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 May 30, 2009TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934 FOR THE TRANSITION PERIOD FROM ______ TO
  _____





Commission
File No. 1-12879





GRIFFIN
LAND & NURSERIES, INC.


(Exact
name of registrant as specified in its charter)





Delaware
            06-0868496(state
      or other jurisdiction of incorporation or organization)
            (IRS
      Employer Identification Number)One
      Rockefeller Plaza, New York, New York
            10020(Address
      of principal executive offices)
            (Zip
      Code)Registrant’s
      Telephone Number including Area Code
            (212)
      218-7910











Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days.





Yes    x
            No
       ̈


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





Large
      accelerated filer
             ̈
            Accelerated
      filer
            xNon-accelerated
      filer
             ̈
            Smaller
      reporting company
             ̈





Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such files).





Yes      ̈
            No     ̈





Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).


Yes      ̈
            No    x





­


Number of
shares of Common Stock outstanding at June 30, 2009: 5,082,436









Griffin
Land & Nurseries, Inc.


Form
10-Q


Index








PART
      I  -
            
            FINANCIAL
      INFORMATIONITEM
      1
            Financial
      StatementsConsolidated
      Statements of Operations (unaudited)13
      and 26 Weeks Ended May 30, 2009 and May 31, 2008
            3Consolidated
      Balance Sheets (unaudited)May
      30, 2009 and November 29, 2008
            4Consolidated
      Statements of Changes in Stockholders’ Equity (unaudited)26
      Weeks Ended May 30, 2009 and May 31, 2008
            5Consolidated
      Statements of Cash Flows (unaudited)26
      Weeks Ended May 30, 2009 and May 31, 2008
            6Notes
      to Consolidated Financial Statements (unaudited)
            7-22ITEM
      2
            Management’s
      Discussion and Analysis ofFinancial
      Condition and Results of Operations
            23-35ITEM
      3
            Quantitative
      and Qualitative Disclosures About Market Risk
            35ITEM
      4
            Controls
      and Procedures
            36PART
      II  -
            
            OTHER
      INFORMATIONITEM
      1
            Not
      ApplicableITEM
      1A
            Risk
      Factors
            37ITEMS
      2-3
            Not
      ApplicableITEM
      4
            Submission
      of Matters to Vote of Security Holders
            37ITEM
      5
            Not
      ApplicableITEM
      6
            Exhibits
            38-40SIGNATURES
            41














PART
      I
            FINANCIAL
      INFORMATIONITEM
      1.
            FINANCIAL
      STATEMENTS





Griffin
Land & Nurseries, Inc.


Consolidated
Statements of Operations


(dollars
in thousands, except per share data)


(unaudited)





For
      the 13 Weeks Ended,
              
              
              For
      the 26 Weeks Ended,May
      30, 2009
              
              
              May
      31, 2008
              
              
              May
      30, 2009
              
              
              May
      31, 2008Landscape
      nursery net sales
              
              $
              15,568
              
              
              $
              17,053
              
              
              $
              16,017
              
              
              $
              17,477Rental
      revenue and property sales
              
              
              4,140
              
              
              
              4,011
              
              
              
              8,324
              
              
              
              8,068Total
      revenue
              
              
              19,708
              
              
              
              21,064
              
              
              
              24,341
              
              
              
              25,545Costs
      of landscape nursery sales
              
              
              14,295
              
              
              
              14,481
              
              
              
              14,714
              
              
              
              14,919Costs
      related to rental revenue and property sales
              
              
              2,851
              
              
              
              2,830
              
              
              
              6,329
              
              
              
              6,301Total
      costs of goods sold and costs related to rental revenue and property
      sales
              
              
              17,146
              
              
              
              17,311
              
              
              
              21,043
              
              
              
              21,220Gross
      profit
              
              
              2,562
              
              
              
              3,753
              
              
              
              3,298
              
              
              
              4,325Selling,
      general and administrative expenses
              
              
              3,329
              
              
              
              3,712
              
              
              
              6,129
              
              
              
              6,421Operating
      (loss) profit
              
              
              (767
              )
              
              
              41
              
              
              
              (2,831
              )
              
              
              (2,096
              )Interest
      expense
              
              
              (818
              )
              
              
              (812
              )
              
              
              (1,626
              )
              
              
              (1,661
              )Investment
      income
              
              
              77
              
              
              
              186
              
              
              
              124
              
              
              
              569Loss
      before income tax benefit
              
              
              (1,508
              )
              
              
              (585
              )
              
              
              (4,333
              )
              
              
              (3,188
              )Income
      tax benefit
              
              
              535
              
              
              
              208
              
              
              
              1,538
              
              
              
              1,202Net
      loss
              
              $
              (973
              )
              
              $
              (377
              )
              
              $
              (2,795
              )
              
              $
              (1,986
              )Basic
      net loss per common share
              
              $
              (0.19
              )
              
              $
              (0.07
              )
              
              $
              (0.55
              )
              
              $
              (0.39
              )Diluted
      net loss per common share
              
              $
              (0.19
              )
              
              $
              (0.07
              )
              
              $
              (0.55
              )
              
              $
              (0.39
              )




See Notes
to Consolidated Financial Statements.








3





Griffin  Land
& Nurseries, Inc.


Consolidated
Balance Sheets


(dollars in thousands, except
per share data)






May
      30, 2009
              
              
              November
      29, 2008ASSETSCurrent
      Assets:Cash
      and cash equivalents
              
              $
              3,074
              
              
              $
              4,773Short-term
      investments, net
              
              
              453
              
              
              
              8,624Accounts
      receivable, less allowance for doubtful accounts and returns and
      allowances of $456 and $148
              
              
              10,710
              
              
              
              2,071Inventories,
      net
              
              
              20,309
              
              
              
              24,347Deferred
      income taxes
              
              
              3,447
              
              
              
              3,447Other
      current assets
              
              
              3,702
              
              
              
              5,537Total
      current assets
              
              
              41,695
              
              
              
              48,799Real
      estate held for sale or lease, net
              
              
              123,684
              
              
              
              113,948Property
      and equipment, net
              
              
              5,943
              
              
              
              6,437Investment
      in Centaur Media plc
              
              
              2,990
              
              
              
              3,374Deferred
      income taxes
              
              
              396
              
              
              
              -Other
      assets
              
              
              10,004
              
              
              
              9,117Total
      assets
              
              $
              184,712
              
              
              $
              181,675LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      Liabilities:Current
      portion of long-term debt
              
              $
              1,211
              
              
              $
              8,661Accounts
      payable and accrued liabilities
              
              
              9,955
              
              
              
              5,240Deferred
      revenue
              
              
              794
              
              
              
              1,175Total
      current liabilities
              
              
              11,960
              
              
              
              15,076Long-term
      debt
              
              
              51,022
              
              
              
              39,855Deferred
      income taxes
              
              
              -
              
              
              
              1,257Other
      noncurrent liabilities
              
              
              4,280
              
              
              
              4,327Total
      liabilities
              
              
              67,262
              
              
              
              60,515Commitments
      and contingencies (Note 10)Stockholders'
      Equity:Common
      stock, par value $0.01 per share, 10,000,000 sharesauthorized,
      5,465,429 and 5,455,382 shares issued,respectively, and 5,078,463 and 5,068,416 shares
      outstanding, respectively
              
              
              55
              
              
              
              55Additional
      paid-in capital
              
              
              104,310
              
              
              
              103,997Retained
      earnings
              
              
              26,077
              
              
              
              29,888Accumulated
      other comprehensive income, net of tax
              
              
              434
              
              
              
              646Treasury
      stock, at cost, 386,966 shares
              
              
              (13,426
              )
              
              
              (13,426
              )Total
      stockholders' equity
              
              
              117,450
              
              
              
              121,160Total
      liabilities and stockholders' equity
              
              $
              184,712
              
              
              $
              181,675


See Notes
to Consolidated Financial Statements.




4




Griffin
Land & Nurseries, Inc.


Consolidated
Statements of Changes in Stockholders’ Equity


For the
Twenty-Six Weeks Ended May 30, 2009 and May 31, 2008


(dollars
in thousands)


(unaudited)




Shares
      of Common Stock Issued
              
              
              Common
      Stock
              
              
              Additional Paid-in Capital
              
              
              Retained
      Earnings
              
              
              Accumulated
      Other Comprehensive Income
              
              
              Treasury
      Stock
              
              
              Total
              
              
              Total Comprehensive
      LossBalance
      at December 1, 2007
              
              
              5,321,232
              
              
              $
              53
              
              
              $
              101,703
              
              
              $
              40,199
              
              
              $
              5,002
              
              
              $
              (8,054
              )
              
              $
              138,903Exercise
      of stock options,including
      tax benefit of $53,and shares tendered related tostock
      options exercised
              
              
              8,477
              
              
              
              -
              
              
              
              186
              
              
              
              -
              
              
              
              -
              
              
              
              (136
              )
              
              
              50Stock-based
      compensationexpense
              
              
              -
              
              
              
              -
              
              
              
              100
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              100Repurchase
      of common stock
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (2,337
              )
              
              
              (2,337
              )Dividends
      declared, $0.20 pershare
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,013
              )
              
              
              -
              
              
              
              -
              
              
              
              (1,013
              )Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,986
              )
              
              
              -
              
              
              
              -
              
              
              
              (1,986
              )
              
              $
              (1,986
              )Other
      comprehensive loss,from
      Centaur Media plc,net
      of tax
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,942
              )
              
              
              -
              
              
              
              (1,942
              )
              
              
              (1,942
              )Balance
      at May 31, 2008
              
              
              5,329,709
              
              
              $
              53
              
              
              $
              101,989
              
              
              $
              37,200
              
              
              $
              3,060
              
              
              $
              (10,527
              )
              
              $
              131,775
              
              
              $
              (3,928
              )Balance
      at November 29, 2008
              
              
              5,455,382
              
              
              $
              55
              
              
              $
              103,997
              
              
              $
              29,888
              
              
              $
              646
              
              
              $
              (13,426
              )
              
              $
              121,160Exercise
      of stock options
              
              
              10,047
              
              
              
              -
              
              
              
              132
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              132Stock-based
      compensationexpense
              
              
              -
              
              
              
              -
              
              
              
              181
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              181Dividends
      declared, $0.20  pershare
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,016
              )
              
              
              -
              
              
              
              -
              
              
              
              (1,016
              )Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (2,795
              )
              
              
              -
              
              
              
              -
              
              
              
              (2,795
              )
              
              $
              (2,795
              )Other
      comprehensive income,from
      cash flow hedgingtransaction,
      net of tax
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              37
              
              
              
              -
              
              
              
              37
              
              
              
              37Other
      comprehensive loss,from
      Centaur Media plc,net
      of tax
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (249
              )
              
              
              -
              
              
              
              (249
              )
              
              
              (249
              )Balance
      at May 30, 2009
              
              
              5,465,429
              
              
              $
              55
              
              
              $
              104,310
              
              
              $
              26,077
              
              
              $
              434
              
              
              $
              (13,426
              )
              
              $
              117,450
              
              
              $
              (3,007
              )See
      Notes to Consolidated Financial
Statements.






5




Griffin
Land & Nurseries, Inc.


Consolidated
Statements of Cash Flows


(dollars
in thousands)


(unaudited)


For
      the 26 Weeks Ended,May
      30, 2009
              
              
              May
      31, 2008Operating
      activities:Net
      loss
              
              $
              (2,795
              )
              
              $
              (1,986
              )Adjustments
      to reconcile net loss to net cashprovided
      by operating activities:Depreciation
      and amortization
              
              
              3,233
              
              
              
              3,147Deferred
      income tax benefit
              
              
              (1,538
              )
              
              
              (139
              )Provision
      for inventory losses
              
              
              704
              
              
              
              200Stock-based
      compensation expense
              
              
              181
              
              
              
              100Amortization
      of debt issuance costs
              
              
              84
              
              
              
              50Change
      in unrealized gains on trading securities
              
              
              78
              
              
              
              47Provision
      for bad debts
              
              
              48
              
              
              
              25Equity
      income from equity investment
              
              
              (7
              )
              
              
              (6
              )Gain
      on sales of properties
              
              
              -
              
              
              
              (647
              )Payment
      of employee withholding taxes on stock options exercised
              
              
              -
              
              
              
              (37
              )Changes
      in assets and liabilities:Short-term
      investments
              
              
              8,093
              
              
              
              9,284Accounts
      receivable
              
              
              (8,687
              )
              
              
              (9,347
              )Inventories
              
              
              3,334
              
              
              
              466Other
      current assets
              
              
              1,835
              
              
              
              734Accounts
      payable and accrued liabilities
              
              
              713
              
              
              
              1,276Deferred
      revenue
              
              
              (597
              )
              
              
              (556
              )Other
      noncurrent assets and noncurrent liabilities, net
              
              
              (518
              )
              
              
              (586
              )Net
      cash provided by operating activities
              
              
              4,161
              
              
              
              2,025Investing
      activities:Additions
      to real estate held for sale or lease
              
              
              (8,105
              )
              
              
              (4,732
              )Additions
      to property and equipment
              
              
              (28
              )
              
              
              (320
              )Net
      cash used in investing activities
              
              
              (8,133
              )
              
              
              (5,052
              )Financing
      activities:Proceeds
      from borrowings
              
              
              11,785
              
              
              
              -Payments
      of debt
              
              
              (8,068
              )
              
              
              (625
              )Dividends
      paid to stockholders
              
              
              (1,016
              )
              
              
              (1,018
              )Debt
      issuance costs
              
              
              (560
              )
              
              
              -Exercise
      of stock options
              
              
              132
              
              
              
              34Repurchase
      of common stock
              
              
              -
              
              
              
              (2,337
              )Tax
      benefit of stock options exercised
              
              
              -
              
              
              
              53Net
      cash provided by (used in) financing activities
              
              
              2,273
              
              
              
              (3,893
              )Net
      decrease in cash and cash equivalents
              
              
              (1,699
              )
              
              
              (6,920
              )Cash
      and cash equivalents at beginning of period
              
              
              4,773
              
              
              
              11,120Cash
      and cash equivalents at end of period
              
              $
              3,074
              
              
              $
              4,200





See Notes
to Consolidated Financial Statements.




