Tableof 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 August 28, 2010**                                                                                                                                    |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                           |
| **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 itscharter)

 

| **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 TelephoneNumber including Area Code  **(212) 218-7910**

 

 

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

 

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.  Yes  x  No   ̈

 

Indicate by check mark whether the registranthas submitted electronically and posted on its corporate Web site, if any,every Interactive Data File required to be submitted and posted pursuant to Rule 405of 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 postsuch files).  Yes   ̈  No   ̈

 

Indicate by check mark whether the registrantis a large accelerated filer, an accelerated filer, a non-accelerated filer ora smaller reporting company.  See thedefinitions of  “large accelerated filer,”“accelerated filer” and “smaller reporting company” in Rule 12b-2 of theExchange Act.

 

| Large accelerated filer  ̈ |   | Accelerated filer x              |
|--------------------------------|--------|----------------------------------|
|                           |   |                             |
| Non-accelerated filer  ̈   |   | Smaller reporting company  ̈ |

 

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

 

Number of shares of Common Stock outstanding at September 30,2010: **5,107,436**

 

 

 

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Tableof Contents

 

GRIFFIN LAND & NURSERIES, INC.

FORM 10-Q

Index

 
| *PART I  -* |        | FINANCIAL  INFORMATION                                                                                                                     |   |
|------------------|-------------|--------------------------------------------------------------------------------------------------------------------------------------------|--------|
|             |        |                                                                                                                                       |   |
| * *         | *ITEM 1*    | Financial  Statements                                                                                                                      |   |
|             |        |                                                                                                                                       |   |
|             |        | Consolidated Statements of Operations (unaudited)  13 and 39 Weeks Ended August 28, 2010 and August 29, 2009                     | 3      |
|             |        |                                                                                                                                       |   |
|             |        | Consolidated Balance Sheets (unaudited)  August 28, 2010 and November 28, 2009                                                   | 4      |
|             |        |                                                                                                                                       |   |
|             |        | Consolidated Statements of Changes in Stockholders’  Equity (unaudited)  39 Weeks Ended August 28, 2010 and August 29, 2009 | 5      |
|             |        |                                                                                                                                       |   |
|             |        | Consolidated Statements of Cash Flows (unaudited)  39 Weeks Ended August 28, 2010 and August 29, 2009                            | 6      |
|             |        |                                                                                                                                       |   |
|             |        | Notes to Consolidated Financial Statements (unaudited)                                                                                     | 7-22   |
|             |        |                                                                                                                                       |   |
| * *         | *ITEM 2*    | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                | 23-35  |
|             |        |                                                                                                                                       |   |
| * *         | *ITEM 3*    | Quantitative  and Qualitative Disclosures About Market Risk                                                                                | 35-36  |
|             |        |                                                                                                                                       |   |
| * *         | *ITEM 4*    | Controls and  Procedures                                                                                                                   | 36     |
|             |        |                                                                                                                                       |   |
| *PART II -* |        | OTHER INFORMATION                                                                                                                          |   |
|             |        |                                                                                                                                       |   |
| * *         | *ITEM 1*    | Not Applicable                                                                                                                             |   |
|             |        |                                                                                                                                       |   |
| * *         | *ITEM 1A*   | Risk Factors                                                                                                                               | 37     |
|             |        |                                                                                                                                       |   |
| * *         | *ITEMS 2-5* | Not Applicable                                                                                                                             |   |
|             |        |                                                                                                                                       |   |
| * *         | *ITEM  6*   | Exhibits                                                                                                                                   | 37-39  |
|             |        |                                                                                                                                       |   |
|             |        | SIGNATURES                                                                                                                                 | 40     |

 

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Table ofContents

 

**PART I          FINANCIALINFORMATION**

** **

ITEM 1.**         **FINANCIALSTATEMENTS

 

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,** | ** ** |
|-----------------------------------------------------------------------------------|------------|-------------------------------------------------|-------------|-------------------------------------------------|------------|
| ** **                                                                        | ** ** | **August 28,  2010**                       | ** **  | **August 29,  2009**                       | ** ** | **August 28,  2010** | ** ** | **August 29,  2009** | ** ** |
| Landscape nursery net sales and other revenue       |       | $                                               |  2,620 |                                            | $          |  3,528 |   | $ |  13,767 |   | $ |  19,545 |   |
| Rental  revenue and property sales                                                |       | 4,912                                           |        | 4,246                                           |       | 14,062 |   | 12,570 |   |
| Total  revenue                                                                    |       | 7,532                                           |        | 7,774                                           |       | 27,829 |   | 32,115 |   |
|                                                                              |       |                                            |        |                                            |       |   |   |   |   |
| Costs  of landscape nursery sales and other revenue                               |       | 3,381                                           |        | 3,715                                           |       | 13,320 |   | 18,429 |   |
| Costs  related to rental revenue and property sales                               |       | 3,126                                           |        | 3,021                                           |       | 9,790 |   | 9,350 |   |
| Total  costs of goods sold and costs related to rental revenue and property sales |       | 6,507                                           |        | 6,736                                           |       | 23,110 |   | 27,779 |   |
|                                                                              |       |                                            |        |                                            |       |   |   |   |   |
| Gross  profit                                                                     |       | 1,025                                           |        | 1,038                                           |       | 4,719 |   | 4,336 |   |
|                                                                              |       |                                            |        |                                            |       |   |   |   |   |
| Selling,  general and administrative expenses                                     |       | 2,071                                           |        | 2,596                                           |       | 7,957 |   | 8,725 |   |
| Operating  loss                                                                   |       | (1,046                                          | )           | (1,558                                          | )          | (3,238 | ) | (4,389 | ) |
| Interest  expense                                                                 |       | (1,173                                          | )           | (880                                            | )          | (3,355 | ) | (2,506 | ) |
| Investment  income                                                                |       | 20                                              |        | 28                                              |       | 194 |   | 152 |   |
| Loss  before income tax benefit                                                   |       | (2,199                                          | )           | (2,410                                          | )          | (6,399 | ) | (6,743 | ) |
| Income  tax benefit                                                               |       | 886                                             |        | 974                                             |       | 2,457 |   | 2,512 |   |
| Net  loss                                                                         |       | $                                               | (1,313      | )                                               | $          | (1,436 | ) | $ | (3,942 | ) | $ | (4,231 | ) |
|                                                                              |       |                                            |        |                                            |       |   |   |   |   |
| Basic  net loss per common share                                                  |       | $                                               | (0.26       | )                                               | $          | (0.28 | ) | $ | (0.77 | ) | $ | (0.83 | ) |
|                                                                              |       |                                            |        |                                            |       |   |   |   |   |
| Diluted  net loss per common share                                                |       | $                                               | (0.26       | )                                               | $          | (0.28 | ) | $ | (0.77 | ) | $ | (0.83 | ) |

 

See Notes to Consolidated Financial Statements*.*

 

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GRIFFIN LAND & NURSERIES, INC.

Consolidated Balance Sheets

(dollars in thousands, except per share data)

(unaudited)

 
| ** **                                                                                                                                                                                  | ** ** | **August 28, 2010** | ** ** | **November 28, 2009** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------|------------|---------------------------------|------------|
| ASSETS                                                                                                                                                                                      |       |                          |       |                            |       |
| Current  Assets:                                                                                                                                                                            |       |                          |       |                            |       |
| Cash  and cash equivalents                                                                                                                                                                  |       | $                             | 5,763      |                            | $          | 9,149 |   |
| Trading  securities - short-term investments, net                                                                                                                                           |       | —                        |       | 454                             |       |
| Accounts  receivable, less allowance of $157 and $187                                                                                                                                       |       | 2,240                         |       | 2,681                           |       |
| Income  taxes receivable                                                                                                                                                                    |       | 6,683                         |       | 6,336                           |       |
| Inventories,  net                                                                                                                                                                           |       | 14,939                        |       | 19,573                          |       |
| Deferred  income taxes                                                                                                                                                                      |       | —                        |       | 143                             |       |
| Other  current assets                                                                                                                                                                       |       | 4,316                         |       | 3,645                           |       |
| Total  current assets                                                                                                                                                                       |       | 33,941                        |       | 41,981                          |       |
| Real  estate held for sale or lease, net                                                                                                                                                    |       | 133,413                       |       | 128,311                         |       |
| Available  for sale securities - Investment in Centaur Media plc                                                                                                                            |       | 3,742                         |       | 4,615                           |       |
| Property  and equipment, net                                                                                                                                                                |       | 2,426                         |       | 2,730                           |       |
| Deferred  income taxes                                                                                                                                                                      |       | 1,922                         |       | —                          |       |
| Other  assets                                                                                                                                                                               |       | 11,420                        |       | 11,099                          |       |
| Total  assets                                                                                                                                                                               |       | $                             | 186,864    |                            | $          | 188,736 |   |
|                                                                                                                                                                                        |       |                          |       |                            |       |
| LIABILITIES  AND STOCKHOLDERS’ EQUITY                                                                                                                                                  |       |                          |       |                            |       |
| Current  Liabilities:                                                                                                                                                                       |       |                          |       |                            |       |
| Current  portion of long-term debt                                                                                                                                                          |       | $                             | 8,716      |                            | $          | 1,532 |   |
| Accounts  payable and accrued liabilities                                                                                                                                                   |       | 3,997                         |       | 3,667                           |       |
| Deferred  revenue                                                                                                                                                                           |       | 1,925                         |       | 1,249                           |       |
| Total  current liabilities                                                                                                                                                                  |       | 14,638                        |       | 6,448                           |       |
| Long-term  debt                                                                                                                                                                             |       | 57,240                        |       | 61,066                          |       |
| Deferred  income taxes                                                                                                                                                                      |       | —                        |       | 1,050                           |       |
| Other  noncurrent liabilities                                                                                                                                                               |       | 6,501                         |       | 5,426                           |       |
| Total  liabilities                                                                                                                                                                          |       | 78,379                        |       | 73,990                          |       |
|                                                                                                                                                                                        |       |                          |       |                            |       |
| Commitments  and contingencies (Note 11)                                                                                                                                                    |       |                          |       |                            |       |
|                                                                                                                                                                                        |       |                          |       |                            |       |
| Stockholders’  Equity:                                                                                                                                                                 |       |                          |       |                            |       |
| Common  stock, par value $0.01 per share, 10,000,000 shares authorized, 5,494,402 and  5,479,402 shares issued, respectively, and 5,107,436 and 5,092,436 shares  outstanding, respectively |       | 55                            |       | 55                              |       |
| Additional  paid-in capital                                                                                                                                                                 |       | 105,304                       |       | 104,849                         |       |
| Retained  earnings                                                                                                                                                                          |       | 16,869                        |       | 22,342                          |       |
| Accumulated  other comprehensive (loss) income, net of tax                                                                                                                                  |       | (317                          | )          | 926                             |       |
| Treasury  stock, at cost, 386,966 shares                                                                                                                                                    |       | (13,426                       | )          | (13,426                         | )          |
| Total  stockholders’ equity                                                                                                                                                            |       | 108,485                       |       | 114,746                         |       |
| Total  liabilities and stockholders’ equity                                                                                                                                            |       | $                             | 186,864    |                            | $          | 188,736 |   |

 

See Notes to Consolidated FinancialStatements**.**

 

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GRIFFINLAND & NURSERIES, INC.

ConsolidatedStatements of Changes in Stockholders’ Equity

Forthe Thirty-Nine Weeks Ended August 28, 2010 and August 29, 2009

(dollars in thousands)

(unaudited)

 
| ** **                                                                | ** ** | **Shares of  Common  Stock  Issued** | ** ** | **Common  Stock** | ** ** | **Additional  Paid-in  Capital** | ** ** | **Retained  Earnings** | ** ** | **Accumulated  Other  Comprehensive  (Loss) Income** | ** ** | **Treasury  Stock** | ** ** | **Total** | ** ** | **Total  Comprehensive  Loss** | ** ** |
|---------------------------------------------------------------------------|------------|-------------------------------------------|------------|-------------------|------------|----------------------------------|------------|------------------------|------------|-----------------------------------------------------------|------------|---------------------|------------|-----------|------------|--------------------------------|------------|
| Balance  at November 29, 2008                                        |       | 5,455,382                                 |       | $                 | 55         |                             | $          | 103,997                |       | $                                                         | 29,888     |                | $          | 646       |       | $                              | (13,426    | ) | $ | 121,160 |   |   |   |
|                                                                      |       |                                      |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                           |       |
| Exercise  of stock options                                                |       | 14,020                                    |       | —            |       | 232                              |       | —                 |       | —                                                    |       | —              |       | 232       |       |                           |       |
|                                                                      |       |                                      |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                           |       |
| Stock-based  compensation expense                                         |       | —                                    |       | —            |       | 274                              |       | —                 |       | —                                                    |       | —              |       | 274       |       |                           |       |
|                                                                      |       |                                      |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                           |       |
| Dividends  declared, $0.30 per share                                      |       | —                                    |       | —            |       | —                           |       | (1,524                 | )          | —                                                    |       | —              |       | (1,524    | )          |                           |       |
|                                                                      |       |                                      |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                           |       |
| Net  loss                                                                 |       | —                                    |       | —            |       | —                           |       | (4,231                 | )          | —                                                    |       | —              |       | (4,231    | )          | $                              | (4,231     | ) |
|                                                                      |       |                                      |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                           |       |
| Other  comprehensive loss from cash flow hedging transactions, net of tax |       | —                                    |       | —            |       | —                           |       | —                 |       | (11                                                       | )          | —              |       | (11       | )          | (11                            | )          |
|                                                                      |       |                                      |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                           |       |
| Other  comprehensive loss from Centaur Media plc, net of tax              |       | —                                    |       | —            |       | —                           |       | —                 |       | (45                                                       | )          | —              |       | (45       | )          | (45                            | )          |
|                                                                      |       |                                      |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                           |       |
| Balance  at August 29, 2009                                          |       | 5,469,402                                 |       | $                 | 55         |                             | $          | 104,503                |       | $                                                         | 24,133     |                | $          | 590       |       | $                              | (13,426    | ) | $ | 115,855 |   | $ | (4,287 | ) |
|                                                                      |       |                                      |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                           |       |
| Balance  at November 28, 2009                                        |       | 5,479,402                                 |       | $                 | 55         |                             | $          | 104,849                |       | $                                                         | 22,342     |                | $          | 926       |       | $                              | (13,426    | ) | $ | 114,746 |   |   |   |
|                                                                      |       |                                      |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                           |       |
| Exercise  of stock options                                                |       | 15,000                                    |       | —            |       | 170                              |       | —                 |       | —                                                    |       | —              |       | 170       |       |                           |       |
|                                                                      |       |                                      |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                           |       |
| Stock-based  compensation expense                                         |       | —                                    |       | —            |       | 285                              |       | —                 |       | —                                                    |       | —              |       | 285       |       |                           |       |
|                                                                      |       |                                      |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                           |       |
| Dividend  declared, $0.30 per share                                       |       | —                                    |       | —            |       | —                           |       | (1,531                 | )          | —                                                    |       | —              |       | (1,531    | )          |                           |       |
|                                                                      |       |                                      |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                           |       |
| Net  loss                                                                 |       | —                                    |       | —            |       | —                           |       | (3,942                 | )          | —                                                    |       | —              |       | (3,942    | )          | $                              | (3,942     | ) |
|                                                                      |       |                                      |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                           |       |
| Other  comprehensive loss from cash flow hedging transactions, net of tax |       | —                                    |       | —            |       | —                           |       | —                 |       | (676                                                      | )          | —              |       | (676      | )          | (676                           | )          |
|                                                                      |       |                                      |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                           |       |
| Other  comprehensive loss from Centaur Media plc, net of tax              |       | —                                    |       | —            |       | —                           |       | —                 |       | (567                                                      | )          | —              |       | (567      | )          | (567                           | )          |
|                                                                      |       |                                      |       |              |       |                             |       |                   |       |                                                      |       |                |       |      |       |                           |       |
| Balance  at August 28, 2010                                          |       | 5,494,402                                 |       | $                 | 55         |                             | $          | 105,304                |       | $                                                         | 16,869     |                | $          | (317      | )          | $                              | (13,426    | ) | $ | 108,485 |   | $ | (5,185 | ) |

 

SeeNotes to Consolidated Financial Statements.

