**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**Form 10-Q/A**

 
| **ý** | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                   |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** **                                                                                                                                                                     |
| ** ** | **FOR THE  QUARTERLY PERIOD ENDED FEBRUARY 26, 2005**                                                                                                                          |
| ** ** | ** **                                                                                                                                                                     |
| **o**      | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                  |
| ** ** | ** **                                                                                                                                                                     |
| ** ** | **FOR THE  TRANSITION PERIOD FROM              TO             ** |

 

**Commission File No. 1-12879**

 

**GRIFFIN LAND & NURSERIES, INC.**

(Exact name of registrant as specified in itscharter)

 
| **Delaware**                                                   |   | **06-0868496**                        |
|----------------------------------------------------------------|--------|---------------------------------------|
| (state or other jurisdiction of incorporation or organization) |   | (IRS Employer Identification  Number) |
|                                                           |   |                                  |
| **One Rockefeller Plaza, New York, New York**                  |   | **10020**                             |
| (Address of principal executive  offices)                      |   | (Zip Code)                            |

 

Registrant’s Telephone Number including AreaCode     **(212)218-7910**

 

 

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

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15 (d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

 

| Yes        o |   | No    ý |
|-------------------------------------------------|--------|------------------------|

 

Indicate by check mark whether the registrant is an accelerated filer(as defined in Rule 12b-2 of the Exchange Act).

 

| Yes         o |   | No    ý |
|--------------------------------------------------|--------|------------------------|

 

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

 

| Yes         o |   | No    ý |
|--------------------------------------------------|--------|------------------------|

 

Number of shares of Common Stock outstandingat October 17, 2005:  **4,999,604**

 

 

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GRIFFIN LAND & NURSERIES, INC.

Form 10-Q/A

Explanatory Note

 

Griffin Land& Nurseries, Inc. (“Griffin”) has restated its consolidated financialstatements for the fiscal years ended November 30, 2002, November 29, 2003 andNovember 27, 2004 and for the thirteen weeks ended February 26, 2005.  The restatement reflects changes to Griffin’sfinancial statements to correct: (a) rental revenue and depreciation and amortizationexpense of its real estate business as a result of an incorrect allocation ofthe purchase price for Griffin’s fiscal 2003 acquisition of a controllinginterest in a joint venture that owned two office buildings in Windsor,Connecticut (Griffin had previously held a 30% interest in the joint venture),(b) depreciation expense of its real estate business for tenant improvementsrelated to certain leases in other of Griffin Land’s buildings as a result ofthe incorrect recording of the useful lives of certain tenant improvements andthe misclassification of certain improvements as tenant improvements ratherthan as building improvements, (c) rental revenue and depreciation expense ofits real estate business due to the misclassification of a payment received infiscal 2004 from a tenant for tenant improvements made by Griffin in accordancewith the lease agreement and (d) the classification of the amortization of debtissuance costs related to Griffin’s financing agreements from selling, generaland administrative expenses to interest expense.  Thisamendment includes in Item 1 such restated financial statements for thethirteen weeks ended February 26, 2005 and February 28, 2004 and otherinformation relating to such restated consolidated financial statements,including Management’s Discussion and Analysis of Financial Condition andResults of Operations (Item 2). Information regarding the reasons for and the effects of the restatementon Griffin’s financial condition at February 26, 2005 and its results ofoperations for the thirteen weeks ended February 26, 2005 and February 28, 2004is provided in Note 11 to the consolidated financial statements included inItem 1 of this amendment.  An updatedevaluation of Griffin’s disclosure controls and procedures is included in Item4 of this amendment.

 

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| *PART I -*  |       | FINANCIAL INFORMATION                                                                         |   |
|-------------|------------|-----------------------------------------------------------------------------------------------|--------|
|        | *ITEM 1 -* |                                                                                          |   |
|        |       | Financial Statements                                                                          |   |
|        |       |                                                                                          |   |
|        |       | Consolidated Statements of  Operations                                                        |   |
|        |       | 13 Weeks Ended  February 26, 2005 and February 28, 2004                                       |   |
|        |       |                                                                                          |   |
|        |       | Consolidated Balance Sheets                                                                   |   |
|        |       | February 26, 2005 and  November 27, 2004                                                      |   |
|        |       |                                                                                          |   |
|        |       | Consolidated Statements of  Changes in Stockholders’ Equity                              |   |
|        |       | 13 Weeks Ended  February 26, 2005 and February 28, 2004                                       |   |
|        |       |                                                                                          |   |
|        |       | Consolidated Statements of  Cash Flows                                                        |   |
|        |       | 13 Weeks Ended  February 26, 2005 and February 28, 2004                                       |   |
|        |       |                                                                                          |   |
|        |       | Notes to Consolidated  Financial Statements                                                   |   |
|        |       |                                                                                          |   |
|        | *ITEM 2 -* | Management’s  Discussion and Analysis of   Financial Condition and Results of Operations |   |
|        |       |                                                                                          |   |
|        | *ITEM 4 -* | Controls and Procedures                                                                       |   |
|        |       |                                                                                          |   |
| *PART II -* |       | OTHER INFORMATION                                                                             |   |
|        |       |                                                                                          |   |
|        | *ITEM 1 -* | Legal Proceedings                                                                             |   |
|        |       |                                                                                          |   |
|        | *ITEM 6 -* | Exhibits                                                                                      |   |
|        |       |                                                                                          |   |
|        |       | SIGNATURES                                                                                    |   |

 

3

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**PART I****                               FINANCIALINFORMATION**

 

ITEM 1.                             FINANCIAL STATEMENTS

 

**GRIFFIN LAND &NURSERIES, INC.**

Consolidated Statements of Operations

(dollars in thousands, except per share data)

(unaudited)

 
| *** ***                                                          | *** *** | **For the 13 Weeks Ended,**  | *** *** |
|-----------------------------------------------------------------------|--------------|------------------------------|--------------|
| ** **                                                            | ** **   | **Feb. 26, 2005**            | ** **   | **Feb. 28, 2004** | ** ** |
| ** **                                                            | ** **   | **(As Restated)  (Note 11)** | ** **   | **(As Restated)  (Note 11)** | ** ** |
| Landscape  nursery net sales                                          |         | $                            | 464          |   | $ | 422 |   |
| Rental  revenue and property sales                                    |         | 2,865                        |         | 2,487 |   |
| Total  revenue                                                        |         | 3,329                        |         | 2,909 |   |
|                                                                  |         |                         |         |   |   |
| Costs of  landscape nursery sales                                     |         | 597                          |         | 442 |   |
| Costs  related to rental revenue and property sales                   |         | 2,258                        |         | 1,909 |   |
| Total costs  of goods sold                                            |         | 2,855                        |         | 2,351 |   |
|                                                                  |         |                         |         |   |   |
| Gross profit                                                          |         | 474                          |         | 558 |   |
| Selling,  general and administrative expenses                         |         | 2,318                        |         | 1,923 |   |
| Operating  loss                                                       |         | (1,844                       | )            | (1,365 | ) |
| Interest  expense                                                     |         | (536                         | )            | (771 | ) |
| Interest  income, dividend income and gains on short-term investments |         | 186                          |         | 6 |   |
| Loss before  income tax benefit and equity investment                 |         | (2,194                       | )            | (2,130 | ) |
| Income tax  benefit                                                   |         | (753                         | )            | (793 | ) |
| Loss before equity  investment                                        |         | (1,441                       | )            | (1,337 | ) |
| Equity loss  from Centaur Communications, Ltd.                        |         | —                       |         | (89 | ) |
| Net loss                                                              |         | $                            | (1,441       | ) | $ | (1,426 | ) |
|                                                                  |         |                         |         |   |   |
| Basic net  loss per common share                                      |         | $                            | (0.29        | ) | $ | (0.29 | ) |
| Diluted net  loss per common share                                    |         | $                            | (0.29        | ) | $ | (0.29 | ) |

 

See Notes to Consolidated Financial Statements*.*

 

4

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GRIFFIN LAND & NURSERIES, INC.

Consolidated Balance Sheets

(dollars in thousands, except per share data)

(unaudited)

 
| ** **                                                                                                                                   | ** ** | **Feb. 26, 2005**            | ** ** | **Nov. 27, 2004**            | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                                                                                                                                   | ** ** | **(As Restated)  (Note 11)** | ** ** | **(As Restated)  (Note 11)** | ** ** |
| ASSETS                                                                                                                                       |       |                         |       |                         |       |
| Current  Assets:                                                                                                                             |       |                         |       |                         |       |
| Cash and cash equivalents                                                                                                                    |       | $                            | 508        |                         | $          | 8,827 |   |
| Short-term investments, net                                                                                                                  |       | 30,336                       |       | 30,173                       |       |
| Accounts receivable, less allowance of $159  and $188                                                                                        |       | 908                          |       | 2,162                        |       |
| Inventories, net                                                                                                                             |       | 37,556                       |       | 32,184                       |       |
| Deferred income taxes                                                                                                                        |       | 1,772                        |       | 1,572                        |       |
| Other current assets                                                                                                                         |       | 3,969                        |       | 3,423                        |       |
| Total  current assets                                                                                                                        |       | 75,049                       |       | 78,341                       |       |
| Real estate  held for sale or lease, net                                                                                                     |       | 67,270                       |       | 65,675                       |       |
| Property and  equipment, net                                                                                                                 |       | 11,164                       |       | 11,310                       |       |
| Investment  in Centaur Holdings, plc                                                                                                         |       | 12,800                       |       | 11,290                       |       |
| Other assets                                                                                                                                 |       | 10,018                       |       | 10,274                       |       |
| Total assets                                                                                                                                 |       | $                            | 176,301    |                         | $          | 176,890 |   |
|                                                                                                                                         |       |                         |       |                         |       |
| LIABILITIES  AND STOCKHOLDERS’ EQUITY                                                                                                   |       |                         |       |                         |       |
| Current  Liabilities:                                                                                                                        |       |                         |       |                         |       |
| Current portion of long-term debt                                                                                                            |       | $                            | 855        |                         | $          | 855 |   |
| Accounts payable and accrued liabilities                                                                                                     |       |                         | 5,419      |                         |       | 6,044 |   |
| Total  current liabilities                                                                                                                   |       | 6,274                        |       | 6,899                        |       |
| Long-term  debt                                                                                                                              |       | 31,259                       |       | 31,479                       |       |
| Deferred  income taxes                                                                                                                       |       | 2,394                        |       | 1,758                        |       |
| Other  noncurrent liabilities                                                                                                                |       | 2,662                        |       | 2,624                        |       |
| Total  liabilities                                                                                                                           |       | 42,589                       |       | 42,760                       |       |
|                                                                                                                                         |       |                         |       |                         |       |
| Commitments  and contingencies (Note 10)                                                                                                     |       |                         |       |                         |       |
|                                                                                                                                         |       |                         |       |                         |       |
| Stockholders’  Equity:                                                                                                                  |       |                         |       |                         |       |
| Common stock, par value $0.01 per share,  10,000,000 shares authorized, 4,963,438 and 4,959,162 shares issued and outstanding,  respectively |       | 50                           |       | 50                           |       |
| Additional  paid-in capital                                                                                                                  |       | 94,741                       |       | 94,699                       |       |
| Retained  earnings                                                                                                                           |       | 32,736                       |       | 34,177                       |       |
| Accumulated  other comprehensive income, net of tax                                                                                          |       | 6,185                        |       | 5,204                        |       |
| Total  stockholders’ equity                                                                                                             |       | 133,712                      |       | 134,130                      |       |
| Total  liabilities and stockholders’ equity                                                                                             |       | $                            | 176,301    |                         | $          | 176,890 |   |

 

See Notes to Consolidated Financial Statements**.**

 

5

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GRIFFIN LAND & NURSERIES, INC.

