrent liabilities

 

7,767

 

6,939

 

Total liabilities

 

75,233

 

73,370

 

 

 

 

 

 

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

Common stock, par value $0.01 per share, 10,000,000 shares authorized, 5,526,492 and 5,521,170 shares issued, respectively and 5,139,526 and 5,134,204 shares outstanding, respectively

 

55

 

55

 

Additional paid-in capital

 

106,878

 

106,370

 

Retained earnings

 

13,276

 

11,284

 

Accumulated other comprehensive loss, net of tax

 

(1,409

)

(978

)

Treasury stock, at cost, 386,966 shares

 

(13,426

)

(13,426

)

Total stockholders’ equity

 

105,374

 

103,305

 

Total liabilities and stockholders’ equity

 

$

180,607

 

$

176,675

 

 

See Notes to Consolidated Financial Statements.

 

3



Table of Contents

 

GRIFFIN LAND & NURSERIES, INC.

Consolidated Statements of Operations

(dollars in thousands, except per share data)

(unaudited)

 

 

 

For the 13 Weeks Ended,

 

For the 39 Weeks Ended,

 

 

 

September 1,
2012

 

August 27,
2011

 

September 1,
2012

 

August 27,
2011

 

Rental revenue and property sales

 

$

9,866

 

$

5,044

 

$

18,755

 

$

13,888

 

Landscape nursery net sales and other revenue

 

2,681

 

2,969

 

11,139

 

12,414

 

Total revenue

 

12,547

 

8,013

 

29,894

 

26,302

 

 

 

 

 

 

 

 

 

 

 

Costs related to rental revenue and property sales

 

3,747

 

3,077

 

9,669

 

9,605

 

Costs of landscape nursery sales and other revenue

 

2,434

 

2,843

 

9,769

 

11,759

 

Total costs of goods sold and costs related to rental revenue and property sales

 

6,181

 

5,920

 

19,438

 

21,364

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

6,366

 

2,093

 

10,456

 

4,938

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

2,354

 

2,007

 

7,774

 

7,833

 

(Gain) on insurance recovery

 

 

 

 

(200

)

Operating profit (loss)

 

4,012

 

86

 

2,682

 

(2,695

)

Interest expense

 

(817

)

(1,061

)

(2,522

)

(3,193

)

Investment income

 

10

 

14

 

479

 

105

 

Income (loss) before income tax (provision) benefit

 

3,205

 

(961

)

639

 

(5,783

)

Income tax (provision) benefit

 

(1,323

)

393

 

(294

)

2,183

 

Income (loss) from continuing operations

 

1,882

 

(568

)

345

 

(3,600

)

Discontinued operation, net of tax:

 

 

 

 

 

 

 

 

 

Income from operations, net of tax

 

 

140

 

117

 

414

 

Gain on sale of warehouse, net of tax

 

 

 

1,530

 

 

Total discontinued operation, net of tax

 

 

140

 

1,647

 

414

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

1,882

 

$

(428

)

$

1,992

 

$

(3,186

)

 

 

 

 

 

 

 

 

 

 

Basic net income (loss) per common share:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

0.37

 

$

(0.11

)

$

0.07

 

$

(0.70

)

Income from discontinued operation

 

 

0.03

 

0.32

 

0.08

 

Basic net income (loss) per common share

 

$

0.37

 

$

(0.08

)

$

0.39

 

$

(0.62

)

 

 

 

 

 

 

 

 

 

 

Diluted net income (loss) per common share:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

0.37

 

$

(0.11

)

$

0.07

 

$

(0.70

)

Income from discontinued operation

 

 

0.03

 

0.32

 

0.08

 

Diluted net income (loss) per common share

 

$

0.37

 

$

(0.08

)

$

0.39

 

$

(0.62

)

 

See Notes to Consolidated Financial Statements.

 

4



Table of Contents

 

GRIFFIN LAND & NURSERIES, INC.

Consolidated Statements of Comprehensive Income (Loss)

(dollars in thousands)

(unaudited)

 

 

 

For the 13 Weeks Ended,

 

For the 39 Weeks Ended,

 

 

 

September 1,
2012

 

August 27,
2011

 

September 1,
2012

 

August 27,
2011

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

1,882

 

$

(428

)

$

1,992

 

$

(3,186

)

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in fair value of Centaur Media plc

 

257

 

(893

)

61

 

(1,098

)

 

 

 

 

 

 

 

 

 

 

Unrealized loss related to cash flow hedges

 

(144

)

(672

)

(492

)

(553

)

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income (loss), net of tax

 

113

 

(1,565

)

(431

)

(1,651

)

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

 

$

1,995

 

$

(1,993

)

$

1,561

 

$

(4,837

)

 

See Notes to Consolidated Financial Statements.

 

5



Table of Contents

 

GRIFFIN LAND & NURSERIES, INC.

Consolidated Statements of Changes in Stockholders’ Equity

For the Thirty-Nine Weeks Ended September 1, 2012 and August 27, 2011

(dollars in thousands)

(unaudited)

 

 

 

Shares of
Common
Stock
Issued

 

Common
Stock

 

Additional
Paid-in
Capital

 

Retained
Earnings

 

Accumulated
Other
Comprehensive
Income (Loss)

 

Treasury
Stock

 

Total

 

Balance at November 27, 2010

 

5,510,503

 

$

55

 

$

105,620

 

$

15,811

 

$

1,007

 

$

(13,426

)

$

109,067

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

10,667

 

 

186

 

 

 

 

186

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

447

 

 

 

 

447

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared, $0.30 per share

 

 

 

 

(1,539

)

 

 

(1,539

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

(3,186

)

 

 

(3,186

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss from cash flow hedging transactions, net of tax

 

 

 

 

 

(553

)

 

(553

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss from Centaur Media plc, net of tax

 

 

 

 

 

(1,098

)

 

(1,098

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at August 27, 2011

 

5,521,170

 

$

55

 

$

106,253

 

$

11,086

 

$

(644

)

$

(13,426

)

$

103,324

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 3, 2011

 

5,521,170

 

$

55

 

$

106,370

 

$

11,284

 

$

(978

)

$

(13,426

)

$

103,305

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

428

 

 

 

 

428

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

5,322

 

 

80

 

 

 

 

80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

1,992

 

 

 

1,992

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss from cash flow hedging transactions, net of tax

 

 

 

 

 

(492

)

 

(492

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income from Centaur Media plc, net of tax

 

 

 

 

 

61

 

 

61

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 1, 2012

 

5,526,492

 

$

55

 

$

106,878

 

$

13,276

 

$

(1,409

)

$

(13,426

)

$

105,374

 

 

See Notes to Consolidated Financial Statements.