 

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GRIFFINLAND & NURSERIES, INC.

ConsolidatedStatements of Cash Flows

(dollars in thousands)

(unaudited)

 
| ** **                                                                       | ** ** | **For the 39 Weeks Ended,** | ** ** |
|----------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                                       | ** ** | **August 28, 2010**                   | ** ** | **August 29, 2009** | ** ** |
| **Operating activities:**                                                        |       |                                            |       |   |   |
| Net  loss                                                                        |       | $                                               | (3,942     | ) | $ | (4,231 | ) |
| Adjustments  to reconcile net loss to net cash provided by operating activities: |       |                                            |       |   |   |
| Depreciation  and amortization                                                   |       | 5,289                                           |       | 4,839 |   |
| Deferred  income taxes                                                           |       | (2,126                                          | )          | (2,512 | ) |
| Proceeds  from sales of trading securities - short-term investments              |       | 454                                             |       | 8,093 |   |
| Stock-based  compensation expense                                                |       | 285                                             |       | 274 |   |
| Amortization  of debt issuance costs                                             |       | 208                                             |       | 143 |   |
| (Credit)  provision for bad debts                                                |       | (31                                             | )          | 104 |   |
| Income  from equity investment                                                   |       | (2                                              | )          | (7 | ) |
| Provision  for inventory losses                                                  |       | —                                          |       | 1,129 |   |
| Change  in unrealized gains on trading securities                                |       | —                                          |       | 78 |   |
| Changes  in assets and liabilities:                                              |       |                                            |       |   |   |
| Accounts  receivable                                                             |       | 472                                             |       | (1,038 | ) |
| Inventories                                                                      |       | 4,634                                           |       | 2,877 |   |
| Income  tax receivable                                                           |       | (347                                            | )          | 16 |   |
| Other  current assets                                                            |       | (671                                            | )          | (489 | ) |
| Accounts  payable and accrued liabilities                                        |       | 453                                             |       | (199 | ) |
| Deferred  revenue                                                                |       | 417                                             |       | 238 |   |
| Other  noncurrent assets and noncurrent liabilities, net                         |       | (1,006                                          | )          | (330 | ) |
| Net  cash provided by operating activities                                       |       | 4,087                                           |       | 8,985 |   |
|                                                                             |       |                                            |       |   |   |
| **Investing activities:**                                                        |       |                                            |       |   |   |
| Building  acquisition                                                            |       | (5,440                                          | )          | — |   |
| Additions  to real estate held for sale or lease                                 |       | (3,835                                          | )          | (15,487 | ) |
| Additions  to property and equipment                                             |       | (96                                             | )          | (40 | ) |
| Net  cash used in investing activities                                           |       | (9,371                                          | )          | (15,527 | ) |
|                                                                             |       |                                            |       |   |   |
| **Financing activities:**                                                        |       |                                            |       |   |   |
| Proceeds  from debt                                                              |       | 4,524                                           |       | 21,636 |   |
| Dividends  paid to stockholders                                                  |       | (1,530                                          | )          | (1,523 | ) |
| Payments  of debt                                                                |       | (1,166                                          | )          | (8,363 | ) |
| Exercise  of stock options                                                       |       | 170                                             |       | 232 |   |
| Debt  issuance costs                                                             |       | (100                                            | )          | (841 | ) |
| Net  cash provided by financing activities                                       |       | 1,898                                           |       | 11,141 |   |
| Net  (decrease) increase in cash and cash equivalents                            |       | (3,386                                          | )          | 4,599 |   |
| Cash  and cash equivalents at beginning of period                                |       | 9,149                                           |       | 4,773 |   |
| Cash  and cash equivalents at end of period                                      |       | $                                               | 5,763      |   | $ | 9,372 |   |

 

See Notes to Consolidated FinancialStatements.

 

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GRIFFIN LAND & NURSERIES, INC.

Notes to ConsolidatedFinancial Statements

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

(unaudited)

 

1.     Summary of SignificantAccounting Policies

 

*Basis of Presentation*

 

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

 

Theaccompanying financial statements have been prepared in accordance with theaccounting policies stated in Griffin’s audited financial statements for thefiscal year ended November 28, 2009 included in Griffin’s Annual Report onForm 10-K as filed with the Securities and Exchange Commission, and shouldbe read in conjunction with the Notes to Consolidated Financial Statementsappearing in that report. All adjustments, comprising only normal recurringadjustments, which are, in the opinion of management, necessary for a fairpresentation of results for the interim periods, have been reflected and allintercompany transactions have been eliminated. The consolidated balance sheet data as of November 28, 2009 wasderived from Griffin’s audited financial statements but does not include alldisclosures required by accounting principles generally accepted in the UnitedStates of America.

 

Thepreparation of financial statements in accordance with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities at the date of the financial statements and the reported amounts ofrevenue and expenses in the reporting period. Griffin regularly evaluates estimates and assumptions related to theuseful life and recoverability of long-lived assets, stock-based compensationexpense, deferred income tax asset valuations, valuation of derivative instrumentsand inventory reserves.  Griffin basesits estimates and assumptions on current facts, historical experience andvarious other factors that it believes to be reasonable under thecircumstances, the results of which form the basis for making judgments aboutthe carrying values of assets and liabilities and the accrual of costs andexpenses that are not readily apparent from other sources. The actual resultsexperienced by Griffin may differ materially and adversely from Griffin’sestimates.  To the extent there arematerial differences between the estimates and the actual results, futureresults of operations will be affected.

 

Infiscal 2009, Griffin entered into two interest rate swap agreements to hedgeinterest rate exposures.  Griffin doesnot 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 derivativeinstruments and hedging activities.  ASC815-10 requires Griffin to recognize all derivatives as either assets orliabilities on its consolidated balance sheet and measure those instruments atfair value.  The changes in the fairvalues of the interest rate swap agreements are assessed in accordance with ASC815-10 and reflected in the carrying values of the interest rate swapagreements on Griffin’s consolidated balance sheet.  The estimated fair values are based primarilyon projected future swap rates.

 

Griffin applies cash flowhedge accounting to its interest rate swap agreements that are designated ashedges of the variability of future cash flows from floating rate liabilitiesbased on the benchmark interest rates. The change in fair values of Griffin’s interest rate swap agreements arerecorded as 

 

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components of accumulatedother comprehensive income in stockholders’ equity, to the extent they areeffective.  Any ineffective portions ofthe change in fair value of these instruments would be recorded as interestexpense.

 

Theresults of operations for the thirteen weeks ended August 28, 2010 (the “2010third quarter”) and the thirty-nine weeks ended August 28, 2010 (the “2010nine month period”) are not necessarily indicative of the results to beexpected for the full year. The thirteen weeks ended August 29, 2009 isreferred to herein as the “2009 third quarter” and the thirty-nine weeks ended August 29,2009 is referred to herein as the “2009 nine month period.”

 

*Recent Accounting Pronouncements*

 

In February 2010, the FASB issued AccountingStandards Update No. 2010-09, “Subsequent Events,” which amends theprevious guidance on subsequent events and no longer requires Securities andExchange Commission filers to disclose the date through which subsequent eventshave been evaluated.  The subsequentevent provisions were effective for Griffin in the 2010 first quarter.  This guidance did not impact Griffin’sconsolidated financial statements.

 

In the 2010 first quarter, Griffin adopted the newguidance in FASB ASC 805-10, “Business Combinations” (“ASC 805-10”) when itpurchased an industrial building in Breinigsville, Pennsylvania.  The new guidance on business combinationsretains the underlying concepts of the previously issued standard in that theacquirer of a business is required to account for the business combination atfair value.  As with previous guidance,the assets and liabilities of the acquisition are recorded at their fair valueson the date of acquisition.  Any excessof the fair value of consideration transferred over the estimated fair valuesof the net assets acquired is recorded as goodwill.  Griffin did not record any goodwill relatedto this acquisition.  The new guidanceresults in changes to the method of applying the acquisition method ofaccounting for business combinations in a number of significant aspects.  Among other changes required under the newguidance, all acquisition costs are expensed as incurred. Prior to the newguidance, acquisition costs were capitalized. As required under ASC 805-10, Griffin’s acquisition costs related tothis purchase have been expensed.

 

In January 2010, the FASB issued AccountingStandards Update No. 2010-06, “Fair Value Measurements and Disclosures,”which requires new disclosures and provides clarification of existingdisclosures about fair value measurements. More specifically, this update will require: (a) an entity todisclose separately the amounts of significant transfers in and out of Levels 1and 2 fair value measurements and to describe the reasons for the transfers;and (b) information about purchases, sales, issuances and settlements tobe presented separately in the reconciliation for fair value measurements usingsignificant unobservable inputs (Level 3 inputs).  This guidance clarifies existing disclosurerequirements for the level of disaggregation used for classes of assets andliabilities measured at fair value and requires disclosures about the valuationtechniques and inputs used to measure fair value for both recurring andnonrecurring fair value measurements using Level 2 and Level 3 inputs.  In the 2010 second quarter, Griffin adoptedthe guidance regarding the enhanced disclosure requirements.  The guidance regarding the disclosures aboutpurchases, sales, issuances and settlements in the rollforward activity ofLevel 3 fair value measurements is effective for fiscal years beginning after December 15,2010, and for interim periods within those fiscal years.  Griffin does not believe the adoption of thisguidance will have a material impact on its consolidated financial statements.

 

2.     Industry SegmentInformation

 

Griffin defines itsreportable segments by their products and services, which are comprised of thelandscape nursery and real estate segments. Management operates and receives reporting based upon 

 

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these segments.  Griffin has nooperations outside the United States. Griffin’s export sales and transactions between segments are notmaterial.

 
| ** **                                     | ** ** | **For the 13 Weeks Ended,** | ** ** | **For the 39 Weeks Ended,** | ** ** |
|------------------------------------------------|------------|-------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                     | ** ** | **August 28,  2010**                       | ** ** | **August 29,  2009**                       | ** ** | **August 28,  2010** | ** ** | **August 29,  2009** | ** ** |
| Total  net sales and other revenue:            |       |                                            |       |                                            |       |   |   |   |   |
| Landscape  nursery net sales and other revenue |       | $                                               | 2,620      |                                            | $          | 3,528 |   | $ | 13,767 |   | $ | 19,545 |   |
| Rental  revenue and property sales             |       | 4,912                                           |       | 4,246                                           |       | 14,062 |   | 12,570 |   |
|                                           |       | $                                               | 7,532      |                                            | $          | 7,774 |   | $ | 27,829 |   | $ | 32,115 |   |
| Operating  (loss) profit:                      |       |                                            |       |                                            |       |   |   |   |   |
| Landscape  nursery                             |       | $                                               | (1,507     | )                                               | $          | (1,175 | ) | $ | (2,257 | ) | $ | (2,223 | ) |
| Real  estate                                   |       | 1,136                                           |       | 618                                             |       | 1,972 |   | 1,196 |   |
| Industry  segment totals                       |       | (371                                            | )          | (557                                            | )          | (285 | ) | (1,027 | ) |
| General  corporate expense                     |       | (675                                            | )          | (1,001                                          | )          | (2,953 | ) | (3,362 | ) |
| Operating  loss                                |       | (1,046                                          | )          | (1,558                                          | )          | (3,238 | ) | (4,389 | ) |
| Interest  expense                              |       | (1,173                                          | )          | (880                                            | )          | (3,355 | ) | (2,506 | ) |
| Investment  income                             |       | 20                                              |       | 28                                              |       | 194 |   | 152 |   |
| Loss  before income tax benefit                |       | $                                               | (2,199     | )                                               | $          | (2,410 | ) | $ | (6,399 | ) | $ | (6,743 | ) |

 
| ** **                | ** ** | **August 28, 2010** | ** ** | **November 28, 2009** | ** ** |
|---------------------------|------------|-------------------------------|------------|---------------------------------|------------|
| Identifiable assets: |       |                          |       |                            |       |
| Landscape  nursery        |       | $                             | 23,430     |                            | $          | 28,238 |   |
| Real  estate              |       | 149,239                       |       | 139,681                         |       |
| Industry  segment totals  |       | 172,669                       |       | 167,919                         |       |
| General  corporate        |       | 14,195                        |       | 20,817                          |       |
| Total  assets             |       | $                             | 186,864    |                            | $          | 188,736 |   |

 

The real estate segment had no revenue from property sales in eitherthe 2010 nine month period or the 2009 nine month period.  Included in other revenue of the landscapenursery segment in the 2010 third quarter and 2010 nine month period is revenuefrom the rental of Imperial’s Florida farm of $121 and $365, respectively.Included in the other revenue of the landscape nursery segment in the 2009third quarter and 2009 nine month period was $51 of rental revenue with respectto  Imperial’s Florida farm.  Imperial shut down its operations on itsFlorida farm in the 2009 third quarter.

 

3.     Fair Value

 

Griffinadopted the provisions of FASB ASC 820, “Fair Value Measurements andDisclosures” (“ASC 820”), which established a fair value hierarchy thatrequires an entity to maximize the use of observable inputs and minimize theuse of unobservable inputs when measuring fair value.  An asset or liability’s categorization withinthe fair value hierarchy is based upon the lowest level of input that issignificant to the fair value measurement.  ASC 820 established three levels of inputs that may be used to measurefair value, as follows:

 

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Level1 applies to assets or liabilities for which there are quoted market prices inactive markets for identical assets or liabilities.  Level 1 securities include Griffin’sshort-term (trading account) investments and available-for-sale securities.

 

Level2 applies to assets or liabilities for which there are inputs other than quotedprices 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 orinfrequent transactions (less active markets); or model-derived valuations inwhich significant inputs are observable or can be derived principally from, orcorroborated by, observable market data. Level 2 liabilities include Griffin’s two interest rate swap derivatives(see Note 8).  The fair values of Griffin’sinterest rate swap derivative instruments are determined based on discountedcash flow models that incorporate the cash flows of the derivatives as well asthe current LIBOR rate and swap curve along with other market data.  As these inputs are readily available inpublic markets or can be derived from information available in publicly quotedmarkets, Griffin has categorized these derivative instruments as Level 2 withinthe fair value hierarchy.

 

OnJanuary 8, 2010, Griffin closed on the acquisition of an approximate120,000 square foot industrial building located in Breinigsville, Pennsylvania(see Note 5).  The acquisition wasaccounted for in accordance with ASC 805-10 whereby the assets acquired wererecorded at their fair values. The fair value of the real estate assetsacquired was based upon an independent appraisal, which included theutilization of publicly available data for similar properties.  Therefore, Griffin has categorized the realestate assets acquired as Level 2 within the fair value hierarchy.

 

Level3 applies to assets or liabilities for which there are unobservable inputs tothe valuation methodology that are significant to the measurement of the fairvalue of the assets or liabilities.  Asof August 28, 2010, Griffin’s consolidated balance sheet includes acquiredintangible assets related to the building acquisition in Breinigsville,Pennsylvania.  These intangible assetsare comprised of the value of the in-place lease and the associated tenantrelationship.  Griffin derived thesevalues based on a discounted cash flow analysis using assumptions that includedthe rental rate of the in-place lease, the commission percentage expected to bepaid on the lease up of vacant space and other data contained in theindependent appraisal.  Therefore,Griffin categorized the acquired intangible assets related to this transactionas Level 3 within the fair value hierarchy. As of November 28, 2009, Griffin’s financial statements did notinclude any Level 3 assets or liabilities.