Consolidated Statements of Changes inStockholders’ Equity

(dollars in thousands)

(unaudited)

 
| ** **                                             | ** ** | **Shares of  Common  Stock** | ** ** | **Common  Stock** | ** ** | **Additional  Paid-in  Capital** | ** ** | **Retained  Earnings  (As Restated)  (Note 11)** | ** ** | **Accumulated  Other  Comprehensive  Income** | ** ** | **Total  (As Restated)  (Note 11)** | ** ** | **Total  Comprehensive  Income (Loss)  (As Restated)  (Note 11)** | ** ** |
|--------------------------------------------------------|------------|------------------------------|------------|-------------------|------------|----------------------------------|------------|--------------------------------------------------|------------|-----------------------------------------------|------------|-------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                             | ** ** | ** **                   | ** ** | ** **        | ** ** | ** **                       | ** ** | ** **                                       |
| Balance at Nov. 29, 2003 (as  restated)                |       | 4,876,916                    |       | $                 | 49         |                             | $          | 93,392                                           |       | $                                             | 3,189      |                                | $          | 271                                                               |       | $ | 96,901 |   | $ | — |   |
|                                                   |       |                         |       |              |       |                             |       |                                             |       |                                          |       |                                |       |                                                              |       |
| Exercise of stock options                              |       | 11,212                       |       | —            |       | 122                              |       | —                                           |       | —                                        |       | 122                                 |       | —                                                            |       |
|                                                   |       |                         |       |              |       |                             |       |                                             |       |                                          |       |                                |       |                                                              |       |
| Net loss (as restated)                                 |       | —                       |       | —            |       | —                           |       | (1,426                                           | )          | —                                        |       | (1,426                              | )          | (1,426                                                            | )          |
|                                                   |       |                         |       |              |       |                             |       |                                             |       |                                          |       |                                |       |                                                              |       |
| Other comprehensive income                             |       | —                       |       | —            |       | —                           |       | —                                           |       | 351                                           |       | 351                                 |       | 351                                                               |       |
|                                                   |       |                         |       |              |       |                             |       |                                             |       |                                          |       |                                |       |                                                              |       |
| Balance at Feb. 28, 2004 (as  restated)                |       | 4,888,128                    |       | $                 | 49         |                             | $          | 93,514                                           |       | $                                             | 1,763      |                                | $          | 622                                                               |       | $ | 95,948 |   | $ | (1,075 | ) |
|                                                   |       |                         |       |              |       |                             |       |                                             |       |                                          |       |                                |       |                                                              |       |
| Balance at Nov. 27, 2004 (as  restated)                |       | 4,959,162                    |       | $                 | 50         |                             | $          | 94,699                                           |       | $                                             | 34,177     |                                | $          | 5,204                                                             |       | $ | 134,130 |   | $ | — |   |
|                                                   |       |                         |       |              |       |                             |       |                                             |       |                                          |       |                                |       |                                                              |       |
| Exercise of stock options including tax benefit of $10 |       | 4,276                        |       | —            |       | 42                               |       | —                                           |       | —                                        |       | 42                                  |       | —                                                            |       |
|                                                   |       |                         |       |              |       |                             |       |                                             |       |                                          |       |                                |       |                                                              |       |
| Net loss (as restated)                                 |       | —                       |       | —            |       | —                           |       | (1,441                                           | )          | —                                        |       | (1,441                              | )          | (1,441                                                            | )          |
|                                                   |       |                         |       |              |       |                             |       |                                             |       |                                          |       |                                |       |                                                              |       |
| Other comprehensive income                             |       | —                       |       | —            |       | —                           |       | —                                           |       | 981                                           |       | 981                                 |       | 981                                                               |       |
|                                                   |       |                         |       |              |       |                             |       |                                             |       |                                          |       |                                |       |                                                              |       |
| Balance at Feb. 26, 2005 (as  restated)                |       | 4,963,438                    |       | $                 | 50         |                             | $          | 94,741                                           |       | $                                             | 32,736     |                                | $          | 6,185                                                             |       | $ | 133,712 |   | $ | (460 | ) |

 

See Notes to Consolidated Financial Statements.

 

6

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GRIFFIN LAND & NURSERIES, INC.

Consolidated Statements of Cash Flows

(dollars in thousands)

(unaudited)

 
| *** ***                                                                 | *** *** | **For the 13 Weeks Ended,**  | ** ** |
|------------------------------------------------------------------------------|--------------|------------------------------|------------|
| ** **                                                                   | ** **   | **Feb. 26, 2005**            | ** ** | **Feb. 28, 2004** | ** ** |
| ** **                                                                   | ** **   | **(As Restated)  (Note 11)** | ** ** | **(As Restated)  (Note 11)** | ** ** |
| **Operating  activities:**                                                   |         |                         |       |   |   |
| Net loss                                                                     |         | $                            | (1,441     | ) | $ | (1,426 | ) |
| Adjustments  to reconcile net loss to net cash used in operating activities: |         |                         |       |   |   |
| Depreciation and amortization                                                |         | 1,124                        |       | 1,093 |   |
| Real estate asset write-offs                                                 |         | 169                          |       | 90 |   |
| Provision for inventory losses                                               |         | 140                          |       | — |   |
| Deferred income taxes                                                        |         | (93                          | )          | (1,046 | ) |
| Provision for bad debts                                                      |         | 67                           |       | — |   |
| Unrealized gains on trading securities                                       |         | 1                            |       | — |   |
| Amortization of debt issuance costs                                          |         | 14                           |       | 64 |   |
| Loss from equity investment                                                  |         | —                       |       | 89 |   |
| Other                                                                        |         | (17                          | )          | (20 | ) |
| Changes in  assets and liabilities:                                          |         |                         |       |   |   |
| Investment in trading securities                                             |         | (164                         | )          | — |   |
| Accounts receivable                                                          |         | 1,283                        |       | 1,028 |   |
| Inventories                                                                  |         | (5,512                       | )          | (4,760 | ) |
| Other current assets                                                         |         | (568                         | )          | (436 | ) |
| Accounts payable and accrued liabilities                                     |         | 191                          |       | 1,586 |   |
| Other noncurrent assets and noncurrent  liabilities, net                     |         | (62                          | )          | 16 |   |
| Net cash  used in operating activities                                       |         | (4,868                       | )          | (3,722 | ) |
|                                                                         |         |                         |       |   |   |
| **Investing  activities:**                                                   |         |                         |       |   |   |
| Additions to  real estate held for sale or lease                             |         | (3,141                       | )          | (1,632 | ) |
| Additions to  property and equipment                                         |         | (213                         | )          | (224 | ) |
| Proceeds  from sale of properties, net of expenses                           |         | 91                           |       | — |   |
| Investment  in Shemin Acquisition Corp.                                      |         | —                       |       | (143 | ) |
| Net cash  used in investing activities                                       |         | (3,263                       | )          | (1,999 | ) |
|                                                                         |         |                         |       |   |   |
| **Financing  activities:**                                                   |         |                         |       |   |   |
| Payments of  debt                                                            |         | (220                         | )          | (196 | ) |
| Exercise of  stock options                                                   |         | 32                           |       | 122 |   |
| Increase in  debt                                                            |         | —                       |       | 5,925 |   |
| Other, net                                                                   |         | —                       |       | (129 | ) |
| Net cash  (used in) provided by financing activities                         |         | (188                         | )          | 5,722 |   |
| Net  (decrease) increase in cash and cash equivalents                        |         | (8,319                       | )          | 1 |   |
| Cash and  cash equivalents at beginning of period                            |         | 8,827                        |       | 18 |   |
| Cash and  cash equivalents at end of period                                  |         | $                            | 508        |   | $ | 19 |   |

 

See Notes to Consolidated Financial Statements.

 

7

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GRIFFIN LAND & NURSERIES, INC.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

(unaudited)

 

1.                    Basisof Presentation

 

The unauditedconsolidated financial statements of Griffin Land & Nurseries, Inc. (“Griffin”)include the accounts of Griffin’s real estate division (“Griffin Land”) andGriffin’s wholly-owned subsidiary, Imperial Nurseries, Inc. (“Imperial”), andhave been prepared in conformity with the standards of accounting measurementset forth in Accounting Principles Board Opinion No. 28 and amendments theretoadopted by the Financial Accounting Standards Board (“FASB”). Also, theaccompanying financial statements have been prepared in accordance with theaccounting policies stated in Griffin’s audited financial statements for theyear ended November 27, 2004 included in the Report on Form 10-K/A as filedwith the Securities and Exchange Commission, and should be read in conjunctionwith the Notes to Financial Statements appearing in that report. Alladjustments, comprising only normal recurring adjustments, which are, in theopinion of management, necessary for a fair presentation of results for theinterim periods have been reflected.  Theyear end consolidated balance sheet data as of November 27, 2004 was derivedfrom audited financial statements but does not include all disclosures requiredby accounting principles generally accepted in the United States of America.

 

Griffin hasrestated its consolidated financial statements for the thirteen weeks endedFebruary 26, 2005 and February 28, 2004, and for the fiscal years endedNovember 27, 2004, November 29, 2003 and November 30, 2002, including thefinancial information of the interim periods in fiscal years 2004 and 2003 tocorrect:  (a) rental revenue anddepreciation and amortization expense of its real estate business as a resultof an incorrect allocation of the purchase price for Griffin’s fiscal 2003acquisition of a controlling interest in a joint venture that owned two officebuildings in Windsor, Connecticut (Griffin had previously held a 30% interestin the joint venture), (b) depreciation expense of its real estate business fortenant improvements related to certain leases in other of Griffin Land’sbuildings as a result of the incorrect recording of the useful lives of certaintenant improvements and the misclassification of certain improvements as tenantimprovements rather than as building improvements, (c) rental revenue anddepreciation expense of its real estate business due to the misclassificationof a payment received in the 2004 second quarter from a tenant for tenantimprovements made by Griffin in accordance with the lease agreement and (d) theclassification of the amortization expense of debt issuance costs related toGriffin’s financing agreements from selling, general and administrativeexpenses to interest expense.

 

The correctedallocation of the purchase price increased by $1.5 million the amount ofintangible assets related to the value of in-place leases and tenantrelationships and reduced by $1.5 million the amount previously allocated toGriffin’s tangible real estate assets. The effect of this correction to the purchase price allocation was toincrease Griffin’s operating losses by $47 and $66 in the thirteen weeks endedFebruary 26, 2005 and February 28, 2004, respectively, as a result of anincrease in depreciation and amortization expense because of the shorter timeperiod over which the intangible assets are amortized as compared to thedepreciable lives of the tangible real estate assets.

 

The adjustmentto depreciation expense related to the correction of the useful lives used todetermine the amount of depreciation for tenant improvements related to certainleases and the change in classification of certain improvements from tenantimprovements to building improvements decreased Griffin’s operating losses by$67 and $34 for the thirteen weeks ended February 26, 2005 and February 28,2004, respectively.

 

8

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Griffindetermined that a payment received from a tenant in the 2004 second quarter fortenant improvements made by Griffin in accordance with the lease agreementshould have been recorded as deferred rental revenue and amortized into rentalrevenue over the term of the lease. Griffin had recorded the payment received as a reduction of tenantimprovements.  The effect of thisadjustment was to increase Griffin’s rental revenue and increase depreciationexpense by $31 for the thirteen weeks ended February 26, 2005.  There was no effect on Griffin’s operatinglosses because the depreciable lives of the tenant improvements were the sameas the lease term over which the amount received from the tenant will berecognized as rental revenue.