6


Griffin
Land & Nurseries, Inc.
 Notes to
Consolidated Financial Statements
 (dollars
in thousands unless otherwise noted, except per share data)
 (unaudited)
 
 1.      Summary
of Significant Accounting Policies
  
 Basis
of Presentation
 
 The
accompanying unaudited consolidated financial statements of Griffin Land &
Nurseries, Inc. (“Griffin”) include the accounts of Griffin’s real estate
division (“Griffin Land”) and Griffin’s wholly-owned subsidiary in the landscape
nursery business, Imperial Nurseries, Inc. (“Imperial”), and have been prepared
in conformity with the standards of accounting measurement set forth in
Accounting Principles Board Opinion No. 28 and amendments thereto adopted by the
Financial Accounting Standards Board (“FASB”).
 
 The
accompanying financial statements have been prepared in accordance with the
accounting policies stated in Griffin’s audited financial statements for the
fiscal year ended November 29, 2008 included in Griffin’s Report on Form 10-K as
filed with the Securities and Exchange Commission, and should be read in
conjunction with the Notes to Consolidated Financial Statements appearing in
that report. All adjustments, comprising only normal recurring adjustments,
which are, in the opinion of management, necessary for a fair presentation of
results for the interim periods, have been reflected and all intercompany
transactions have been eliminated.  The consolidated balance sheet
data as of November 29, 2008 was derived from Griffin’s audited financial
statements but does not include all disclosures required by accounting
principles generally accepted in the United States of America.
 
 The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses in the reporting period.  Griffin regularly
evaluates estimates and assumptions related to the useful life and
recoverability of long-lived assets, stock-based compensation expense, deferred
income tax asset valuations, valuation of derivative instruments and inventory
reserves.  Griffin bases its estimates and assumptions on current
facts, historical experience and various other factors that it believes to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities and the
accrual of costs and expenses that are not readily apparent from other sources.
The actual results experienced by Griffin may differ materially and adversely
from Griffin’s estimates.  To the extent there are material
differences between the estimates and the actual results, future results of
operations will be affected.
 
 In the 2009 first quarter, Griffin
entered into an interest rate swap to hedge an interest rate
exposure.  Griffin does not use derivatives for speculative
purposes.  Griffin applied SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” (“SFAS 133”) as amended, which establishes
accounting and reporting standards for derivative instruments and hedging
activities.  SFAS 133 requires Griffin to recognize all derivatives as
either assets or liabilities on its consolidated balance sheet and measure those
instruments at fair value.  The change in the fair value of the
interest rate swap is assessed in accordance with SFAS 133 and reflected in the
carrying value of the interest rate swap on the consolidated balance
sheet.  The estimated fair value is based primarily on projected
future swap rates.
 
 Griffin applies cash flow hedge
accounting to its interest rate swap that is designated as a hedge of the
variability of future cash flows from a floating rate liability based on the
benchmark interest rate.  The change in fair value of Griffin’s
interest rate swap is recorded as a component of accumulated other
  7
  comprehensive
income in stockholders’ equity, to the extent it is effective.  Any
ineffective portion of the change in fair value of this instrument would be
recorded to interest expense.
 
 The
results of operations for the thirteen weeks ended May 30, 2009 (the “2009
second quarter”) and the twenty-six weeks ended May 30, 2009 (the “2009 six
month period”) are not necessarily indicative of the results to be expected for
the full year. The thirteen weeks ended May 31, 2008 is referred to herein as
the “2008 second quarter” and the twenty-six weeks ended May 31, 2008 is
referred to herein as the “2008 six month period.”
 
 Recent Accounting
Pronouncements
 
 In
February 2008, the FASB issued FASB Staff Position 157-2 “Effective Date of FASB
Statement No. 157,” (“FSP 157-2”), which delayed the effective date of SFAS No.
157 for all nonfinancial assets and nonfinancial liabilities, except for items
that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually), until the 2009 first quarter for Griffin.
The application of SFAS No. 157 to Griffin’s nonfinancial assets and
nonfinancial liabilities did not impact Griffin’s 2009 six month period
consolidated financial statements (see Note 9).
 
 In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities, an Amendment of FASB Statement No. 133” (“SFAS No.
161”). This new pronouncement did not require any changes in the accounting for
derivative instruments, but is intended to improve transparency in financial
reporting by requiring enhanced disclosures of an entity’s derivative
instruments and hedging activities and their effects on the entity’s financial
position, financial performance and cash flows. SFAS No. 161 applies to all
derivative instruments within the scope of SFAS No. 133, “Accounting for
Derivative Instruments and Hedging Activities,” as well as related hedged items,
bifurcated derivatives and nonderivative instruments that are designated and
qualify as hedging instruments. Entities with instruments subject to SFAS No.
161 must provide more robust qualitative disclosures and expanded quantitative
disclosures.  The enhanced disclosures as required under SFAS No. 161
are included in Griffin’s financial statements for the 2009 six month
period.
 
 In April
2008, the FASB issued FASB Staff Position 142-3, “Determination of the Useful
Life of Intangible Assets” (“FSP 142-3”), which amends the factors that should
be considered in developing renewal or extension assumptions used to determine
the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill
and Other Intangible Assets” (“SFAS No. 142”).  The objective of FSP
142-3 is to improve the consistency between the useful life of a recognized
intangible asset under SFAS No. 142 and the period of expected cash flows used
to measure the fair value of the asset under SFAS No. 141(R), “Business
Combinations” and other principles of generally accepted accounting
principles.  FSP 142-3 applies to all intangible assets, whether
acquired in a business combination or otherwise, and shall be effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years and applied prospectively to
intangible assets acquired after the effective date.  Griffin is
required to adopt FSP 142-3 in fiscal 2010 and is currently evaluating the
effect of this new pronouncement on its consolidated financial
statements.
 
 In April 2009, the FASB issued FASB
Staff Position SFAS No. 107-1 and APB No. 28-1, “Interim Disclosures about Fair
Value of Financial Instruments” (“FSP 107-1 and APB 28-1”).  This FSP
amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments” and
APB Opinion No. 28, “Interim Financial Reporting”, to require disclosures about
fair value of financial instruments not measured on the balance sheet at fair
value in interim financial statements as well as in annual financial
statements.  Prior to this FSP, fair value for these assets and
liabilities was only disclosed annually.  FSP 107-1 and APB 28-1
applies to all financial instruments within the scope of SFAS No. 107 and
requires all entities to disclose the methods and significant assumptions used
to estimate the fair value of financial instruments.  Griffin is
required to adopt FSP 107-1 and APB 28-1 in the third quarter of fiscal
2009.  In
  8
  periods
after initial adoption, this FSP requires comparative disclosures only for
periods ending after initial adoption.  Griffin is currently
evaluating the effect of the new disclosure requirements of these pronouncements
on its consolidated financial statements.
 
 In April 2009, the FASB issued FASB
Staff Position SFAS No. 115-2 and SFAS No. 124-2, “Recognition and Presentation
of Other-Than-Temporary Impairments” (“FSP 115-2 and FSP
124-2”).  This FSP provides guidance on the recognition and
presentation of other-than-temporary impairments of debt securities classified
as available-for-sale and held-to-maturity for interim and annual financial
statements.  It also expands and increases the frequency of
disclosures about other-than-temporary impairments in both debt and equity
securities.  Griffin is required to adopt FSP 115-2 and FSP 124-2 in
the third quarter of fiscal 2009.  As of May 30, 2009 Griffin did not
hold any debt securities classified as available-for-sale
securities.  Griffin is currently evaluating the effect of the new
disclosure requirements of these pronouncements on its consolidated financial
statements.
 
 In April 2009, the FASB issued FASB
Staff Position SFAS No. 157-4, “Determining Fair Value When the Volume and Level
of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly” (“FSP 157-4”).  This
FSP provides additional guidance for estimating fair value in accordance with
SFAS No. 157 when the volume and level of activity for the asset or liability
have significantly decreased in relation to normal market
activity.  Additionally, FSP 157-4 provides guidance on identifying
circumstances that indicate a transaction is not orderly. FSP 157-4 requires
interim disclosures of the inputs and valuation techniques used to measure fair
value reflecting changes in the valuation techniques and related
inputs.  Griffin is required to adopt FSP 157-4 in the third quarter
of fiscal 2009.  Griffin is currently evaluating the effect of this
new pronouncement on its consolidated financial statements.
 
 In May 2009, the FASB issued SFAS No.
165, “Subsequent Events” (“SFAS No. 165”).  This new pronouncement
establishes principles and standards related to the accounting for and
disclosure of events that occur after the balance sheet date but before the
financial statements are issued.  SFAS No. 165 requires an entity to
recognize, in the financial statements, subsequent events that provide
additional information regarding conditions that existed at the balance sheet
date.  Subsequent events that provide information about
conditions that did not exist at the balance sheet date shall not be recognized
in the financial statements under SFAS No. 165.  SFAS No. 165 is
effective for Griffin in the third quarter of fiscal 2009.
 
  2.      Industry
Segment Information
  
 Griffin defines its reportable segments
by their products and services, which are comprised of the landscape nursery and
real estate segments.  Management operates and receives reporting
based upon these segments.  Griffin has no operations outside the
United States.  Griffin’s export sales and transactions between
segments are not material.
  9
  For
      the 13 Weeks Ended,
              
              For
      the 26 Weeks Ended,May
      30, 2009
              
              May
      31, 2008
              
              May
      30, 2009
              
              May
      31, 2008Total
      revenue:Landscape
      nursery net sales
              $
              15,568
              
              $
              17,053
              
              $
              16,017
              
              $
              17,477Rental
      revenue and property sales
              
              4,140
              
              
              4,011
              
              
              8,324
              
              
              8,068$
              19,708
              
              $
              21,064
              
              $
              24,341
              
              $
              25,545Operating
      (loss) profit:Landscape
      nursery
              $
              (198
              )
              $
              817
              
              $
              (1,048
              )
              $
              (154
              )Real
      estate
              
              572
              
              
              454
              
              
              578
              
              
              386Industry
      segment totals
              
              374
              
              
              1,271
              
              
              (470
              )
              
              232General
      corporate expense
              
              (1,141
              )
              
              (1,230
              )
              
              (2,361
              )
              
              (2,328
              )Operating
      (loss) profit
              
              (767
              )
              
              41
              
              
              (2,831
              )
              
              (2,096
              )Interest
      expense
              
              (818
              )
              
              (812
              )
              
              (1,626
              )
              
              (1,661
              )Investment
      income
              
              77
              
              
              186
              
              
              124
              
              
              569Loss
      before income tax benefit
              $
              (1,508
              )
              $
              (585
              )
              $
              (4,333
              )
              $
              (3,188
              )





Identifiable
      assets:
                
                May
      30, 2009
                
                November
      29, 2008Landscape
      nursery
                
                $
                37,310
                
                $
                32,984Real
      estate
                
                
                135,038
                
                
                125,611Industry
      segment totals
                
                
                172,348
                
                
                158,595General
      corporate
                
                
                12,364
                
                
                23,080Total
      assets
                
                $
                184,712
                
                $
                181,675
 The real estate segment had no revenue
from property sales in the 2009 six month period.  Revenue of the real
estate segment in the 2008 second quarter and 2008 six month period includes
property sales revenue of $405 and $826, respectively.
 