 

6



Table of Contents

 

GRIFFIN LAND & NURSERIES, INC.

Consolidated Statements of Cash Flows

(dollars in thousands)

(unaudited)

 

 

 

For the 39 Weeks Ended,

 

 

 

September 1, 2012

 

August 27, 2011

 

Operating activities:

 

 

 

 

 

Net income (loss)

 

$

1,992

 

$

(3,186

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

Gain on sales of properties

 

(7,510

)

(348

)

Depreciation and amortization

 

4,593

 

5,113

 

Deferred income taxes

 

1,115

 

(1,907

)

Stock-based compensation expense

 

428

 

447

 

Provision for inventory losses

 

250

 

700

 

Amortization of debt issuance costs

 

222

 

202

 

Increase in allowance for bad debts

 

17

 

28

 

Income from equity investments

 

(6

)

(6

)

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(764

)

(918

)

Inventories

 

(97

)

(2

)

Other current assets

 

73

 

(516

)

Accounts payable and accrued liabilities

 

648

 

515

 

Deferred revenue

 

217

 

228

 

Other noncurrent assets and noncurrent liabilities, net

 

340

 

(121

)

Net cash provided by operating activities

 

1,518

 

229

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

Proceeds from sales of properties, net of expenses

 

22,466

 

374

 

Additions to real estate assets

 

(12,330

)

(1,216

)

Proceeds from property sale deposited in escrow

 

(6,931

)

 

Return of capital from Shemin Nurseries Holding Corp.

 

309

 

 

Additions to property and equipment

 

(130

)

(215

)

Net cash provided by (used in) investing activities

 

3,384

 

(1,057

)

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

Payments of debt

 

(1,233

)

(1,301

)

Dividends paid to stockholders

 

(513

)

(1,538

)

Exercise of stock options

 

80

 

186

 

Debt issuance costs

 

 

(262

)

Net cash used in financing activities

 

(1,666

)

(2,915

)

Net increase (decrease) in cash and cash equivalents

 

3,236

 

(3,743

)

Cash and cash equivalents at beginning of period

 

7,431

 

9,260

 

Cash and cash equivalents at end of period

 

$

10,667

 

$

5,517

 

 

See Notes to Consolidated Financial Statements.

 

7



Table of Contents

 

GRIFFIN LAND & NURSERIES, INC.

Notes to Consolidated Financial Statements

(dollars in thousands unless otherwise noted, except per share data)

(unaudited)

 

1.              Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements of Griffin Land & Nurseries, Inc. (“Griffin”) include the accounts of Griffin’s real estate division (“Griffin Land”) and Griffin’s wholly-owned subsidiary in the landscape nursery business, Imperial Nurseries, Inc. (“Imperial”), and have been prepared in conformity with the standards of accounting measurement set forth by the Financial Accounting Standards Board (“FASB”) ASC 270, “Interim Reporting.”

 

The accompanying financial statements have been prepared in accordance with the accounting policies stated in Griffin’s audited financial statements for the fiscal year ended December 3, 2011 (“fiscal 2011”) included in Griffin’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission, and should be read in conjunction with the Notes to Consolidated 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 and all intercompany transactions have been eliminated.  The consolidated balance sheet data as of December 3, 2011 was derived from Griffin’s audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period.  Griffin regularly evaluates estimates and assumptions related to the useful life and recoverability of long-lived assets, stock-based compensation expense, deferred income tax asset valuations, valuation of derivative instruments, and the recoverability of its accounts receivable and the adequacy of inventory reserves.  Griffin bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by Griffin may differ materially and adversely from Griffin’s estimates.  To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

Griffin is a party to three interest rate swap agreements to hedge its interest rate exposures.  Griffin does not use derivatives for speculative purposes.  Griffin applied FASB ASC 815-10, “Derivatives and Hedging,” (“ASC 815-10”) as amended, which establishes accounting and reporting standards for derivative instruments and hedging activities.  ASC 815-10 requires Griffin to recognize all derivatives as either assets or liabilities on its consolidated balance sheet and measure those instruments at fair value.  The changes in the fair values of the interest rate swap agreements are assessed in accordance with ASC 815-10 and reflected in the carrying values of the interest rate swap agreements on Griffin’s consolidated balance sheet.

 

Griffin applies cash flow hedge accounting to its interest rate swap agreements that are designated as hedges of the variability of future cash flows from floating rate liabilities based on the benchmark

 

8



Table of Contents

 

interest rates.  The change in fair values of Griffin’s interest rate swap agreements are recorded as components of accumulated other comprehensive income in stockholders’ equity, to the extent they are effective.  Any ineffective portions of the change in fair value of these instruments would be recorded as interest expense.

 

The results of operations for the thirteen weeks ended September 1, 2012 (the “2012 third quarter”) and the thirty-nine weeks ended September 1, 2012 (the “2012 nine month period”) are not necessarily indicative of the results to be expected for the full year. The thirteen weeks ended August 27, 2011 is referred to herein as the “2011 third quarter” and the thirty-nine weeks ended August 27, 2011 is referred to herein as the “2011 nine month period.”