 

The effect ofthe correction to the classification of the amortization of debt issuance costswas to decrease Griffin’s operating loss and increase interest expense by $64for the thirteen weeks ended February 28, 2004. The amortization of debt issuance costs was included in interest expenseas originally reported for the thirteen weeks ended February 26, 2005.

 

In aggregate,the above adjustments resulted in a decrease to Griffin’s net loss of  $13 and an increase to Griffin’s net loss of  $22 for the thirteen weeks ended February 26,2005 and February 28, 2004, respectively. The adjustments described herein affected only noncash credits andcharges and did not affect Griffin’s cash position.  In addition, the adjustments related to the amortizationof debt issuance costs did not affect Griffin’s pretax loss, net loss or netloss per share in any period.  The aboveadjustments did not affect originally reported net cash provided by or used inoperating, investing or financing activities for the thirteen weeks endedFebruary 26, 2005 and February 28, 2004. Griffin’s consolidated balance sheets as of February 26, 2005 andNovember 27, 2004 were restated for the effects of the above adjustments, butsuch adjustments were not material to Griffin’s consolidated balance sheets(see Note 11).

 

As reported inits Report on Form 10-K/A for the fiscal year ended November 27, 2004, Griffinrevised the amounts reported on the quarterly data from those originallyreported in its Report on Form 10-Q for the thirteen weeks ended February 28,2004 for rental revenue and costs related to rental revenue because Griffindetermined that it had inadvertently reported certain intercompany revenue andexpenses of the same amount in each period related to property managementactivities at Griffin’s real estate business. The revisions decreased both revenue and related costs in the thirteenweeks ended February 28, 2004 by $189 to eliminate those offsettingintercompany amounts that were inadvertently included in the prior period. Therevisions had no effect on previously reported gross profit, operating profit(loss), net income (loss) or net income (loss) per share in any of Griffin’spreviously issued consolidated statements of operations. In addition, therevisions had no effect on any of Griffin’s previously issued consolidatedbalance sheets or consolidated statements of cash flows.

 

The results ofoperations for the thirteen weeks ended February 26, 2005 are not necessarilyindicative of the results to be expected for the full year.  Certain amounts from the prior year have beenreclassified to conform to the current presentation.

 

Griffinaccounts for stock options under Accounting Principles Board OpinionNo. 25, “Accounting for Stock Issued to Employees,” and has adopted SFASNo. 123, which requires disclosure of the pro forma effect on earnings andearnings per share of the fair value method of accounting for stock-basedcompensation, and SFAS No. 148, which prescribes a method of disclosure.  Griffin’s results would have been thefollowing pro forma amounts under the method prescribed by SFAS No. 123:

 

9

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| ** **                                                                                                             | *** *** | **For the 13 Weeks Ended,**  | ** ** |
|------------------------------------------------------------------------------------------------------------------------|--------------|------------------------------|------------|
| ** **                                                                                                             | ** **   | **Feb 26, 2005**             | ** ** | **Feb. 28, 2004** | ** ** |
| ** **                                                                                                             | ** **   | **(As Restated)  (Note 11)** | ** ** | **(As Restated)  (Note 11)** | ** ** |
| Net loss, as  reported                                                                                                 |         | $                            | (1,441     | ) | $ | (1,426 | ) |
| Total stock based employee compensation expense  determined under fair value method for all awards, net of tax effects |         | (3                           | )          | (28 | ) |
| Net loss,  pro forma                                                                                                   |         | $                            | (1,444     | ) | $ | (1,454 | ) |
|                                                                                                                   |         |                         |       |   |   |
| Basic net  loss per common share, as reported                                                                          |         | $                            | (0.29      | ) | $ | (0.29 | ) |
|                                                                                                                   |         |                         |       |   |   |
| Basic net  loss per common share, pro forma                                                                            |         | $                            | (0.29      | ) | $ | (0.30 | ) |
|                                                                                                                   |         |                         |       |   |   |
| Diluted net  loss per common share, as reported                                                                        |         | $                            | (0.29      | ) | $ | (0.29 | ) |
|                                                                                                                   |         |                         |       |   |   |
| Diluted net  loss per common share, pro forma                                                                          |         | $                            | (0.29      | ) | $ | (0.30 | ) |

 

There were nostock options granted during the thirteen weeks ended February 26, 2005 andFebruary 28, 2004.

 

2.                    RecentAccounting Pronouncements

 

In November2004, the FASB issued SFAS No. 151, “Inventory Costs (an amendment of ARB No.43, Chapter 4).”  This new standardrequires the recognition of abnormal inventory costs related to idle facilityexpenses, freight, handling costs and spoilage as period costs.  SFAS No. 151 will be effective for Griffin infiscal 2006 and is not expected to have a material impact on Griffin’sconsolidated financial statements.

 

In December2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets (anamendment of APB Opinion No. 29).”  Thisnew standard requires an issuer to measure and recognize nonmonetary exchangeswhich are anticipated to have an impact on future cash flows.  SFAS No. 153 will be effective for Griffin inthe fourth quarter of fiscal 2005 and is not expected to have any impact onGriffin’s consolidated financial statements.

 

In December2004, the FASB issued SFAS No. 123R, “Share-Based Payment.”  This new standard supersedes APB Opinion No.25, “Accounting for Stock Issued to Employees,” and its related implementationguidance.  SFAS No. 123R requires anissuer to recognize the compensation cost of employee services received inexchange for an award of equity instruments. Therefore, the cost of rewarding individuals with equity instrumentswill be recognized in Griffin’s financial statements rather than disclosed in apro forma statement in the financial statement footnotes.  SFAS No. 123R will be effective for Griffinin the first quarter of fiscal 2006. Management expects to adopt SFAS No. 123R using the modified prospectiveapplication method, and expects that the adoption of SFAS No. 123R willdecrease Griffin’s annual basic and diluted per share results by $0.01 to $0.04per share.

 

10

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**3.**                    IndustrySegment Information

 

**Griffin’s reportable segments are defined by their productsand services, and are comprised of the landscape nursery and real estatesegments.  Management operates andreceives reporting based upon these segments. Griffin has no operations outside the United States.  Griffin’s export sales and transactionsbetween segments are not material.**

 
| ** **                                                                                     | ** ** | **For the 13 Weeks Ended,**  | ** ** |
|------------------------------------------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                                                     | ** ** | **February 26,  2005**       | ** ** | **February 28,  2004** | ** ** |
| ** **                                                                                     | ** ** | **(As Restated)  (Note 11)** | ** ** | **(As Restated)  (Note 11)** | ** ** |
| Total  revenue                                                                                 |       |                         |       |   |   |
| Landscape  nursery net sales                                                                   |       | $                            | 464        |   | $ | 422 |   |
| Rental  revenue and property sales                                                             |       | 2,865                        |       | 2,487 |   |
|                                                                                           |       | $                            | 3,329      |   | $ | 2,909 |   |
| Operating  loss:                                                                               |       |                         |       |   |   |
| Landscape  nursery                                                                             |       | $                            | (1,013     | ) | $ | (873 | ) |
| Real estate                                                                                    |       | (48                          | )          | — |   |
| Industry  segment totals                                                                       |       | (1,061                       | )          | (873 | ) |
| General  corporate expense                                                                     |       | (783                         | )          | (492 | ) |
| Operating  loss                                                                                |       | (1,844                       | )          | (1,365 | ) |
| Interest expense, net of interest income,  dividend income and gains on short-term investments |       | (350                         | )          | (765 | ) |
| Loss before  income tax benefit                                                                |       | $                            | (2,194     | ) | $ | (2,130 | ) |

 
| ** **                                             | ** ** | **Feb. 26, 2005**            | ** ** | **Nov. 27, 2004**            | ** ** |
|--------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                                             | ** ** | **(As Restated)  (Note 11)** | ** ** | **(As Restated)  (Note 11)** | ** ** |
| Identifiable  assets:                                  | ** ** | ** **                   | ** ** | ** **                   | ** ** |
| Landscape  nursery                                     |       | $                            | 54,286     |                         | $          | 50,330 |   |
| Real estate                                            |       | 73,910                       |       | 73,451                       |       |
| Industry  segment totals                               |       | 128,196                      |       | 123,781                      |       |
| General  corporate (consists primarily of investments) |       | 48,105                       |       | 53,109                       |       |
| Total assets                                           |       | $                            | 176,301    |                         | $          | 176,890 |   |

 

Griffin restatedits consolidated financial statements for the thirteen weeks ended February 26,2005 and February 28, 2004 and for the fiscal years ended November 27, 2004,November 29, 2003 and November 30, 2002 (see Note 11).

 

Griffinrevised previously reported rental revenue and costs related to rental revenuein the same amount to eliminate certain duplicated amounts included in theprior year (see Note 1). The effect of these revisions, which Griffinbelieves were not material, was to decrease both revenue and related costs ofthe real estate segment in the thirteen weeks ended February 28, 2004 by $189.The revisions had no effect on previously reported real estate segmentoperating profit or previously reported identifiable assets of the real estatesegment.

 

11

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Revenue forthe real estate segment in the thirteen weeks ended February 26, 2005 includesproperty sales revenue of $107. There were no property sales in the thirteenweeks ended February 28, 2004.

 

See Note 4 forinformation on Griffin’s previously held equity investment in Centaur.

 

4.                    EquityInvestment

 

On March 10,2004, Griffin completed the sale of its investment in Centaur Communications,Ltd. (“Centaur”).  Prior to the sale,Griffin accounted for its investment in Centaur under the equity method ofaccounting for investments.  Theunaudited summarized financial data of Centaur presented below were derivedfrom consolidated financial information of Centaur for the thirteen weeks endedFebruary 28, 2004.  Griffin’s equity lossfor the thirteen weeks ended February 28, 2004 included $92 for amortization ofpublishing rights and reflected adjustments necessary to present Centaur’sresults in accordance with generally accepted accounting principles in theUnited States of America.

 
| ** **           | ** ** | **Three Months  Ended,  Feb. 28, 2004** | ** ** |
|----------------------|------------|-----------------------------------------|------------|
| Net sales            |       | $                                       | 25,410     |   |
| Costs and  expenses  |       | 25,664                                  |       |
| Operating  loss      |       | (254                                    | )          |
| Nonoperating  income |       | 169                                     |       |
| Pretax loss          |       | (85                                     | )          |
| Income tax  benefit  |       | (94                                     | )          |
| Net income           |       | $                                       | 9          |   |

 

5.                    Long-TermDebt

 

Long-term debtincludes:

 
| ** **                   | ** ** | **Feb. 26, 2005** | ** ** | **Nov. 27, 2004** | ** ** |
|------------------------------|------------|-------------------|------------|-------------------|------------|
| Nonrecourse  mortgages:      |       |              |       |              |       |
| 8.54% due July 1, 2009       |       | $                 | 7,820      |              | $          | 7,842 |   |
| 6.08% due January 1, 2013    |       | 9,388             |       | 9,433             |       |
| 6.30% due May 1, 2014        |       | 1,408             |       | 1,436             |       |
| 8.13% due April 1, 2016      |       | 5,810             |       | 5,853             |       |
| 7.0% due October 1, 2017     |       | 7,376             |       | 7,410             |       |
| Total  nonrecourse mortgages |       | 31,802            |       | 31,974            |       |
| Capital  leases              |       | 312               |       | 360               |       |
| Total                        |       | 32,114            |       | 32,334            |       |
| Less:  current portion       |       | (855              | )          | (855              | )          |
| Total  long-term debt        |       | $                 | 31,259     |              | $          | 31,479 |   |

 

12

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In March 2004, as a result of the proceeds received from the sale ofCentaur (see Note 4), Griffin repaid the entire amount then outstanding ($18.4million) under its Credit Agreement (the “Credit Agreement”) with Fleet NationalBank and subsequently terminated the Credit Agreement, which was scheduled toexpire in February 2005.