 

Duringthe 2010 nine month period, Griffin did not transfer any assets or liabilitiesin or out of Levels 1 and 2.  Thefollowing are Griffin’s financial assets and liabilities carried at fair valueand measured at fair value on a recurring basis:

 

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| ** **                      | ** ** | **August 28, 2010**    | ** ** |
|---------------------------------|------------|----------------------------------|------------|
| ** **                      | ** ** | **Quoted Prices in**   | ** ** | **Significant** | ** ** | **Significant** | ** ** |
| ** **                      | ** ** | **Active Markets for** | ** ** | **Observable** | ** ** | **Unobservable** | ** ** |
| ** **                      | ** ** | **Identical Assets**        | ** ** | **Inputs** | ** ** | **Inputs** | ** ** |
| ** **                      | ** ** | **(Level 1)**               | ** ** | **(Level 2)** | ** ** | **(Level 3)** | ** ** |
| Marketable  equity securities   |       | $                                | 3,742      |   | $ | — |   | $ | — |   |
| Interest  rate swap liabilities |       | $                                | —     |   | $ | (1,843 | ) | $ | — |   |

 
| ** **                      | ** ** | **November 28, 2009**  | ** ** |
|---------------------------------|------------|----------------------------------|------------|
| ** **                      | ** ** | **Quoted Prices in**   | ** ** | **Significant** | ** ** | **Significant** | ** ** |
| ** **                      | ** ** | **Active Markets for** | ** ** | **Observable** | ** ** | **Unobservable** | ** ** |
| ** **                      | ** ** | **Identical Assets**        | ** ** | **Inputs** | ** ** | **Inputs** | ** ** |
| ** **                      | ** ** | **(Level 1)**               | ** ** | **(Level 2)** | ** ** | **(Level 3)** | ** ** |
| U.S.  Treasury securities       |       | $                                | 454        |   | $ | — |   | $ | — |   |
| Marketable  equity securities   |       | $                                | 4,615      |   | $ | — |   | $ | — |   |
| Interest  rate swap liabilities |       | $                                | —     |   | $ | (770 | ) | $ | — |   |

 

Thecarrying and estimated fair values of Griffin’s financial instruments are asfollows:

 
| ** **                     | ** ** | **August 28, 2010** | ** ** | **November 28, 2009** | ** ** |
|--------------------------------|------------|-------------------------------|------------|---------------------------------|------------|
| ** **                     | ** ** | **Carrying**                  | ** ** | **Estimated**                   | ** ** | **Carrying** | ** ** | **Estimated** | ** ** |
| ** **                     | ** ** | **Value**                     | ** ** | **Fair Value**             | ** ** | **Value** | ** ** | **Fair Value** | ** ** |
| Financial  assets:             |       |                          |       |                            |       |   |   |   |   |
| Cash  and cash equivalents     |       | $                             | 5,763      |                            | $          | 5,763 |   | $ | 9,149 |   | $ | 9,149 |   |
| Trading  securities            |       | —                        |       | —                          |       | 454 |   | 454 |   |
| Available-for-sale  securities |       | 3,742                         |       | 3,742                           |       | 4,615 |   | 4,615 |   |
|                           |       |                          |       |                            |       |   |   |   |   |
| Financial  liabilities:        |       |                          |       |                            |       |   |   |   |   |
| Revolving  line of credit      |       | $                             | 2,500      |                            | $          | 2,500 |   | $ | 2,500 |   | $ | 2,500 |   |
| Mortgage  debt                 |       | 63,406                        |       | 65,174                          |       | 60,002 |   | 59,508 |   |
| Interest  rate swaps           |       | 1,843                         |       | 1,843                           |       | 770 |   | 770 |   |

 

Thefair values of the trading and available-for-sale securities are based onquoted market prices.  The fair values ofthe revolving line of credit and mortgage debt are estimated based on currentrates offered to Griffin for similar debt of the same remaining maturities and,additionally, Griffin considers its credit worthiness in determining the fairvalue of its debt.  The fair value of theinterest rate swaps (used for purposes other than trading) is the estimatedamount Griffin would pay to terminate the swap agreements at the balance sheetdate, taking into account current interest rates and the credit worthiness ofthe counterparty for assets and the credit worthiness of Griffin forliabilities.

 

At August 28, 2010 and November 28, 2009, the fair values ofGriffin’s fixed rate mortgages were $44.9 million and $39.3 million,respectively.  The fair values were basedon the present values of future cash flows discounted at estimated borrowingrates for similar loans.

 

Thefair values of Griffin’s nonfinancial assets related to the buildingacquisition in Breinigsville, Pennsylvania on January 8, 2010, theacquisition date, are listed below. There were no liabilities assumed 

 

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inconnection with this acquisition.  Theseassets were initially recorded at fair value but will not be re-measured atfair value on a recurring basis.

 
| ** **                  | ** ** | **Quoted Prices in**   | ** ** | **Significant**    | ** ** | **Significant**    | ** ** |
|-----------------------------|------------|----------------------------------|------------|--------------------|------------|--------------------|------------|
| ** **                  | ** ** | **Active Markets for** | ** ** | **Observable**     | ** ** | **Unobservable**   | ** ** |
| ** **                  | ** ** | **Identical Assets**        | ** ** | **Inputs**         | ** ** | **Inputs**         | ** ** |
| ** **                  | ** ** | **(Level 1)**               | ** ** | **(Level 2)** | ** ** | **(Level 3)** | ** ** |
| Real  estate held for lease |       | $                                | —     |               | $          | 5,381              |       | $ | — |   |
| Intangible  assets          |       | $                                | —     |               | $          | —             |       | $ | 1,019 |   |

 

4.     Inventories

 

Inventories consist of:

 
| ** **              | ** ** | **August 28, 2010** | ** ** | **November 28, 2009** | ** ** |
|-------------------------|------------|-------------------------------|------------|---------------------------------|------------|
|                    |       |                          |       |                            |       |
| Nursery  stock          |       | $                             | 13,912     |                            | $          | 17,999 |   |
| Materials  and supplies |       | 1,027                         |       | 1,574                           |       |
|                    |       | $                             | 14,939     |                            | $          | 19,573 |   |

 

As a result of the shutdown of Imperial’s Floridafarm in fiscal 2009, all of Imperial’s inventory as of August 28, 2010 andNovember 28, 2009 is at Imperial’s Connecticut farm and field liner bedslocated nearby that farm.

 

5.     Real Estate Assets

 

*Buildingand Undeveloped Land Acquisitions*

 

On January 8, 2010,Griffin Land closed on the purchase of an approximate 120,000 square footindustrial building in Breinigsville, Pennsylvania.  The building was acquired from the bankruptcyestate of the previous owner of the building. Griffin Land paid $6.4 million in cash for the building, includingapproximately $1.0 million paid as a deposit in the 2009 fourth quarter.  The building is located in a major industrialarea of Pennsylvania’s Lehigh Valley and is currently under a full buildinglease to Olympus Corporation of the Americas (“Olympus”).  Griffin Land incurred approximately $0.3million of acquisition costs on the purchase of this building, which areincluded in selling, general and administrative expenses on Griffin’sconsolidated statement of operations for the 2010 nine month period.  Subsequent to the purchase of this building,Griffin Land completed a lease amendment with Olympus that extends the leaseterm through 2025.  On January 29,2010, Griffin closed on a $4.3 million nonrecourse mortgage on this building(see Note 8).  This is Griffin Land’sfirst real estate purchase outside of the Hartford, Connecticut market, whereGriffin Land’s core real estate holdings are located.

 

Basedon an independent appraisal of the building acquired, Griffin determined thatthe fair value of the assets acquired approximated the purchase price.  Of the $6.4 million purchase price, approximately$5.4 million represented the fair value of the real estate held for lease andapproximately $1.0 million represented the fair value of the acquiredintangible assets, comprised of the value of the in-place lease at the time ofpurchase and a tenant relationship intangible asset.  The intangible assets are included in otherassets on Griffin’s consolidated balance sheet.

 

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OnMarch 17, 2010, Griffin Land closed on the purchase of approximately 51acres of undeveloped land in Lower Nazareth, Pennsylvania.  The undeveloped land was acquired from thebankruptcy estate of the sole owner of the property.  The purchase price was $1.8 million plusacquisition expenses, with approximately $0.3 million paid as a deposit in the2009 fourth quarter.  The undevelopedland is located in a major industrial area of Pennsylvania’s Lehigh Valley andhas approvals for the development of two industrial buildings totalingapproximately 530,000 square feet.

 

Real estate held for sale or lease consists of:

 
| ** **                  | ** ** | **Estimated**                                     | ** ** | **August 28, 2010** | ** ** |
|-----------------------------|------------|---------------------------------------------------|------------|-------------------------------|------------|
| ** **                  | ** ** | **Useful Lives**                             | ** ** | **Held for Sale**   | ** ** | **Held for Lease** | ** ** | **Total** | ** ** |
| Land                        |       |                                              |       | $                             | 1,634      |   | $ | 10,952 |   | $ | 12,586 |   |
| Land  improvements          |       | 10  to 30 years                                   |       | 691                           |       | 13,312 |   | 14,003 |   |
| Buildings  and improvements |       | 10  to 40 years                                   |       | —                        |       | 128,397 |   | 128,397 |   |
| Tenant  improvements        |       | Shorter  of useful life or terms of related lease |       | —                        |       | 14,033 |   | 14,033 |   |
| Development  costs          |       |                                              |       | 6,920                         |       | 4,531 |   | 11,451 |   |
|                        |       |                                              |       | 9,245                         |       | 171,225 |   | 180,470 |   |
| Accumulated  depreciation   |       |                                              |       | —                        |       | (47,057 | ) | (47,057 | ) |
|                        |       |                                              |       | $                             | 9,245      |   | $ | 124,168 |   | $ | 133,413 |   |

 
| ** **                  | ** ** | **Estimated**                                     | ** ** | **November 28, 2009** | ** ** |
|-----------------------------|------------|---------------------------------------------------|------------|---------------------------------|------------|
| ** **                  | ** ** | **Useful Lives**                             | ** ** | **Held for Sale**     | ** ** | **Held for Lease** | ** ** | **Total** | ** ** |
| Land                        |       |                                              |       | $                               | 1,634      |   | $ | 8,048 |   | $ | 9,682 |   |
| Land  improvements          |       | 10  to 30 years                                   |       | 691                             |       | 12,952 |   | 13,643 |   |
| Buildings  and improvements |       | 10  to 40 years                                   |       | —                          |       | 124,603 |   | 124,603 |   |
| Tenant  improvements        |       | Shorter  of useful life or terms of related lease |       | —                          |       | 12,538 |   | 12,538 |   |
| Development  costs          |       |                                              |       | 6,720                           |       | 4,270 |   | 10,990 |   |
|                        |       |                                              |       | 9,045                           |       | 162,411 |   | 171,456 |   |
| Accumulated  depreciation   |       |                                              |       | —                          |       | (43,145 | ) | (43,145 | ) |
|                        |       |                                              |       | $                               | 9,045      |   | $ | 119,266 |   | $ | 128,311 |   |

 

Includedin real estate held for lease as of August 28, 2010 and November 28,2009 was $2,538 and $2,786, respectively, reflecting the net book value ofImperial’s Florida farm that was shut down in fiscal 2009 and is being leasedto another landscape nursery grower.

 

Totaldepreciation expense related to real estate held for sale or lease was $1,451and $1,235 in the 2010 and 2009 third quarters, respectively, and $4,388 and$3,606 in the 2010 and 2009 nine month 

 

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periods,respectively.  There was no capitalizedinterest in the 2010 nine month period. Griffin capitalized interest of $100 and $181 in the 2009 third quarterand nine month periods, respectively.

 

6.     Investments

 

*Short-Term Investments*

 

Inthe 2010 first quarter, Griffin sold its remaining short-term investments.  Griffin’s short-term investments werecomprised of debt securities and were accounted for as trading securities underFASB ASC 320-10, “Investments - Debt and Equity Securities” (“ASC 320-10”).  Accordingly, the securities were recorded attheir fair value based upon quoted market prices at the balance sheet date andnet realized and unrealized gains and losses on these investments are includedin investment income in Griffin’s consolidated statements of operations.  The composition of short-term investments at November 28,2009 was as follows:

 
| ** **                | ** ** | **Cost** | ** ** | **Fair Value** | ** ** |
|---------------------------|------------|----------|------------|---------------------|------------|
| U.S.  Treasury securities |       | $        | 453        |                | $          | 454 |   |
|                           |            |          |            |                     |            |  |  |

 

Investmentincome in the 2010 and 2009 third quarters and the 2010 and 2009 nine monthperiods consists of:

 
| ** **                                                 | ** ** | **For the 13 Weeks Ended,** | ** ** | **For the 39 Weeks Ended,** | ** ** |
|------------------------------------------------------------|------------|-------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                 | ** ** | **Aug. 28, 2010**                     | ** ** | **Aug. 29, 2009**                     | ** ** | **Aug. 28, 2010** | ** ** | **Aug. 29, 2009** | ** ** |
|                                                       |       |                                            |       |                                            |       |   |   |   |   |
| Interest  and dividend income                              |       | $                                               | 20         |                                            | $          | 28 |   | $ | 192 |   | $ | 115 |   |
| Net  realized gains on the sales of short-term investments |       | —                                          |       | —                                          |       | — |   | 108 |   |
| Change  in unrealized gains on short-term investments      |       | —                                          |       | —                                          |       | — |   | (78 | ) |
| Other  investment income                                   |       | —                                          |       | —                                          |       | 2 |   | 7 |   |
|                                                       |       | $                                               | 20         |                                            | $          | 28 |   | $ | 194 |   | $ | 152 |   |

 

*Centaur Media plc*

 

Griffin’s investment in thecommon stock of Centaur Media plc (“Centaur Media”) is accounted for as anavailable-for-sale security under ASC 320-10, whereby increases ordecreases in the fair value of this investment, net of income taxes, along withthe effect of changes in the foreign currency exchange rate, net of incometaxes, are recorded as a component of other comprehensive income (see Note 9).

 

As of August 28, 2010, the cost, gross unrealized gain and fairvalue of Griffin’s investment in Centaur Media were $2,677, $1,065 and $3,742,respectively.  As of November 28,2009, the cost, gross unrealized gain and fair value of Griffin’s investment inCentaur Media were $2,677, $1,938 and $4,615, respectively.

 

7.     Property and Equipment

 

Propertyand equipment consist of:

 

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| ** **                  | ** ** | **Estimated Useful  Lives** | ** ** | **August 28, 2010** | ** ** | **November 28, 2009** | ** ** |
|-----------------------------|------------|----------------------------------|------------|-------------------------------|------------|---------------------------------|------------|
| 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                   |       | 11,806                        |       | 11,824                          |       |
|                        |       |                             |       | 15,646                        |       | 15,664                          |       |
| Accumulated  depreciation   |       |                             |       | (13,220                       | )          | (12,934                         | )          |
|                        |       |                             |       | $                             | 2,426      |                            | $          | 2,730 |   |

 

Griffindid not incur any new capital lease obligations in either the 2010 or the 2009nine month periods.

 

8.     Long-Term Debt

 

Long-term debt includes:

 
| ** **                                          | ** ** | **August 28, 2010** | ** ** | **November 28, 2009** | ** ** |
|-----------------------------------------------------|------------|-------------------------------|------------|---------------------------------|------------|
| Nonrecourse  mortgages:                             |       |                          |       |                            |       |
| 6.08%,  due January 1, 2013                    |       | $                             | 7,248      |                            | $          | 7,419 |   |
| 6.30%,  due May 1, 2014                        |       | 675                           |       | 792                             |       |
| 5.73%,  due July 1, 2015                       |       | 19,845                        |       | 20,097                          |       |
| 8.13%,  due April 1, 2016                      |       | 4,616                         |       | 4,814                           |       |
| 7.0%,  due October 1, 2017                     |       | 6,493                         |       | 6,636                           |       |
| Variable  rate mortgage, due February 1, 2019* |       | 11,898                        |       | 11,776                          |       |
| Variable  rate mortgage, due July 1, 2019*     |       | 8,367                         |       | 8,468                           |       |
| 6.5%,  due January 27, 2020                    |       | 4,264                         |       | —                          |       |
| Total  nonrecourse mortgages                        |       | 63,406                        |       | 60,002                          |       |
| Revolving  line of credit                           |       | 2,500                         |       | 2,500                           |       |
| Capital  leases                                     |       | 50                            |       | 96                              |       |
| Total                                               |       | 65,956                        |       | 62,598                          |       |
| Less:  current portion                              |       | (8,716                        | )          | (1,532                          | )          |
| Total  long-term debt                               |       | $                             | 57,240     |                            | $          | 61,066 |   |

 

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* Griffin entered intointerest rate swap agreements to effectively fix the interest rates on theseloans (see below).