 
 3.   Facility
Shutdown
  As reported in Griffin’s 2008 financial
statements, Imperial will shut down its Quincy, Florida farm by the end of
fiscal 2009.  The Quincy farm represents all of Imperial’s growing
operations in Florida.  Imperial expects to continue to operate its
farm in Granby, Connecticut.  The shutdown of the Florida farm
reflects the difficulties that facility has encountered in delivering product to
most of Imperial’s major markets, which are located in the mid-Atlantic area and
northeastern United States.  Imperial has been unable to develop
sufficient volume in more southern markets to reduce its dependence on shipping
Florida product substantial distances.  The closure of the Florida
farm will enable Imperial to focus as a regional grower with most of its major
markets within close proximity of its Connecticut farm.
  As a result of the decision to shut
down Imperial’s Florida farm, Griffin recorded a total charge of $8.9 million in
the fiscal 2008 fourth quarter, comprised of $7.2 million included in costs of
landscape nursery sales for Florida inventories that were expected to be sold
below their carrying values at the time of sale and a restructuring charge of
$1.7 million that included: (i) $1.1 million to write down fixed assets
  10
  that will
no longer be used; and (ii) $0.6 million for severance payments.  In
the 2009 six month period, $3.9 million was charged against the reserve for
inventory primarily reflecting the sale of inventory below its carrying
costs.  A total of approximately 70 employees were affected by the
shutdown of the Florida farm.  During the 2009 six month period, one
employee was terminated as a result of the shutdown of the Florida farm,
bringing the total number of employees terminated as a result of the shutdown of
the Florida farm to 15 as of May 30, 2009.  The liquidation of the
Florida inventory, payment of the balance of severance and the shutdown of the
Florida farm are expected to take place during the balance of fiscal
2009.  Changes in the inventory reserve related to the shutdown of the
Florida farm during the 2009 six month period were as follows:
 Balance
      at beginning of period
              
              $
              7,311Reductions
      to the reserve due to the sale of inventoriesbelow
      their carrying costs
              
              
              (3,347
              )Reductions
      to the reserve related to costs ofdisposal
      of inventories
              
              
              (595
              )Balance
      at end of period
              
              $
              3,369
  Included in
the reserve for inventory are the excess of the carrying value of the inventory
over the estimated sales proceeds, costs to maintain the inventory prior to sale
and estimated disposal costs.  During the 2009 six month period, there
were no revisions made to the original estimates used in determining the amount
of the charge for inventories that are being sold below cost included in cost of
landscape nursery sales and the restructuring charge recorded as of November 29,
2009.  Although management used its best judgment in estimating the
amount of the required inventory reserve, the actual amount may differ from the
amount estimated based on several factors, including market
conditions.
 
 4.  Inventories
 
 Inventories consist of:
  May
      30, 2009
                
                November
      29, 2008Nursery
      stock
                $
                22,751
                
                $
                30,051Materials
      and supplies
                
                1,935
                
                
                2,01724,686
                
                
                32,068Reserves
                
                (4,377
                )
                
                (7,721
                )$
                20,309
                
                $
                24,347
 
 
 5.   Real
Estate Assets
 
 Real estate held for sale or lease
consists of:
  11
  May
      30, 2009Estimated Useful
      Lives
                Held
      for Sale
                
                Held
      for Lease
                
                TotalLand
                
                $
                1,634
                
                $
                7,770
                
                $
                9,404Land
      improvements
                10
      to 30 years
                
                691
                
                
                7,770
                
                
                8,461Buildings
      and improvements
                10
      to 40 years
                
                -
                
                
                103,684
                
                
                103,684Tenant
      improvements
                Shorter
      of useful life or terms of related lease
                
                -
                
                
                10,912
                
                
                10,912Development
      costs
                
                
                6,403
                
                
                17,079
                
                
                23,4828,728
                
                
                147,215
                
                
                155,943Accumulated
      depreciation
                
                
                -
                
                
                (32,259
                )
                
                (32,259
                )$
                8,728
                
                $
                114,956
                
                $
                123,684
 
 November
      29, 2008Estimated Useful
      Lives
                Held
      for Sale
                
                Held
      for Lease
                
                TotalLand
                
                $
                1,634
                
                $
                7,770
                
                $
                9,404Land
      improvements
                10
      to 30 years
                
                691
                
                
                7,729
                
                
                8,420Buildings
      and improvements
                10
      to 40 years
                
                -
                
                
                103,651
                
                
                103,651Tenant
      improvements
                Shorter
      of useful life or terms of related lease
                
                -
                
                
                11,464
                
                
                11,464Development
      costs
                
                
                6,151
                
                
                5,314
                
                
                11,4658,476
                
                
                135,928
                
                
                144,404Accumulated
      depreciation
                
                
                -
                
                
                (30,456
                )
                
                (30,456
                )$
                8,476
                
                $
                105,472
                
                $
                113,948
 
 Griffin capitalized interest of $61 and
$81 in the 2009 second quarter and six month period, respectively, and $38 and
$41 in the 2008 second quarter and six month period,
respectively.  Total depreciation expense related to real estate held
for sale or lease was $1,184 and $2,371 in the 2009 second quarter and six month
period, respectively, and $1,123 and $2,211 in the 2008 second quarter and six
month period, respectively.
   6.   Investments
 
 Short-Term Investments
 
 Griffin's short-term investments are
comprised of debt securities and are accounted for as trading securities under
SFAS No. 115, “Accounting for Certain Investments in Debt and Equity
Securities.”   Accordingly, the securities are carried at their
fair values based upon the quoted market prices of those investments at the
balance sheet dates, and net realized and unrealized gains and losses on those
investments are included in Griffin’s pretax loss.  The composition of
short-term investments at May 30, 2009 and November 29, 2008 is as
follows:
 12
 
 May
      30, 2009
                  
                  November
      29, 2008Cost
                  
                  Fair
      Value
                  
                  Cost
                  
                  Fair
      ValueU.S.
      Treasury securities
                  $
                  454
                  
                  $
                  453
                  
                  $
                  8,433
                  
                  $
                  8,510Certificates
      of deposit
                  
                  -
                  
                  
                  -
                  
                  
                  114
                  
                  
                  114Total
      short-term investments
                  $
                  454
                  
                  $
                  453
                  
                  $
                  8,547
                  
                  $
                  8,624
  Investment income in the 2009
and 2008 second quarters and 2009 and 2008 six month periods consists
of:
 
 For
      the 13 Weeks Ended,
                    
                    For
      the 26 Weeks Ended,May
      30, 2009
                    
                    May
      31, 2008
                    
                    May
      30, 2009
                    
                    May
      31, 2008Interest
      and dividend income
                    $
                    64
                    
                    $
                    153
                    
                    $
                    87
                    
                    $
                    190Net
      realized gains on the sales of short-term investments
                    
                    22
                    
                    
                    219
                    
                    
                    108
                    
                    
                    420Change
      in unrealized gains on short-term investments
                    
                    (16
                    )
                    
                    (192
                    )
                    
                    (78
                    )
                    
                    (47
                    )Other
      investment income
                    
                    7
                    
                    
                    6
                    
                    
                    7
                    
                    
                    6$
                    77
                    
                    $
                    186
                    
                    $
                    124
                    
                    $
                    569
 
 Centaur Media plc
 
 Griffin’s investment in the common
stock of Centaur Media plc (“Centaur Media”) is accounted for as an
available-for-sale security under SFAS No. 115.  Accordingly, changes
in the value of Centaur Media, reflecting both changes in the stock price and
changes in the foreign currency exchange rate are included, net of income taxes,
in Accumulated Other Comprehensive Income (see Note 8).
 
 As of May 30, 2009, the cost, gross
unrealized gain and fair value of Griffin’s investment in Centaur Media were
$2,677, $313 and $2,990, respectively.  As of November 29, 2008, the
cost, gross unrealized gain and fair value of Griffin’s investment in Centaur
Media were $2,677, $697 and $3,374, respectively.
  
 7.      Long-Term
Debt
 
 Long-term debt includes:
  13
  May
      30, 2009
                  
                  November
      29, 2008Nonrecourse
      mortgages:8.54%,
      due July 1, 2009 (prepaid April 1, 2009)
                  $
                  -
                  
                  $
                  7,4826.08%,
      due January 1, 2013
                  
                  7,526
                  
                  
                  7,6346.30%,
      due May 1, 2014
                  
                  867
                  
                  
                  9395.73%,
      due July 1, 2015
                  
                  20,260
                  
                  
                  20,4188.13%,
      due April 1, 2016
                  
                  4,939
                  
                  
                  5,0607.0%,
      due October 1, 2017
                  
                  6,727
                  
                  
                  6,816Total
      nonrecourse mortgages
                  
                  40,319
                  
                  
                  48,349Construction
      to permanent mortgage loan
                  
                  4,285
                  
                  
                  -Revolving
      line of credit
                  
                  7,500
                  
                  
                  -Capital
      leases
                  
                  129
                  
                  
                  167Total
                  
                  52,233
                  
                  
                  48,516Less:
      current portion
                  
                  (1,211
                  )
                  
                  (8,661
                  )Total
      long-term debt
                  $
                  51,022
                  
                  $
                  39,855
 
 
 On February 6, 2009, Griffin entered
into a $12 million construction to permanent loan with Berkshire Bank (the
“Berkshire Bank Loan”), which is providing a significant portion of the
financing for construction in 2009 of an approximate 304,000 square foot
warehouse facility in New England Tradeport (“Tradeport”), Griffin’s industrial
park in Windsor and East Granby, Connecticut.  Prior to the closing of
the Berkshire Bank Loan, Griffin Land entered into a ten-year lease with Tire
Rack Inc. to lease approximately 257,000 square feet of this new
facility.  Under certain conditions, but no later than the beginning
of the sixth year of the lease, the tenant is required to lease the entire
building.  The lease contains provisions for a potential expansion of
the building of up to approximately 450,000 square feet.
 
 During the first year, the Berkshire
Bank Loan will function as a construction loan, with Griffin Land drawing funds
as construction of the new warehouse progresses.  The interest rate
during the first year of the Berkshire Bank Loan is the greater of 2.75% above
the thirty day LIBOR rate or 4%.  As of May 30, 2009, the one-month
LIBOR rate was 0.34%.  Payments during this period are for interest
only.  One year after the loan closing date, the Berkshire Bank Loan
converts to a nine-year nonrecourse mortgage collateralized by the new warehouse
facility.  Payments during those nine years will be for principal and
interest and will be based on a twenty-five year amortization
period.  As of May 30, 2009, $4.3 million was outstanding under the
Berkshire Bank Loan.
 
 At the time Griffin closed the
Berkshire Bank Loan, Griffin also entered into an interest rate swap agreement
with the bank for a notional principal amount of $12 million at inception to fix
the interest rate for the final nine years of the loan at 6.35%.  The
swap agreement was entered into on February 6, 2009; however, the settlements
under the swap agreement commence on March 1, 2010.  Payments under
this swap agreement will continue on the first day of each month until February
1, 2019, which is also the termination date of the Berkshire Bank
Loan.  Griffin is accounting for the interest rate swap agreement as
an effective cash flow hedge (see Notes 8 and 9).  No ineffectiveness
on the cash flow hedge was recognized as of May 30, 2009 and none is anticipated
over the term of the agreement.  There were no amounts reclassified
from other comprehensive income to interest expense as of May 30, 2009 and $2 is
expected to be reclassified in the next twelve months.  Amounts in
other comprehensive income will be reclassified into interest expense over
the term of the swap agreement to achieve the fixed rate on the
debt.  This interest rate swap agreement contains no credit risk
related contingent features.  For the 2009 six month period, the
amount of gain recognized on the effective portion of this interest rate swap
agreement in other comprehensive income was $0.1 million, before
taxes.  As of May 30, 2009, the
  14
  interest
rate swap asset was approximately $0.1 million and is included in other
noncurrent assets on Griffin’s consolidated balance sheet.
 
 On February 27, 2009, Griffin entered
into a $10 million Revolving Line of Credit with Doral Bank (the “Credit Line”)
that has a term of two years, but may be extended for an additional year by
Griffin.  The Credit Line is collateralized by several of Griffin
Land’s buildings in Griffin Center and Griffin Center South.  The
interest rate on the Credit Line is the greater of the prime rate plus 1.5% or
6.88%.  As of May 30, 2009, the prime rate was
3.25%.  Griffin intends to use this facility for seasonal working
capital needs, to supplement cash flow from operations and for general corporate
purposes.  As of May 30, 2009, $7.5 million was outstanding under the
Credit Line.  The borrowings under the Credit Line were used to
prepay, on April 1, 2009, Griffin’s 8.54% nonrecourse mortgage that was due on
July 1, 2009.  The mortgage had a balance of $7.4 million when it was
repaid and there was no prepayment penalty.  Three of the four
buildings that were collateral for the mortgage that was repaid will be included
in the collateral of a new nonrecourse mortgage (see below).
  In the near future, Griffin expects to
close on a mortgage for $8.5 million with People’s United Bank (“the People’s
Bank Mortgage”) on four of its industrial buildings in Tradeport, three of which
were included in the collateral on the mortgage that was repaid on April 1, 2009
(see above).  The People’s Bank Mortgage is nonrecourse, however, a
subsidiary of Griffin will enter into a ten-year master lease on 90% of the
space in the mortgaged buildings.  The master lease will stay in
effect until overall occupancy and operating results of the collateral
properties increase to certain levels.  If not terminated earlier, the
master lease will expire at the end of the mortgage term.  In
addition, the People’s Bank Mortgage may be increased in increments up to an
aggregate borrowing of $10.5 million if the leasing of the currently vacant
space meets certain criteria.  The People’s Bank Mortgage will have a
term of ten years with payments based on a twenty-five year amortization
period.  The interest rate under the People’s Bank Mortgage will be at
a floating rate, but Griffin expects to enter into a swap agreement to fix the
interest rate over the term of the loan.
 