 

At February26, 2005 and November 27, 2004, the fair values of Griffin’s mortgages were$34.8 million and $33.2 million, respectively. Fair value is based on thepresent value of future cash flows discounted at estimated borrowing rates forcomparable risks, maturities and collateral.

 

6.                    StockOptions

 

Activity underthe Griffin Land & Nurseries, Inc. 1997 Stock Option Plan (the “GriffinStock Option Plan”) is summarized as follows:

 
|                                 | ** ** | **For the thirteen weeks ended,** | ** ** |
|--------------------------------------|------------|-----------------------------------|------------|
|                                 | ** ** | **Feb. 26, 2005**                 | ** ** | **Feb. 28, 2004** | ** ** |
|                                 | ** ** | **Number of  Shares**             | ** ** | **Weighted Avg.  Exercise Price** | ** ** | **Number  of Shares** | ** ** | **Weighted Avg.  Exercise Price** | ** ** |
| Outstanding  at beginning of year    |       | 584,514                           |       | $ | 12.78 |   | 659,542 |   | $ | 12.57 |   |
| Exercised                            |       | (4,276                            | )          | 7.53 |   | (11,212 | ) | 10.94 |   |
| Cancelled                            |       | (9,667                            | )          | 13.70 |   | — |   | — |   |
| Outstanding  at end of first quarter |       | 570,571                           |       | $ | 12.80 |   | 648,330 |   | $ | 12.60 |   |

 
| Number of  option holders at February 26, 2005 |   |   |   | 26 |   |   |   |   |   |
|------------------------------------------------|--------|--------|--------|----|--------|--------|--------|--------|--------|

 
| **Range of Exercise Prices** | ** ** | **Outstanding at  Feb. 26, 2005** | ** ** | **Weighted Avg.  Exercise Price** | ** ** | **Weighted Avg.  Remaining  Contractual Life  (in years)** | ** ** |
|------------------------------|------------|-----------------------------------|------------|-----------------------------------|------------|------------------------------------------------------------|------------|
| Under $3.00                  |       | 6,000                             |       | $                                 | 2.07       |                                                       | 0.2        |   |
| $3.00-$11.00                 |       | 98,172                            |       | 7.53                              |       | 1.0                                                        |       |
| Over $11.00                  |       | 466,399                           |       | 14.05                             |       | 4.0                                                        |       |
|                         |       | 570,571                           |       |                              |       |                                                       |       |
|                              |            |                                   |            |                                   |            |                                                            |            |  |

 

At February26, 2005, 508,296 options outstanding under the Griffin Stock Option Plan wereexercisable with a weighted average exercise price of $12.60 per share.

 

13

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7.                    PerShare Results

 

Basic anddiluted per share results were based on the following:

 
|                                                                                            | ** ** | **For the 13 Weeks Ended,**  | ** ** |
|-------------------------------------------------------------------------------------------------|------------|------------------------------|------------|
|                                                                                            | ** ** | **Feb. 26, 2005**            | ** ** | **Feb. 28, 2004** | ** ** |
|                                                                                            | ** ** | **(As Restated)  (Note 11)** | ** ** | **(As Restated)  (Note 11)** | ** ** |
|                                                                                            | ** ** | ** **                   | ** ** | ** ** | ** ** |
| Net loss as reported for computation of  basic and diluted per share results                    |       | $                            | (1,441     | ) | $ | (1,426 | ) |
|                                                                                            |       |                         |       |   |   |
| Weighted average shares outstanding for computation  of basic and diluted per share results (a) |       | 4,961,000                    |       | 4,879,000 |   |
|                                                                                                 |            |                              |            |  |  |  |  |

 

----

(a)                     Incrementalshares from the exercise of Griffin stock options were not included in periodswhere the inclusion of such shares would be anti-dilutive.  For the thirteen weeks ended February 26,2005 and February 28, 2004 the incremental shares from the assumed exercise ofstock options would have been 205,000 and 148,000, respectively.

 

**8.**                    SupplementalFinancial Statement Information

 

*Short-TermInvestments*

 

Griffin’sshort-term investments are comprised of equity and debt securities and areaccounted for as trading securities under SFAS No. 115, “Accounting for CertainInvestments in Debt and Equity Securities.”  Accordingly, the securities arecarried at their fair values based upon the quoted market prices of thoseinvestments at the balance sheet date, and net realized and unrealized gainsand losses on those investments are included in pretax income (loss).  The composition of short-term investments atFebruary 26, 2005 and November 27, 2004 is as follows:

 

14

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| ** **                            | ** ** | **As of Feb. 26, 2005** | ** ** | **As of Nov. 27, 2004** | ** ** |
|---------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                            |       | **Cost**                | ** ** | **Market Value**        | ** ** | **Cost** | ** ** | **Market Value** | ** ** |
| Commercial  Paper                     |       | $                       | 6,242      |                    | $          | 6,244 |   | $ | 15,015 |   | $ | 15,032 |   |
| Certificates  of Deposit              |       | 3,249                   |       | 3,266                   |       | 7,368 |   | 7,415 |   |
| Auction Rate  Fixed Income Securities |       | 4,500                   |       | 4,507                   |       | 4,500 |   | 4,506 |   |
| Federal  Agency Coupon Notes          |       | 16,275                  |       | 16,319                  |       | 3,219 |   | 3,220 |   |
| Total  short-term investments         |       | $                       | 30,266     |                    | $          | 30,336 |   | $ | 30,102 |   | $ | 30,173 |   |

 

Income fromcash equivalents and short-term investments for the thirteen weeks endedFebruary 26, 2005 and February 28, 2004 consists of:

 
| ** **                                                 | ** ** | **For the 13 Weeks Ended,** | ** ** |
|------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                 | ** ** | **Feb. 26, 2005**           | ** ** | **Feb. 28, 2004** | ** ** |
| Interest and  dividend income                              |       | $                           | 33         |   | $ | 6 |   |
| Net realized  gains on the sales of short-term investments |       | 154                         |       | — |   |
| Change in  net unrealized loss on short-term investments   |       | (1                          | )          | — |   |
|                                                       |       | $                           | 186        |   | $ | 6 |   |

 

*AccumulatedOther Comprehensive Income*

 

Changes inaccumulated other comprehensive income for the thirteen weeks ended February26, 2005 and February 28, 2004 consist of the following:

 
| ** **                                                                                                     | ** ** | **For the 13 Weeks Ended,** | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                                                                     | ** ** | **Feb. 26, 2005**           | ** ** | **Feb. 28, 2004** | ** ** |
|                                                                                                           |       |                        |       |   |   |
| Balance at  beginning of period                                                                                |       | $                           | 5,204      |   | $ | 271 |   |
| Effect of foreign currency exchange rate  changes related to equity investment in Centaur Communications, Ltd. |       | —                      |       | 351 |   |
| Increase in fair market value at end of  period of Centaur Holdings, plc, net of tax of $473                   |       | 877                         |       | — |   |
| Increase in value of Centaur Holdings, plc,  due to foreign currency exchange rate changes, net of tax of $56  |       | 104                         |       | — |   |
| Balance at  end of period                                                                                      |       | $                           | 6,185      |   | $ | 622 |   |

 

*SupplementalCash Flow Information*

 

15

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Included inaccounts payable and accrued liabilities at February 26, 2005 and November 27,2004 were $1,393 and $2,209, respectively, for additions to real estate heldfor sale or lease.

 

*Inventories*

 

Inventoriesconsist of:

 
| ** **              | ** ** | **Feb. 26,  2005** | ** ** | **Nov. 27,  2004** | ** ** |
|-------------------------|------------|--------------------|------------|--------------------|------------|
|                    |       |               |       |               |       |
| Nursery  stock          |       | $                  | 35,724     |               | $          | 31,737 |   |
| Materials  and supplies |       | 2,618              |       | 1,096              |       |
|                    |       | 38,342             |       | 32,833             |       |
| Reserves                |       | (786               | )          | (649               | )          |
|                    |       | $                  | 37,556     |               | $          | 32,184 |   |

 

*Propertyand Equipment*

 

Property andequipment consist of:

 
| ** **                  | ** ** | **Estimated  Useful Lives** | ** ** | **Feb. 26,  2005** | ** ** | **Nov. 27,  2004** | ** ** |
|-----------------------------|------------|-----------------------------|------------|--------------------|------------|--------------------|------------|
| Land                        |       |                        |       | $                  | 1,283      |               | $          | 1,283 |   |
| Land  improvements          |       | 10 to 20 years              |       | 5,316              |       | 5,274              |       |
| Buildings  and improvements |       | 10 to 40 years              |       | 3,043              |       | 3,033              |       |
| Machinery  and equipment    |       | 3 to 20 years               |       | 16,199             |       | 16,054             |       |
|                        |       |                        |       | 25,841             |       | 25,644             |       |
| Accumulated  depreciation   |       |                        |       | (14,677            | )          | (14,334            | )          |
|                        |       |                        |       | $                  | 11,164     |               | $          | 11,310 |   |

 

Griffin didnot incur any capital lease obligations in the thirteen weeks ended February26, 2005.  Griffin incurred capital leaseobligations of $92 in the thirteen weeks ended February 28, 2004.

 

16

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*Real EstateHeld for Sale or Lease*

 

Real estateheld for sale or lease consists of:

 
| ** **                  | ** ** | ** **                                          | ** ** | **February 26, 2005** | ** ** |
|-----------------------------|------------|-----------------------------------------------------|------------|-----------------------|------------|
| ** **                  | ** ** | **Estimated  Useful Lives**                         | ** ** | **Held for  Sale**    | ** ** | **Held for Lease  (As Restated)  (Note 11)** | ** ** | **Total  (As Restated)  (Note 11)** | ** ** |
| ** **                  | ** ** | ** **                                          | ** ** | ** **            | ** ** |
| Land                        |       |                                                |       | $                     | 1,250      |   | $ | 4,288 |   | $ | 5,538 |   |
| Land  improvements          |       | 15 years                                            |       | —                |       | 4,951 |   | 4,951 |   |
| Buildings  and improvements |       | 10 to 40 years                                      |       | —                |       | 54,596 |   | 54,596 |   |
| Tenant  improvements        |       | Shorter of  useful life or  terms of  related lease |       |                  |       | 6,242 |   | 6,242 |   |
| Development  costs          |       |                                                |       | 5,064                 |       | 9,073 |   | 14,137 |   |
|                        |       |                                                |       | 6,314                 |       | 79,150 |   | 85,464 |   |
| Accumulated  depreciation   |       |                                                |       | —                |       | (18,194 | ) | (18,194 | ) |
|                        |       |                                                |       | $                     | 6,314      |   | $ | 60,956 |   | $ | 67,270 |   |

* *
| ** **                  | ** ** | ** **                                          | ** ** | **November 27, 2004** | ** ** |
|-----------------------------|------------|-----------------------------------------------------|------------|-----------------------|------------|
| ** **                  | ** ** | **Estimated  Useful Lives**                         | ** ** | **Held for  Sale**    | ** ** | **Held for Lease  (As Restated)  (Note 11)** | ** ** | **Total  (As Restated)  (Note 11)** | ** ** |
| ** **                  | ** ** | ** **                                          | ** ** | ** **            | ** ** |
| Land                        |       |                                                |       | $                     | 1,252      |   | $ | 4,287 |   | $ | 5,539 |   |
| Land  improvements          |       | 15 years                                            |       | —                |       | 4,951 |   | 4,951 |   |
| Buildings  and improvements |       | 10 to 40 years                                      |       | —                |       | 54,185 |   | 54,185 |   |
| Tenant  improvements        |       | Shorter of  useful life or  terms of  related lease |       | —                |       | 6,627 |   | 6,627 |   |
| Development  costs          |       |                                                |       | 4,939                 |       | 6,998 |   | 11,937 |   |
|                        |       |                                                |       | 6,191                 |       | 77,048 |   | 83,239 |   |
| Accumulated  depreciation   |       |                                                |       | —                |       | (17,564 | ) | (17,564 | ) |
|                        |       |                                                |       | $                     | 6,191      |   | $ | 59,484 |   | $ | 65,675 |   |

 

*DeferredIncome Taxes*

 

A deferred taxliability of $529 was included as a charge to other comprehensive income in thethirteen weeks ended February 26, 2005 related to the mark to market adjustmenton the investment in Centaur Holdings.