 

On January 29, 2010,Griffin closed on a $4.3 million nonrecourse mortgage with NewAllianceBank.  This mortgage is collateralized bythe 120,000 square foot industrial building in Breinigsville, Pennsylvania thatwas acquired in the 2010 first quarter. This mortgage has a ten-year term and a fixed interest rate of 6.5% withmonthly principal and interest payments that started on March 1, 2010,based on a twenty-five year amortization schedule.

 

On February 6, 2009,Griffin closed on a $12 million construction to permanent mortgage loan withBerkshire Bank (the “Berkshire Bank Loan”), which provided a significantportion of the financing for construction in 2009 of an approximate 304,000square foot warehouse facility in New England Tradeport (“Tradeport”), Griffin’sindustrial park in Windsor and East Granby, Connecticut.  Prior to the closing of the Berkshire BankLoan, Griffin Land entered into a ten-year lease with The Tire Rack, Inc.(“Tire Rack”), a private company, to lease approximately 257,000 square feet ofthis facility.  Under 

 

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certain conditions, but nolater than August 2014, the beginning of the sixth year of the lease, TireRack is required to lease the entire building. The lease contains provisions for a potential expansion that wouldincrease the size of the building up to approximately 450,000 square feet.

 

Through January 31,2010, the Berkshire Bank Loan functioned as a construction loan, with GriffinLand drawing funds as construction on the new warehouse progressed.  The interest rate during that period was thegreater of 2.75% above the thirty day LIBOR rate or 4%.  Payments during that period were for interestonly.  On February 1, 2010, theBerkshire Bank Loan converted to a nine-year nonrecourse mortgagecollateralized by the new warehouse facility, with monthly payments ofprincipal and interest that started on March 1, 2010, based on atwenty-five year amortization schedule. On February 1, 2010, the interest rate on the Berkshire Bank Loanconverted to the thirty day LIBOR rate plus 2.75%.

 

At the time Griffin closedthe Berkshire Bank Loan, Griffin also entered into an interest rate swapagreement with the bank for a notional principal amount of $12 million atinception to fix the interest rate at 6.35% for the final nine years of theloan.  Payments under the swap agreementcommenced on the same date that payments under the nine-year nonrecoursemortgage commenced and will continue monthly until February 1, 2019, whichis also the termination date of the Berkshire Bank Loan.

 

On July 9, 2009 Griffinclosed on a mortgage for $8.5 million with People’s United Bank (“the People’sBank Mortgage”) on four of its industrial buildings in Tradeport, three ofwhich were included in the collateral on a mortgage that was repaid on April 1,2009.  The People’s Bank Mortgage isnonrecourse, however, a subsidiary of Griffin entered into a ten-year lease on90% of the space in the mortgaged buildings. The master lease will stay in effect until overall occupancy and operatingresults of the collateral properties increase to certain levels.  If not terminated earlier, the master leasewill expire at the end of the mortgage term. In addition, the People’s Bank Mortgage may be increased in incrementsup to an aggregate borrowing of $10.5 million if the leasing of the currentlyvacant space meets certain criteria.  ThePeople’s Bank Mortgage has a term of ten years with principal and interestpayments based on a twenty-five year amortization period.  The interest rate under the People’s BankMortgage is the thirty day LIBOR rate plus 3.08%.

 

At the time Griffin closedon the People’s Bank Mortgage, Griffin also entered into an interest rate swapagreement with the bank for a notional principal amount of $8.5 million atinception to fix the interest rate at 6.58% throughout the term of thisloan.  Payments under this swap agreementcommenced at the same time as payments made under the People’s Bank Mortgageand such payments will be made at the same time as the remaining loan paymentswill be made over the ten-year terms of the loan and swap agreement.

 

Griffin accounts for both ofits interest rate swap agreements as effective cash flow hedges (see Note3).  No ineffectiveness on the cash flowhedges was recognized as of August 28, 2010 and none is anticipated overthe term of the agreements.  Amounts inaccumulated other comprehensive income (loss) will be reclassified intointerest expense over the terms of the swap agreements to achieve fixed rateson each mortgage.  Neither of theinterest rate swap agreements contains any credit risk related contingentfeatures.  For the 2010 nine monthperiod, Griffin recognized a loss of $1,073 (included in other comprehensiveloss), before taxes, on its interest rate swap agreements.  As of August 28, 2010, $213 is expectedto be reclassified over the next twelve months from other comprehensive income (loss)to interest expense.  As of August 28,2010, the liability for Griffin’s interest rate swap agreements was $1,843 andis included in other noncurrent liabilities on Griffin’s consolidated balancesheet.

 

On February 27, 2009,Griffin closed on a $10 million Revolving Line of Credit with Doral Bank (the “CreditLine”) that has a term of two years, but may be extended for an additional yearby Griffin.  The Credit Line iscollateralized by several of Griffin Land’s buildings in Griffin Center andGriffin 

 

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Center South.  The interest rate on the Credit Line is thegreater of the prime rate plus 1.5% or 6.88%. As of August 28, 2010, the prime rate was 3.25%.  Griffin is using this facility for seasonalworking capital needs, to supplement cash flow from operations and for generalcorporate purposes.  As of August 28,2010 and November 28, 2009, there was $2.5 million outstanding on theCredit Line.

 

As of August 28, 2010,the entire balance of Griffin’s 6.08% nonrecourse mortgage due January 1,2013 ($7.2 million) is included in the current portion of long-term debt.  Griffin has classified this mortgage ascurrent because, for the twelve month period ending December 31, 2010,Griffin expects that the ratio of the net operating income, as defined in themortgage agreement, of the buildings that collateralize the mortgage, to thedebt service of the mortgage (the “debt service coverage covenant”) will beless than the 1.25 required under the mortgage. The debt service coverage covenant for the twelve months ended December 31,2009 was waived by the bank as Griffin would not have been in compliance atthat measurement date.  Griffin currentlyexpects to obtain a waiver from the bank for the debt service coverage covenantfor the twelve months ending December 31, 2010, prior to that date,although there can be no such assurance that the bank will grant such a waiver.

 

9.     Stockholders’ Equity

 

*EarningsPer Share*

 

Basic and diluted per share results were based onthe following:

 
| ** **                                                                        | ** ** | **For the 13 Weeks Ended,** | ** ** | **For the 39 Weeks Ended,** | ** ** |
|-----------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                                        | ** ** | **August 28,  2010**                       | ** ** | **August 29,  2009**                       | ** ** | **August 28,  2010** | ** ** | **August 29,  2009** | ** ** |
|                                                                              |       |                                            |       |                                            |       |   |   |   |   |
| Net  loss as reported for computation of basic and diluted per share results      |       | $                                               | (1,313     | )                                               | $          | (1,436 | ) | $ | (3,942 | ) | $ | (4,231 | ) |
|                                                                              |       |                                            |       |                                            |       |   |   |   |   |
| Weighted  average shares outstanding for computation of basic per share results   |       | 5,106,000                                       |       | 5,082,000                                       |       | 5,103,000 |   | 5,077,000 |   |
|                                                                              |       |                                            |       |                                            |       |   |   |   |   |
| Incremental  shares from assumed exercise of Griffin stock options (a)            |       | —                                          |       | —                                          |       | — |   | — |   |
|                                                                              |       |                                            |       |                                            |       |   |   |   |   |
| Weighted  average shares outstanding for computation of diluted per share results |       | 5,106,000                                       |       | 5,082,000                                       |       | 5,103,000 |   | 5,077,000 |   |
|                                                                                   |            |                                                 |            |                                                 |            |  |  |  |  |  |  |  |  |

 

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(a)               Incrementalshares from the assumed exercise of Griffin stock options are not included inperiods where the inclusion of such shares would be anti-dilutive. Theincremental shares from the assumed exercise of stock options in the thirteenand thirty-nine weeks ended August 28, 2010, would have been 16,000 and18,000, respectively. The incremental shares from the assumed exercise of stockoptions in the thirteen and thirty-nine weeks ended August 29, 2009, wouldhave been 33,000 and 36,000, respectively.

 

*Griffin Stock Option Plan*

 

In fiscal 2009, the Board ofDirectors adopted the Griffin Land & Nurseries, Inc. 2009 StockOption Plan (the “2009 Stock Option Plan”), which replaced the Griffin Land &Nurseries, Inc. 1997 Stock Option Plan (the “1997 Stock Option Plan”).  The 2009 Stock Option Plan was approved by

 

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Griffin’s stockholders atGriffin’s 2009 Annual Meeting of Stockholders held on May 12, 2009.  The Compensation Committee of Griffin’s Boardof Directors administers the 2009 Stock Option Plan.  The 2009 Stock Option Plan makes availableoptions to purchase 386,926 shares of Griffin common stock, which includes161,926 options to purchase the 161,926 shares that were available for issuanceunder the 1997 Stock Option Plan at the time it was replaced.  Options granted under the 2009 Stock OptionPlan may be either incentive stock options or non-qualified stock optionsissued at fair market value on the date approved by Griffin’s Board ofDirectors. Vesting of all of Griffin’s previously issued stock options issolely based upon service requirements and does not contain market orperformance conditions.

 

Stock options issued willexpire ten years from the grant date.  Inaccordance with the 2009 Stock Option Plan, stock options issued tonon-employee directors upon their initial election to the board of directorsare fully exercisable immediately upon the date of the option grant. Stockoptions issued to non-employee directors upon their reelection to the board ofdirectors vest on the second anniversary from the date of grant. Stock optionsissued to employees vest in equal installments on the third, fourth and fifthanniversaries from the date of grant. None of the stock options outstanding at August 28,2010 may be exercised as stock appreciation rights.

 

There were 8,202 and 70,263stock options granted during the 2010 and 2009 nine month periods,respectively.  The fair value of thestock options granted during the 2010 nine month period was $13.48 each.  The fair values of the stock options grantedduring the 2009 nine month period were $14.88 for 22,500 options, $14.40 for22,500 options, $10.54 for 15,000 options, $13.02 for 8,514 options and $15.53for 1,749 options.  The fair values ofall options granted were estimated as of each grant date using theBlack-Scholes option-pricing model. Assumptions used in determining the fair value of the stock optionsgranted in the 2010 and 2009 nine month periods were as follows:

 
| ** **               | ** ** | **For the 39 Weeks Ended,** | ** ** |
|--------------------------|------------|-------------------------------------------------|------------|
| ** **               | ** ** | **August 28, 2010**                   | ** ** | **August 29, 2009** | ** ** |
| Expected  volatility     |       | 42.3%                                           |       | 37.7%  to 43.5% |   |
| Risk  free interest rate |       | 3.0%                                            |       | 1.6%  to 2.7% |   |
| Expected  option term    |       | 8.5  years                                      |       | 5  to 8.5 years |   |
| Annual  dividend yield   |       | $0.40                                           |       | $0.40 |   |

 

Activityunder the Griffin Stock Option Plan is summarized as follows:

 
| ** **                          | ** ** | **For the 39 Weeks Ended,** | ** ** |
|-------------------------------------|------------|-------------------------------------------------|------------|
| ** **                          | ** ** | **August 28, 2010**                   | ** ** | **August 29, 2009** | ** ** |
| **Vested Options**             | ** ** | **Number of  Shares**                      | ** ** | **Weighted  Avg.  Exercise  Price** | ** ** | **Number of  Shares** | ** ** | **Weighted  Avg.  Exercise  Price** | ** ** |
| Outstanding  at beginning of period |       | 71,133                                          |       | $ | 17.61 |   | 89,368 |   | $ | 15.56 |   |
| Exercised                           |       | (15,000                                         | )          | $ | 11.34 |   | (14,020 | ) | $ | 16.59 |   |
| Vested                              |       | 5,698                                           |       | $ | 32.84 |   | 6,154 |   | $ | 34.57 |   |
| Granted  and vested                 |       | —                                          |       | — |   | 1,749 |   | $ | 34.30 |   |
| Forfeited                           |       | —                                          |       | — |   | (2,118 | ) | $ | 31.06 |   |
| Outstanding  at end of period       |       | 61,831                                          |       | $ | 20.53 |   | 81,133 |   | $ | 16.82 |   |

 

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| **Range of Exercise  Prices for Vested  Options** | ** ** | **Outstanding at  August 28, 2010** | ** ** | **Weighted Avg.  Exercise Price** | ** ** | **Weighted Avg.  Remaining  Contractual Life  (in years)** | ** ** | **Total  Intrinsic  Value** | ** ** | **Total  Grant Date  Fair  Value** | ** ** |
|-----------------------------------------------------------------------|------------|----------------------------------------------------|------------|---------------------------------------------|------------|---------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------------------|------------|
| $11.00-$14.00                                                         |       | 23,544                                             |       | $                                           | 12.66      |                                                                      | 1.0        |                        | $          | 317                                     |       | $ | 109 |   |
| $15.00-$18.00                                                         |       | 15,322                                             |       | $                                           | 16.80      |                                                                      | 1.1        |                        | 143        |                                    | 98         |   |
| $24.00-$39.00                                                         |       | 22,965                                             |       | $                                           | 31.09      |                                                                      | 6.0        |                        | 6          |                                    | 362        |   |
|                                                                  |       | 61,831                                             |       | $                                           | 20.53      |                                                                      | 2.9        |                        | $          | 466                                     |       | $ | 569 |   |

 
| ** **                        | ** ** | **For the 39 Weeks Ended,** | ** ** |
|-----------------------------------|------------|-------------------------------------------------|------------|
| ** **                        | ** ** | **August 28, 2010**                   | ** ** | **August 29, 2009** | ** ** |
| **Nonvested Options**        | ** ** | **Number of  Shares**                      | ** ** | **Weighted  Avg.  Exercise  Price** | ** ** | **Number of  Shares** | ** ** | **Weighted  Avg.  Exercise  Price** | ** ** |
| Nonvested  at beginning of period |       | 101,377                                         |       | $ | 32.84 |   | 40,684 |   | $ | 33.66 |   |
| Granted                           |       | 8,202                                           |       | $ | 29.25 |   | 68,514 |   | $ | 32.46 |   |
| Vested                            |       | (5,698                                          | )          | $ | 32.84 |   | (6,154 | ) | $ | 34.57 |   |
| Forfeited                         |       | —                                          |       | — |   | (1,667 | ) | $ | 30.95 |   |
| Nonvested  at end of period       |       | 103,881                                         |       | $ | 32.56 |   | 101,377 |   | $ | 32.84 |   |

 
| **Range of Exercise  Prices for  Nonvested Options** | ** ** | **Outstanding at  August 28, 2010** | ** ** | **Weighted Avg.  Exercise Price** | ** ** | **Weighted Avg.  Remaining  Contractual Life  (in years)** | ** ** | **Total  Intrinsic  Value** | ** ** | **Total  Grant Date  Fair  Value** | ** ** |
|--------------------------------------------------------------------------|------------|----------------------------------------------------|------------|---------------------------------------------|------------|---------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------------------|------------|
| $28.00-$31.00                                                            |       | 18,881                                             |       | $                                           | 28.96      |                                                                      | 8.8        |                        | $          | —                                  |       | $ | 256 |   |
| $33.00-$35.00                                                            |       | 85,000                                             |       | $                                           | 33.36      |                                                                      | 8.1        |                        | —     |                                    | 1,187      |   |
|                                                                     |       | 103,881                                            |       | $                                           | 32.56      |                                                                      | 8.2        |                        | $          | —                                  |       | $ | 1,443 |   |

 
| Number  of option holders at August 28, 2010 |   | 21 |   |
|---------------------------------------------------|--------|----|--------|

 