 

Recent Accounting Pronouncements

 

In January 2010, the FASB issued Accounting Standards Update No. 2010-06, “Fair Value Measurements and Disclosures,” which requires new disclosures and provides clarification of existing disclosures about fair value measurements.  More specifically, this update requires: (a) an entity to disclose separately the amounts of significant transfers in and out of Levels 1 and 2 fair value measurements and to describe the reasons for the transfers; and (b) information about purchases, sales, issuances and settlements to be presented separately in the reconciliation for fair value measurements using significant unobservable inputs (Level 3 inputs).  This guidance clarifies existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured at fair value and requires disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements using Level 2 and Level 3 inputs.  The update was effective for Griffin in the 2011 first quarter, except for the disclosure requirements related to the purchases, sales, issuances and settlements in the rollforward activity of Level 3 fair value measurements.  Those disclosure requirements became effective for Griffin in the fiscal year ending December 1, 2012 (“fiscal 2012”).  The adoption of this guidance did not have a material impact on Griffin’s consolidated financial statements.

 

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurement,” which aligns disclosures related to fair value between U.S. GAAP and International Financial Reporting Standards.  The standards update includes changes to the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and changes to the disclosure of information about fair value measurements.  More specifically, the changes clarify the intent of the FASB regarding the application of existing fair value measurements and disclosures as well as changing some particular principles or requirements for measuring fair value or for disclosing information about fair value measurements.  Those disclosure requirements became effective for Griffin in fiscal 2012.  The adoption of this guidance did not have a material impact on Griffin’s consolidated financial statements.

 

In June 2011, the FASB issued Accounting Standards Update No. 2011-05, “Comprehensive Income,” which amends the presentation of comprehensive income and facilitates the convergence of U.S. GAAP and International Financial Reporting Standards.  The new guidance allows an entity to present components of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements.  This new guidance eliminates the option to report other comprehensive income and its components in the statement of changes in equity.  While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance.  This new guidance became effective for Griffin in the second quarter of fiscal 2012 as Griffin chose to present the components of net income and other comprehensive income in two separate statements.  The adoption of this new presentation of comprehensive income did not have an effect on Griffin’s financial position or results of operations.

 

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2.    Discontinued Operation

 

On January 31, 2012, Griffin Land closed on the sale of its Manchester, Connecticut warehouse to its full building tenant in that building, an affiliate of Raymour & Flanigan (“Raymour”).  Net cash proceeds from the sale, after selling expenses of $438 paid out of proceeds at closing and $25 paid separately, were $15,537, and a pretax gain of $2,886 is included in the results for discontinued operation in the 2012 nine month period.  Upon completion of the sale, Griffin deposited the cash of $15,562 received from the sale at closing into an escrow account for the potential purchase of a replacement property under a Section 1031 like-kind exchange.  As Griffin Land did not identify a replacement property within the time frame required under the tax rules and regulations governing a Section 1031 like-kind exchange, on March 19, 2012 the cash being held in escrow was released to Griffin Land.

 

In the fiscal 2011 fourth quarter, Griffin Land gave notice to Raymour that Griffin Land was exercising the put option under its lease with Raymour to sell the Manchester warehouse to Raymour for $16.0 million. Accordingly, the building was classified as real estate held for sale on Griffin’s consolidated balance sheet as of December 3, 2011. The operating results of the Manchester warehouse are reflected as a discontinued operation in Griffin’s consolidated statements of operations for all periods presented. Rental revenue and operating profit from the Manchester warehouse were as follows:

 

 

 

For the 13 Weeks Ended,

 

For the 39 Weeks Ended,

 

 

 

September 1,
2012

 

August 27,
2011

 

September 1,
2012

 

August 27,
2011

 

 

 

 

 

 

 

 

 

 

 

Rental revenue

 

$

 

$

408

 

$

273

 

$

1,223

 

 

 

 

 

 

 

 

 

 

 

Operating profit

 

$

 

$

227

 

$

221

 

$

671

 

 

3.              Industry Segment Information

 

Griffin defines its reportable segments by their products and services, which are comprised of the real estate and landscape nursery segments.  Management operates and receives reporting based upon these segments.  Griffin has no operations outside the United States.  Griffin’s export sales and transactions between segments are not material.

 

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Table of Contents

 

 

 

For the 13 Weeks Ended,

 

For the 39 Weeks Ended,

 

 

 

September 1,
2012

 

August 27,
2011

 

September 1,
2012

 

August 27,
2011

 

Total net sales and other revenue:

 

 

 

 

 

 

 

 

 

Rental revenue and property sales

 

$

9,866

 

$

5,044

 

$

18,755

 

$

13,888

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Landscape nursery net sales and other revenue

 

2,681

 

2,969

 

11,139

 

12,414

 

 

 

$

12,547

 

$

8,013

 

$

29,894

 

$

26,302

 

Operating profit (loss):

 

 

 

 

 

 

 

 

 

Real estate

 

$

5,498

 

$

1,301

 

$

7,138

 

$

2,241

 

Landscape nursery

 

(468

)

(683

)

(1,075

)

(1,803

)

Industry segment totals

 

5,030

 

618

 

6,063

 

438

 

General corporate expense

 

(1,018

)

(532

)

(3,381

)

(3,133

)

Operating profit (loss)

 

4,012

 

86

 

2,682

 

(2,695

)

Interest expense

 

(817

)

(1,061

)

(2,522

)

(3,193

)

Investment income

 

10

 

14

 

479

 

105

 

Income (loss) before income tax (provision) benefit

 

$

3,205

 

$

(961

)

$

639

 

$

(5,783

)

 

The above table reflects the net sales and other revenue and operating profit (loss) included in continuing operations on Griffin’s consolidated statements of operations.  Operating results of the Manchester, Connecticut warehouse and the gain on the sale of that building are included in the results of the discontinued operation on Griffin’s consolidated statements of operations (see Note 2).