 

17

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*PostretirementBenefits*

 

Griffinmaintains a postretirement benefits program which provides principally healthand life insurance benefits to certain of its retirees. The liability forpostretirement benefits is included in other noncurrent liabilities on theconsolidated balance sheets. Because Griffin’s obligation for retiree medicalbenefits is fixed under the terms of Griffin’s postretirement benefits program,any increase in the medical cost trend would have no effect on the accumulatedpostretirement benefit obligation, service cost or interest cost. Griffin’spostretirement benefits are unfunded, with benefits to be paid from Griffin’sgeneral assets.  Griffin’s contributionsfor the thirteen weeks ended February 26, 2005 and February 28, 2004 were $2and $1 respectively, with an expected contribution of $10 for the fiscal 2005full year.  The components of Griffin’spostretirement benefits expense are as follows:

 
| ** **                         | ** ** | **For the 13 Weeks Ended,** | ** ** |
|------------------------------------|------------|-----------------------------|------------|
| ** **                         | ** ** | **Feb. 26,  2005**          | ** ** | **Feb. 28,  2004** | ** ** |
|                               |       |                        |       |   |   |
| Service cost                       |       | $                           | 9          |   | $ | 8 |   |
| Interest                           |       | 13                          |       | 12 |   |
| Amortization  of unrecognized loss |       | 2                           |       | 2 |   |
|                               |       | $                           | 24         |   | $ | 22 |   |

 

9.                    SubsequentEvent

 

As of February26, 2005, Griffin held an approximate 14% equity interest in Shemin AcquisitionCorporation (“Shemin Acquisition”) at a carrying value of $4.7 million, whichGriffin accounted for under the cost method of accounting for investments.  On May 31, 2005, Griffin received initialcash proceeds of $5.9 million from the sale of its remaining common stock ofShemin Acquisition.  Immediately prior tothat sale, Griffin exchanged a portion of its holdings in Shemin Acquisitionfor an approximate 14% equity interest in Shemin Nurseries Holdings Corp. (“SheminNurseries”), which operates a landscape nursery distribution business throughits subsidiary that previously was a wholly-owned subsidiary of SheminAcquisition.  On June 29, 2005, Griffinreceived a cash distribution of $1.5 million from Shemin Nurseries.  Subsequent to these transactions, SheminNurseries paid $0.2 million to the buyer of Shemin Acquisition, on behalf ofGriffin, for Griffin’s share of the purchase price adjustment related to thedetermination of Shemin Acquisition’s working capital as of the closing date.  The sale of its investment in SheminAcquisition resulted in a gain to Griffin that will be reflected in Griffin’sresults of operations, for the thirteen weeks ended August 27, 2005.  Griffin continues to hold its investment inShemin Nurseries.

 

10.              Commitmentsand Contingencies

 

**As of February 26, 2005, Griffin had committed purchaseobligations of $3.2 million, principally for construction of the shell of a newindustrial building at Griffin Land and for the purchase of raw materials byImperial.**

 

**Griffin is involved, as a defendant, in various litigationmatters arising in the ordinary course of business.  In the opinion of management, based on theadvice of counsel, the ultimate liability, if any, with respect to thesematters will not be material to Griffin’s consolidated financial position,results of operations or cash flows.**

 

18

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11.           Restatement

 

Griffin has restated its consolidated financialstatements for the thirteen weeks ended February 26, 2005 and February 28,2004 to correct:  (a) rental revenueand depreciation and amortization expense of its real estate business as a resultof an incorrect allocation of the purchase price for Griffin’s fiscal 2003acquisition of a controlling interest in a joint venture that owned two officebuildings in Windsor, Connecticut (Griffin had previously held a 30% interestin the joint venture), (b) depreciation expense of its real estatebusiness for tenant improvements related to certain leases in other of GriffinLand’s buildings as a result of the incorrect recording of the useful lives ofcertain tenant improvements and the misclassification of certain improvementsas tenant improvements rather than as building improvements, (c) rentalrevenue and depreciation expense of its real estate business due to themisclassification of a payment received in the 2004 second quarter from atenant for tenant improvements made by Griffin in accordance with the leaseagreement and (d) the classification of the amortization expense of debtissuance costs related to Griffin’s financing agreements from selling, generaland administrative expenses to interest expense.

 

The corrected allocation of the purchase priceincreased by $1.5 million the amount of intangible assets related to the valueof in-place leases and tenant relationships and reduced by $1.5 million theamount previously allocated to Griffin’s tangible real estate assets.  The effect of this correction to the purchaseprice allocation was to increase Griffin’s operating losses by $47 and $66 inthe thirteen weeks ended February 26, 2005 and February 28, 2004,respectively, and to decrease per share results by $0.01 in each of thethirteen weeks ended February 26, 2005 and February 28, 2004 as aresult of an increase in depreciation and amortization expense because of theshorter time period over which the intangible assets are amortized as comparedto the depreciable lives of the tangible real estate assets.

 

The adjustment to depreciation expense related to thecorrection of the useful lives used to determine the amount of depreciation fortenant improvements related to certain leases and the change in classificationof certain improvements from tenant improvements to building improvementsdecreased Griffin’s operating losses by $67 and $34 for the thirteen weeksended February 26, 2005 and February 28, 2004, respectively, andincreased per share results by $0.01 in each of the thirteen weeks ended February 26,2005 and February 28, 2004.

 

Griffin determined that a payment received from atenant in the 2004 second quarter for tenant improvements made by Griffin inaccordance with the lease agreement should have been recorded as deferredrental revenue and amortized into rental revenue over the term of thelease.  Griffin had recorded the paymentreceived as a reduction of tenant improvements. The effect of this adjustment was to increase Griffin’s rental revenueand increase depreciation expense by $31 for the thirteen weeks ended February 26,2005.  There was no effect on Griffin’soperating loss and no effect on per share results because the depreciable livesof the tenant improvements were the same as the lease term over which theamount received from the tenant will be recognized as rental revenue.

 

The effect of the correction to the classification ofthe amortization of debt issuance costs was to decrease Griffin’s operatingloss and increase interest expense by $64 for the thirteen weeks ended February 28,2004.  For the thirteen weeks ended February 26,2005, the amortization of deferred financing costs included interest expense asoriginally reported.

 

In aggregate, the above adjustments resulted in adecrease to Griffin’s net loss of $13 and an increase to Griffin’s net loss of$22 for the thirteen weeks ended February 26, 2005 and February 28,2004, respectively.  The adjustmentsdescribed herein affected only noncash credits and charges and did not affectGriffin’s cash position.  In addition,the adjustments related to the amortization of debt issuance costs did notaffect Griffin’s pretax loss, net loss or net loss per share in anyperiod.  The above

 

19

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adjustments did not affect originallyreported net cash provided by or used in operating, investing or financingactivities for the thirteen weeks ended February 26, 2005 and February 28,2004.  Griffin’s consolidated balancesheets as of February 26, 2005 and November 27, 2004 were restatedfor the effects of the above adjustments, but such adjustments were notmaterial to Griffin’s consolidated balance sheets.

 

The following table sets forth additional detailregarding the effects of the restatement on Griffin’s consolidated financialstatements for the thirteen weeks ended February 26, 2005 and February 28,2004:

 

20

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Statement of Operations Data

 
| ** **                                                           | ** ** | **For the thirteen weeks ended,** | ** ** |
|----------------------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                                           | ** ** | **February 26, 2005**             | ** ** | **February 28, 2004** | ** ** |
| ** **                                                           | ** ** | **As  Reported**                  | ** ** | **Adjustments** | ** ** | **As  Restated** | ** ** | **As  Reported** | ** ** | **Adjustments** | ** ** | **As  Restated** | ** ** |
|                                                                 |       |                              |       |   |   |   |   |   |   |   |   |   |   |
| Landscape nursery net sales                                          |       | $                                 | 464        |   | $ | — |   | $ | 464 |   | $ | 422 |   | $ | — |   | $ | 422 |   |
| Rental revenue and property sales                                    |       | 2,840                             |       | 25 | (a) | 2,865 |   | 2,484 |   | 3 | (a) | 2,487 |   |
| Total revenue                                                        |       | 3,304                             |       | 25 |   | 3,329 |   | 2,906 |   | 3 |   | 2,909 |   |
|                                                                 |       |                              |       |   |   |   |   |   |   |   |   |   |   |
| Costs of landscape nursery sales                                     |       | 597                               |       | — |   | 597 |   | 442 |   | — |   | 442 |   |
| Costs related to rental revenue and property sales                   |       | 2,259                             |       | (1 | )(b) | 2,258 |   | 1,892 |   | 17 | (b) | 1,909 |   |
| Total costs of goods sold                                            |       | 2,856                             |       | (1 | ) | 2,855 |   | 2,334 |   | 17 |   | 2,351 |   |
|                                                                 |       |                              |       |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                                         |       | 448                               |       | 26 |   | 474 |   | 572 |   | (14 | ) | 558 |   |
| Selling, general and administrative expenses                         |       | 2,312                             |       | 6 | (c) | 2,318 |   | 1,969 |   | (46 | )(c) | 1,923 |   |
| Operating loss                                                       |       | (1,864                            | )          | 20 |   | (1,844 | ) | (1,397 | ) | 32 |   | (1,365 | ) |
| Interest expense                                                     |       | (536                              | )          | — |   | (536 | ) | (707 | ) | (64 | )(d) | (771 | ) |
| Interest income, dividend income and gains on short-term investments |       | 186                               |       | — |   | 186 |   | 6 |   | — |   | 6 |   |
| Loss before income tax benefit and equity investment                 |       | (2,214                            | )          | 20 |   | (2,194 | ) | (2,098 | ) | (32 | ) | (2,130 | ) |
| Income tax benefit                                                   |       | (760                              | )          | 7 | (e) | (753 | ) | (783 | ) | (10 | )(e) | (793 | ) |
| Loss before equity investment                                        |       | (1,454                            | )          | 13 |   | (1,441 | ) | (1,315 | ) | (22 | ) | (1,337 | ) |
| Equity loss from Centaur Communications, Ltd.                        |       | —                            |       | — |   | — |   | (89 | ) | — |   | (89 | ) |
| Net loss                                                             |       | $                                 | (1,454     | ) | $ | 13 |   | $ | (1,441 | ) | $ | (1,404 | ) | $ | (22 | ) | $ | (1,426 | ) |
| Basic net loss per common share                                      |       | $                                 | (0.29      | ) | $ | — |   | $ | (0.29 | ) | $ | (0.29 | ) | $ | — |   | $ | (0.29 | ) |
| Diluted net loss per common share                                    |       | $                                 | (0.29      | ) | $ | — |   | $ | (0.29 | ) | $ | (0.29 | ) | $ | — |   | $ | (0.29 | ) |