 At the time Griffin closed on the
People’s Bank Mortgage, Griffin also entered into an interest rate swap
agreement with the bank for a notional principal amount of $8.5 million at
inception to fix the interest rate of the loan for the entire term the loan
is outstanding.  Payments under this swap agreement will commence at
the same time as payments under the loan and will be made at the same time as
the remaining loan payments will be made over the ten-year terms of the loan and
swap agreement.  This interest rate swap agreement contains no credit
risk related contingent features.  Griffin expects to account for this
interest rate swap agreement as an effective cash flow hedge.
   8.    Stockholder’s
Equity
 
 Earnings
Per Share
 
 Basic and
diluted per share results were based on the following:
  15
 
 For
      the 13 Weeks Ended,
                  
                  For
      the 26 Weeks Ended,May
      30, 2009
                  
                  May
      31, 2008
                  
                  May
      30, 2009
                  
                  May
      31, 2008Net
      loss as reported for computationof basic and diluted per share results
                  $
                  (973
                  )
                  $
                  (377
                  )
                  $
                  (2,795
                  )
                  $
                  (1,986
                  )Weighted
      average shares outstanding forcomputation
      of basic per share results
                  
                  5,077,000
                  
                  
                  5,042,000
                  
                  
                  5,075,000
                  
                  
                  5,067,000Incremental
      shares from assumed exerciseof
      Griffin stock options (a)
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Weighted
      average shares outstanding forcomputation
      of diluted per share results
                  
                  5,077,000
                  
                  
                  5,042,000
                  
                  
                  5,075,000
                  
                  
                  5,067,000
  (a)
                Incremental
      shares from the assumed exercise of Griffin stock options are not included
      in periods where the inclusion of such shares would be
      anti-dilutive.  The incremental shares from the assumed exercise
      of stock options in the thirteen and twenty-six weeks ended May 30, 2009
      would have been 34,000 and 37,000, respectively.  The
      incremental shares from the assumed exercise of stock options in the
      thirteen and twenty-six weeks ended May 31, 2008 would have been 94,000
      and 96,000, respectively.
 
 Stock Options
 
 In the
2009 second quarter, the Board of Directors adopted the Griffin Land &
Nurseries, Inc. 2009 Stock Option 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
Griffin’s stockholders at Griffin’s 2009 Annual Meeting of Stockholders held on
May 12, 2009.  The 2009 Stock Option Plan makes available options to
purchase 386,926 shares of Griffin common stock, which includes 161,926 options
to purchase the 161,926 shares that were available for issuance under the 1997
Stock Option Plan at the time it was replaced.  The Compensation
Committee of the Board of Directors of Griffin administers the 2009 Stock Option
Plan. Options granted under the 2009 Stock Option Plan may be either incentive
stock options or non-qualified stock options issued at fair market value on the
date approved by the Board of Directors of Griffin. Vesting of all of Griffin's
previously issued stock options is solely based upon service requirements and
does not contain market or performance conditions.
 
 Stock options issued will expire ten
years from the grant date.  In accordance with the 2009 Stock Option
Plan, stock options issued to non-employee directors upon their initial election
to the board of directors are fully exercisable immediately upon the date of the
option grant. Stock options issued to non-employee directors upon their
reelection to the board of directors vest on the second anniversary from the
date of grant. Stock options issued to employees vest in equal installments on
the third, fourth and fifth anniversaries from the date of grant. None of the
stock options outstanding at May 30, 2009 may be exercised as stock appreciation
rights.
 
 In the 2009 six month period, 61,749
stock options were granted under the 1997 Stock Option Plan, including 60,000
stock options granted to employees and 1,749 stock options granted to a director
upon his initial election to Griffin’s Board of Directors.  In
addition, in the 2009 six month period 8,514 stock options were issued to the
non-employee directors under the 2009 Stock Option Plan upon their reelection to
Griffin’s Board of Directors.  There were 29,704 stock options issued
in the 2008 six month
  16
  period,
including 25,000 stock options issued to an employee and 4,704 issued to
directors upon their reelection to Griffin’s Board of Directors.
 
 There were 70,263 and 29,704 stock
options granted during the 2009 and 2008 six month periods,
respectively.  The fair values of the stock options granted during the
2009 six month period were $14.88 for 22,500 options, $14.40 for 22,500 options,
$10.54 for 15,000 options, $13.02 for 8,514 options and $15.53 for 1,749
options.  The fair values of the stock options granted during the 2008
six month period were $14.82 for 25,000 options and $14.96 for 4,704
options.
 
 The fair
values of all options granted were estimated as of each grant date using the
Black-Scholes option-pricing model.  Assumptions used in determining
the fair value of the stock options granted were as follows:
 
 For
      the 26 Weeks Ended,May
      30, 2009
                  
                  May
      31, 2008Expected
      volatility
                  37.7%
      to 43.5%
                  
                  38.6%
      to 41.1%Risk
      free interest rate
                  1.6%
      to 2.7%
                  
                  3.5%Expected
      option term
                  5
      to 8.5 years
                  
                  7
      to 8 yearsAnnual
      dividend yield
                  $0.40
                  
                  $0.40
 
 Activity
under the Griffin Stock Option Plan is summarized as follows:
 
 For
      the 26 Weeks Ended,May
      30, 2009
                  
                  
                  May
      31, 2008Vested
      Options
                  Number
      of Shares
                  
                  
                  Weighted
      Avg. Exercise Price
                  
                  
                  Number
      of Shares
                  
                  
                  Weighted
      Avg. Exercise PriceOutstanding
      at beginning of period
                  
                  89,368
                  
                  
                  $
                  15.56
                  
                  
                  
                  218,378
                  
                  
                  $
                  14.13Exercised
                  
                  (10,047
                  )
                  
                  $
                  13.20
                  
                  
                  
                  (8,477
                  )
                  
                  $
                  15.72Vested
                  
                  3,156
                  
                  
                  $
                  38.00
                  
                  
                  
                  5,140
                  
                  
                  $
                  31.13Granted
      and vested
                  
                  1,749
                  
                  
                  $
                  34.30
                  
                  
                  
                  -
                  
                  
                  
                  -Outstanding
      at end of period
                  
                  84,226
                  
                  
                  $
                  17.07
                  
                  
                  
                  215,041
                  
                  
                  $
                  14.48
 Range
      of Exercise Prices for Vested Options
                  
                  Outstanding
      at
                    May
      30, 2009
                  
                  Weighted
      Avg. Exercise Price
                  
                  Weighted
      Avg. Remaining Contractual Life (in years)
                  
                  Total
      Intrinsic Value
                  
                  Total Fair Value$
                  11.00-$14.00
                  
                  
                  48,544
                  
                  $
                  11.95
                  
                  
                  1.5
                  
                  $
                  821
                  
                  $
                  239$
                  15.00-$18.00
                  
                  
                  15,322
                  
                  $
                  16.80
                  
                  
                  2.3
                  
                  
                  185
                  
                  
                  98$
                  24.00-$39.00
                  
                  
                  20,360
                  
                  $
                  29.46
                  
                  
                  5.1
                  
                  
                  37
                  
                  
                  30984,226
                  
                  $
                  17.07
                  
                  
                  2.5
                  
                  $
                  1,043
                  
                  $
                  646
    17
  For
      the 26 Weeks Ended,May
      30, 2009
                
                
                May
      31, 2008Nonvested
      Options
                Number
      of Shares
                
                Weighted
      Avg. Exercise Price
                
                Number
      of Shares
                
                Weighted
      Avg. Exercise PriceNonvested
      at beginning of period
                
                40,684
                
                
                $
                33.66
                
                
                
                18,348
                
                
                $
                32.62Granted
                
                68,514
                
                
                $
                32.46
                
                
                
                29,704
                
                
                $
                34.03Vested
                
                (3,156
                )
                
                $
                38.00
                
                
                
                (5,140
                )
                
                $
                31.13Nonvested
      at end of period
                
                106,042
                
                
                $
                32.76
                
                
                
                42,912
                
                
                $
                33.78
  Range
      of Exercise Prices for Nonvested Options
                
                Outstanding
      at
                  May
      30, 2009
                
                Weighted
      Avg. Exercise Price
                
                Weighted
      Avg. Remaining Contractual Life (in years)
                
                Total Intrinsic Value
                
                Total Fair Value$
                28.00-$31.00
                
                
                17,514
                
                $
                29.60
                
                
                8.5
                
                $
                6
                
                $
                257$
                33.00-$35.00
                
                
                88,528
                
                $
                33.38
                
                
                9.3
                
                
                -
                
                
                1,240106,042
                
                $
                32.76
                
                
                9.2
                
                $
                6
                
                $
                1,497
  Number
      of option holders at May 30, 2009
                23
 Compensation expense
for stock options recognized in the 2009 second quarter and six month period was
$93 and $181, respectively, with related tax benefits of $22 and $48,
respectively.  Compensation expense for stock options recognized in
the 2008 second quarter and six month period was $53 and $100, respectively,
with related tax benefits of $16 and $30, respectively.
 
 As of May 30, 2009,
the unrecognized compensation expense related to nonvested stock options that
will be recognized during future periods is as follows:
 
 Balance
      of Fiscal 2009
                
                $188Fiscal
      2010
                
                $354Fiscal
      2011
                
                $264Fiscal
      2012
                
                $141Fiscal
      2013
                
                $56Fiscal
      2014
                
                $7
  Accumulated Other Comprehensive
Income
 
 Changes
in accumulated other comprehensive incomein the 2009 and 2008 six
month periods consist of the following:
  18
  For
      the 26 Weeks Ended,May
      30, 2009
                  
                  
                  May
      31, 2008Balance
      at beginning of period
                  
                  $
                  646
                  
                  
                  $
                  5,002Decrease
      in fair value of Centaur Media, net of taxes of ($185)and
      ($950), respectively
                  
                  
                  (343
                  )
                  
                  
                  (1,763
                  )Increase
      in value of cash flow hedge, net of tax of $20
                  
                  
                  37
                  
                  
                  
                  -Increase
      (decrease) in fair value of Centaur Media, due to exchangegain
      (loss), net of taxes of $50 and ($96), respectively
                  
                  
                  94
                  
                  
                  
                  (179
                  )Balance
      at end of period
                  
                  $
                  434
                  
                  
                  $
                  3,060Accumulated
      other comprehensive income is comprised of the following:May
      30, 2009
                  
                  
                  November
      29, 2008Change
      in the value of Centaur Media plc
                  
                  $
                  213
                  
                  
                  $
                  462Change
      in value of cash flow hedge
                  
                  
                  37
                  
                  
                  
                  -Actuarial
      gain on postretirement benefit plan
                  
                  
                  184
                  
                  
                  
                  184$
                  434
                  
                  
                  $
                  646
  Cash
Dividend
  In both the 2009 and
2008 six month periods, Griffin declared two cash dividends of $0.10 per common
share each.
   9.      Supplemental
Financial Statement Information
  
 Fair Value of Assets, Liabilities and
Interest Rate Hedge
 
 In fiscal 2008, Griffin adopted SFAS
No. 157, “Fair Value Measurements” (“SFAS No. 157”).  SFAS No. 157
establishes a fair value hierarchy that requires an entity to maximize the use
of observable inputs and minimize the use of unobservable inputs when measuring
fair value.  A financial instrument’s categorization within the fair
value hierarchy is based upon the lowest level of input that is significant to
the fair value measurement.  SFAS No. 157 establishes three levels of
inputs that may be used to measure fair value, as follows:
 
 Level 1
applies to assets or liabilities for which there are quoted market prices in
active markets for identical assets or liabilities. Level 1 securities include
Griffin’s short-term (trading account) investments and available for sale
securities.
 
 
 Level 2
applies to assets or liabilities for which there are inputs other than quoted
prices included within Level 1 that are observable for the asset or liability,
such as quoted prices for similar assets or liabilities in active markets;
quoted prices for assets or liabilities in markets with insufficient volume or
infrequent transactions (less active markets); or model-derived valuations in
which significant inputs are observable or can be derived principally from, or
corroborated by, observable market data.  Level 2 liabilities include
an interest rate swap derivative. The fair value of Griffin’s interest rate swap
derivative instrument is determined based on inputs that are readily available
in public markets or
  19
   can be
derived from information available in publicly quoted
markets.  Therefore, Griffin has categorized this derivative
instrument as Level 2 within the fair value hierarchy.
 
 
 Level 3
applies to assets or liabilities for which there are unobservable inputs to the
valuation methodology that are significant to the measurement of the fair value
of the assets or liabilities. Level 3 assets include certain fixed assets and
accruals related to the shutdown of Imperial's Florida farm.  Such
fixed assets were measured in accordance with Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long Lived
Assets." Such accruals were measured in accordance with Statement of Financial
Accounting Standards No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities." These assets and liabilities are classified within Level 3
of the fair value hierarchy because management determined that significant
adjustments derived from Griffin’s own assumptions are required to determine
fair value at the measurement date.
 
 
 The following are Griffin’s financial
assets carried at fair value and measured at fair value on a recurring basis as
of May 30, 2009:
 
 Quoted
      Prices in
                  
                  Significant
                  
                  SignificantActive
      Markets for
                  
                  Observable
                  
                  UnobservableIdentical
      Assets
                  
                  Inputs
                  
                  Inputs(Level
      1)
                  
                  (Level
      2)
                  
                  (Level
      3)Trading
      securities
                  $
                  453
                  
                  $
                  -
                  
                  $
                  -Available
      for sale securities
                  $
                  2,990
                  
                  $
                  -
                  
                  $
                  -Interest
      rate swap
                  $
                  -
                  
                  $
                  57
                  
                  $
                  -
 
 Included on Griffin’s consolidated
balance sheet as of May 30, 2009 are certain nonfinancial assets and
nonfinancial liabilities, related to the shutdown of Imperial’s Florida farm
that are measured at fair value on a nonrecurring basis as follows:
 
 Quoted
      Prices in
                  
                  Significant
                  
                  SignificantActive
      Markets for
                  
                  Observable
                  
                  UnobservableIdentical
      Assets
                  
                  Inputs
                  
                  Inputs(Level
      1)
                  
                  (Level
      2)
                  
                  (Level
      3)Fixed
      assets
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -Severance
      accrual
                  $
                  -
                  
                  $
                  -
                  
                  $
                  (522
                  )
  Certain fixed assets of Imperial’s
Florida farm were deemed to have no fair value as of November 29, 2008 and were
fully impaired at that time.
 