Compensation expense for stock options recognized in the 2010 thirdquarter and 2010 nine month period was $99 and $285, respectively, with relatedtax benefits of $26 and $73, respectively. Compensation expense for stock options recognized in the 2009 thirdquarter and 2009 nine month period was $93 and $274, respectively, with relatedtax benefits of $23 and $71, respectively. As of August 28, 2010, the unrecognized compensation expenserelated to nonvested stock options that will be recognized during futureperiods is as follows:

 
| Balance of Fiscal 2010 |   | $ | 97  |   |
|---------------------------------------|--------|---|-----|--------|
| Fiscal 2011                           |   | $ | 318 |   |
| Fiscal 2012                           |   | $ | 164 |   |
| Fiscal 2013                           |   | $ | 56  |   |
| Fiscal 2014                           |   | $ | 7   |   |

 

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*Accumulated Other Comprehensive (Loss) Income*

 

Changesin accumulated other comprehensive (loss) income in the 2010 and 2009 ninemonth periods consist of the following:

 
| ** **                                                                                                                     | ** ** | **For the 39 Weeks Ended,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                                                                                     | ** ** | **August 28, 2010**                   | ** ** | **August 29, 2009** | ** ** |
|                                                                                                                           |       |                                            |       |   |   |
| Balance  at beginning of period                                                                                                |       | $                                               | 926        |   | $ | 646 |   |
| (Decrease)  increase in fair value of Centaur Media, due to exchange (loss) gain, net of  taxes of ($85) and $61, respectively |       | (157                                            | )          | 114 |   |
| Decrease  in fair value of Centaur Media, net of taxes of ($221) and ($85),  respectively                                      |       | (410                                            | )          | (159 | ) |
| Increase  in value of cash flow hedges, net of taxes of ($397) and ($6), respectively                                          |       | (676                                            | )          | (11 | ) |
| Balance  at end of period                                                                                                      |       | $                                               | (317       | ) | $ | 590 |   |

 

Accumulatedother comprehensive (loss) income is comprised of the following:

 
| ** **                                          | ** ** | **August 28, 2010** | ** ** | **November 28, 2009** | ** ** |
|-----------------------------------------------------|------------|-------------------------------|------------|---------------------------------|------------|
| Unrealized  gain on investment in Centaur Media plc |       | $                             | 714        |                            | $          | 1,281 |   |
| Unrealized  loss on cash flow hedges                |       | (1,162                        | )          | (486                            | )          |
| Actuarial  gain on postretirement benefit plan      |       | 131                           |       | 131                             |       |
|                                                |       | $                             | (317       | )                               | $          | 926 |   |

 

*CashDividends*

 

Inboth the 2010 and 2009 nine month periods, Griffin declared three cashdividends of $0.10 per common share each.

 

10.   Supplemental FinancialStatement Information

 

*Supplemental Cash Flow Information*

 

The decreases of $873 and $69, respectively, in the2010 and 2009 nine month periods in Griffin’s investment in Centaur Mediareflect the mark to market adjustments of this investment and did not affectGriffin’s cash.

 

Included in accounts payable and accruedliabilities at August 28, 2010 and November 28, 2009 were $504 and$515, respectively, for additions to real estate held for sale or lease.  Accounts payable and accrued liabilities relatedto additions to real estate held for sale or lease decreased by $124 in the2010 nine month period and increased by $677 in the 2009 nine month period.

 

As of August 28, 2010, included inGriffin’s accrued liabilities is a dividend payable of $511 reflecting adividend on Griffin’s common stock declared prior to the end of the 2010 thirdquarter that was paid subsequent to the end of Griffin’s 2010 thirdquarter.  As of November 28, 2009,Griffin’s accrued liabilities included $509 for a dividend on Griffin’s commonstock that was declared prior to the end of fiscal 2009 and paid in the 2010first quarter.

 

Interest payments, net of capitalizedinterest, were $1,052 and $803 in the 2010 and 2009 third quarters,respectively, and $3,026 and $2,481 in the 2010 and 2009 nine month periods,respectively.

 

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*Income Taxes*

 

Griffin’seffective income tax rate was (38.4%) for the 2010 nine month period ascompared to (37.3%) for the 2009 nine month period.  The effective tax rate used in the 2010 ninemonth period is based on management’s projections for the balance of theyear.  To the extent that actual resultsdiffer from current projections, the effective income tax rate may change.

 

Anincrease to deferred tax assets of $306 in the 2010 nine month period relatesto the mark to market adjustment on Griffin’s investment in Centaur Media.  An increase to deferred tax assets of $397 inthe 2010 nine month period relates to the fair value adjustment of Griffin’scash flow hedges.  A decrease to deferredtax liabilities of $30 in the 2009 nine month period relates to the mark tomarket adjustment on Griffin’s investment in Centaur Media and to the fairvalue adjustment of a cash flow hedge that was entered into in the 2009 firstquarter.  These increases and decreasesto deferred income taxes are included as charges and credits, respectively, inGriffin’s other comprehensive income (loss) for the 2010 and 2009 nine monthperiods.

 

Asof August 28, 2010, Griffin’s consolidated balance sheet includes a netnoncurrent deferred tax asset of $1,922. Although Griffin has incurred pretax losses for the fiscal years ended November 29,2008 and November 28, 2009 and has also incurred a pretax loss in the 2010nine month period, management has concluded that a valuation allowance againstthose net deferred tax assets is not required because management believes it ismore likely than not that these assets will be realized. Griffin’s consolidatedbalance sheet as of August 28, 2010 includes an income tax receivable ofapproximately $6.7 million, which was collected subsequent to the end of the2010 third quarter.

 

*Postretirement Benefits*

 

Griffinmaintains a postretirement benefits program that provides principally healthand life insurance benefits to certain of its retirees. The liability forpostretirement benefits is included in other noncurrent liabilities on Griffin’sconsolidated balance sheets. Griffin’s postretirement benefits program isunfunded, with benefits to be paid from Griffin’s general assets.  Griffin’s contributions to its postretirementbenefits program in the 2010 and 2009 nine month periods were $2 and $3, respectively,with an expected contribution of $3 for the fiscal 2010 full year.  The components of Griffin’s postretirementbenefits expense are immaterial for all periods presented.

 

11.   Commitments andContingencies

 

Asof August 28, 2010, Griffin had committed purchase obligations of $0.9million, principally for the purchase of plants and raw materials by Imperialand for construction of tenant improvements related to recently signed leasesat Griffin Land.

 

Griffinis involved, as a defendant, in various litigation matters arising in theordinary course of business.  In theopinion of management, based on the advice of counsel, the ultimate liability,if any, with respect to these matters are not expected to be material,individually or in the aggregate, to Griffin’s consolidated financial position,results of operations or cash flows.

 

12.   Subsequent Events

 

Subsequentto the end of the 2010 third quarter, Griffin Land entered into an Option andReal Estate Purchase and Sale Agreement with a private company homebuilderwhereby in exchange for a payment of $100, the homebuilder obtained an optionto purchase the remaining twenty-five residential lots of Stratton Farms, aresidential development in Suffield, Connecticut.  Under the terms of the

 

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agreement, if thehomebuilder exercises its option to purchase all of the residential lots,Griffin Land would receive proceeds that would range from approximately $2.4million to approximately $2.9 million, depending upon the timing of the lotpurchases, over a three-year period and consequently expects to recognize again when the lots are sold.  Purchasesare scheduled annually over the three-year period, and the buyer’s failure tocomplete any scheduled purchase on a timely basis would terminate the buyer’soption. The agreement includes a short contingency period whereby thehomebuilder may terminate the agreement if the results of its tests andinvestigation of the land reveal an unsatisfactory result, condition orcircumstance or if the homebuilder is unable to secure financing upon termssatisfactory to the homebuilder.  If theagreement is terminated by the homebuilder during the contingency period, thehomebuilder is entitled to a refund of the amount paid.  There is no guarantee that this transactionwill be completed under its current terms, or at all.

 

Inaccordance with FASB ASC 855 “Subsequent Events,” Griffin has evaluated allother events or transactions occurring after August 28, 2010, the balancesheet date, and noted that there have been no other such events or transactionswhich would require recognition or disclosure in the consolidated financialstatements as of and for the third quarter and nine month period ended August 28,2010, other than the disclosures herein.

 

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| ITEM 2. |   | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|---------|--------|---------------------------------------------------------------------------------------------|

 

**Overview**

 

The consolidated financial statements of Griffininclude the accounts of Griffin’s subsidiary in the landscape nursery business, ImperialNurseries, Inc. (“Imperial”), and Griffin’s Connecticut and Massachusettsbased real estate business (“Griffin Land”).

 

The significant accounting policies and methods usedin the preparation of Griffin’s consolidated financial statements included inItem 1 are consistent with those used in the preparation of Griffin’s auditedfinancial statements for the fiscal year ended November 28, 2009 includedin Griffin’s Annual Report on Form 10-K as filed with the Securities andExchange Commission.

 

The preparation of financial statements inaccordance with accounting principles generally accepted in the United Statesof America requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities at the date of the financialstatements and the reported amounts of revenue and expenses in the reportingperiod.  Griffin regularly evaluatesestimates and assumptions related to the useful life and recoverability oflong-lived assets, stock-based compensation expense, deferred income tax assetvaluations, valuation of derivative instruments and inventory reserves.  Griffin bases its estimates and assumptions oncurrent facts, historical experience and various other factors that it believesto be reasonable under the circumstances, the results of which form the basisfor making judgments about the carrying values of assets and liabilities andthe accrual of costs and expenses that are not readily apparent from othersources. The actual results experienced by Griffin may differ materially andadversely from Griffin’s estimates.  Tothe extent there are material differences between the estimates and the actualresults, future results of operations will be affected.  The significant accounting estimates used byGriffin in preparation of its financial statements for the thirteen andthirty-nine weeks ended August 28, 2010 are consistent with those used byGriffin to prepare its fiscal 2009 financial statements.

 

**Summary**

 

Griffin incurred a net loss of $1.3 million in thethirteen weeks ended August 28, 2010 (the “2010 third quarter”) ascompared to a net loss of $1.4 million in the thirteen weeks ended August 29,2009 (the “2009 third quarter”).  Theslightly lower net loss in the 2010 third quarter reflects a decrease ofapproximately $0.5 million in the operating loss incurred by Griffin in the2010 third quarter as compared to the 2009 third quarter partially offset by anincrease of approximately $0.3 million in interest expense and an approximately$0.1 million decrease in the income tax benefit in the 2010 third quarter ascompared to the 2009 third quarter.

 

Griffin’s lower operating loss reflects an increaseof approximately $0.5 million in operating profit at Griffin Land and adecrease of approximately $0.3 million in general corporate expense in the 2010third quarter as compared to the 2009 third quarter, partially offset by anincrease of approximately $0.3 million in the operating loss incurred byImperial in the 2010 third quarter as compared to the 2009 third quarter.  The higher operating profit at Griffin Landin the 2010 third quarter as compared to the 2009 third quarter principallyreflects higher rental revenue from an increase in leased space in the currentquarter as compared to the prior year quarter. The higher operating loss at Imperial principally reflects a highercharge for unsaleable inventories incurred in the 2010 third quarter ascompared to the 2009 third quarter.  Thehigher interest expense in the 2010 third quarter as compared to the 2009 thirdquarter reflects a higher level of debt as a result of new borrowings used tofinance Griffin Land’s construction of 

 

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a new building that was completed in the 2009 thirdquarter and to finance Griffin Land’s acquisition of a building in the 2010first quarter.  The occupancy of thesetwo buildings contributed significantly to the increase in space being leasedin the 2010 third  quarter over the prioryear quarter.

 

Griffin incurred a net loss of $3.9 million for thethirty-nine weeks ended August 28, 2010 (the “2010 nine month period”) ascompared to a net loss of $4.2 million for the thirty-nine weeks ended August 29,2009 (the “2009 nine month period”).  Thelower net loss in the 2010 nine month period reflects a decrease ofapproximately $1.2 million in the operating loss incurred by Griffin partiallyoffset by an increase of approximately $0.8 million in interest expense in the2010 nine month period as compared to the 2009 nine month period and a $0.1million decrease in the income tax benefit in the 2010 nine month period ascompared to the 2009 nine month period.

 

Griffin’s lower operating loss reflects an increaseof approximately $0.8 million in operating profit at Griffin Land and adecrease of approximately $0.4 million in general corporate expense in the 2010nine month period as compared to the 2009 nine month period.  The operating loss incurred by Imperial inthe 2010 nine month period was essentially unchanged from the 2009 nine monthperiod.  The higher operating profit atGriffin Land principally reflects higher rental revenue from its leasingoperations.  The lower general corporateexpense was due to lower incentive compensation expense and lower expensesrelated to Griffin’s non-qualified savings plan.  The higher interest expense in the 2010 ninemonth period as compared to the 2009 nine month period reflects a higher levelof debt in the 2010 nine month period as a result of new borrowings used tofinance Griffin Land’s construction of a new building in fiscal 2009 and tofinance Griffin Land’s acquisition of a building in the 2010 firstquarter.  The occupancy of these twobuildings contributed significantly to the increase in leased space in thecurrent nine month period over the prior year nine month period.

 

**Results of Operations**

 

**Thirteen Weeks Ended August 28, 2010 Compared to the ThirteenWeeks Ended August 29, 2009**

 

Griffin’s consolidated total revenue decreased from$7.8 million in the 2009 third quarter to $7.5 million in the 2010 thirdquarter due to an approximate $0.9 million decrease in revenue at Imperial substantiallyoffset by an approximate $0.7 million increase in revenue at Griffin Land.

 

Total revenue at Griffin Land increased from $4.2million in the 2009 third quarter to $4.9 million in the 2010 thirdquarter.  The increase of approximately$0.7 million was due entirely to an increase in rental revenue, reflecting: (a) approximately$0.4 million of rental revenue from leasing much of the new space in GriffinLand’s real estate portfolio, comprised of the 304,000 square foot building inTradeport that was completed and placed in service in the 2009 third quarter(257,000 square feet of which is currently under a ten-year lease pursuant towhich the current tenant is required to lease the balance of the building nolater than August 2014, the beginning of the sixth year of the lease) andthe 120,000 square foot industrial building in Breinigsville, Pennsylvaniaacquired during the 2010 first quarter; and (b) approximately $0.3 millionof rental revenue from leasing previously vacant space subsequent to the end ofthe 2009 third quarter.

 

As a result of the weakened economy, market activityfor industrial space was soft throughout fiscal 2009 and has remained weakthrough the 2010 third quarter.  Marketactivity for office space was also weak in fiscal 2009 and through the 2010third quarter, however, thus far in fiscal 2010, Griffin Land has entered intonew leases for approximately 81,000 square feet of previously vacant officespace.

 

A summary of the square footage of Griffin Land’sreal estate portfolio is as follows:

 

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| ** **                    | ** ** | **Total********Square********Footage** | ** ** | **Square********Footage********Leased** | ** ** | **Percentage********Leased** | ** ** |
|-------------------------------|------------|----------------------------------------|------------|-----------------------------------------|------------|------------------------------|------------|
|                          |       |                                   |       |                                    |       |                         |       |
| As of August 28, 2010    |       | 2,540,000                              |       | 2,081,000                               |       | 82%                          |       |
| As of November 28,  2009 |       | 2,420,000                              |       | 1,893,000                               |       | 78%                          |       |
| As of August 29,  2009   |       | 2,420,000                              |       | 1,893,000                               |       | 78%                          |       |

 

Griffin Land’s total square footage and squarefootage leased at the end of the 2010 third quarter was higher than the 2009year end and the end of the 2009 third quarter due to the purchase of a 120,000square foot fully leased industrial building located in Breinigsville,Pennsylvania in the 2010 first quarter and the leasing of approximately 81,000square feet of previously vacant space, partially offset by leases forapproximately 13,000 square feet that expired and were not renewed.  In addition to the leasing of previouslyvacant office space this year, Griffin Land has renewed most of its leases thatwere scheduled to expire this year, resulting in an aggregate of 135,000 squarefeet, mostly industrial space, being renewed thus far in fiscal 2010.  However, two leases aggregating 63,000 squarefeet of currently leased industrial space will expire in the 2010 fourth quarterand will not be renewed.