 

Balance Sheet Data

 
| ** **                                      | ** ** | **February 26, 2005** | ** ** | **November 27, 2004** | ** ** |
|-------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                      | ** ** | **As  Reported**      | ** ** | **Adjustments**       | ** ** | **As  Restated** | ** ** | **As  Reported** | ** ** | **Adjustments** | ** ** | **As  Restated** | ** ** |
|                                            |       |                  |       |                  |       |   |   |   |   |   |   |   |   |
| Total current assets                            |       | $                     | 75,049     |                  | $          | — |   | $ | 75,049 |   | $ | 78,341 |   | $ | — |   | $ | 78,341 |   |
| Real estate held for sale or lease, net         |       | 67,587                |       | (317                  | )(f)       | 67,270 |   | 66,043 |   | (368 | )(f) | 65,675 |   |
| Property and equipment, net                     |       | 11,164                |       | —                |       | 11,164 |   | 11,310 |   | — |   | 11,310 |   |
| Investment in Centaur Holdings, plc             |       | 12,800                |       | —                |       | 12,800 |   | 11,290 |   | — |   | 11,290 |   |
| Other assets                                    |       | 9,219                 |       | 799                   | (g)        | 10,018 |   | 9,413 |   | 861 | (g) | 10,274 |   |
| Total assets                                    |       | $                     | 175,819    |                  | $          | 482 |   | $ | 176,301 |   | $ | 176,397 |   | $ | 493 |   | $ | 176,890 |   |
|                                            |       |                  |       |                  |       |   |   |   |   |   |   |   |   |
| Total current liabilities                       |       | $                     | 6,151      |                  | $          | 123 | (h) | $ | 6,274 |   | $ | 6,776 |   | $ | 123 | (h) | $ | 6,899 |   |
| Long-term debt                                  |       | 31,259                |       | —                |       | 31,259 |   | 31,479 |   | — |   | 31,479 |   |
| Deferred income taxes                           |       | 2,608                 |       | (214                  | )(i)       | 2,394 |   | 1,979 |   | (221 | )(i) | 1,758 |   |
| Other noncurrent liabilities                    |       | 1,669                 |       | 993                   | (j)        | 2,662 |   | 1,600 |   | 1,024 | (j) | 2,624 |   |
| Total liabilities                               |       | 41,687                |       | 902                   |       | 42,589 |   | 41,834 |   | 926 |   | 42,760 |   |
| Total stockholders’ equity                 |       | 134,132               |       | (420                  | )(k)       | 133,712 |   | 134,563 |   | (433 | )(k) | 134,130 |   |
| Total liabilities and stockholders’ equity |       | $                     | 175,819    |                  | $          | 482 |   | $ | 176,301 |   | $ | 176,397 |   | $ | 493 |   | $ | 176,890 |   |

 

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(a)     Reflects an increase in rentalrevenue of $31 for the thirteen weeks ended February 26, 2005, to reflectthe amortization of deferred rental revenue as a result of a payment receivedfrom a tenant for a portion of tenant improvements made by Griffin.  Also reflects a decrease to rental revenue of$6 for the thirteen weeks ended February 26, 2005 and an increase torental revenue of $3 for the thirteen weeks ended February 28, 2004 foramortization of above-market and below-market leases reflecting a change in thevalue of above-market and below-market leases as a result of the reallocationof a portion of the purchase price of a fiscal 2003 acquisition as described inNote (b)(i) below.

 

(b)     Reflects: (i) net increases in depreciation andamortization expense of intangible assets of $41 and $69 in the thirteen weeksended February 26, 2005 and February 28, 2004, respectively, as aresult of the reallocation of $1.5 million of the purchase price from realestate held for sale or lease to the value of in-place leases and tenantrelationships with respect to Griffin’s fiscal 2003 acquisition of a controllinginterest in a joint venture that owned two office buildings; (ii) decreasesin depreciation expense of $67 and $34 for the thirteen weeks ended February 26,2005 and February 28, 2004, respectively, to correct the depreciationrelated to certain tenant improvements as a result of using incorrect usefullives to determine the amount of depreciation and the change in classificationof certain improvements from tenant improvements to building improvements; (iii) anincrease in depreciation expense of $31 for the thirteen weeks ended February 26,2005  as a result of recording a paymentreceived from a tenant for tenant improvements made by Griffin as deferredrental revenue instead of as a reduction to tenant improvements as originallyrecorded; and (iv) decreases in costs related to rental revenue of $6 and$18 for the thirteen weeks ended February 26, 2005 and February 28,2004, respectively, to reclassify $6 and $5 of depreciation expense to selling,general and administrative expenses and to correct the classification of $13for the amortization of debt issuance costs to interest expense.

 

(c)     Reflects a decrease in selling, general andadministrative expenses of $51 in the thirteen weeks ended February 28,2004 as a result of the correction to the classification of the amortization ofdebt issuance costs to interest expense. Also reflects increases in selling, general and administrative expensesof $6 and $5 in the thirteen weeks ended February 26, 2005 and February 28,2004, respectively, for the reclassification of depreciation expense from costsrelated to rental revenue to selling, general and administrative expenses.

 

(d)     Reflects an increase in interest expense of $64 in thethirteen weeks ended February 28, 2004 for the correction to theclassification of amortization of debt issuance costs of $51 from selling,general and administrative expenses to interest expense and for the correctionto the classification of amortization of debt issuance costs of $13 from costsrelated to rental revenue to interest expense. The amortization of debt issuance costs was included in interest expensefor the thirteen weeks ended February 27, 2005, therefore, no adjustmentwas necessary.

 

(e)     Reflects a decrease in the income tax benefit as aresult of the decrease in loss before income tax benefit in the thirteen weeksended February 26, 2005 and an increase in the income tax benefit as aresult of the increase in the loss before income tax benefit in the thirteenweeks ended February 28, 2004 as a result of the adjustments describedabove.

 

(f)      Reflects: (i) decreases in real estate held forsale or lease of $1,349 and $1,364 as of February 26, 2005 and November 27,2004, respectively, as a result of the correction to the allocation of the

 

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purchaseprice of the fiscal 2003 acquisition as described in Note (b)(i) above; (ii) increasesin real estate held for sale or lease of $1,116 and $1,147 as of February 26,2005 and November 27, 2004, respectively, for recording the paymentreceived from a tenant for tenant improvements as deferred rental revenueinstead of as a reduction of tenant improvements as originally recorded; and (iii) decreasesin real estate held for sale or lease of $84 and $151 as of February 26,2005 and November 27, 2004, respectively, to correct the depreciationrelated to certain tenant improvements as a result of the incorrect usefullives of these assets being used to determine the amount of depreciationpartially offset by the effect of the change in classification of certainimprovements from tenant improvements to building improvements.

 

(g)     Reflects increases in the values of in-place leasesand tenant relationships, which are included in other assets on Griffin’sconsolidated balance sheet, of $799 and $861 as of February 26, 2005 and November 27,2004, respectively, as a result of the reallocation of a portion of the purchaseprice of a fiscal 2003 acquisition as described in Note (b)(i) above.

 

(h)     Reflects increases to currentliabilities of $123 as of February 26, 2005 and November 27, 2004 forthe current portion of deferred rental revenue reflecting a payment received froma tenant for tenant improvements made by Griffin as described in Note (b)(iii) above.  The deferred rental revenue is beingamortized to rental revenue over the term of the lease.

 

(i)      Reflects the cumulative tax effect related to theadjustments to rental revenue and costs of rental revenue as discussed above.

 

(j)      Reflects increases in other noncurrent liabilities of$993 and $1,024 as of February 26, 2005 and November 27, 2004,respectively, for deferred rental revenue reflecting a payment received from atenant for tenant improvements made by Griffin as described in Note (b)(iii) above.  The deferred rental revenue is beingamortized to rental revenue over the term of the lease.

 

(k)     Reflects the cumulative effect ofthe above adjustments on stockholders’ equity.

 

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ITEM 2.          MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

**Restatement**

 

Griffin has restated its consolidated financialstatements for the thirteen weeks ended February 26, 2005 and February 28,2004 to correct:  (a) rental revenueand depreciation and amortization expense of its real estate business as aresult of an incorrect allocation of the purchase price for Griffin’s fiscal2003 acquisition of a controlling interest in a joint venture that owned twooffice buildings in Windsor, Connecticut (Griffin had previously held a 30%interest in the joint venture), (b) depreciation expense of its realestate business for tenant improvements related to certain leases in other ofGriffin Land’s buildings as a result of the incorrect recording of the usefullives of certain tenant improvements and the misclassification of certainimprovements as tenant improvements rather than as building improvements, (c) rentalrevenue and depreciation expense of its real estate business due to themisclassification of a payment received in the 2004 second quarter from atenant for tenant improvements made by Griffin in accordance with the leaseagreement and (d) the classification of the amortization expense of debtissuance costs related to Griffin’s financing agreements from selling, generaland administrative expenses to interest expense.

 

The corrected allocation of the purchase priceincreased by $1.5 million the amount of intangible assets related to the valueof in-place leases and tenant relationships and reduced by $1.5 million theamount previously allocated to Griffin’s tangible real estate assets.  The effect of this correction to the purchaseprice allocation was to increase Griffin’s operating losses by $47,000 and$66,000 in the thirteen weeks ended February 26, 2005 and February 28,2004, respectively, as a result of an increase in depreciation and amortizationexpense because of the shorter time period over which the intangible assets areamortized as compared to the depreciable lives of the tangible real estateassets.

 

The adjustment to depreciation expense related to thecorrection of the useful lives used to calculate the amount of depreciation fortenant improvements related to certain leases and the change in classificationof certain improvements from tenant improvements to building improvementsdecreased Griffin’s operating losses by $67,000 and $34,000 for the thirteenweeks ended February 26, 2005 and February 28, 2004, respectively.

 

Griffin determined that a payment received from atenant in the 2004 second quarter for tenant improvements made by Griffin inaccordance with the lease agreement should have been recorded as deferredrental revenue and amortized into rental revenue over the term of thelease.  Griffin had recorded the paymentreceived as a reduction of tenant improvements. The effect of this adjustment was to increase Griffin’s rental revenueand increase depreciation expense by $31,000 for the thirteen weeks ended February 26,2005.  There was no effect on Griffin’soperating profit because the depreciable lives of the tenant improvements werethe same as the lease term over which the amount received from the tenant willbe recognized as rental revenue.

 

The effect of the correction to the classification ofthe amortization of debt issuance costs was to decrease Griffin’s operatingloss and increase interest expense by $64,000 for the thirteen weeks ended February 28,2004.  For the thirteen weeks ended February 26,2005, the amortization of deferred financing costs was included in interestexpense as originally reported.