 Deferred
Revenue on Land Sale
 
 In fiscal
2006, Griffin sold 130 acres of undeveloped land in Tradeport for cash proceeds
of $13.0 million.  As provided under the contract for the sale of that
land and under the State Traffic Commission Certificate covering the area in
Tradeport located in Windsor, Connecticut, certain improvements to
existing roads
  20
 
  were
required.  The cost of these improvements was the responsibility
of Griffin, however, a portion of the costs were reimbursed from the purchaser
of the land or performed by the town.  As a result of Griffin’s
continuing involvement with the required road improvements, that land sale was
accounted for under the percentage of completion method.  Accordingly,
the revenue and the pretax gain on the sale were recognized on a pro rata basis
in a ratio equal to the percentage of the total costs incurred to the total
anticipated costs of sale, including the allocated costs of the required road
improvements.  Griffin’s consolidated statement of operations for the
2008 second quarter and six month period included revenue of $0.4 million and
$0.8 million, respectively, and pretax gains of $0.3 million and $0.6 million,
respectively, from this land sale.  As of November 29, 2008, the
required road improvements were completed and all of the costs incurred,
therefore, all of the revenue and pretax gain on the sale were recognized as of
that date.  Accordingly, there is no revenue or pretax gain related to
this transaction in the 2009 six month period.
 
 Supplemental
Cash Flow Information
 
 The decreases of $384 and $2,988,
respectively, in the 2009 and 2008 six month periods in Griffin’s investment in
Centaur Media reflect the mark to market adjustment of this investment and did
not affect Griffin’s cash.
 
 Included in accounts payable and
accrued liabilities at May 30, 2009 and November 29, 2008 were $4,985 and $983,
respectively, for additions to real estate held for sale or
lease.  Accounts payable and accrued liabilities related to additions
to real estate held for sale or lease increased by $4,002 and $435 in the 2009
six month period and 2008 six month period, respectively.
 
 As of May 30, 2009, included in
Griffin’s accrued liabilities is a dividend payable of $508 reflecting a
dividend on Griffin’s common stock declared prior to the end of the 2009 second
quarter, that was paid subsequent to the end of Griffin’s 2009 second
quarter.  As of November 29, 2008, Griffin’s accrued liabilities
included $507 for a dividend on Griffin’s common stock that was declared prior
to the end of fiscal 2008 and paid in the 2009 first quarter.
 
 Interest payments, net of capitalized
interest, were $1.7 million and $1.6 million in the 2009 and 2008 six month
periods, respectively.
 
 Property and Equipment
 
 Property and equipment consist
of:
  Estimated Useful
      Lives
                  
                  May
      30, 2009
                  
                  November
      29, 2008Land
                  
                  
                  $
                  715
                  
                  $
                  715Land
      improvements
                  10
      to 20 years
                  
                  
                  5,650
                  
                  
                  5,650Buildings
      and improvements
                  10
      to 40 years
                  
                  
                  3,060
                  
                  
                  3,060Machinery
      and equipment
                  3
      to 20 years
                  
                  
                  17,502
                  
                  
                  17,52926,927
                  
                  
                  26,954Accumulated
      depreciation
                  
                  
                  
                  (20,984
                  )
                  
                  (20,517
                  )$
                  5,943
                  
                  $
                  6,437
 Griffin
did not incur any new capital lease obligations in the 2009 six month
period.  Griffin incurred new capital lease obligations of $70 in the
2008 six month period.
  21
 Income Taxes
 
 Griffin’s effective income tax rate was
35.5% in the 2009 six month period as compared to 37.7% in the 2008 six month
period.  The effective tax rate used in the 2009 six month period is
based on management’s projections for the balance of the year.  To the
extent that actual results differ from current projections, the effective income
tax rate may change.
 
 Included in the net decrease in
deferred income tax liabilities of $1,257 in the 2009 six month period was a
decrease of $135 related to a decrease in the mark to market adjustment on
Griffin’s investment in Centaur Media and an increase of $20 related to the
value of a derivative that was entered into in the 2009 six month
period.  The net decrease in deferred taxes in the 2008 six month
period includes $1,046 related to the mark to market adjustment related to
Centaur Media.  These decreases to deferred income tax liabilities are
included as credits in Griffin’s comprehensive loss for the 2009 and 2008
six month periods.  All other changes to deferred tax liabilities and
all changes in deferred tax assets relate to Griffin’s income tax benefits for
the 2009 and 2008 six month periods.
 
 Postretirement
Benefits
 
 Griffin maintains a postretirement
benefits program that provides principally health and life insurance benefits to
certain of its retirees. The liability for postretirement benefits is included
in other noncurrent liabilities on Griffin’s consolidated balance sheets.
Griffin’s postretirement benefits are unfunded, with benefits to be paid from
Griffin's general assets.  Griffin’s contributions to its
postretirement benefits program in the 2009 and 2008 six month periods were $2
and $3, respectively, with an expected contribution of $6 for the fiscal 2009
full year.  The components of Griffin's postretirement benefits
expense are immaterial for all periods presented.
 
 
 10.           Commitments
and Contingencies
 
 As of May
30, 2009, Griffin had committed purchase obligations of $4.1 million,
principally for Griffin Land’s construction of a new industrial building in
Tradeport and for the purchase of plants and raw materials by
Imperial.
 
 Griffin
is involved, as a defendant, in various litigation matters arising in the
ordinary course of business.  In the opinion of management, based on
the advice of counsel, the ultimate liability, if any, with respect to these
matters will not be material, individually or in the aggregate, to Griffin’s
consolidated financial position, results of operations or cash
flows.
   22
 
 ITEM
      2.
                  MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIALCONDITION
      AND RESULTS OF OPERATIONS
 
 Overview
 
 The consolidated financial statements
of Griffin include the accounts of Griffin’s Connecticut and Massachusetts based
real estate business (“Griffin Land”) and Griffin’s subsidiary in the landscape
nursery business, Imperial Nurseries, Inc. (“Imperial”).
 
 The significant accounting policies and
methods used in the preparation of Griffin’s consolidated financial statements
included in Item 1 are consistent with those used in the preparation of
Griffin’s audited financial statements for the fiscal year ended November 29,
2008 included in Griffin’s Annual Report on Form 10-K as filed with the
Securities and Exchange Commission.
 
 The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses in the reporting period.  Griffin regularly
evaluates estimates and assumptions related to the useful life and
recoverability of long-lived assets, stock-based compensation expense, deferred
income tax asset valuations, valuation of derivative instruments and inventory
reserves.  Griffin bases its estimates and assumptions on current
facts, historical experience and various other factors that it believes to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities and the
accrual of costs and expenses that are not readily apparent from other sources.
The actual results experienced by Griffin may differ materially and adversely
from Griffin’s estimates.  To the extent there are material
differences between the estimates and the actual results, future results of
operations will be affected.  The significant accounting estimates
used by Griffin in preparation of its financial statements for the thirteen and
twenty-six weeks ended May 30, 2009 are consistent with those used by Griffin to
prepare its fiscal 2008 financial statements.
 
 Summary
 
 Griffin incurred a net loss for the
thirteen weeks ended May 30, 2009 (the “2009 second quarter”) of $1.0 million as
compared to a net loss of $0.4 million for the thirteen weeks ended May 31, 2008
(the “2008 second quarter”).  The higher net loss in the 2009 second
quarter principally reflects lower operating results at Imperial, which incurred
an operating loss of $0.2 million in the 2009 second quarter as compared to an
operating profit of $0.8 million in the 2008 second
quarter.  Operating profit at Griffin Land increased from $0.5 million
in the 2008 second quarter to $0.6 million in the 2009 second quarter and
general corporate expense decreased from $1.2 million in the 2008 second quarter
to $1.1 million in the 2009 second quarter.   The lower operating
results at Imperial principally reflect lower gross profit due to both lower
margins on sales and higher charges for unsaleable inventories incurred in the
current quarter.  The increase in operating profit at Griffin Land
reflects increased results from its leasing operations substantially offset by
not having any property sales in the 2009 second quarter.  Griffin
Land reported profit of $0.3 million from property sales in the 2008 second
quarter.
 
 Griffin incurred a net loss for the
twenty-six weeks ended May 30, 2009 (the “2009 six month period”) of $2.8
million as compared to a net loss of $2.0 million for the twenty-six weeks ended
May 31, 2008 (the “2008 six month period”).  The higher net loss in
the 2009 six month period principally reflects an increase in the operating loss
incurred by Imperial from $0.2 million in the 2008 six month period to $1.0
million in the 2009 six month period.  The lower operating results at
Imperial in the 2009 six month period are due to the same factors as the lower
2009 second quarter results discussed above.  Operating
  23
  profit at
Griffin Land increased from $0.4 million in the 2008 six month period to $0.6
million in the 2009 six month period due principally to improved results from
its leasing operations.  Griffin’s general corporate expense was
essentially unchanged in the 2009 six month period as compared to the 2008 six
month period.  Investment income decreased from $0.6 million in the
2008 six month period to $0.1 million in the 2009 six month period due
principally to a lower amount of short-term investments held by Griffin in the
2009 six month period and lower dividend income from Griffin’s investment in
Centaur Media plc (“Centaur”).
 
 Results
of Operations
 
 Thirteen
Weeks Ended May 30, 2009 Compared to the Thirteen Weeks Ended May 31,
2008
 
 Griffin’s consolidated total revenue
decreased from $21.1 million in the 2008 second quarter to $19.7 million in the
2009 second quarter due principally to a $1.5 million decrease in revenue at
Imperial partially offset by an increase in revenue of $0.1 million at Griffin
Land.
 
 Total revenue at Griffin Land increased
from $4.0 million in the 2008 second quarter to $4.1 million in the 2009 second
quarter.  The net increase of $0.1 million reflects an increase of
$0.5 million of rental revenue from leasing operations offset by a $0.4 million
decrease in revenue from property sales. The increase in rental revenue
principally reflects $0.6 million of rental revenue from leases that became
effective in the second half of last year, including $0.5 million of rental
revenue from previously vacant space and $0.1 million of rental revenue from a
new 100,000 square foot building that was completed and placed in service in the
2008 third quarter.  Partially offsetting these increases was a
decrease of $0.1 million of rental revenue from leases that expired and were not
renewed.  The decrease in revenue from property sales reflects there
being no property sales revenue in the 2009 second quarter whereas the 2008
second quarter included $0.4 million of property sales revenue recognized on the
sale of undeveloped land to Walgreen in New England Tradeport (“Tradeport”),
Griffin Land’s industrial park in Windsor and East Granby, Connecticut, that
closed in 2006 and was accounted for under the percentage of completion
method.  All of the previously deferred revenue related to the 2006
land sale to Walgreen was recognized as of the end of fiscal
2008.  Property sales occur periodically and changes in revenue from
year to year from these transactions may not be indicative of any trends in the
real estate business.
 
 A summary
of the square footage of Griffin Land’s real estate portfolio is as
follows:
 
 Total
                    Square
                    Footage
                  
                  Square
                    Footage
                    Leased
                  
                  Percentage
                    LeasedAs
      of May 30, 2009
                  2,116,000
                  
                  1,636,000
                  
                  77%As
      of November 29, 2008
                  2,116,000
                  
                  1,684,000
                  
                  80%As
      of May 31, 2008
                  2,016,000
                  
                  1,332,000
                  
                  66%
 
 The
decrease in square footage leased during the first six months of fiscal 2009
compared to the end of fiscal 2008 reflects leases for approximately 89,000
square feet that expired and were not renewed, partially offset by entering into
a new lease of approximately 40,000 square feet for an entire office building
that had been vacant in Griffin Center South.  Although the lease was
executed in the 2009 second quarter, rental revenue on this new lease will not
begin until the third quarter when Griffin Land completes the required tenant
improvements on this space. The increase of 100,000 square feet in total space
at the end of the 2009 second quarter compared to the end of the 2008
second quarter reflects the new building in Tradeport that was completed in the
2008 third quarter.  The increase in square footage leased at the end
of the 2009 second quarter compared to the end of the 2008 second quarter
principally
  24
 
  reflects
the leasing, during the third quarter of fiscal 2008, of Griffin Land’s
approximate 308,000 square foot warehouse in Manchester, Connecticut that had
been vacant.
 
 Market activity for
industrial and office space continued to be soft through the 2009 second
quarter, reflecting the weak economy.  However, earlier this year,
Griffin Land entered into a ten-year lease with Tire Rack, Inc. for
approximately 257,000 square feet in an approximate 304,000 square foot
industrial building that is currently being built in Tradeport by Griffin Land
and is expected to be completed in the 2009 third quarter.  Under
certain conditions, but no later than the beginning of the sixth year of the
lease, the tenant is required to lease the entire building.  The lease
also contains provisions for the expansion of the building up to approximately
450,000 square feet.
 