 

Continuing operations of the real estate segment in the 2012 third quarter and 2012 nine month period includes property sales revenue of $5,360 (see Note 6). Continuing operations of the real estate segment in the 2011 third quarter and 2011 nine month period includes property sales revenue of $400. In fiscal 2009, Imperial shut down operations on its Florida farm and entered into a lease with another grower for that property. Other revenue of the landscape nursery segment includes revenue from the rental of Imperial’s Florida farm as follows:

 

 

 

For the 13 Weeks Ended,

 

For the 39 Weeks Ended,

 

 

 

September 1,
2012

 

August 27,
2011

 

September 1,
2012

 

August 27,
2011

 

 

 

 

 

 

 

 

 

 

 

Rental revenue from Imperial’s Florida farm

 

$

117

 

$

117

 

$

352

 

$

352

 

 

 

 

September 1, 2012

 

December 3, 2011

 

Identifiable assets:

 

 

 

 

 

Real estate

 

$

143,479

 

$

140,409

 

Landscape nursery

 

21,058

 

21,303

 

Industry segment totals

 

164,537

 

161,712

 

General corporate

 

16,070

 

14,963

 

Total assets

 

$

180,607

 

$

176,675

 

 

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Table of Contents

 

4.              Fair Value

 

Griffin applies the provisions of FASB ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), which establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  An asset or liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  ASC 820 establishes three levels of inputs that may be used to measure fair value, as follows:

 

Level 1 applies to assets or liabilities for which there are quoted market prices in active markets for identical assets or liabilities.  Griffin’s available-for-sale securities are considered Level 1 within the fair value hierarchy.

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, such as quoted prices for similar assets or liabilities in active markets; quoted prices for assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.  Level 2 liabilities include Griffin’s three interest rate swap derivatives (see Note 9).  The fair values of Griffin’s interest rate swap derivative instruments are based on discounted cash flow models that incorporate the cash flows of the derivatives as well as the current LIBOR rate and swap curve along with other market data.  These inputs are readily available in public markets or can be derived from information available in publicly quoted markets, therefore, Griffin has categorized these derivative instruments as Level 2 within the fair value hierarchy.

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.  As of September 1, 2012 and December 3, 2011, Griffin’s consolidated balance sheets include acquired intangible assets related to a building acquired in fiscal 2010.  These assets are comprised of the value of an in-place lease and the associated tenant relationship.  Griffin derived these values at the date of acquisition based on a discounted cash flow analysis using assumptions that included the rental rate of the in-place lease, the commission percentage expected to be paid on the leasing of vacant space and other data contained in the independent appraisal.  Therefore, Griffin categorized the acquired intangible assets related to this transaction as Level 3 within the fair value hierarchy.

 

During the 2012 nine month period, Griffin did not transfer any assets or liabilities in or out of Levels 1 and 2.  The following are Griffin’s financial assets and liabilities carried at fair value and measured at fair value on a recurring basis:

 

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Table of Contents

 

 

 

September 1, 2012

 

 

 

Quoted Prices in

 

Significant

 

Significant

 

 

 

Active Markets for

 

Observable

 

Unobservable

 

 

 

Identical Assets

 

Inputs

 

Inputs

 

 

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Marketable equity securities

 

$

3,098

 

$

 

$

 

Interest rate swap liabilities

 

$

 

$

3,196

 

$

 

 

 

 

December 3, 2011

 

 

 

Quoted Prices in

 

Significant

 

Significant

 

 

 

Active Markets for

 

Observable

 

Unobservable

 

 

 

Identical Assets

 

Inputs

 

Inputs

 

 

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Marketable equity securities

 

$

3,005

 

$

 

$

 

Interest rate swap liabilities

 

$

 

$

2,415

 

$

 

 

The carrying and estimated fair values of Griffin’s financial instruments are as follows:

 

 

 

September 1, 2012

 

December 3, 2011

 

 

 

Carrying

 

Estimated

 

Carrying

 

Estimated

 

 

 

Value

 

Fair Value

 

Value

 

Fair Value

 

Financial assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

10,667

 

$

10,667

 

$

7,431

 

$

7,431

 

Available-for-sale securities

 

3,098

 

3,098

 

3,005

 

3,005

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

Revolving line of credit

 

 

 

 

 

Mortgage debt

 

59,922

 

62,262

 

61,135

 

63,294

 

Interest rate swaps

 

3,196

 

3,196

 

2,415

 

2,415

 

 

The fair values of the available-for-sale securities are based on quoted market prices.  The fair values of the mortgage debt are estimated based on current rates offered to Griffin for similar debt of the same remaining maturities, and additionally, Griffin considers its credit worthiness in determining the fair value of its debt.  The fair values of the interest rate swaps (used for purposes other than trading) are determined based on discounted cash flow models that incorporate the cash flows of the derivatives as well as the current LIBOR rate and swap curve along with other market data, taking into account current interest rates and the credit worthiness of the counterparty for assets and the credit worthiness of Griffin for liabilities.

 

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Table of Contents

 

5.               Inventories

 

Inventories consist of:

 

 

 

September 1, 2012

 

December 3, 2011

 

 

 

 

 

 

 

Nursery stock

 

$

12,829

 

$

12,739

 

Materials and supplies

 

713

 

956

 

 

 

$

13,542

 

$

13,695

 

 

In the 2012 third quarter and 2012 nine month period, a charge of $250 was included in costs of landscape nursery sales to increase reserves for unsaleable inventories and plants that are expected to be sold below cost as seconds.