 

In aggregate, the above adjustments resulted in adecrease to Griffin’s net loss by $13,000 and an increase to Griffin’s net lossby $22,000 for the thirteen weeks ended February 26, 2005 and February 28,2004, respectively.  The adjustmentsdescribed herein affected only noncash credits and charges and did

 

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not affect Griffin’s cashposition.  In addition, the adjustmentsrelated to the amortization of debt issuance costs did not affect Griffin’spretax loss, net loss or net loss per share in any period.  The above adjustments did not affectoriginally reported net cash provided by or used in operating, investing orfinancing activities for the thirteen weeks ended February 26, 2005 and February 28,2004.  Griffin’s consolidated balancesheets as of February 26, 2005 and November 27, 2004 were restatedfor the effects of the above adjustments, but such adjustments were notmaterial to Griffin’s consolidated balance sheets.  See Note 11 to Griffin’s consolidatedfinancial statements in Item 1 for additional information regarding the effectsof the restatement on previously issued financial statements.

 

**Overview**

 

**The consolidated financial statements ofGriffin include the accounts of Griffin’s subsidiary in the landscape nurserybusiness, Imperial Nurseries, Inc. (“Imperial”), and Griffin’s Connecticutand Massachusetts based real estate business (“Griffin Land”).  Through March 9, 2004, Griffin had anequity investment in Centaur Communications, Ltd. (“Centaur”), a privately heldmagazine publishing business based in the United Kingdom.  On March 10, 2004, Griffin completed thesale of its investment in Centaur, receiving cash proceeds of $68.9 millionafter transaction expenses of $1.5 million but before income tax payments, and6,477,150 shares of common stock of Centaur Holdings, plc. (“Centaur Holdings”),the newly formed acquiring company. Griffin has retained its ownership interest in Centaur Holdings andaccounts for that investment as an available-for-sale security under SFAS No. 115,“Accounting For Certain Investments in Debt and Equity Securities.”**

 

**The significant accounting policies andmethods used in the preparation of Griffin’s consolidated financial statementsincluded in Item 1 are consistent with those used in the preparation of Griffin’saudited financial statements for the year ended November 27, 2004 includedin Griffin’s Report on Form 10-K/A as filed with the Securities andExchange Commission.  The preparation ofGriffin’s financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makecertain estimates and assumptions that affect the reported amounts of assetsand liabilities and disclosure of contingent assets and liabilities at thedates of the financial statements and revenue and expenses during the periodsreported.  Actual results could differfrom those estimates.  The significantaccounting estimates used by Griffin in preparation of its financial statementsfor the thirteen weeks ended February 26, 2005 are consistent with thoseused by Griffin in preparation of its fiscal 2004 financial statements.**

 

**Summary**

 

**Griffin’s net loss for the thirteen weeksended February 26, 2005 (the “2005 first quarter”) was substantiallyunchanged from the net loss for the thirteen weeks ended February 28, 2004(the “2004 first quarter”).  An increasein Griffin’s operating loss in the 2005 first quarter as compared to the 2004first quarter was substantially offset by lower interest expense and higherinterest income, dividend income and gains on short-term investments in the2005 first quarter.  Griffin Land’soperating results were essentially break even in the 2005 and 2004 firstquarters, as higher rental revenue in the current year’s quarter was offset bya charge of $0.2 million to write off capitalized costs related to a leasetermination (a new lease with a new tenant became effective upon thetermination of the existing lease) and higher operating expenses of itsbuildings.  The 2005 first quarteroperating loss at Imperial was higher than Imperial’s operating loss in the2004 first quarter due principally to a charge for inventory losses in the 2005first quarter.  Imperial historicallyincurs a first quarter operating loss due to the highly seasonal nature of thelandscape nursery business.**

 

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**Results ofOperations**

 

**Thirteen WeeksEnded February 26, 2005 Compared to the Thirteen Weeks Ended February 28,2004**

 

**Griffin’s consolidated total revenueincreased from $2.9 million in the 2004 first quarter to $3.3 million in the2005 first quarter.  The increase of $0.4million reflects an increase in revenue of $0.4 million at Griffin Land as netsales at Imperial were substantially unchanged.**

 

**Revenue at Griffin Land increased from $2.5million in the 2004 first quarter to $2.9 million in the 2005 firstquarter.  The increase of $0.4 millionreflects an increase of $0.3 million in revenue from its leasing operations andrevenue of $0.1 million from a property sale. There were no property sales in the 2004 first quarter.  The increase in revenue from leasingoperations principally reflects a net increase in space leased in the 2005first quarter as compared to the 2004 first quarter.  At February 26, 2005, Griffin Land owned1,130,000 square feet of industrial, flex and office space, with 934,000 squarefeet (83%) leased.  At the end of the2004 first quarter, Griffin Land had 1,130,000 square feet of industrial, flexand office space, with 870,000 square feet (77%) leased.  The increase in space leased at the end ofthe 2005 first quarter versus the comparable time last year principallyreflects the start of rental payments on new leases subsequent to the 2004first quarter.  These include two leasesfor an aggregate of 54,000 square feet of the 117,000 square foot industrialbuilding in the New England Tradeport in Windsor, Connecticut that wascompleted near the end of fiscal 2003 and a lease for 16,000 square feet ofGriffin’s 50,000 square foot single story office building in Griffin Center inWindsor, Connecticut.  Rental revenuefrom new leases of previously vacant space covering approximately 20,000 squarefeet in one of Griffin Land’s older industrial buildings in the New EnglandTradeport, was substantially offset by approximately 25,000 square feet, primarilyflex space, that was leased in the 2004 first quarter, but vacant in the 2005first quarter.**

 

**There was a significant increase in realestate market activity particularly by users of industrial and warehouse spacein the latter part of fiscal 2004 which continued through the 2005 first quarter.  The increased market activity was evidencedby the increases in requests for proposals to Griffin Land by prospective usersfor that type of space and interest by certain current tenants seeking toincrease the amount of warehouse and industrial space they currentlylease.  However, market activity appearsto have softened in the second half of fiscal 2005, as evidenced by a declinein inquiries from prospective tenants.  Subsequentto the end of the 2005 first quarter, Griffin Land completed leases for anadditional approximately 63,000 square feet of its 117,000 square footindustrial building, resulting in that building now being fully leased.  Also, subsequent to the 2005 first quarter,Griffin Land signed a lease for approximately 31,300 square feet for its137,000 square foot industrial building that was completed at the end of the2005 second quarter.  This new lease,which became effective in the 2005 third quarter, is with a tenant from one ofGriffin Land’s other industrial buildings that required additional space andvacated the 25,000 square feet it had leased in one of Griffin Land’s otherindustrial buildings.  The vacated spacewas leased to that building’s other tenant which was also seeking to increasethe amount of space it leases.  A leasefor 39,100 square feet for the new industrial building completed at the end ofthe 2005 second quarter had been signed earlier.  Also subsequent to the 2005 first quarter,Griffin Land agreed to a lease termination with a tenant that had leased 22,500square feet in one of Griffin Land’s buildings in Griffin Center South.  The lease that was terminated was scheduledto extend through January 2008. Griffin Land received $0.3 million in connection with this leasetermination.**

 

**Net sales and other revenue at Imperial weresubstantially unchanged in the 2005 first quarter as compared to the 2004 firstquarter.  Imperial’s landscape nurserybusiness is highly seasonal, with sales peaking in the spring.  Sales in the winter months that comprise thefirst quarter (December through**

 

26

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**February)are not significant when compared to the full year’s net sales.  Over the past three years, Imperial’s firstquarter net sales accounted for less than 3% of the full year net sales in eachof those years.**

 

**Griffin incurred a consolidated operatingloss of $1.8 million in the 2005 first quarter as compared to a consolidatedoperating loss of $1.4 million in the 2004 first quarter.  The higher operating loss principally reflectsan increase of $0.1 million in the operating loss at Imperial and an increaseof $0.3 million of general corporate expense. Griffin Land’s operating results were essentially break even in the 2004and 2005 first quarters, reflecting the following:**

 
| ** **                                                                                                                       | ** ** | **2005  First Qtr.**       | ** ** | **2004  First Qtr.** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------|------------|----------------------|------------|
|                                                                                                                             |       | **(As Restated)**          |       | **(As Restated)**    |       |
| ** **                                                                                                                       | ** ** | **(amounts in thousands)** | ** ** |
| Rental revenue                                                                                                                   |       | $                          | 2,758      |                 | $          | 2,487 |   |
| Revenue from land sales                                                                                                          |       | 107                        |       | —               |       |
| Total revenue                                                                                                                    |       | 2,865                      |       | 2,487                |       |
| Costs related to rental revenue excluding depreciation  and amortization (a)                                                     |       | 1,360                      |       | 1,050                |       |
| Costs related to land sales                                                                                                      |       | 118                        |       | 70                   |       |
| Total costs excluding depreciation and  amortization                                                                             |       | 1,478                      |       | 1,120                |       |
| Profit from leasing activities before  general and administrative expenses and before depreciation and amortization  expense (a) |       | 1,398                      |       | 1,437                |       |
| Loss from land sales                                                                                                             |       | (11                        | )          | (70                  | )          |
| General and administrative expenses  excluding depreciation and amortization expense (a)                                         |       | (649                       | )          | (573                 | )          |
| Profit before depreciation and amortization  expense                                                                             |       | 738                        |       | 794                  |       |
| Depreciation and amortization expense  related to costs of rental revenue                                                        |       | (780                       | )          | (789                 | )          |
| Depreciation and amortization expense -  other                                                                                   |       | (6                         | )          | (5                   | )          |
| Operating loss                                                                                                                   |       | $                          | (48        | )                    | $          | — |   |

 

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**(a)**   The costs related torental revenue excluding depreciation and amortization, profit from leasingactivities before general and administrative expenses and before depreciationand amortization expense and general and administrative expenses excludingdepreciation and amortization expense are disclosures not in conformity withgenerally accepted accounting principles. They are presented because Griffin believes they are useful financialindicators for measuring the results in its real estate division.  However, they should not be considered as analternative to operating profit as a measure of operating results in accordancewith generally accepted accounting principles.

 

**Profit from leasing activities before generaland administrative expenses and before depreciation and amortization expensewas slightly lower in the 2005 first quarter as compared to the 2004 firstquarter, as the increase in rental revenue was more than offset by a charge of$0.2 million to write off capitalized costs related to a lease that wasterminated in the 2005 first quarter and higher building operating expenses,due to seasonal cost of snow plowing during the winter months.  The lease**

 

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**terminationwas related to a new longer-term lease with a new tenant for thatbuilding.  The new lease rental rateswere equal to the rental rates under the terminated lease over the remainingterm of the terminated lease.  The saleof a residential lot generated proceeds of $0.1 million but was essentially atthe break even profit level.  Althoughthere were no property sales in the 2004 first quarter, Griffin Land wrote offcosts related to a proposed property sale that did not take place.  Griffin Land’s general and administrativeexpenses were higher in the 2005 first quarter than the 2004 first quarter dueprincipally to higher bad debt expense and higher insurance expenses.**

 

**The operating loss at Imperial increased from$0.9 million in the 2004 first quarter to $1.0 million in the 2005 firstquarter, as follows:**

 
| ** **                                    | ** ** | **2005**                   | ** ** | **2004**       | ** ** |
|-----------------------------------------------|------------|----------------------------|------------|----------------|------------|
| ** **                                    | ** ** | **First Qtr.**             | ** ** | **First Qtr.** | ** ** |
| ** **                                    | ** ** | **(amounts in thousands)** | ** ** |
| Net sales  and other revenue                  |       | $                          | 464        |           | $          | 422 |   |
| Cost of  goods sold                           |       | 597                        |       | 442            |       |
| Gross loss                                    |       | (133                       | )          | (20            | )          |
| Selling,  general and administrative expenses |       | (880                       | )          | (853           | )          |
| Operating  loss                               |       | $                          | (1,013     | )              | $          | (873 | ) |