 Net sales and other revenue at Imperial
decreased from $17.1 million in the 2008 second quarter to $15.6 million in the
2009 second quarter despite a 10% increase in unit sales
volume.  Imperial’s landscape nursery business is highly seasonal,
with second quarter sales comprising a majority of its annual
sales.  Imperial previously announced that it will shut down its
Quincy, Florida farm by the end of fiscal 2009.  As a result, all of
the Florida inventory will be liquidated in fiscal 2009.  The overall
increase in unit sales volume in the 2009 second quarter reflects a 31% increase
in unit sales volume of Florida sales whereas unit sales volume of Connecticut
sales decreased 6% in the 2009 second quarter as compared to the 2008 second
quarter.  Despite the increase in unit sales volume of Florida sales,
net sales from the Florida farm decreased from $7.1 million in the 2008 second
quarter to $6.3 million in the 2009 second quarter due to significant price
reductions to stimulate sales of Florida product.  The significantly
lower pricing on Florida product also reflects selling certain plants prior to
their reaching normal salable size.  Net sales from Imperial’s Granby,
Connecticut farm, which Imperial expects to continue to operate, decreased from
$10.0 million in the 2008 second quarter to $9.3 million in the 2009 second
quarter.  The decrease in net sales of the Connecticut farm reflects
the lower unit sales volume and lower pricing.   Imperial’s sales
have been negatively impacted by the weak economy and the reduction in new home
and commercial construction.  Market conditions for growers of
landscape nursery plants appear to be worsening, as the oversupply of product
available for sale may deter customers from placing advance orders for spring
2010 deliveries.
 
 Griffin incurred a consolidated
operating loss, including general corporate expense, of $0.8 million in the 2009
second quarter as compared to essentially break-even operating results in the
2008 second quarter.  The lower operating results in the 2009 second
quarter principally reflect a decrease of approximately $1.0 million in the
operating results of Imperial, partially offset by an increase of approximately
$0.1 million of operating profit at Griffin Land and a reduction in general
corporate expense of approximately $0.1 million.
  Operating
results at Griffin Land in the 2009 and 2008 second quarters were as
follows:
  25
  2009
                      
                      
                      2008Second
      Qtr.
                      
                      
                      Second
      Qtr.(amounts
      in thousands)Rental
      revenue
                      
                      $
                      4,140
                      
                      
                      $
                      3,606Costs
      related to rental revenue excludingdepreciation
      and amortization expense (a)
                      
                      
                      (1,484
                      )
                      
                      
                      (1,492
                      )Profit
      from leasing activities before general andadministrative
      expenses and before depreciationand
      amortization expense (a)
                      
                      
                      2,656
                      
                      
                      
                      2,114Revenue
      from property sales
                      
                      
                      -
                      
                      
                      
                      405Costs
      related to property sales
                      
                      
                      -
                      
                      
                      
                      (88
                      )Gain
      from property sales
                      
                      
                      -
                      
                      
                      
                      317Profit
      from leasing activities and gain from property salesbefore
      general and administrative expenses and beforedepreciation
      and amortization expense (a)
                      
                      
                      2,656
                      
                      
                      
                      2,431General
      and administrative expenses excluding depreciationand amortization expense (a)
                      
                      
                      (709
                      )
                      
                      
                      (719
                      )Profit
      before depreciation and amortization expense (a)
                      
                      
                      1,947
                      
                      
                      
                      1,712Depreciation
      and amortization expense related to costs ofrental revenue
                      
                      
                      (1,367
                      )
                      
                      
                      (1,250
                      )Depreciation
      and amortization expense - other
                      
                      
                      (8
                      )
                      
                      
                      (8
                      )Operating
      profit
                      
                      $
                      572
                      
                      
                      $
                      454
 
 (a)
                    The
      costs related to rental revenue excluding depreciation and amortization
      expense, profit from leasing activities before general and administrative
      expenses and before depreciation and amortization expense, general and
      administrative expenses excluding depreciation and amortization expense
      and profit before depreciation and amortization expense are disclosures
      not in conformity with accounting principles generally accepted in the
      United States of America.  They are presented because Griffin
      believes they are useful financial indicators for measuring the results of
      its real estate business segment.  However, they should not be
      considered as an alternative to operating profit as a measure of operating
      results in accordance with accounting principles generally accepted in the
      United States of America.  The aggregate of: (i) costs related
      to rental revenue excluding depreciation and amortization expense; (ii)
      costs related to property sales; and (iii) depreciation and amortization
      expense related to costs of rental revenue, equals the costs related to
      rental revenue and property sales as reported on Griffin’s consolidated
      statement of operations.
 
 Griffin Land’s profit from leasing
activities before general and administrative expenses and before depreciation
and amortization expense increased by approximately $0.5 million in the 2009
second quarter as compared to the 2008 second quarter.  The increase
principally reflects the higher rental revenue as a result of more space being
under lease in the 2009 second quarter as compared to the 2008 second
quarter.  Costs related to rental revenue were essentially unchanged
in the 2009 second quarter as compared to the 2008 second quarter, as the
building operating expenses related to the new Tradeport building placed in
service in the 2008 third quarter were offset by a net reduction in building
operating expenses in all of Griffin Land’s other properties.
  26
 There
were no property sales in the 2009 second quarter.  The gain from
property sales in the 2008 second quarter reflects only the recognition of a
portion of the previously deferred gain from the land sale to Walgreen that
closed in 2006.  As of November 29, 2008, all of the previously
deferred gain on the 2006 sale of Tradeport land to Walgreen had been
recognized.
 
 Griffin
Land’s general and administrative expenses were essentially unchanged in the
2009 second quarter as compared to the 2008 second
quarter.  Depreciation and amortization expense at Griffin Land
increased from approximately $1.3 million in the 2008 second quarter to
approximately $1.4 million in the 2009 second quarter.  The increase
principally reflects depreciation expense related to the Tradeport building
completed and placed in service in the second half of fiscal 2008.
 
 Operating results at Imperial in the
2009 and 2008 second quarters were as follows:
  2009
                      
                      
                      2008Second
      Qtr.
                      
                      
                      Second
      Qtr.(amounts
      in thousands)Net
      sales and other revenue
                      
                      $
                      15,568
                      
                      
                      $
                      17,053Cost
      of goods sold
                      
                      
                      14,295
                      
                      
                      
                      14,481Gross
      profit
                      
                      
                      1,273
                      
                      
                      
                      2,572Selling,
      general and administrative expenses
                      
                      
                      (1,471
                      )
                      
                      
                      (1,755
                      )Operating
      (loss) profit
                      
                      $
                      (198
                      )
                      
                      $
                      817
 
 Imperial’s operating loss of $0.2
million in the 2009 second quarter as compared to an operating profit of $0.8
million in the 2008 second quarter, principally reflects a $1.3 million decrease
in gross profit partially offset by a $0.3 million decrease in selling, general
and administrative expenses.  The $1.3 million decrease in gross
profit principally reflects $0.6 million due to lower pricing on sales from
Imperial’s Connecticut farm and a $0.5 million increase in the charge for
unsaleable inventories. The increase in the charge for unsaleable inventories in
the 2009 second quarter reflects growing issues on certain plants, changes in
production planning whereby certain units in the propagation stage of
development will be disposed instead of being potted into saleable size units
and excess inventories of certain plant varieties that are not expected to be
sold before they become unsaleable.  The production plan changes
reflect management’s decision to reduce future inventory levels given the
current difficult market conditions that management believes have resulted in an
oversupply of product in the marketplace.
 
 Imperial’s
gross margin on sales, excluding the effect of the charges for unsaleable
inventories in the 2009 and 2008 second quarters, decreased from 16.3% in the
2008 second quarter to 12.7 % in the 2009 second quarter.  Due to the
perishable nature of Imperial’s inventory, continued sales shortfalls could
result in additional charges for unsaleable inventories in the latter part of
the year.
 
 Imperial’s 2009 second quarter selling,
general and administrative expenses decreased by approximately $0.3 million from
the 2008 second quarter.  The lower selling, general and
administrative expenses in the 2009 second quarter reflects a decrease of
approximately $0.2 million in selling expenses, due principally to lower
commission expenses resulting from the lower net sales and lower headcount of
sales personnel, and a decrease of $0.1 million in general and administrative
expenses due principally to lower donations and contributions expense and lower
consulting expenses.  As a percentage of net sales, Imperial’s
selling, general and administrative expenses decreased from 10.3% in the 2008
second quarter to 9.4% in the 2009 second quarter.
  27
  Griffin’s general corporate expense
decreased from approximately $1.2 million in the 2008 second quarter to
approximately $1.1 million in the 2009 second quarter due principally to the
timing of expenses.
 
 Griffin’s
consolidated interest expense was approximately $0.8 million in both the 2009
and 2008 second quarters.  Griffin’s average outstanding debt was
$49.6 million in the 2009 second quarter as compared to $49.3 million in the
2008 second quarter.  Although Griffin’s average outstanding debt was
slightly higher in the 2009 second quarter than the 2008 second quarter,
interest expense was essentially unchanged because more interest was capitalized
in the 2009 second quarter than the 2008 second quarter.
 
 Griffin
reported investment income of $0.1 million in the 2009 second quarter as
compared to $0.2 million in the 2008 second quarter.  The lower
investment income in the current period reflects a lower amount of short-term
investments in the 2009 second quarter as compared to the 2008 second quarter
and lower dividend income received from Centaur.
 
 Griffin’s effective income tax rate was
35.5% in the 2009 second quarter as compared to 35.6% in the 2008 second
quarter.  The effective tax rate reflects the statutory federal tax
rate adjusted for state income taxes.  The effective tax rate used in
the 2009 second quarter was based on management’s projections of operating
results for the full year.  To the extent that actual results differ
from current projections, the effective income tax rate may
change.
  Twenty-Six
Weeks Ended May 30, 2009 Compared to the Twenty-Six Weeks Ended May 31,
2008
 
 Griffin’s consolidated total revenue
decreased from $25.5 million in the 2008 six month period to $24.3 million in
the 2009 six month period.   The decrease in revenue of
approximately $1.2 million reflects a decrease in revenue of approximately $1.5
million at Imperial partially offset by an increase in revenue of approximately
$0.3 million at Griffin Land.
 
 Total revenue at Griffin Land increased
from $8.1 million in the 2008 six month period to $8.3 million in the 2009 six
month period, reflecting an increase of approximately $1.1 million of rental
revenue from its leasing operations partially offset by a decrease of
approximately $0.8 million in revenue from property sales.  The
increase in Griffin Land's rental revenue in the 2009 six month period, as
compared to the 2008 six month period, principally reflects $1.3 million from
new leases that became effective in the second half of last year, including $1.0
million of rental revenue from leasing previously vacant space and $0.3 million
of rental revenue from a new 100,000 square foot building that was completed and
placed in service in the 2008 third quarter.  Partially offsetting
these increases was a decrease of approximately $0.2 million of rental revenue
from leases that expired and were not renewed.  There were no property
sales in the 2009 six month period.  The 2008 six month period
included $0.8 million of revenue recognized on the sale of undeveloped Tradeport
land to Walgreen that closed in 2006 and was accounted for under the percentage
of completion method.  All of the previously deferred revenue related
to the 2006 land sale to Walgreen was recognized as of the end of fiscal
2008.  Property sales occur periodically and changes in revenue from
year to year from these transactions may not be indicative of any trends in the
real estate business.
 
 Net sales and other revenue at Imperial
decreased from $17.5 million in the 2008 six month period to $16.0 million in
the 2009 six month period.  Although net sales decreased in the 2009
six month period as compared to the 2008 six month period, unit sales volume
increased 16% in the 2009 six month period over the 2008 six month
period.  Due to seasonality, landscape nursery sales in the second
quarter comprise over 95% of sales for the six month
period.  Accordingly, the factors that affected the decrease in net
sales for the 2009 six month period are the same factors as discussed in the
analysis of the 2009 second quarter results above.
  28
 Griffin incurred a consolidated
operating loss, after general corporate expense, of $2.8 million in the 2009 six
month period as compared to a consolidated operating loss, after general
corporate expense, of $2.1 million in the 2008 six month period.  The
higher operating loss in the 2009 six month period principally reflects an
increase in Imperial’s operating loss of approximately $0.9 million partially
offset by an increase of $0.2 million in operating profit at Griffin
Land.  Griffin’s general corporate expense was essentially unchanged
in the 2009 six month period as compared to the 2008 six month
period.
 