 

In the 2011 nine month period, a charge of $700 was included in costs of landscape nursery sales for excess plant losses and to increase reserves for plants that had become unsaleable or were expected to be sold below costs as seconds.  The charge includes $300 for plants lost because some of Imperial’s hoop houses in which the plants were stored collapsed as a result of snow load from winter storms.  There were no charges recorded for the damaged hoop houses because they were fully depreciated prior to fiscal 2011.  Initial insurance proceeds of $200, related to the hoop house damage, were reflected as a gain on insurance recovery in the 2011 nine month period consolidated statement of operations (see Notes 8 and 11).  The claim was settled in the 2011 fourth quarter and an additional $279 of insurance proceeds was received at that time.

 

6.               Real Estate Assets

 

Real estate assets consist of:

 

 

 

Estimated
Useful Lives

 

September 1, 2012

 

December 3, 2011

 

Land

 

 

 

$

10,267

 

$

10,435

 

Land improvements

 

10 to 30 years

 

14,069

 

14,037

 

Buildings and improvements

 

10 to 40 years

 

117,432

 

117,120

 

Tenant improvements

 

Shorter of useful life or terms of related lease

 

14,591

 

14,104

 

Development costs

 

 

 

23,354

 

12,464

 

 

 

 

 

179,713

 

168,160

 

Accumulated depreciation

 

 

 

(55,572

)

(51,865

)

 

 

 

 

$

124,141

 

$

116,295

 

 

Included in real estate assets, net, as of September 1, 2012 and December 3, 2011 was $1,973 and $2,161, respectively, reflecting the net book value of Imperial’s Florida farm that was shut down in fiscal 2009 and is being leased to another landscape nursery grower.

 

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Table of Contents

 

Total depreciation expense and capitalized interest related to real estate assets, net were as follows:

 

 

 

For the 13 Weeks Ended,

 

For the 39 Weeks Ended,

 

 

 

September 1,
2012

 

August 27,
2011

 

September 1,
2012

 

August 27,
2011

 

 

 

 

 

 

 

 

 

 

 

Depreciation expense

 

$

1,269

 

$

1,307

 

$

3,839

 

$

3,983

 

 

 

 

 

 

 

 

 

 

 

Capitalized interest

 

$

227

 

$

 

$

596

 

$

 

 

On July 6, 2012, Griffin Land completed the sale of 93 acres of undeveloped land in the New England Tradeport (“Tradeport”), Griffin Land’s industrial park located in Windsor and East Granby, Connecticut, for cash proceeds of $7,000, before transaction costs.  As required under the terms of the agreements for the sale of this land, Griffin Land will construct a sewer line to service the land that was sold.  As a result of Griffin Land’s continuing involvement with the land sold, this transaction is accounted for under the percentage of completion method.  Accordingly, the revenue and the pretax gain on the sale are being recognized on a pro rata basis in a ratio equal to the percentage of the total costs incurred to the total anticipated costs of sale, including the costs of the required construction of the sewer line. Costs included in determining the percentage of completion are the cost of the land sold, allocated master planning costs of Tradeport, selling and transaction costs and estimated future costs related to the land sold.  Upon completion of the sale, Griffin Land deposited the cash of $6,929 received from the sale at closing into an escrow account, reflected as Proceeds Held in Escrow on Griffin’s consolidated balance sheet as of September 1, 2012, for the potential purchase of a replacement property under a Section 1031 like-kind exchange.  In accordance with the requirements of a Section 1031 like-kind exchange, Griffin Land subsequently identified a parcel of undeveloped land in the Lehigh Valley of Pennsylvania as a replacement property, and on September 21, 2012 entered into a contract to purchase this land (see Note 12).

 

As of September 1, 2012, approximately 77% of the total costs related to the sale of the 93 acres in Tradeport have been incurred, therefore, from the date of the transaction through September 1, 2012, 77% of the total revenue and pretax gain on the sale have been recognized in Griffin’s consolidated statements of operations.  Griffin’s statements of operations for the thirteen and thirty-nine weeks ended September 1, 2012 include revenue of $5,360 and a pretax gain of $4,624 from this land sale.  The balance of the revenue and the pretax gain on sale will be recognized as the remaining costs, principally the required construction of a sewer line, are incurred, which is expected to take place over the next six months. Included on Griffin’s consolidated balance sheet as of September 1, 2012 is deferred revenue of approximately $1,640 that will be recognized as the construction of a sewer line is completed.  Including the pretax gain on the sale of approximately $4,624 recognized from the date of the land sale through September 1, 2012, the total pretax gain on this transaction is expected to be approximately $6,000 after all revenue is recognized and all costs incurred.  Management has used its best estimates, based on industry knowledge and experience, in projecting the total costs of the required construction of a sewer line, however, increases or decreases in projected future costs from current estimated amounts would reduce or increase the amount of gain to be recognized in future periods.

 

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Table of Contents

 

Real estate assets held for sale consist of:

 

 

 

Estimated
Useful Lives

 

September 1, 2012

 

December 3, 2011

 

Land

 

 

 

$

61

 

$

1,911

 

Land improvements

 

10 to 30 years

 

 

4

 

Buildings and improvements

 

10 to 40 years

 

 

11,855

 

Development costs

 

 

 

1,265

 

1,151

 

 

 

 

 

1,326

 

14,921

 

Accumulated depreciation

 

 

 

 

(1,932

)

 

 

 

 

$

1,326

 

$

12,989

 

 

The decrease in real estate assets held for sale during the 2012 nine month period principally reflects the sale of the warehouse in Manchester, Connecticut that closed on January 31, 2012 (see Note 2).

 

7.               Investments

 

Centaur Media plc

 

Griffin’s investment in the common stock of Centaur Media plc (“Centaur Media”) is accounted for as an available-for-sale security under FASB ASC 320-10, “Investments — Debt and Equity Securities.”  Accordingly, changes in the fair value of Centaur Media, net of income taxes, along with the effect of changes in the foreign currency exchange rate, net of income taxes, are included in accumulated other comprehensive income (see Note 10).