 

Griffin Land had no property sales revenue in eitherthe 2010 or the 2009 third quarters. Property sales occur periodically and changes in revenue from year toyear from those transactions may not be indicative of any trends in the realestate business.

 

Net sales and other revenue at Imperial decreasedfrom $3.5 million in the 2009 third quarter to $2.6 million in the 2010 thirdquarter.  The decrease in total net salesand other revenue at Imperial reflects the closure of Imperial’s Florida farmin the third quarter last year.  TheFlorida farm is currently leased to another grower.  As a result of the Florida farm’s closure, Imperial’s2010 third quarter includes no net sales from the Florida farm but does includeother revenue of $0.1 million from leasing that facility, whereas the 2009third quarter included $1.2 million of net sales from the Florida farm asImperial liquidated most of the farm’s inventory prior to its closure.  The lack of net sales from Imperial’s Floridafarm in the 2010 third quarter resulted in only a $0.2 million reduction inImperial’s gross profit in the 2010 third quarter as compared to the 2009 thirdquarter because net sales from Imperial’s Florida farm in the 2009 thirdquarter were essentially made at the carrying value of the relatedinventory.  The $0.2 million of grossprofit from the Florida farm in the 2009 third quarter reflected the differencebetween the estimated inventory reserve recorded at the previous year end andactual results from liquidating the Florida inventory in fiscal 2009.

 

Partially offsetting the effect on net sales andother revenue of the shutdown of the Florida farm was an increase ofapproximately $0.1 million of net sales and other revenue from Imperial’sConnecticut farm in the 2010 third quarter as compared to the 2009 thirdquarter.  Net sales of plants from theConnecticut farm were essentially unchanged in the 2010 third quarter ascompared to the 2009 third quarter, as an approximate 9% decrease in unit salesvolume was offset by selling, on average, larger plant sizes in the currentquarter at slightly higher pricing than the 2009 third quarter.  The increase in net sales and other revenue of the Connecticut farm includesan increase of $0.1 million in royalty revenue, due to timing.

 

Griffin incurred a consolidated operating loss,including general corporate expense, of approximately $1.0 million in the 2010third quarter as compared to a consolidated operating loss, including generalcorporate expense, of approximately $1.6 million in the 2009 thirdquarter.  The lower 

 

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operating loss in the 2010 third quarter principallyreflects an increase of approximately $0.5 million in operating profit atGriffin Land and a decrease of approximately $0.3 million of general corporateexpense, partially offset by an increase of approximately $0.3 million in theoperating loss incurred by Imperial.

 

Operating results of Griffin Land in the 2010 and2009 third quarters were as follows:

 
| ** **                                                                                                                                                    | ** ** | **2010**                             | ** ** | **2009**            | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|---------------------|------------|
| ** **                                                                                                                                                    | ** ** | **Third Qtr.**                  | ** ** | **Third Qtr.** | ** ** |
| ** **                                                                                                                                                    | ** ** | **(amounts in thousands)** | ** ** |
| Rental  revenue                                                                                                                                               |       | $                                    | 4,912      |                | $          | 4,246 |   |
| Costs  related to rental revenue excluding depreciation and amortization expense (a)                                                                          |       | (1,569                               | )          | (1,659              | )          |
| Profit  from leasing activities before general and administrative expenses and before  depreciation and amortization expense (a)                              |       | 3,343                                |       | 2,587               |       |
| Revenue  from property sales                                                                                                                                  |       | —                               |       | —              |       |
| Costs  related to property sales                                                                                                                              |       | —                               |       | —              |       |
| Gain  from property sales                                                                                                                                     |       | —                               |       | —              |       |
| Profit  from leasing activities and gain from property sales before general and  administrative expenses and before depreciation and amortization expense (a) |       | 3,343                                |       | 2,587               |       |
| General  and administrative expenses excluding depreciation and amortization expense  and excluding acquisition expenses (a)                                  |       | (644                                 | )          | (599                | )          |
| Acquisition  expenses                                                                                                                                         |       | —                               |       | —              |       |
| Total  general and administrative expenses excluding depreciation and amortization  expense (a)                                                               |       | (644                                 | )          | (599                | )          |
| Profit  before depreciation and amortization expense (a)                                                                                                      |       | 2,699                                |       | 1,988               |       |
| Depreciation  and amortization expense related to costs of rental revenue                                                                                     |       | (1,557                               | )          | (1,362              | )          |
| Depreciation  and amortization expense - other                                                                                                                |       | (6                                   | )          | (8                  | )          |
| Operating  profit                                                                                                                                             |       | $                                    | 1,136      |                | $          | 618 |   |

 

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(a)              The costs related to rental revenue excluding depreciation andamortization expense, profit from leasing activities before general andadministrative expenses and before depreciation and amortization expense,general and administrative expenses excluding depreciation and amortizationexpense and excluding acquisition expenses, total general and administrativeexpenses excluding depreciation and amortization expense and profit beforedepreciation and amortization expense are disclosures not in conformity withaccounting principles generally accepted in the United States of America.  They are presented because Griffin believesthey are useful financial indicators for measuring the results in its realestate business segment.  However, theyshould not be considered as an alternative to operating profit as a measure ofoperating results in accordance with accounting principles generally acceptedin the United States of America.  Theaggregate of: (i) costs related to rental revenue excluding depreciationand amortization expense; (ii) costs related to property sales; and (iii) depreciationand amortization expense related 

 

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to costs of rental revenue, equals the costs relatedto rental revenue and property sales as reported on Griffin’s consolidatedstatement of operations.

 

Griffin Land’s profit from leasing activities beforegeneral and administrative expenses and before depreciation and amortizationexpense increased by approximately $0.8 million in the 2010 third quarter ascompared to the 2009 third quarter.  Theincrease principally reflects the higher rental revenue as a result of morespace being under lease in the 2010 third quarter than in the 2009 thirdquarter.  Costs related to rental revenueexcluding depreciation and amortization expense decreased by approximately $0.1million in the 2010 third quarter as compared to the 2009 third quarter, aslower operating expenses of approximately $0.2 million across all of GriffinLand’s other properties were partially offset by approximately $0.1 million ofbuilding operating expenses for the new Tradeport building placed in service inthe 2009 third quarter and the building in Breinigsville, Pennsylvania acquiredin the 2010 first quarter.

 

Griffin Land’s general and administrative expenseswere essentially unchanged in the 2010 third quarter as compared to the 2009third quarter.  Depreciation andamortization expense at Griffin Land increased from approximately $1.4 millionin the 2009 third quarter to approximately $1.6 million in the 2010 thirdquarter due principally to depreciation and amortization expense related to the304,000 square foot Tradeport building completed and placed in service in the2009 third quarter and the 120,000 square foot building in Breinigsville,Pennsylvania purchased in the 2010 first quarter.

 

Operating results of Imperial in the 2010 and 2009third quarters were as follows:

 
| ** **                                    | ** ** | **2010**                             | ** ** | **2009**            | ** ** |
|-----------------------------------------------|------------|--------------------------------------|------------|---------------------|------------|
| ** **                                    | ** ** | **Third Qtr.**                  | ** ** | **Third Qtr.** | ** ** |
| ** **                                    | ** ** | **(amounts in thousands)** | ** ** |
| Net  sales and other revenue                  |       | $                                    | 2,620      |                | $          | 3,528 |   |
| Cost  of goods sold                           |       | 3,381                                |       | 3,715               |       |
| Gross  loss                                   |       | (761                                 | )          | (187                | )          |
| Selling,  general and administrative expenses |       | (746                                 | )          | (988                | )          |
| Operating  loss                               |       | $                                    | (1,507     | )                   | $          | (1,175 | ) |

 

Imperial’s operating loss of $1.5 million in the2010 third quarter as compared to an operating loss of $1.2 million in the 2009third quarter reflects an increase of approximately $0.6 million in Imperial’sgross loss partially offset by an approximate $0.2 million decrease in selling,general and administrative expenses.  Theincrease in the gross loss principally reflects the effect of a $1.0 millioncharge, included in cost of goods sold, for unsaleable inventories incurred inthe 2010 third quarter as compared to a charge, included in cost of goods sold,of $0.5 million for unsaleable inventories in the 2009 third quarter.  The inventory charge in the current yearreflects crop losses resulting from changes in the plant fertilization methods madein the current year.  These changes weremade to improve plant quality and reduce growing costs.  However, the extremely hot weatherexperienced this summer and the additional fertilizer applied to Imperial’sinventory negatively affected some varieties, particularly rhododendron andcertain other broadleaf evergreens.  Thecrop losses in the 2010 third quarter are not expected to have a significantimpact on net sales over the next twelve months as those units would generallynot have become saleable until the latter part of 2011, but will result infewer plants available for sale in the second half of fiscal 2011 and in fiscal2012.

 

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Imperial’s selling, general and administrativeexpenses decreased by approximately $0.2 million in the 2010 third quarter ascompared to the 2009 third quarter.  Thelower selling, general and administrative expenses in the 2010 third quarterprincipally reflects a reduction of $0.1 million in payroll and payroll relatedexpenses from a reduction in headcount of sales and administrative personnelresulting from the shutdown of the Florida farm last year and a reduction of$0.1 million due to lower bad debt expense. As a percentage of net sales, Imperial’s selling, general andadministrative expenses increased from 28.0% in the 2009 third quarter to 28.5%in the 2010 third quarter as the expense reductions were not proportionate to thereduction in net sales resulting from the shutdown of Imperial’s Florida farm.

 

Griffin’s general corporate expense decreased fromapproximately $1.0 million in the 2009 third quarter to approximately $0.7million in the 2010 third quarter.  Thedecrease of approximately $0.3 million reflects a $0.2 million decrease inexpenses related to Griffin’s non-qualified savings plan and a decrease of $0.1million in incentive compensation expense.

 

Griffin’s consolidated interest expense increasedfrom $0.9 million in the 2009 third quarter to $1.2 million in the 2010 thirdquarter due principally to an increased debt level in the 2010 thirdquarter.  Griffin’s average outstandingdebt was $66.2 million in the 2010 third quarter as compared to $57.0 millionin the 2009 third quarter.   Theincreased debt principally reflects borrowings under a $12 million nonrecoursemortgage that financed a significant portion of the construction of the 304,000square foot built-to-suit Tradeport warehouse built in fiscal 2009 and a $4.3million mortgage taken out in the 2010 first quarter on the industrial buildingin Pennsylvania that was acquired in the 2010 first quarter.

 

Griffin’s effective income tax rate was (40.3%) inthe 2010 third quarter as compared to an effective income tax rate of (40.4%)in the 2009 third quarter.  The slightlylower effective tax rate in the current quarter reflects the effect of stateincome taxes.  The effective tax rateused in the 2010 third quarter was based on management’s projections of operatingresults for the full year.  To the extentthat actual results differ from current projections, the effective income taxrate may change.

 

**Thirty-NineWeeks Ended August 28, 2010 Compared to the Thirty-Nine Weeks Ended August 29,2009**

 

Griffin’s consolidated total revenue decreased from$32.1 million in the 2009 nine month period to $27.8 million in the 2010 ninemonth period.   The decrease in revenueof approximately $4.3 million reflects an approximately $5.8 million decreasein revenue at Imperial partially offset by an approximately $1.5 millionincrease in revenue at Griffin Land.

 

Total revenue at Griffin Land increased fromapproximately $12.6 million in the 2009 nine month period to approximately$14.1 million in the 2010 nine month period. The increase of approximately $1.5million was due entirely to an increase in rental revenue, reflecting: (a) approximately$1.5 million of revenue from leasing much of the new space in Griffin Land’sreal estate portfolio, comprised of the 304,000 square foot building inTradeport that was completed and placed in service in the 2009 third quarterand the 120,000 square foot industrial building in Breinigsville, Pennsylvaniaacquired during the 2010 first quarter; and (b) approximately $0.6 millionfrom leasing previously vacant space subsequent to the end of the 2009 thirdquarter; partially offset by (c) an approximately $0.6 million reductionin rental revenue as a result of leases that expired and were not renewed.

 

Griffin Land had no property sales revenue in eitherthe 2010 or the 2009 nine month periods. Property sales occur periodically and changes in revenue from year toyear from those transactions may not be indicative of any trends in the realestate business.

 

Imperial’s landscape nursery business is highlyseasonal, with spring sales included in its second quarter (March throughMay) historically comprising a majority of Imperial’s annual sales.  Net sales and 

 

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other revenue at Imperial decreased from $19.5million in the 2009 nine month period to $13.8 million in the 2010 nine monthperiod.  The decrease in total net salesand other revenue at Imperial principally reflects the closure of Imperial’sFlorida farm in the third quarter last year. The Florida farm is currently leased to another grower.  As a result of the Florida farm’s closure, Imperial’s2010 nine month period includes no net sales from the Florida farm but doesinclude other revenue of $0.4 million from leasing that facility, whereas the2009 nine month period included $7.8 million of net sales from the Florida farmas Imperial liquidated most of the farm’s inventory prior to its closure.  The lack of net sales from Imperial’s Floridafarm in the 2010 nine month period resulted in a $0.5 million reduction inImperial’s gross profit in the 2010 nine month period as compared to the 2009nine month period, including $0.2 million of gross profit reflected in the 2009third quarter for the difference between the estimated inventory reserverecorded at the previous year end and actual results of liquidating the Floridainventory in 2009.  Net sales from Imperial’sFlorida farm in the 2009 nine month period were essentially made at thecarrying value of the related inventory.

 

Partially offsetting the effect on net sales andother revenue of the shutdown of the Florida farm was an increase ofapproximately $1.5 million of net sales from Imperial’s Connecticut farm in the2010 nine month period as compared to the 2009 nine month period, reflecting anapproximate 13% increase in unit sales volume partially offset by anapproximate 5% decrease in pricing.  Theincrease in sales from Imperial’s Connecticut farm was mostly due to increasedsales to Imperial’s garden center customer segment, and is attributed tofavorable spring weather in Imperial’s markets and lower pricing.  The lower pricing in the current year was setto meet competitive pricing pressures in a market where we believe there isexcess product available due to unsold product remaining from prior years.  Overall sales in the landscape nurserybusiness have been negatively impacted during the past two years by the weakeconomy and significant slowdown in new commercial and residentialconstruction.  Management believes thatthere remains an oversupply of landscape nursery product available in themarketplace.  Therefore, Imperialdoes not expect any significant improvement in pricing over the next twelvemonths. Thus far this year, two competitors of Imperial have announced theirintention of exiting the business of growing landscape nursery plants.  These actions may lead to increased salesopportunities for Imperial in future years.

 

Griffin incurred a consolidated operating loss,including general corporate expense, of approximately $3.2 million in the 2010nine month period as compared to a consolidated operating loss, includinggeneral corporate expense, of $4.4 million in the 2009 nine month period.  The lower operating loss in the 2010 ninemonth period principally reflects an increase of approximately $0.8 million inoperating profit at Griffin Land and a decrease of approximately $0.4 millionin general corporate expense in the 2010 nine month period as compared to the2009 nine month period.  The operatingloss incurred by Imperial in the 2010 nine month period was essentiallyunchanged from Imperial’s operating loss in the 2009 nine month period.