 Operating results at Griffin Land in
the 2009 and 2008 six month periods were as follows:
 
 2009
                      
                      
                      2008Six
      Month Period
                      
                      
                      Six
      Month Period(amounts
      in thousands)Rental
      revenue
                      
                      $
                      8,324
                      
                      
                      $
                      7,242Costs
      related to rental revenue excludingdepreciation
      and amortization expense (a)
                      
                      
                      (3,601
                      )
                      
                      
                      (3,645
                      )Profit
      from leasing activities before general andadministrative
      expenses and before depreciationand
      amortization expense (a)
                      
                      
                      4,723
                      
                      
                      
                      3,597Revenue
      from property sales
                      
                      
                      -
                      
                      
                      
                      826Costs
      related to property sales
                      
                      
                      -
                      
                      
                      
                      (179
                      )Gain
      from property sales
                      
                      
                      -
                      
                      
                      
                      647Profit
      from leasing activities and gain from property salesbefore general and administrative expenses and beforedepreciation and amortization expense (a)
                      
                      
                      4,723
                      
                      
                      
                      4,244General
      and administrative expenses excluding depreciationand amortization expense (a)
                      
                      
                      (1,401
                      )
                      
                      
                      (1,364
                      )Profit
      before depreciation and amortization expense (a)
                      
                      
                      3,322
                      
                      
                      
                      2,880Depreciation
      and amortization expense related to costs ofrental revenue
                      
                      
                      (2,728
                      )
                      
                      
                      (2,477
                      )Depreciation
      and amortization expense - other
                      
                      
                      (16
                      )
                      
                      
                      (17
                      )Operating
      profit
                      
                      $
                      578
                      
                      
                      $
                      386
  (a)
                    The
      costs related to rental revenue excluding depreciation and amortization
      expense, profit from leasing activities before general and administrative
      expenses and before depreciation and amortization expense, general and
      administrative expenses excluding depreciation and amortization expense
      and profit before depreciation and amortization expense are disclosures
      not in conformity with accounting principles generally accepted in the
      United States of America.  They are presented because Griffin
      believes they are useful financial indicators for measuring the results of
      its real estate business segment.  However, they should not be
      considered as an alternative to operating profit as a measure of operating
      results in accordance with accounting principles generally accepted in the
      United States of America.  The aggregate of: (i) costs related
      to rental revenue excluding depreciation and amortization expense; (ii)
      costs related to property sales; and (iii) depreciation and amortization
      expense related to costs of rental revenue, equals
    the
   29
   costs
      related to rental revenue and property sales as reported on Griffin’s
      consolidated statement of operations.
  The increase of $1.1 million in Griffin
Land’s profit from leasing activities before general and administrative expenses
and before depreciation and amortization expense principally reflects the
increase in rental revenue.  Costs related to rental revenue excluding
depreciation and amortization were essentially unchanged in the 2009 six month
period as compared to the 2008 six month period.  The increase in
building operating expenses for the new Tradeport building that was placed in
service in the second half of fiscal 2008 was offset by overall lower expenses
at Griffin Land’s other buildings.
 
 There were no property sales in the
2009 six month period.  The gain from property sales in the 2008 six
month period reflects only the recognition of a portion of the previously
deferred gain from the land sale to Walgreen that closed in 2006.  As
of November 29, 2008, all of the previously deferred gain on the 2006 sale of
Tradeport land to Walgreen had been recognized.
 
 Griffin
Land’s general and administrative expenses were essentially unchanged in the
2009 six month period as compared to the 2008 six month
period.  Depreciation and amortization expense at Griffin Land
increased from approximately $2.5 million in the 2008 six month period to
approximately $2.7 million in the 2009 six month period.  The increase
principally reflects depreciation expense related to the new Tradeport building
placed in service in the second half of fiscal 2008.
 
 Imperial’s operating results for the
2009 and the 2008 six month periods are as follows:
 
 2009
                      
                      
                      2008Six
      Month Period
                      
                      
                      Six
      Month Period(amounts
      in thousands)Net
      sales and other revenue
                      
                      $
                      16,017
                      
                      
                      $
                      17,477Cost
      of goods sold
                      
                      
                      14,714
                      
                      
                      
                      14,919Gross
      profit
                      
                      
                      1,303
                      
                      
                      
                      2,558Selling,
      general and administrative expenses
                      
                      
                      (2,351
                      )
                      
                      
                      (2,712
                      )Operating
      loss
                      
                      $
                      (1,048
                      )
                      
                      $
                      (154
                      )
 
 Imperial’s operating loss in the 2009
six month period was approximately $0.9 million higher than its operating loss
in the 2008 six month period, reflecting an approximate $1.2 million decrease in
gross profit substantially offset by an approximate $0.3 million decrease in
selling, general and administrative expenses.  The decrease in gross
profit reflects the factors discussed above in the analysis of the 2009 second
quarter results.  Imperial’s gross margin on sales, excluding charges
of $0.7 million and $0.2 million for unsaleable inventories in the 2009 and 2008
six month periods, respectively, decreased from 15.8% in the 2008 six month
period to 12.5% in the 2009 six month period.  Due to the perishable
nature of Imperial’s inventory, continued sales shortfalls could result in
additional charges for unsaleable inventories in the latter part of the
year.
 
 Imperial’s selling, general and
administrative expenses decreased from approximately $2.7 million in the 2008
six month period to approximately $2.4 million in the 2009 six month
period.  The lower selling, general and administrative expenses in the
current six month period reflects a decrease of $0.2 million of selling
expenses, due to lower commission expenses resulting from the decrease in sales
and a decrease of $0.1 million in general and administrative expenses due
principally to lower donation and contribution expense and lower consulting
expenses.  As a percentage of net sales, Imperial’s selling,
  30
  general
and administrative expenses decreased from 15.5% in the 2008 six month period to
14.7% in the 2009 six month period.
 
 Griffin’s general corporate expense was
essentially unchanged in the 2009 six month period as compared to the 2008 six
month period.
 
 Griffin’s consolidated interest expense
decreased slightly in the 2009 six month period as compared to the 2008 six
month period.  Griffin’s average outstanding debt in the 2009 six
month period was $49.1 million as compared to $49.4 million in the 2008 six
month period.
 
 Griffin’s investment income decreased
from $0.6 million in the 2008 six month period to $0.1 million in the 2009 six
month period.  The decrease in investment income reflects, on average,
a lower average balance of short-term investments in the 2009 six month period
as compared to the 2008 six month period, lower investment returns in the
current six month period, attributed to lower short-term interest rates this
year, and lower dividend income received from Centaur.
 
 Griffin’s effective income tax rate was
35.5% for the 2009 six month period, as compared to 37.7% for the 2008 six month
period.  The effective tax rate for the 2009 and 2008 six month
periods reflect the statutory federal income tax rate adjusted for state income
taxes.  Griffin’s effective tax rate for the 2009 six month period is
based on management’s projections for the balance of the year.  To the
extent that actual results differ from current projections, the effective income
tax rate may change.
  Off
Balance Sheet Arrangements
 
 Griffin does not have any material off
balance sheet arrangements.
 
 Liquidity
and Capital Resources
 
 Net cash provided by operating
activities was $4.2 million in the 2009 six month period as compared to $2.0
million in the 2008 six month period.  Net cash provided by operating
activities in the 2009 six month period includes $8.1 million of cash generated
from a reduction of short-term investments as compared to $9.3 million of cash
generated from a reduction of short-term investments in the 2008 six month
period.  Excluding the reduction of short-term investments in each
period, Griffin had net cash used in operating activities of $3.9 million in the
2009 six month period as compared to $7.3 million in the 2008 six month
period.  The lower usage of cash in the 2009 six month period as
compared to the 2008 six month period principally reflects the reduction of
inventories at Imperial, mostly due to the liquidation of inventory at
Imperial’s Florida farm as a result of the planned shutdown of that facility by
the end of this year.
 
 In the 2009 six month period, Griffin
had net cash of $8.1 million used in investing activities as compared to net
cash of $5.1 million used in investing activities in the 2008 six month
period.  The net cash used in investing activities in the 2009 six
month period principally reflects additions to Griffin Land’s real estate
assets, mainly for the construction of a new approximate 304,000 square foot
warehouse facility in Tradeport.  This facility is being built as a
result of Griffin Land entering into a ten-year lease with Tire Rack, Inc. for
this new building (see above).  Construction of this new facility is
expected to be completed in the 2009 third quarter.  Additions to
property and equipment at Imperial were minimal in the 2009 six month period as
compared to $0.3 million in the 2008 six month period, principally to replace
equipment used in Imperial’s farming operations.
 
 Net cash provided by financing
activities was $2.3 million in the 2009 six month period as compared to net cash
used in financing activities of $3.9 million in the 2008 six month
period.  The net cash provided by financing activities in the 2009 six
month period principally reflects the $7.5 million of
  31
  borrowing
under Griffin’s new credit line and $4.3 million of borrowings under a new
construction to permanent mortgage loan that closed during the 2009 six month
period.  Financing activities in the 2009 six month period also
includes $8.1 million for payments of principal on Griffin Land’s nonrecourse
mortgages (including the early repayment of the mortgage due July 1, 2009) and
capital lease obligations, $1.0 million of dividend payments on Griffin’s common
stock, and $0.6 million of debt issuance costs in connection with the two new
borrowing facilities completed in the 2009 six month period.
 
 In fiscal 2007, Griffin’s Board of
Directors authorized a program to repurchase, from time to time, outstanding
shares of Griffin common stock.  The program to repurchase did not
obligate Griffin to repurchase any specific number of shares. The program
expired on December 31, 2008 and was not extended.  Griffin did not
repurchase any common stock in the 2009 six month period.
 
 On February 6, 2009,
Griffin entered into a $12 million construction to permanent loan with Berkshire
Bank (the “Berkshire Bank Loan”), which is providing a significant portion of
the financing for construction of the new warehouse facility in Tradeport being
built to suit for Tire Rack, Inc.  During the first year, the
Berkshire Bank Loan is functioning as a construction loan, with Griffin Land
drawing funds as construction of the new warehouse progresses.  The
interest rate during the first year of the Berkshire Bank Loan is the greater of
2.75% above the thirty day LIBOR rate or 4%.  Payments during this
period are for interest only.  One year after the closing date of the
Berkshire Bank Loan, it converts to a nine-year nonrecourse mortgage
collateralized by the new warehouse facility.  At the time Griffin
closed on the Berkshire Bank Loan, Griffin also entered into a swap agreement
with the bank for a notional principal amount of $12 million at inception to fix
the interest rate for the final nine years of the loan at
6.35%.  Payments during those nine years will be for principal and
interest and will be based on a twenty-five year amortization
period.  Griffin is accounting for the interest rate swap agreement as
an effective cash flow hedge (see Notes 7, 8 and 9 to the consolidated financial
statements in Item 1).  As of May 30, 2009, Griffin had drawn $4.3
million under the Berkshire Bank Loan.
 
 On February 27,
2009, Griffin entered into a $10 million Revolving Line of Credit with Doral
Bank (the “Credit Line”) that has a term of two years, but may be extended for
an additional year by Griffin.  The Credit Line is collateralized by
several of Griffin Land’s buildings in Griffin Center and Griffin Center
South.  The interest rate on the Credit Line is the greater of the
prime rate plus 1.5% or 6.88%.  Griffin intends to use this facility
for seasonal working capital needs, to supplement cash flow from operations and
other corporate purposes.  As of May 30, 2009, $7.5 million was
outstanding under the Credit Line.  Griffin used the borrowings under
the Credit Line to prepay, on April 1, 2009, its 8.54% nonrecourse mortgage that
was due on July 1, 2009.  The mortgage had a balance of $7.4 million
when it was repaid without a prepayment penalty.
  In
the near future, Griffin expects to close on a mortgage on four of its New
England Tradeport buildings, three of which collateralized the mortgage that was
repaid earlier this year and another building that was not previously
mortgaged.  The new mortgage financing is for a maximum of $10.5
million, with $8.5 million of proceeds to be received at closing and the balance
to be received if currently vacant space in the buildings is leased within three
years.  The mortgage will be nonrecourse, but a subsidiary of Griffin
will enter into a ten-year master lease on 90% of the space in the mortgaged
buildings.  The master lease will stay in effect until overall
occupancy and operating results of the collateral properties increase to certain
levels.  If not terminated earlier, the master lease will expire at
the end of the mortgage term.  Interest on the mortgage will be at a
floating rate, but Griffin expects to enter into a swap agreement to fix the
interest rate over the life of the loan.
 In the near-term, Griffin plans to
continue to invest in its real estate business, including the construction of
the new 304,000 square foot warehouse facility in Tradeport, expenditures to
build out interiors of its buildings as leases are completed and infrastructure
improvements required for future development of its real estate
holdings.
  32
 Griffin’s
payments (including principal and interest) under contractual obligations as of
May 30, 2009 are as follows:
  Total
                      
                      Due
      Within One Year
                      
                      Due
      From 1-3 Years
                      
                      Due
      From 3-5 Years
                      
                      Due
      in More Than 5 Years(in
      millions)Mortgages
                      $
                      61.0
                      
                      $
                      3.9
                      
                      $
                      8.0
                      
                      $
                      13.7
                      
                      $
                      35.4Revolving
      Line of Credit
                      
                      7.5
                      
                      
                      -
                      
                      
                      7.5
                      
                      
                      -
                      
                      
                      -Capital
      Lease Obligations
                      
                      0.2
                      
                      
                      0.1
                      
                      
                      0.1
                      
                      
                      -
                      
                      
                      -Operating
      Lease Obligations
                      
                      1.0
                      
                      
                      0.2
                      
                      
                      0.5
                      
                      
                      0.3
                      
                      
                      -Purchase
      Obligations (1)
                      
                      4.1
                      
                      
                      4.1
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -Other
      (2)
                      
                      1.9
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      1.9$
                      75.7
                      
                      $
                      8.3
                      
                      $
                      16.1
                      
                      $
                      14.0
                      
                      $
                      37.3
 
 (1)
                      Includes
      obligations for the construction of a new industrial building by Griffin
      Land and for the purchase of plants and raw materials by
      Imperial.
 (2)
                      Includes
      Griffin’s deferred compensation plan and other postretirement benefit
      liabilities.
   As of May
30, 2009, Griffin had cash and short-term investments of approximately $3.5
million.  As described above, in the near future, Griffin expects to
close on a mortgage on four of its Tradeport properties.  Management
believes that its cash and short-term investments, expected proceeds from the
new mortgage and borrowing capacity under its Credit Line are sufficient to meet
Griffin’s seasonal working capital requirements, the continued investment in
Griffin’s real estate assets, including the construction of the approximate
304,000 square foot facility currently being built in Tradeport and the payment
of quarterly dividends on its common stock.  Griffin may also continue
to seek other nonrecourse mortgage placements on its
properties.  Griffin also anticipates seeking to purchase either or
both land and buildings.  Real estate acquisitions may or may not
occur based on many factors, including real estate pricing.
 Recent
Accounting Pronouncements
 
 In
February 2008, the Financial Accounting Standards Board (“FASB”) issued FASB
Staff Position 157-2, “Effective Date of FASB Statement No. 157” (“FSP 157-2”),
which delayed the effective date of SFAS No. 157 for all nonfinancial assets and
nonfinancial liabilities, except for items that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually),
until the 2009 first quarter for Griffin.  The application of SFAS No.
157 to Griffin’s nonfinancial assets and nonfinancial liabilities did not impact
Griffin’s 2009 six month period consolidated financial statements.
 