 

The cost, unrealized gain and fair value of Griffin’s investment in Centaur Media are as follows:

 

 

 

September 1, 2012

 

December 3, 2011

 

 

 

 

 

 

 

Cost

 

$

2,677

 

$

2,677

 

Unrealized gain

 

421

 

328

 

Fair value

 

$

3,098

 

$

3,005

 

 

Shemin Nurseries Holding Corp.

 

Griffin holds an approximate 14% equity interest in Shemin Nurseries Holding Corp. (“SNHC”), which operates a landscape nursery distribution business through its subsidiary.  Griffin accounts for its investment in SNHC under the cost method of accounting for investments.  In the 2012 first quarter, Griffin received a cash distribution of $693 from SNHC.  Prior to receiving this distribution, Griffin’s carrying value of its investment in SNHC was $309.  As SNHC did not have cumulative earnings since the previous cash distribution from SNHC to Griffin in fiscal 2007, Griffin reported $309 of the payment received as a return of investment, with the balance of $384 reflected as investment income in the 2012 nine month period.  Accordingly, Griffin does not have any remaining book value in its investment in SNHC.

 

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Table of Contents

 

8.               Property and Equipment

 

Property and equipment consist of:

 

 

 

Estimated Useful
Lives

 

September 1, 2012

 

December 3, 2011

 

Land

 

 

 

$

437

 

$

437

 

Land improvements

 

10 to 20 years

 

1,561

 

1,561

 

Buildings and improvements

 

10 to 40 years

 

1,842

 

1,842

 

Machinery and equipment

 

3 to 20 years

 

12,264

 

12,129

 

 

 

 

 

16,104

 

15,969

 

Accumulated depreciation

 

 

 

(13,951

)

(13,721

)

 

 

 

 

$

2,153

 

$

2,248

 

 

As a result of winter storms early in the 2011 nine month period, some of Imperial’s hoop houses collapsed and a portion of the plants stored in the damaged hoop houses became unsaleable.  There was no charge to earnings for the damaged hoop houses because they were fully depreciated prior to the start of fiscal 2011.  A gain on insurance recovery of $200 related to the initial insurance proceeds received for the damaged hoop houses is included in Griffin’s 2011 nine month period consolidated statement of operations.  The claim was settled in the 2011 fourth quarter and an additional $279 of insurance proceeds was received at that time (see Notes 5 and 11).

 

Griffin incurred new capital lease obligations of $54 and $38, respectively, in the 2012 nine month period and 2011 nine month period.

 

9.               Long-Term Debt

 

Long-term debt includes:

 

 

 

September 1, 2012

 

December 3, 2011

 

Nonrecourse mortgages:

 

 

 

 

 

6.30%, due May 1, 2014

 

$

335

 

$

453

 

5.73%, due August 1, 2015

 

19,115

 

19,368

 

8.13%, due April 1, 2016

 

4,024

 

4,232

 

7.0%, due October 1, 2017

 

6,073

 

6,220

 

Variable rate mortgage, due October 2, 2017*

 

6,756

 

6,926

 

Variable rate mortgage, due February 1, 2019*

 

11,455

 

11,609

 

Variable rate mortgage, due August 1, 2019*

 

8,074

 

8,176

 

5.25%, due January 28, 2020

 

4,090

 

4,151

 

Total nonrecourse mortgages

 

59,922

 

61,135

 

Revolving line of credit

 

 

 

Capital leases

 

80

 

46

 

Total

 

60,002

 

61,181

 

Less: current portion

 

(1,860

)

(1,700

)

Total long-term debt

 

$

58,142

 

$

59,481

 

 


*  Griffin entered into interest rate swap agreements effectively to fix the interest rates on these loans (see below).

 

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Table of Contents

 

On June 15, 2012, Griffin and two of its wholly-owned subsidiaries entered into the Third Modification Agreement (the “Modification Agreement”) to the mortgage loan originally due January 1, 2013 with Webster Bank (the “Webster Mortgage”).  The Modification Agreement extends the maturity of the Webster Mortgage to October 2, 2017.  In accordance with the Modification Agreement, the interest rate under the Webster Mortgage, which was fixed at 6.08% through September 30, 2012, changed, effective October 1, 2012, to a floating rate of the one month LIBOR plus 2.75%.  In anticipation of entering into the Modification Agreement, on June 7, 2012, Griffin entered into an interest rate swap agreement with Webster Bank to effectively fix the interest rate on the Webster Mortgage at 3.86% from October 1, 2012 through the maturity of the Webster Mortgage.  Pursuant to the Modification Agreement, effective on October 1, 2012, principal payments on the Webster Mortgage will be based on a twenty-five year amortization schedule.  The Webster Mortgage is collateralized by Griffin Land’s two multi-story office buildings in Windsor, Connecticut.  The Modification Agreement did not alter the collateral for the Webster Mortgage.  As of September 1, 2012, the principal balance of the Webster Mortgage was $6,756.

 

Griffin is a party to three interest rate swap agreements related to nonrecourse mortgages on certain of its real estate assets.  Griffin accounts for its interest rate swap agreements as effective cash flow hedges (see Note 4).  No ineffectiveness on the cash flow hedges was recognized as of September 1, 2012 and none is anticipated over the term of the agreements.  Amounts in other comprehensive income (loss) will be reclassified into interest expense over the term of the swap agreements to achieve fixed rates on each mortgage.  The interest rate swap agreements do not contain any credit risk related contingent features.  In the 2012 and 2011 nine month periods, Griffin recognized losses (included in other comprehensive income) before taxes, of $781 and $878, respectively, on its interest rate swap agreements.  The amounts of loss recognized on the effective portion of the interest rate swap agreements were as follows:

 

 

 

For the 13 Weeks Ended,

 

For the 39 Weeks Ended,

 

 

 

September 1,
2012

 

August 27,
2011

 

September 1,
2012

 

August 27,
2011

 

 

 

 

 

 

 

 

 

 

 

Loss on swap agreements

 

$

(166

)

$

(170

)

$

(495

)

$

(505

)

 

As of September 1, 2012, $654 is expected to be reclassified over the next twelve months from other comprehensive income (loss) to interest expense.  As of September 1, 2012, the liability for Griffin’s interest rate swap agreements was $3,196 and is included in other noncurrent liabilities on Griffin’s consolidated balance sheet.