 

Operating results of Griffin Land in the 2010 and2009 nine month periods were as follows:

 

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| ** **                                                                                                                                                    | ** ** | **2010**                             | ** ** | **2009**            | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|---------------------|------------|
| ** **                                                                                                                                                    | ** ** | **Nine Month**                  | ** ** | **Nine Month** | ** ** |
| ** **                                                                                                                                                    | ** ** | **Period**                           | ** ** | **Period**          | ** ** |
| ** **                                                                                                                                                    | ** ** | **(amounts in thousands)** | ** ** |
| Rental  revenue                                                                                                                                               |       | $                                    | 14,062     |                | $          | 12,570 |   |
| Costs  related to rental revenue excluding depreciation and amortization expense (a)                                                                          |       | (5,124                               | )          | (5,260              | )          |
| Profit  from leasing activities before general and administrative expenses and before  depreciation and amortization expense (a)                              |       | 8,938                                |       | 7,310               |       |
| Revenue  from property sales                                                                                                                                  |       | —                               |       | —              |       |
| Costs  related to property sales                                                                                                                              |       | —                               |       | —              |       |
| Gain  from property sales                                                                                                                                     |       | —                               |       | —              |       |
| Profit  from leasing activities and gain from property sales before general and  administrative expenses and before depreciation and amortization expense (a) |       | 8,938                                |       | 7,310               |       |
| General  and administrative expenses excluding depreciation and amortization expense  and excluding acquisition expenses (a)                                  |       | (1,980                               | )          | (2,000              | )          |
| Acquisition  expenses                                                                                                                                         |       | (301                                 | )          | —              |       |
| Total  general and administrative expenses excluding depreciation and amortization  expense (a)                                                               |       | (2,281                               | )          | (2,000              | )          |
| Profit  before depreciation and amortization expense (a)                                                                                                      |       | 6,657                                |       | 5,310               |       |
| Depreciation  and amortization expense related to costs of rental revenue                                                                                     |       | (4,666                               | )          | (4,090              | )          |
| Depreciation  and amortization expense - other                                                                                                                |       | (19                                  | )          | (24                 | )          |
| Operating  profit                                                                                                                                             |       | $                                    | 1,972      |                | $          | 1,196 |   |

 

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(a)                                  The costs related to rental revenue excluding depreciation andamortization expense, profit from leasing activities before general andadministrative expenses and before depreciation and amortization expense,general and administrative expenses excluding depreciation and amortizationexpense and excluding acquisition expenses, total general and administrativeexpenses excluding depreciation and amortization expense and profit beforedepreciation and amortization expense are disclosures not in conformity withaccounting principles generally accepted in the United States of America.  They are presented because Griffin believesthey are useful financial indicators for measuring the results of its realestate business segment.  However, theyshould not be considered as an alternative to operating profit as a measure ofoperating results in accordance with accounting principles generally acceptedin the United States of America.  Theaggregate of: (i) costs related to rental revenue excluding depreciationand amortization expense; (ii) costs related to property sales; and (iii) depreciationand amortization expense related to costs of rental revenue, equals the costsrelated to rental revenue and property sales as reported on Griffin’sconsolidated statement of operations.

 

The increase of $1.6 million in Griffin Land’sprofit from leasing activities before general and administrative expenses andbefore depreciation and amortization expense principally reflects the increase 

 

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in rental revenue as a result of more space beingunder lease in the 2010 nine month period than in the 2009 nine monthperiod.  Costs related to rental revenueexcluding depreciation and amortization expense decreased by approximately $0.1million in the 2010 nine month period as compared to the 2009 nine monthperiod, as a decrease of approximately $0.2 million due principally to lowersnow removal and utility expenses was partially offset by building operatingexpenses of approximately $0.1 million for the new Tradeport building that wasplaced in service in the 2009 third quarter and the building in Breinigsville,Pennsylvania acquired in the 2010 first quarter.

 

Griffin Land’s general and administrative expensesin the 2010 nine month period increased by approximately $0.3 million over the2009 nine month period due to $0.3 million of acquisition expenses incurred forthe purchase of the 120,000 square foot industrial building that closed duringthe 2010 first quarter.  There were noacquisition expenses in the 2009 nine month period.  Depreciation and amortization expense atGriffin Land increased from approximately $4.1 million in the 2009 nine monthperiod to approximately $4.7 million in the 2010 nine month period.  The increase of approximately $0.6 millionprincipally reflects depreciation and amortization expense related to the newTradeport building placed in service in the 2009 third quarter and the 120,000square foot industrial building purchased in the 2010 first quarter.

 

Operating results of Imperial for the 2010 and the2009 nine month periods were as follows:

 
| ** **                                    | ** ** | **2010**                             | ** ** | **2009**                    | ** ** |
|-----------------------------------------------|------------|--------------------------------------|------------|-----------------------------|------------|
| ** **                                    | ** ** | **Nine Month  Period**          | ** ** | **Nine Month  Period** | ** ** |
| ** **                                    | ** ** | **(amounts in thousands)** | ** ** |
|                                          |       |                                 |       |                        |       |
| Net  sales and other revenue                  |       | $                                    | 13,767     |                        | $          | 19,545 |   |
| Cost  of goods sold                           |       | 13,320                               |       | 18,429                      |       |
| Gross  profit                                 |       | 447                                  |       | 1,116                       |       |
| Selling,  general and administrative expenses |       | (2,704                               | )          | (3,339                      | )          |
| Operating  loss                               |       | $                                    | (2,257     | )                           | $          | (2,223 | ) |

 

Imperial’s operating loss in the 2010 nine monthperiod was essentially unchanged from the operating loss incurred in the 2009nine month period, reflecting an approximately $0.7 million decrease in grossprofit offset by an approximately $0.6 million decrease in selling, general andadministrative expenses.  The decrease ingross profit reflects: (a) the 2009 nine month period including $0.5million of gross profit from the Florida farm before its closure, whichincludes $0.2 million of gross profit from the difference between the estimatedinventory reserve recorded at the previous year end and the actual results ofliquidating the Florida inventory in 2009; (b) a net reduction of $0.1million of gross profit from Imperial’s Connecticut farm, due to lower pricingand higher costs, substantially offset by the effect of the higher sales volumeand a lower charge for unsaleable and excess inventories in the 2010 nine monthperiod; and (c) a charge of $0.1 million in the 2010 nine month period fora retrospective workers compensation charge related to the previously closedFlorida farm. Imperial incurred a $1.0 million charge in the 2010 nine monthperiod for plant losses incurred in the 2010 third quarter (as described in theabove discussion of the third quarter results) as compared to an inventorycharge of $1.2 million for unsaleable and excess inventories in the 2009 ninemonth period.

 

Imperial’s gross margin on sales from itsConnecticut farm, excluding the charges for unsaleable and excess inventoriesin the 2010 and 2009 nine month periods, decreased from 15.6% in the 2009 ninemonth period to 10.5% in the 2010 nine month period as a result of lowerpricing and, to a lesser extent, higher costs in the 2010 nine month period.

 

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Imperial’s selling, general and administrativeexpenses decreased from approximately $3.3 million in the 2009 nine monthperiod to approximately $2.7 million in the 2010 nine month period.  The lower selling, general and administrativeexpenses in the 2010 nine month period as compared to the 2009 nine monthperiod principally reflects $0.4 million of lower expenses from a reduction inheadcount of sales and administrative personnel as a result of the shutdown ofthe Florida farm, $0.1 million of lower bad debt expenses and a $0.1 millionnet reduction in all other general and administrative expenses.  As a percentage of net sales, Imperial’sselling, general and administrative expenses increased from 17.1% in the 2009nine month period to 19.6% in the 2010 nine month period as the effect of theexpense reductions were not proportionate to the reduction in net salesresulting from the shutdown of Imperial’s Florida farm in fiscal 2009.

 

Griffin’s general corporate expense decreased fromapproximately $3.4 million in the 2009 nine month period to approximately $3.0million in the 2010 nine month period. The decrease of $0.4 million in general corporate expense principallyreflects a $0.2 million decrease in expenses related to Griffin’s non-qualifiedsavings plan, a decrease of $0.1 million in incentive compensation expense anda decrease of $0.1 million in audit expense, due principally to timing.

 

Griffin’s consolidated interest expense increased to$3.4 million in the 2010 nine month period from $2.5 million in the 2009 ninemonth period due principally to an increased debt level in the 2010 nine monthperiod.  Griffin’s average outstandingdebt in the 2010 nine month period was $65.6 million as compared to $52.7million in the 2009 nine month period. The increased debt principally reflects borrowings under a $12 millionnonrecourse mortgage that financed a significant portion of the 304,000 squarefoot Tradeport warehouse built in fiscal 2009 and the $4.3 million mortgagetaken out in the 2010 first quarter on the industrial building inBreinigsville, Pennsylvania that was acquired in the 2010 first quarter.

 

Griffin’s effective income tax rate was (38.4%) forthe 2010 nine month period, as compared to (37.3%) for the 2009 nine monthperiod.  The higher effective tax rate inthe 2010 nine month period reflects the effect of state income taxes.  Griffin’s effective tax rate for the 2010nine month period is based on management’s projections for the balance of theyear.  To the extent that actual resultsdiffer from current projections, the effective income tax rate may change.

 

**OffBalance Sheet Arrangements**

 

Griffin does not have any material off balance sheetarrangements.

 

**Liquidity and Capital Resources**

 

Net cash provided by operating activities was $4.1million in the 2010 nine month period as compared to $9.0 million in the 2009nine month period.  Net cash provided byoperating activities in the 2010 nine month period includes $0.5 million ofcash generated from the sales of short-term investments as compared to $8.1million of cash generated from the sales of short-term investments in the 2009nine month period.  Excluding theproceeds from the sales of short-term investments in each nine month period,Griffin had net cash provided by operating activities of $3.6 million in the2010 nine month period as compared to $0.9 million in the 2009 nine monthperiod.  The change in cash provided byoperating activities in the 2010 nine month period as compared to the 2009 ninemonth period principally reflects a reduction in accounts receivable atImperial in the current year as compared to an increase in Imperial’s accountsreceivable in the prior year, due principally to the lower sales at Imperial,and a higher reduction in inventory at Imperial in the 2010 nine month periodas compared to the 2009 nine month period. The reduction in Imperial’sinventory reflects management’s ongoing efforts to reduce 

 

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inventory to levels in line with expected salesdemand and the $1.0 million of crop losses incurred in the 2010 third quarter.

 

In the 2010 nine month period, Griffin had net cashof $9.4 million used in investing activities as compared to net cash of $15.5million used in investing activities in the 2009 nine month period.  The net cash used in investing activities inthe 2010 nine month period principally reflects $5.4 million paid for theacquisition of the fully leased 120,000 square foot industrial building inBreinigsville, Pennsylvania.  The totalpurchase price of the building was $6.4 million, of which approximately $1.0million was paid as a deposit in the 2009 fourth quarter.  Additions to real estate held for sale orlease were $3.8 million during the 2010 nine month period and additions toproperty and equipment were $0.1 million during the 2010 nine monthperiod.  The additions to real estateheld for sale or lease in the 2010 nine month period includes the purchase ofapproximately 51 acres of undeveloped land in Lower Nazareth, Pennsylvania,which closed in the 2010 second quarter. The land was purchased for approximately $1.8 million, beforeacquisition expenses, and is located in a major industrial area in the LehighValley.  The acquired land has approvalsfor the development of two industrial buildings totaling approximately 530,000 squarefeet.  This transaction, along with thepurchase of the 120,000 square foot industrial building in nearbyBreinigsville, Pennsylvania are Griffin’s first real estate acquisitionsoutside of the Hartford, Connecticut market, where Griffin Land’s core realestate holdings are located.  The balanceof the additions to real estate held for sale or lease are principally fortenant improvements related to Griffin Land’s new leases in the current year.The additions to real estate held for sale or lease in the 2009 nine monthperiod of $15.5 million principally reflected construction of the 304,000square foot Tradeport building that was ongoing during that period.

 

Net cash provided by financing activities was $1.9million in the 2010 nine month period as compared to net cash provided byfinancing activities of $11.1 million in the 2009 nine month period.  The net cash provided by financing activitiesin the 2010 nine month period reflects $4.5 million of proceeds from newborrowings, comprised of $4.3 million from a new nonrecourse mortgage withNewAlliance Bank on the 120,000 square foot industrial building acquired inPennsylvania and $0.2 million from the final borrowings under the constructionto permanent mortgage loan with Berkshire Bank. The new mortgage with NewAlliance Bank has a fixed interest rate of 6.5%and a ten-year term with payments based on a twenty-five year amortizationschedule.  In addition, Griffin received$0.2 million of cash from the exercise of stock options.  The proceeds from debt and cash received fromthe exercise of stock options were partially offset by dividend paymentstotaling $1.5 million on Griffin’s common stock, $1.2 million for payments ofprincipal on Griffin Land’s nonrecourse mortgages and $0.1 million of debt issuancecosts. The net cash provided by financing activities in the 2009 nine monthperiod principally reflected proceeds from new borrowings partially offset bycash used for the repayment of debt, including $7.4 million for the repaymentof a nonrecourse mortgage that came due in fiscal 2009, the payment ofdividends on Griffin’s common stock and debt issuance costs.

 

As of August 28, 2010,the entire balance of Griffin’s 6.08% nonrecourse mortgage due January 1,2013 ($7.2 million) is included in the current portion of long-term debt.  Griffin has classified this mortgage ascurrent because, for the twelve month period ending December 31, 2010,Griffin expects that the ratio of the net operating income, as defined in themortgage agreement, of the buildings that collateralize the mortgage, to thedebt service of the mortgage (the “debt service coverage covenant”) will beless than the 1.25 required under the mortgage. The debt service coverage covenant for the twelve months ended December 31,2009, was waived by the bank as Griffin would not have been in compliance atthat measurement date.  Griffin currentlyexpects to obtain a waiver from the bank for the debt service coverage covenantfor the twelve months ending December 31, 2010, prior to that date, althoughthere can be no such assurance that the bank will grant such a waiver.

 

Griffin’s payments (including principal andinterest) under contractual obligations as of August 28, 2010 are asfollows:

 

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| ** **                   | ** ** | **Total**              | ** ** | **Due Within  One Year** | ** ** | **Due From  1-3 Years** | ** ** | **Due From  3-5 Years** | ** ** | **Due in More  Than 5 Years** | ** ** |
|------------------------------|------------|------------------------|------------|------------------------------------|------------|-----------------------------------|------------|-----------------------------------|------------|---------------------------------------------------|------------|
| ** **                   | ** ** | **(in millions)** | ** ** |
| Mortgages                    |       | $                      | 87.2       |                               | $          | 5.7                               |       | $                                 | 17.6       |                                              | $          | 27.5 |   | $ | 36.4 |   |
| Revolving  Line of Credit    |       | 2.5                    |       | —                             |       | 2.5                               |       | —                            |       | —                                            |       |
| Capital  Lease Obligations   |       | 0.1                    |       | 0.1                                |       | —                            |       | —                            |       | —                                            |       |
| Operating  Lease Obligations |       | 0.7                    |       | 0.2                                |       | 0.5                               |       | —                            |       | —                                            |       |
| Purchase  Obligations (1)    |       | 0.9                    |       | 0.8                                |       | 0.1                               |       | —                            |       | —                                            |       |
| Other  (2)                   |       | 2.3                    |       | —                             |       | —                            |       | —                            |       | 2.3                                               |       |
|                         |       | $                      | 93.7       |                               | $          | 6.8                               |       | $                                 | 20.7       |                                              | $          | 27.5 |   | $ | 38.7 |   |

 

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(1)           Includes obligations for the purchase of plants and raw materials byImperial and construction of tenant improvements related to recently signedleases.

(2)           Includes Griffin’s deferred compensation plan and other postretirementbenefit liabilities.

 

Subsequent to the end of the 2010 third quarter,Griffin Land entered into an Option and Real Estate Purchase and Sale Agreementwith a private company homebuilder whereby in exchange for a payment of$100,000, the homebuilder obtained an option to purchase the remainingtwenty-five residential lots of Stratton Farms, a residential development inSuffield, Connecticut.  Under the termsof the agreement, if the homebuilder exercises its option to purchase all ofthe residential lots, Griffin Land would receive proceeds that would range fromapproximately $2.4 million to approximately $2.9 million, depending upon thetiming of the lot purchases, over a three-year period and consequently expectsto recognize a gain when the lots are sold. Purchases are scheduled annually over the three-year period, and thebuyer’s failure to complete any scheduled purchase on a timely basis wouldterminate the buyer’s option. Theagreement includes a short contingency period whereby the homebuilder mayterminate the agreement if the results of its tests and investigations of theland reveal an unsatisfactory result, condition or circumstance or if thehomebuilder is unable to secure financing upon terms satisfactory to thehomebuilder.  If the agreement isterminated by the homebuilder during the contingency period, the homebuilder isentitled to a refund of the amount paid. There is no guarantee that thistransaction will be completed under its current terms, or at all.