 In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities, an Amendment of FASB Statement No. 133” (“SFAS No.
161”). This new pronouncement did not require any changes in the accounting for
derivative instruments, but is intended to improve transparency in financial
reporting by requiring enhanced disclosures of an entity’s derivative
instruments and hedging activities and their effects on the entity’s financial
position, financial performance and cash flows. SFAS No. 161 applies to all
derivative instruments within the scope of SFAS No. 133, “Accounting for
Derivative Instruments and Hedging Activities,” as well as related hedged items,
bifurcated derivatives and nonderivative instruments that are designated and
qualify as hedging instruments. Entities with instruments subject to SFAS No.
161 must provide more robust
  33
 
  qualitative
disclosures and expanded quantitative disclosures.  The enhanced
disclosures as required under SFAS No. 161 are included in Griffin’s financial
statements for the 2009 six month period.
 
 In April
2008, the FASB issued FASB Staff Position 142-3, “Determination of the Useful
Life of Intangible Assets” (“FSP 142-3”), which amends the factors that should
be considered in developing renewal or extension assumptions used to determine
the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill
and Other Intangible Assets” (“SFAS No. 142”).  The objective of FSP
142-3 is to improve the consistency between the useful life of a recognized
intangible asset under SFAS No. 142 and the period of expected cash flows used
to measure the fair value of the asset under SFAS No. 141(R), “Business
Combinations” and other principles of generally accepted accounting
principles.  FSP 142-3 applies to all intangible assets, whether
acquired in a business combination or otherwise, and shall be effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years and applied prospectively to
intangible assets acquired after the effective date.  Griffin is
required to adopt FSP 142-3 in fiscal 2010 and is currently evaluating the
effect of this new pronouncement on its consolidated financial
statements.
 
 In April 2009, the FASB issued FASB
Staff Position SFAS No. 107-1 and APB No. 28-1, “Interim Disclosures about Fair
Value of Financial Instruments” (“FSP 107-1 and APB 28-1”).  This FSP
amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments” and
APB Opinion No. 28, “Interim Financial Reporting”, to require disclosures about
fair value of financial instruments not measured on the balance sheet at fair
value in interim financial statements as well as in annual financial
statements.  Prior to this FSP, fair value for these assets and
liabilities was only disclosed annually.  FSP 107-1 and APB 28-1
applies to all financial instruments within the scope of SFAS No. 107 and
requires all entities to disclose the methods and significant assumptions used
to estimate the fair value of financial instruments.  Griffin is
required to adopt FSP 107-1 and APB 28-1 in the third quarter of fiscal
2009.  In periods after initial adoption, this FSP requires
comparative disclosures only for periods ending after initial
adoption.  Griffin is currently evaluating the effect of the new
disclosure requirements of these pronouncements on its consolidated financial
statements.
 
 In April 2009, the FASB issued FASB
Staff Position SFAS No. 115-2 and SFAS No. 124-2, “Recognition and Presentation
of Other-Than-Temporary Impairments” (“FSP 115-2 and FSP
124-2”).  This FSP provides guidance on the recognition and
presentation of other-than-temporary impairments of debt securities classified
as available-for-sale and held-to-maturity for interim and annual financial
statements.  It also expands and increases the frequency of
disclosures about other-than-temporary impairments in both debt and equity
securities.  Griffin is required to adopt FSP 115-2 and FSP 124-2 in
the third quarter of fiscal 2009.  As of May 30, 2009 Griffin did not
hold any debt securities classified as available-for-sale
securities.  Griffin is currently evaluating the effect of the new
disclosure requirements of these pronouncements on its consolidated financial
statements.
 
 In April 2009, the FASB issued FASB
Staff Position SFAS No. 157-4, “Determining Fair Value When the Volume and Level
of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly” (“FSP 157-4”).  This
FSP provides additional guidance for estimating fair value in accordance with
SFAS No. 157 when the volume and level of activity for the asset or liability
have significantly decreased in relation to normal market
activity.  Additionally, FSP 157-4 provides guidance on identifying
circumstances that indicate a transaction is not orderly. FSP 157-4 requires
interim disclosures of the inputs and valuation techniques used to measure fair
value reflecting changes in the valuation techniques and related
inputs.  Griffin is required to adopt FSP 157-4 in the third quarter
of fiscal 2009.  Griffin is currently evaluating the effect of this
new pronouncement on its consolidated financial statements.
 
 In May 2009, the FASB issued SFAS No.
165, “Subsequent Events” (“SFAS No. 165”).  This new pronouncement
establishes principles and standards related to the accounting for and
disclosure of
  34
  events
that occur after the balance sheet date but before the financial statements are
issued.  SFAS No. 165 requires an entity to recognize, in the
financial statements, subsequent events that provide additional information
regarding conditions that existed at the balance sheet
date.  Subsequent events that  provide information about
conditions that did not exist at the balance sheet date shall not be recognized
in the financial statements under SFAS No. 165.  SFAS No. 165 is
effective for Griffin in the third quarter of fiscal 2009.
 
 Forward-Looking
Information
 
 The above information in Management’s
Discussion and Analysis of Financial Condition and Results of Operations
includes “forward-looking statements” within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act.  Although Griffin
believes that its plans, intentions and expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
plans, intentions or expectations will be achieved, particularly with respect to
the timing of the shutdown of Imperial’s Florida farm, the sale of the remaining
Florida inventories in 2009, leasing of currently vacant space, construction of
additional facilities in its real estate business, approval of proposed
residential subdivisions and Griffin’s anticipated future
liquidity.  The projected information disclosed herein is based on
assumptions and estimates that, while considered reasonable by Griffin as of the
date hereof, are inherently subject to significant business, economic,
competitive and regulatory uncertainties and contingencies, many of which are
beyond the control of Griffin.
 
 ITEM
      3.
                    QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
 
 Market risk represents the risk of
changes in value of a financial instrument, derivative or non-derivative, caused
by fluctuations in interest rates, foreign exchange rates and equity
prices.  Changes in these factors could cause fluctuations in earnings
and cash flows.
 
 For fixed rate mortgage debt, changes
in interest rates generally affect the fair market value of the debt instrument,
but not earnings or cash flows.  Griffin does not have an obligation
to prepay any fixed rate debt prior to maturity and, therefore, interest rate
risk and changes in the fair market value of fixed rate debt should not have a
significant impact on earnings or cash flows until such debt is refinanced, if
necessary.  Griffin’s mortgage interest rates are described in Note 7
to the unaudited consolidated financial statements included in Item
1.  For variable rate debt, changes in interest rates generally do not
impact the fair market value of the debt instrument, but do affect future
earnings and cash flows.  During the 2009 six month period, Griffin
entered into two loan facilities that have variable interest
rates.  Griffin also entered into a swap agreement that effectively
converts the variable rate interest on its new $12 million construction to
permanent loan to a fixed rate during the final nine years of that ten-year
loan.
 
 Griffin is potentially exposed to
market risks from fluctuations in interest rates and the effects of those
fluctuations on the market values of Griffin’s cash
equivalents.  These investments generally consist of overnight
investments that are not significantly exposed to interest rate
risk.  Griffin’s short-term investments generally consist of debt
instruments with maturities ranging up to five months, with a weighted average
maturity of approximately three months as of May 30, 2009.  These
investments are not significantly exposed to interest rate risk except to the
extent that changes in interest rates will ultimately affect the amount of
interest income earned and cash flow from these investments.
 
 Griffin does not have foreign currency
exposure related to its operations.  Griffin does have an investment
in a public company, Centaur Media plc, based in the United
Kingdom.  The amount to be realized from the ultimate liquidation of
that investment and conversion of proceeds into United States currency is
subject to future foreign currency exchange rates.
  35
  ITEM
      4.
                      CONTROLS
      AND PROCEDURES
 
 Evaluation
of Disclosure Controls and Procedures
 
 Griffin maintains disclosure controls
and procedures that are designed to ensure that information required
to be disclosed in its Exchange Act reports is recorded, processed, summarized
and reported within
the time periods specified in the Securities and Exchange Commission’s rules and
forms, and that such
information is accumulated and communicated to Griffin’s management, including
its Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure.  In designing
and evaluating the disclosure controls and procedures, management recognizes
that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and management necessarily is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.
 
 As required by SEC Rule 13a-15(b),
Griffin carried out an evaluation, under the supervision and with the
participation of Griffin’s management, including Griffin’s Chief Executive
Officer and Griffin’s Chief Financial Officer, of the effectiveness of the
design and operation of Griffin’s disclosure controls and procedures as of the
end of the fiscal period covered by this report.  Based on the
foregoing, Griffin’s Chief Executive Officer and Chief Financial Officer
concluded that disclosure controls and procedures were effective at the
reasonable assurance level.
 
 Changes
in Internal Control over Financial Reporting
 
 There has been no change in Griffin’s
internal control over financial reporting during Griffin’s most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, Griffin’s internal control over financial reporting.
   36
 
 PART
      II
                      OTHER
      INFORMATION
 
 ITEM
      1A.
                      RISK
      FACTORS
 
 There have been no material changes
from risk factors as previously disclosed in Item 1A of the Company’s Annual
Report on Form 10-K for the year ended November 29, 2008.
 
 ITEM
      4.
                      SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
 (a)
                      Annual
      Meeting of Stockholders:  May 12, 2009(b)
                      The
      following were elected as Directors at the Annual Meeting, representing
      all of the directors:(i)
                      1)
      Mr. Winston J. Churchill, Jr. was elected a Director for 2009 with
      4,910,356 votes in favor, 37,010 withheld, and 129,097 not
      voting.2)
      Mr. Edgar M. Cullman was elected a Director for 2009 with 4,941,568 votes
      in favor, 5,798 withheld, and 129,097 not voting.3)
      Mr. David M. Danziger was elected a Director for 2009 with 4,939,643 votes
      in favor, 7,723 withheld, and 129,097 not voting.4)
      Mr. Frederick M. Danziger was elected a Director for 2009 with 4,941,643
      votes in favor, 5,723 withheld, and 129,097 not voting.5)
      Mr. Thomas C. Israel was elected a Director for 2009 with 4,746,379 votes
      in favor, 200,987 withheld, and 129,097 not voting.6)
      Mr. Albert H. Small, Jr. was elected a Director for 2009 with 4,941,666
      votes in favor, 5,700 withheld, and 129,097 not voting.7)
      Mr. David F. Stein was elected a Director for 2009 with 4,746,194 votes in
      favor, 201,172 withheld, and 129,097 not voting.(c)
      (i)
                      The
      Griffin Land & Nurseries, Inc. 2009 Stock Option Plan was approved
      with 4,617,504 votes in favor, 97,348 votes opposed, and 361,611 not
      voting.(c)
      (ii)
                      The
      selection of McGladrey & Pullen, LLP as independent registered public
      accountants for 2009 was ratified with 4,923,422 votes in favor, 23,022
      opposed, and 130,019 not voting.
 
 
 37
 
 
 ITEM
      6.
                      EXHIBITSExhibit
      No.
                      Description3.1
                      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)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
   38
   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 on November 2,
      2005)10.30
                      Promissory
      Note dated July 6, 2005 (incorporated by reference to Form 10-Q dated May
      28, 2005, filed on 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 on 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 (incorporated by reference to Form 10-Q dated February 28,
      2009, filed April 9, 2009)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)
   39
  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)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 200231.2
      *
                      Certifications
      of Chief Financial Officer Pursuant to Rule 13a-14(a), as Adopted Pursuant
      to Section 302 of the Sarbanes Oxley Act of 200232.1
      *
                      Certifications
      of Chief Executive Officer Pursuant to 18 U.S.CSection
      1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
      200232.2
      *
                      Certifications
      of Chief Financial Officer Pursuant to 18 U.S.CSection
      1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002
 
 
 *  Filed
herewith.
 
 40
  SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
 
 GRIFFIN
      LAND & NURSERIES, INC.BY:  /s/ FREDERICK M.
      DANZIGERDate:  July
      9, 2009
                      
                      Frederick
      M. DanzigerPresident
      and Chief Executive OfficerBY:  /s/ ANTHONY J.
      GALICIDate:  July
      9, 2009
                      
                      Anthony
      J. GaliciVice
      President, Chief Financial Officer
                        and
      SecretaryChief
      Accounting Officer
 41