 

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Table of Contents

 

10.         Stockholders’ Equity

 

Earnings Per Share

 

Basic and diluted per share results were based on the following:

 

 

 

For the 13 Weeks Ended,

 

For the 39 Weeks Ended,

 

 

 

September 1,
2012

 

August 27,
2011

 

September 1,
2012

 

August 27,
2011

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations for computation of basic and diluted per share results, net of tax

 

$

1,882

 

$

(568

)

$

345

 

$

(3,600

)

 

 

 

 

 

 

 

 

 

 

Income from discontinued operation for computation of basic and diluted per share results, net of tax

 

 

140

 

1,647

 

414

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

1,882

 

$

(428

)

$

1,992

 

$

(3,186

)

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding for computation of basic per share results

 

5,139,000

 

5,134,000

 

5,137,000

 

5,129,000

 

 

 

 

 

 

 

 

 

 

 

Incremental shares from assumed exercise of Griffin stock options (a)

 

4,000

 

 

4,000

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted weighted average shares for computation of diluted per share results

 

5,143,000

 

5,134,000

 

5,141,000

 

5,129,000

 

 


(a)

Incremental shares from the assumed exercise of Griffin stock options are not included in periods where the inclusion of such shares would be anti-dilutive.  Such assessment is based on income (loss) from continuing operations when net income (loss) includes discontinued operations.  The incremental shares from the assumed exercise of stock options in the thirteen and thirty-nine weeks ended August 27, 2011 would have been 6,000 and 8,000, respectively.

 

Griffin Stock Option Plan

 

Stock options are granted by Griffin under the Griffin Land & Nurseries, Inc. 2009 Stock Option Plan (the “2009 Stock Option Plan”).  Options granted under the 2009 Stock Option Plan may be either incentive stock options or non-qualified stock options issued at fair market value on the date approved by Griffin’s Compensation Committee. Vesting of all of Griffin’s previously issued stock options is solely based upon service requirements and does not contain market or performance conditions.  Stock options issued will expire ten years from the grant date.  In accordance with the 2009 Stock Option Plan, stock options issued to non-employee directors upon their initial election to the board of directors are fully exercisable immediately upon the date of the option grant. Stock options issued to non-employee directors upon their reelection to the board of directors vest on the second anniversary from the date of grant. Stock options issued to employees vest in equal installments on the third, fourth and fifth anniversaries from the date of grant. None of the stock options outstanding at September 1, 2012 may be exercised as stock appreciation rights.

 

The following options were granted by Griffin under the 2009 Stock Option Plan to non-employee directors upon their re-election to Griffin’s Board of Directors and to Griffin’s employees:

 

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Table of Contents

 

 

 

For the 39 Weeks Ended,

 

 

 

September 1, 2012

 

August 27, 2011

 

 

 

Number of
Shares

 

Fair Value per
Option at Grant
Date

 

Number of
Shares

 

Fair Value per
Option at Grant
Date

 

 

 

 

 

 

 

 

 

 

 

Non-employee directors

 

6,748

 

$

11.32

 

8,712

 

$

12.03

 

Employees

 

 

 

 

104,500

 

$

10.37 - 12.88

 

Total

 

6,748

 

 

 

113,212

 

 

 

 

The fair values of all options granted were estimated as of the grant date using the Black-Scholes option-pricing model.  Assumptions used in determining the fair value of the stock options granted in the 2012 and 2011 nine month periods were as follows:

 

 

 

For the 39 Weeks Ended,

 

 

 

September 1, 2012

 

August 27, 2011

 

 

 

 

 

 

 

Expected volatility

 

41.1%

 

42.0% to 43.4%

 

Risk free interest rate

 

1.16%

 

2.06% to 2.81%

 

Expected option term (in years)

 

8.5

 

5 to 8.5

 

Annual dividend yield

 

 

1.4%

 

 

Activity under the Griffin Stock Option Plan is summarized as follows:

 

 

 

For the 39 Weeks Ended,

 

 

 

September 1, 2012

 

August 27, 2011

 

Vested Options

 

Number of
Shares

 

Weighted
Avg.
Exercise
Price

 

Number of
Shares

 

Weighted
Avg.
Exercise
Price

 

Outstanding at beginning of period

 

54,075

 

$

27.08

 

45,730

 

$

23.18

 

Exercised

 

(5,322

)

$

15.03

 

(10,667

)

$

17.45

 

Vested

 

33,801

 

$

32.69

 

19,012

 

$

31.06

 

Forfeited

 

(1,419

)

$

28.18

 

 

 

Outstanding at end of period

 

81,135

 

$

30.19

 

54,075

 

$

27.08

 

 

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Table of Contents

 

Range of Exercise
Prices for Vested 
Options

 

Outstanding at
September 1, 2012

 

Weighted Avg. 
Exercise Price

 

Weighted Avg. 
Remaining
Contractual Life
(in years)

 

Total
Intrinsic
Value

 

Total
Grant Date
Fair
Value

 

$11.00-$12.00

 

6,776

 

$

11.81

 

0.7

 

$

112

 

$

35

 

$24.00-$32.00

 

29,260

 

$

28.74

 

4.0

 

20

 

413

 

$33.00-$39.00

 

45,099

 

$

33.89

 

5.6

 

 

669

 

 

 

81,135

 

$

30.19

 

4.6

 

$

132

 

$

1,117

 

 

 

 

For the 39 Weeks Ended,

 

 

 