 

Griffin Land has also entered into an Agreement ofPurchase and Sale with a local homebuilder to acquire approximately 57 acres ofundeveloped land held by Griffin Land in Granby, Connecticut for developmentinto residential lots. The closing on the transaction is contingent on thebuyer obtaining all required land use approvals for its residential subdivisionplans.  Proceeds from this transactionwould be a minimum of $0.6 million, but could be higher depending on the numberof residential lots to be developed. Closing on this transaction, if it occurs, would not be anticipateduntil mid-2011.  There is noguarantee that this transaction will be completed under its current terms, orat all.

 

In the near-term, Griffin plans to continue toinvest in its real estate business, including expenditures to build outinteriors of its buildings as leases are completed, infrastructure improvementsrequired for future development of its real estate holdings and the potentialacquisition of properties principally outside of the Hartford, Connecticutmarket.  Griffin does not expect tocommence any speculative construction projects for its Connecticut real estateportfolio until a substantial portion of Griffin Land’s currently vacant spaceis leased.  Griffin Land may commencespeculative construction on the undeveloped Lehigh Valley land recentlyacquired if management believes that such development would be sufficientlyprofitable.  Griffin Land may alsocommence construction of a new building on any of its undeveloped land if it isable to secure a tenant for a build-to-suit facility.

 

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As of August 28, 2010, Griffin had cash andcash equivalents of approximately $5.8 million and unused borrowing capacity of$7.5 million under its $10 million credit line with Doral Bank.  Subsequent to the end of the 2010 thirdquarter, Griffin received an income tax refund of approximately $6.7 million.  Management believes that its cash and cashequivalents on hand at August 28, 2010, the income tax refund received andunused borrowing capacity under its credit line are sufficient to meet Griffin’sseasonal working capital requirements, the continued investment in Griffin’sreal estate assets and the payment of quarterly dividends on its commonstock.  Griffin may also continue to seekother nonrecourse mortgage placements on its properties.  Griffin Land’s real estate portfoliocurrently includes seven buildings aggregating approximately 750,000 squarefeet that are not mortgaged.  Griffinalso expects to continue to seek to purchase either or both land and buildingsin markets principally outside of the Hartford, Connecticut area.  Real estate acquisitions may or may not occurbased on many factors, including real estate pricing.

 

**Forward-Looking Information**

 

The above information in Management’s Discussion andAnalysis of Financial Condition and Results of Operations includes “forward-lookingstatements” within the meaning of Section 27A of the Securities Act and Section 21Eof the Exchange Act.  Although Griffinbelieves that its plans, intentions and expectations reflected in suchforward-looking statements are reasonable, it can give no assurance that suchplans, intentions or expectations will be achieved, particularly with respectto leasing of currently vacant space, construction of additional facilities inthe real estate business, the ability to obtain additional mortgage financing,development of the 51 acre land parcel recently acquired, completion of landsales currently under contract,  Imperial’spotential sales opportunities resulting from the announced exit of twocompetitors from the landscape nursery business and Griffin’s anticipatedfuture liquidity.  The projected informationdisclosed herein is based on assumptions and estimates that, while consideredreasonable by Griffin as of the date hereof, are inherently subject tosignificant business, economic, competitive and regulatory uncertainties andcontingencies, many of which are beyond the control of Griffin.

 

ITEM 3.          QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK

 

Market risk represents therisk of changes in value of a financial instrument, derivative ornon-derivative, caused by fluctuations in interest rates, foreign exchangerates and equity prices.  Changes inthese factors could cause fluctuations in earnings and cash flows.

 

For fixed rate mortgagedebt, changes in interest rates generally affect the fair market value of thedebt instrument, but not earnings or cash flows.  Griffin does not have an obligation to prepayany fixed rate debt prior to maturity, therefore, interest rate risk andchanges in the fair market value of fixed rate debt should not have a significantimpact on earnings or cash flows until such debt is refinanced, ifnecessary.  Griffin’s mortgage interestrates are described in Note 8 to the unaudited consolidated financialstatements included in Item 1.

 

For variable rate debt,changes in interest rates generally do not impact the fair market value of thedebt instrument, but do affect future earnings and cash flows.  As of August 28, 2010, Griffin had $22.8million of variable rate debt outstanding, including $20.3 million for whichGriffin had entered into interest rate swap agreements that effectively fixedthe interest rate on that debt.  Becausethe remaining variable rate debt includes a provision establishing a minimuminterest rate, a 1% increase in the benchmark interest rate on which thevariable rate debt is based would not have increased Griffin’s interestexpense.

 

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Griffin is exposed to marketrisks from fluctuations in interest rates and the effects of those fluctuationson the market values of Griffin’s cash equivalents.  These investments generally consist of moneymarket securities that are not significantly exposed to interest rate risk.

 

Griffindoes not have foreign currency exposure related to its operations.  Griffin does have an investment in a publiccompany, Centaur Media plc, based in the United Kingdom.  The amount to be realized from the ultimateliquidation of that investment and conversion of proceeds into United Statescurrency is subject to future foreign currency exchange rates.

 

ITEM 4.           CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Griffin maintains disclosure controls and proceduresthat are designed to ensure that information required to be disclosed in itsExchange Act reports is recorded, processed, summarized and reported within thetime periods specified in the Securities and Exchange Commission’s rules andforms, and that such information is accumulated and communicated to Griffin’smanagement, including its Chief Executive Officer and Chief Financial Officer,as appropriate, to allow timely decisions regarding required disclosure.  In designing and evaluating the disclosurecontrols and procedures, management recognizes that any controls andprocedures, no matter how well designed and operated, can provide onlyreasonable assurance of achieving the desired control objectives, andmanagement necessarily is required to apply its judgment in evaluating thecost-benefit relationship of possible controls and procedures.

 

As required by SEC Rule 13a-15(b), Griffincarried out an evaluation, under the supervision and with the participation ofGriffin’s management, including Griffin’s Chief Executive Officer and Griffin’sChief Financial Officer, of the effectiveness of the design and operation ofGriffin’s disclosure controls and procedures as of the end of the fiscal periodcovered by this report.  Based on theforegoing, Griffin’s Chief Executive Officer and Chief Financial Officer concludedthat disclosure controls and procedures were effective at the reasonableassurance level.

 

Changes in Internal Control over Financial Reporting

 

There has been no change in Griffin’s internalcontrol over financial reporting during Griffin’s most recent fiscal quarterthat has materially affected, or is reasonably likely to materially affect,Griffin’s internal control over financial reporting.

 

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**PART II**                                                          **OTHERINFORMATION**

 

ITEM 1A.                                                              RISK FACTORS

 

There have been no material changes from riskfactors as previously disclosed in Item 1A of the Company’s Annual Report on Form 10-Kfor the year ended November 28, 2009.

 

ITEM 6.                                                                        EXHIBITS

 
| **Exhibit No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                             |
|----------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |       |                                                                                                                                                                                                                                                                                                                                        |
| 3.1                  |       | Form of  Amended and Restated Certificate of Incorporation of Griffin Land &  Nurseries, Inc. (incorporated by reference to the Form 10 of  Griffin Land & Nurseries, Inc., filed April 8, 1997, as  amended)                                                                                    |
|                 |       |                                                                                                                                                                                                                                                                                                                                        |
| 3.2                  |       | Form of  Bylaws of Griffin Land & Nurseries, Inc. (incorporated by  reference to the Form 10 of Griffin Land &  Nurseries, Inc., filed April 8, 1997, as 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, as amended)                                                    |
|                 |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.6                 |       | Form of  1997 Stock Option Plan of Griffin Land & Nurseries, Inc.  (incorporated by reference to the Form 10 of Griffin Land &  Nurseries, Inc., filed April 8, 1997, as amended)                                                                                                                |
|                 |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.7                 |       | Form of  401(k) Plan of Griffin Land & Nurseries, Inc.  (incorporated by reference to the Form 10 of Griffin Land &  Nurseries, Inc., filed April 8, 1997, as amended)                                                                                                                      |
|                 |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.17                |       | Loan  Agreement dated June 24, 1999 (incorporated by reference to  Form 10-Q dated August 28, 1999, filed October 8, 1999)                                                                                                                                                                                              |
|                 |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.21                |       | Mortgage  Deed, Security Agreement, Financing Statement and Fixture Filing with  Absolute Assignment of Rents and Leases dated September 17, 2002 between  Tradeport Development I, LLC and Farm Bureau Life Insurance Company  (incorporated by reference to Form 10-Q dated August 31, 2002,  filed October 11, 2002) |
|                 |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.22                |       | Letter  of Agreement between Griffin Land & Nurseries, Inc. and USAA  Real Estate Company (incorporated by reference to Form 10-Q dated  August 31, 2002, filed October 11, 2002)                                                                                                                              |
|                 |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.23                |       | Agreement  of Purchase and Sale of Partnership Interest between Griffin Land &  Nurseries, Inc. and USAA Real Estate Company dated December 3, 2002  (incorporated by reference to Form 10-K dated November 30, 2002,  filed February 28, 2003)                                                           |

 

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| 10.24    |   | Mortgage  Deed and Security Agreement dated December 17, 2002 between Griffin  Center Development IV, LLC and Webster Bank (incorporated by reference to  Form 10-K dated November 30, 2002, filed February 28, 2003)                                                                                                                    |
|----------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |   |                                                                                                                                                                                                                                                                                                                                                         |
| 10.28    |   | Secured  Installment Note and First Amendment of Mortgage and Loan Documents dated  April 16, 2004 among Tradeport Development I, LLC, and Griffin  Land & Nurseries, Inc. and Farm Bureau Life Insurance Company  (incorporated by reference to Form 10-Q dated May 29, 2004, filed  July 13, 2004)                       |
|     |   |                                                                                                                                                                                                                                                                                                                                                         |
| 10.29    |   | Mortgage  Deed Security Agreement, Fixture Filing, Financing Statement and Assignment  of Leases and Rents dated July 6, 2005 by Tradeport Development II, LLC  in favor of First Sunamerica Life Insurance Company (incorporated by  reference to Form 10-Q dated May 28, 2005, filed November 2,  2005)                                |
|     |   |                                                                                                                                                                                                                                                                                                                                                         |
| 10.30    |   | Promissory  Note dated July 6, 2005 (incorporated by reference to Form 10-Q  dated May 28, 2005, filed November 2, 2005)                                                                                                                                                                                                                 |
|     |   |                                                                                                                                                                                                                                                                                                                                                         |
| 10.31    |   | Guaranty  Agreement as of July 6, 2005 by Griffin Land &  Nurseries, Inc. in favor of Sunamerica Life Insurance Company  (incorporated by reference to Form 10-Q dated May 28, 2005, filed  November 2, 2005)                                                                                                              |
|     |   |                                                                                                                                                                                                                                                                                                                                                         |
| 10.32    |   | Amended  and Restated Mortgage Deed Security Agreement, Fixture Filing, Financing  Statement and Assignment of Leases and Rents dated November 16, 2006 by  Tradeport Development II, LLC in favor of First Sunamerica Life Insurance  Company (incorporated by reference to Form 10-K dated December 2,  2006, filed February 15, 2007) |
|     |   |                                                                                                                                                                                                                                                                                                                                                         |
| 10.33    |   | Amended  and Restated Promissory Note dated November 16, 2006 (incorporated by  reference to Form 10-K dated December 2, 2006, filed  February 15, 2007)                                                                                                                                                                                 |
|     |   |                                                                                                                                                                                                                                                                                                                                                         |
| 10.34    |   | Guaranty  Agreement as of November 16, 2006 by Griffin Land &  Nurseries, Inc. in favor of Sunamerica Life Insurance Company  (incorporated by reference to Form 10-K dated December 2, 2006,  filed February 15, 2007)                                                                                                    |
|     |   |                                                                                                                                                                                                                                                                                                                                                         |
| 10.35    |   | Employment  Agreement by and between Imperial Nurseries, Inc. and Gregory Schaan  dated January 1, 2001, as amended April 9, 2008 (incorporated by  reference to Form 10-Q dated March 1, 2008, filed April 10,  2008)                                                                                                         |
|     |   |                                                                                                                                                                                                                                                                                                                                                         |
| 10.36  * |   | Construction  Loan and Security Agreement dated February 6, 2009 by and between  Tradeport Development III, LLC, Griffin Land & Nurseries, Inc.,  and Berkshire Bank                                                                                                                                                                      |

 

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| 10.37    |   | $12,000,000  Construction Note dated February 6, 2009 (incorporated by reference to  Form 10-Q dated February 28, 2009, filed April 9, 2009)                                                                                       |
|----------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |   |                                                                                                                                                                                                                                                   |
| 10.38    |   | Revolving  Line of Credit Loan Agreement dated February 27, 2009 between Griffin  Land & Nurseries, Inc. and Doral Bank, FSB (incorporated by  reference to Form 10-Q dated February 28, 2009, filed April 9,  2009) |
|     |   |                                                                                                                                                                                                                                                   |
| 10.39    |   | $10,000,000  Promissory Note (Revolving Line of Credit) dated February 27, 2009  (incorporated by reference to Form 10-Q dated February 28, 2009,  filed April 9, 2009)                                                            |
|     |   |                                                                                                                                                                                                                                                   |
| 10.40    |   | Loan  and Security Agreement dated July 9, 2009 between Griffin  Land & Nurseries, Inc. and People’s United Bank (incorporated  by reference to Form 10-Q dated May 29, 2010, filed July 7,  2010)              |
|     |   |                                                                                                                                                                                                                                                   |
| 10.41    |   | $10,500,000  Promissory Note dated July 9, 2009 (incorporated by reference to  Form 10-Q dated August 29, 2009, filed October 8, 2009)                                                                                             |
|     |   |                                                                                                                                                                                                                                                   |
| 10.42  * |   | Mortgage  and Security Agreement dated January 27, 2010 between Riverbend  Crossings III Holdings, LLC and NewAlliance Bank                                                                                                                       |
|     |   |                                                                                                                                                                                                                                                   |
| 10.43    |   | $4,300,000  Promissory Note dated January 27, 2010 (incorporated by reference to Form 10-Q  dated February 27, 2010, filed April 8, 2010)                                                                                          |
|     |   |                                                                                                                                                                                                                                                   |
| 31.1  *  |   | Certifications  of Chief Executive Officer Pursuant to Rule 13a-14(a), as Adopted  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                 |
|     |   |                                                                                                                                                                                                                                                   |
| 31.2  *  |   | Certifications  of Chief Financial Officer Pursuant to Rule 13a-14(a), as Adopted  Pursuant to Section 302 of the Sarbanes Oxley Act of 2002                                                                                                 |
|     |   |                                                                                                                                                                                                                                                   |
| 32.1  *  |   | Certifications  of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as  Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                         |
|     |   |                                                                                                                                                                                                                                                   |
| 32.2  *  |   | Certifications  of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as  Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                         |

 

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*  Filed herewith.

 

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SIGNATURES

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, the Registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorized.

 
|                        |   | GRIFFIN LAND & NURSERIES, INC.            |
|-----------------------------|--------|---------------------------------------------------------|
|                        |   |                                                    |
|                        |   |                                                    |
|                        |   | BY:                                                     | /s/ FREDERICK M. DANZIGER |
| DATE:  October 6, 2010 |   |                                                    | Frederick M. Danziger |
|                        |   |                                                    | President and Chief  Executive Officer |
|                        |   |                                                    |   |
|                        |   |                                                    |   |
|                        |   | BY:                                                     | /s/ ANTHONY J. GALICI |
| DATE:  October 6, 2010 |   | Anthony J. Galici                                       |
|                        |   | Vice  President, Chief Financial Officer and Secretary, |
|                        |   | Chief  Accounting Officer                               |

 

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