September 1, 2012

 

August 27, 2011

 

Nonvested Options

 

Number of
Shares

 

Weighted
Avg.
Exercise
Price

 

Number of
Shares

 

Weighted
Avg.
Exercise
Price

 

Nonvested at beginning of period

 

190,443

 

$

30.56

 

103,881

 

$

32.56

 

Granted

 

6,748

 

$

23.70

 

113,212

 

$

28.68

 

Vested

 

(33,801

)

$

32.69

 

(19,012

)

$

31.06

 

Nonvested at end of period

 

163,390

 

$

29.84

 

198,081

 

$

30.48

 

 

Range of Exercise
Prices for
Nonvested Options

 

Outstanding at
September 1, 2012

 

Weighted Avg.
Exercise Price

 

Weighted Avg.
Remaining
Contractual Life
(in years)

 

Total
Intrinsic
Value

 

Total
Grant Date
Fair
Value

 

$23.00-$30.00

 

115,056

 

$

28.41

 

8.5

 

$

36

 

$

1,429

 

$33.00-$35.00

 

48,334

 

$

33.24

 

6.2

 

 

668

 

 

 

163,390

 

$

29.84

 

7.8

 

$

36

 

$

2,097

 

 

Number of option holders at September 1, 2012

 

17

 

 

Compensation expense and related tax benefits for stock options were as follows:

 

 

 

For the 13 Weeks Ended,

 

For the 39 Weeks Ended,

 

 

 

September 1,
2012

 

August 27,
2011

 

September 1,
2012

 

August 27,
2011

 

 

 

 

 

 

 

 

 

 

 

Compensation expense

 

$

124

 

$

170

 

$

428

 

$

447

 

 

 

 

 

 

 

 

 

 

 

Related tax benefit

 

$

32

 

$

40

 

$

98

 

$

111

 

 

As of September 1, 2012, the unrecognized compensation expense related to nonvested stock options that will be recognized during future periods is as follows:

 

Balance of Fiscal 2012

 

$

123

 

Fiscal 2013

 

$

403

 

Fiscal 2014

 

$

213

 

Fiscal 2015

 

$

90

 

Fiscal 2016

 

$

12

 

 

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Table of Contents

 

Accumulated Other Comprehensive Loss

 

Accumulated other comprehensive loss is comprised of the following:

 

 

 

September 1, 2012

 

December 3, 2011

 

Unrealized gain on investment in Centaur Media

 

$

321

 

$

260

 

Unrealized loss on cash flow hedges

 

(2,014

)

(1,522

)

Actuarial gain on postretirement benefit plan

 

284

 

284

 

 

 

$

(1,409

)

$

(978

)

 

Cash Dividend

 

Griffin did not declare a cash dividend in the 2012 nine month period.  During the 2012 first quarter, Griffin paid $513 for the cash dividend declared in the 2011 fourth quarter.  In the 2011 third quarter, Griffin declared a cash dividend of $0.10 per common share for holders of record as of the close of business on August 25, 2011, which was paid on September 1, 2011.

 

11.          Supplemental Financial Statement Information

 

Gain on Insurance Recovery

 

In the 2011 nine month period, snow load from winter storms resulted in the collapse of some of Imperial’s hoop houses and some of the plants stored in those hoop houses became unsaleable.  A charge of $300 was included in costs of landscape nursery sales in the 2011 nine month period to establish a reserve for the estimated book value of the inventory that became unsaleable.  There was no charge to earnings related to the damage to the hoop houses because they were fully depreciated prior to fiscal 2011.  Initial insurance proceeds of $200, related to the hoop house damage, were received in the 2011 first quarter and were reflected as a gain on insurance recovery in the 2011 nine month period consolidated statement of operations.   The claim for the damaged hoop houses was settled in the 2011 fourth quarter when Griffin received additional proceeds of $279 (see Notes 5 and 8).

 

Supplemental Cash Flow Information

 

An increase of $93 in the 2012 nine month period and a decrease of $1,690 in the 2011 nine month period in Griffin’s Investment in Centaur Media reflect the mark to market adjustments of this investment and did not affect Griffin’s cash.

 

Included in accounts payable and accrued liabilities at September 1, 2012 and December 3, 2011 were $590 and $542, respectively, for additions to real estate assets.  Accounts payable and accrued liabilities related to additions to real estate assets increased by $48 and $138 in the 2012 nine month period and 2011 nine month period, respectively.

 

As of December 3, 2011, Griffin’s accrued liabilities included $513 for a dividend on Griffin’s common stock that was declared prior to the end of fiscal 2011 and paid in the 2012 first quarter.

 

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Table of Contents

 

 

 

For the 13 Weeks Ended,

 

For the 39 Weeks Ended,

 

 

 

September 1,
2012

 

August 27,
2011

 

September 1,
2012

 

August 27,
2011

 

 

 

 

 

 

 

 

 

 

 

Interest payments, net of capitalized interest

 

$

409

 

$

970

 

$

1,966

 

$

2,993

 

 

In the 2012 nine month period, Griffin made income tax payments of $516.  Griffin did not make any income tax payments in the 2011 nine month period.

 

Income Taxes

 

Griffin’s effective tax rate on continuing operations was 46.0% in the 2012 nine month period as compared to 37.7% in the 2011 nine month period.  The effective tax rate used in the 2012 nine month period is based on management’s projections for the balance of the year.  To the extent that actual results differ from current projections, the effective income tax rate may change.

 

The following increases and decreases to deferred tax assets and liabilities are included as credits and charges, respectively, in Griffin’s other comprehensive loss:

 

 

 

For the 13 weeks ended, September 1, 2012

 

For the 39 weeks ended, September 1, 2012

 

 

 

Pre-Tax

 

Tax
(Expense)
Benefit

 

Net-of-Tax

 

Pre-Tax

 

Tax
(Expense)
Benefit

 

Net-of-Tax