 

**Due to the seasonality of the landscapenursery business, Imperial historically incurs a first quarter operatingloss.  The increase in cost of goods soldin the 2005 first quarter as compared to the 2004 first quarter reflects acharge of $0.1 million for unsalable inventory. The unsalable inventory charge was due to the inventory of one plantvariety, which is no longer in production, at Imperial’s northern Floridaoperation that became diseased over the winter.**

 

**Griffin’s general corporate expense increasedfrom $0.5 million in the 2004 first quarter to $0.8 million in the 2005 firstquarter due principally to increased audit expenses and higher donationexpenses.**

 

**Griffin’s consolidated interest expensedecreased from $0.8 million in the 2004 first quarter to $0.5 million in the2005 first quarter.  The lower interestexpense reflects the termination of Griffin’s revolving credit agreement in the2004 second quarter and a portion of the 2005 first quarter interest beingcapitalized as compared to no capitalized interest in the 2004 firstquarter.  Griffin’s average outstandingdebt in the 2005 first quarter was $32.2 million as compared to averageoutstanding debt of $45.5 million in the 2004 first quarter.**

 

**Griffin reported higher interest income,dividend income and gains on short-term investments of $0.2 million in the 2005first quarter, reflecting earnings on investment of the remaining proceeds fromthe sale of Centaur.**

 

**Griffin’s effective income tax benefit ratewas 34.3% in the 2005 first quarter as compared to 37.2% in the 2004 firstquarter.  The lower income tax benefitrate principally reflects the effect of state and local income taxes.**

 

**There was no equity income in the 2005 firstquarter as a result of the sale of Centaur on March 10, 2004.  Griffin incurred an equity loss of $0.1million from Centaur in the 2004 first quarter.**

 

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**Liquidity andCapital Resources**

 

**Net cash used in operating activitiesincreased from $3.7 million in the 2004 first quarter period to $4.9 million inthe 2005 first quarter period.  The $1.2million increase in net cash used in operating activities principally reflectsan increase of $0.2 million in accounts payable and accrued liabilities in the2005 first quarter as compared to an increase of $1.6 million in accountspayable and accrued liabilities in the 2004 first quarter and an increase of$5.5 million in inventories in the 2005 first quarter as compared to an increaseof $4.8 million in the 2004 first quarter. The change in accounts payable and accrued liabilities principallyreflects timing of payments. The higher increase in inventories reflects thetiming of raw material purchases at Imperial. The unfavorable changes ofinventories and accounts payable were partially offset by non-cash adjustmentsto the net loss being higher in the 2005 first quarter as compared to the 2004first quarter.**

 

**Net cash used in investing activitiesincreased from $2.0 million in the 2004 first quarter to $3.3 million in the2005 first quarter.  Additions to realestate held for sale or lease increased from $1.6 million in the 2004 firstquarter to $3.1 million in the 2005 first quarter.  The higher amount of additions to GriffinLand’s real estate assets principally reflects the ongoing construction of theshell of a 137,000 square foot industrial building in the New EnglandTradeport, which was substantially completed at the end of the 2005 secondquarter.  This building was built onspeculation, however leases for 70,400 square feet have been signed.  Additions to property and equipment,principally for Imperial, were $0.2 million in both the 2005 and 2004 firstquarters.  The current year expenditureswere principally to purchase additional portable shelving units that are usedon trucks in delivering product to customers. The prior year additions at Imperial were principally for completion ofthe expansion of its Florida operations.**

 

**Net cash used in financing activities was$0.2 million in the 2005 first quarter as compared to net cash of $5.7 millionprovided by financing activities in the 2004 first quarter.  The net cash used in financing activities inthe 2005 first quarter reflects payments of principal on Griffin Land’smortgages.  The net cash provided byfinancing activities in the 2004 first quarter included borrowings under theCredit Agreement to finance Griffin’s operations during that period.  The balance outstanding under the CreditAgreement was subsequently repaid with a portion of the proceeds from the saleof Centaur and the Credit Agreement was then terminated.**

 

**In the balance of fiscal 2005, Griffin plansto continue to invest in its real estate business.  As a result of the recent completion of newleases for industrial space and expressions of interest by potential users ofthat type of space, Griffin Land started construction in the 2005 secondquarter on the shell of an additional 137,000 square foot industrial buildingin the Tradeport.  This new constructionis also being done on speculation. Griffin Land has recently entered into leases for approximately 69,000square feet in this building for delivery at the end of this year.  This new building will be at least 50% leasedwhen it comes on line at the end of this year. Griffin Land also expects to incur expenditures to build out theinteriors of its new buildings as leases are completed, and to continue toinvest in infrastructure improvements required for present and futuredevelopment in its office and industrial parks.**

 

**Last year, Griffin Land received approval forits proposed residential development, Stratton Farms, in Suffield,Connecticut.  An owner of certain landadjacent to Stratton Farms filed an appeal of the approval issued by the town’sland use commission.  A recent courtruling has denied that appeal, however, the owner of the adjacent land hasrequested a rehearing.  Infrastructurework on this residential development may begin later this year as all requiredpermits have been received.  Griffin Landis continuing development activities to obtain approvals for its proposedresidential development in Simsbury, Connecticut.  Griffin Land intends to proceed withresidential development plans on other of its lands that are also appropriatefor that use.  Thus far in fiscal 2005,Griffin Land has completed sales of commercial and residential land whichgenerated total cash proceeds of $2.4 million.**

 

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**On May 31, 2005, Griffin receivedinitial cash proceeds of $5.9 million from the sale of its remaining commonstock of Shemin Acquisition Corporation (“Shemin Acquisition”).  Immediately prior to that sale, Griffinexchanged a portion of its holdings in Shemin Acquisition for common stock inShemin Nurseries Holding Corp. (“Shemin Nurseries”), which operates a landscapenursery distribution business through its subsidiary that previously was asubsidiary of Shemin Acquisition.  On June 29,2005, Griffin received a cash distribution of $1.5 million from SheminNurseries.  Subsequent to thesetransactions, Shemin Nurseries paid $0.2 million to the buyer of SheminAcquisition, on behalf of Griffin, for Griffin’s share of the purchase priceadjustment related to the determination of Shemin Acquisition’s working capitalas of the closing date.  Griffincontinues to hold its investment in Shemin Nurseries.**

 

**On July 7, 2005, a subsidiary of GriffinLand completed a $12.7 million mortgage on two of its Tradeport industrialbuildings, the 137,000 square foot building completed at the end of the 2005second quarter and the 117,000 square foot building completed in 2003.  The new mortgage has an interest rate of5.46% and a ten-year term with payments based on a thirty-year amortizationschedule.  The new mortgage isnonrecourse, however, Griffin entered into a master lease with its subsidiaryfor the space in the buildings that was not leased to third-party tenants atthe inception of the mortgage (the “Initial Vacant Space”).  As Griffin Land enters into approved leasesfor the Initial Vacant Space, the master lease between Griffin and itssubsidiary on that portion of the Initial Vacant Space will be terminated.  Mortgage payments under this new mortgagewill be $0.9 million per year.**

 

**Griffin’s payments (including principal andinterest) under contractual obligations as of February 26, 2005 are asfollows:**

 
| ** **                   | ** ** | **Total**  | ** ** | **Due Within  One Year** | ** ** | **Due From  1-3 Years** | ** ** | **Due From  3-5 Years** | ** ** | **Due in More  Than 5 Years** | ** ** |
|------------------------------|------------|------------|------------|--------------------------|------------|-------------------------|------------|-------------------------|------------|-------------------------------|------------|
| ** **                   | ** ** | ** ** | ** ** | ** **               | ** ** | **(in millions)**       | ** ** | ** **              | ** ** | ** **                    | ** ** |
| Mortgages                    |       | $          | 48.8       |                     | $          | 3.0                     |       | $                       | 6.0        |                          | $          | 13.0 |   | $ | 26.8 |   |
| Capital  Lease Obligations   |       | 0.4        |       | 0.1                      |       | 0.2                     |       | 0.1                     |       | —                        |       |
| Operating  Lease Obligations |       | 0.6        |       | 0.2                      |       | 0.3                     |       | 0.1                     |       | —                        |       |
| Purchase  Obligations (1)    |       | 3.2        |       | 3.2                      |       | —                  |       | —                  |       | —                        |       |
| Other (2)                    |       | 1.4        |       | —                   |       | —                  |       | —                  |       | 1.4                           |       |
|                         |       | $          | 54.4       |                     | $          | 6.5                     |       | $                       | 6.5        |                          | $          | 13.2 |   | $ | 28.2 |   |

 

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**(1)**     Includes obligations forthe construction of the shell of a new industrial building at Griffin Land andfor the purchase of raw materials by Imperial.

 

**(2)**     Includes Griffin’sdeferred compensation plan and other postretirement benefit liabilities.

 

**Management believes that the significantamount of cash and short-term investments held by Griffin will be sufficient tofinance the working capital requirements of Griffin’s businesses and fund**

 

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**continuedinvestment in Griffin’s real estate assets for the foreseeable future.  Griffin Land may also continue to seeknonrecourse mortgage placements on selected properties.  Griffin also anticipates seeking to purchaseeither or both land and buildings with a substantial portion of its cash andshort-term investment balances.  Thereare no specific real estate acquisitions planned at this time.  Such acquisitions may or may not occur basedon many factors, including real estate pricing.**

 

**Recent Accounting Pronouncements**

 

**In November 2004, the FASB issued SFAS No. 151,“Inventory Costs (an amendment of ARB No. 43, Chapter 4).”  This new standard requires the recognition ofabnormal inventory costs related to idle facility expenses, freight, handlingcosts and spoilage as period costs.  SFASNo. 151 will be effective for Griffin in fiscal 2006 and is not expectedto have a material impact on Griffin’s consolidated financial statements.**

 

**In December 2004, the FASB issued SFAS No. 153,“Exchanges of Nonmonetary Assets (an amendment of APB Opinion No. 29).”  This new standard requires an issuer tomeasure and recognize nonmonetary exchanges which are anticipated to have animpact on future cash flows.  SFAS No. 153will be effective for Griffin in the fourth quarter of fiscal 2005 and is notexpected to have any impact on Griffin’s consolidated financial statements.**

 

**In December 2004, the FASB issued SFAS No. 123R,“Share-Based Payment.”  This new standardsupersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,”and its related implementation guidance. SFAS No. 123R requires an issuer to recognize the compensation costof employee services received in exchange for an award of equityinstruments.  Therefore, the cost ofrewarding individuals with equity instruments will be recognized in Griffin’sfinancial statements rather than disclosed in a pro forma statement in thefinancial statement footnotes.  SFAS No. 123Rwill be effective for Griffin in fiscal 2006. Management expects to adopt SFAS No. 123R using the modifiedprospective application method, and expects that the adoption of SFAS No. 123Rwill decrease Griffin’s annual basic and diluted per share results by $0.01 to$0.04 per share.**

 

**Forward-LookingInformation**

 

**The above information in Management’sDiscussion and Analysis of Financial Condition and Results of Operationsincludes “forward-looking statements” within the meaning of Section 27A ofthe Securities Act and Section 21E of the Exchange Act.  Although Griffin believes that its plans,intentions and expectations reflected in such forward-looking statements arereasonable, it can give no assurance that such plans, intentions orexpectations will be achieved, particularly with respect to improvement inoperating results of Imperial, leasing currently vacant space, construction ofadditional facilities in the real estate business, completion of land salesthat are currently under contract and approval of currently proposedresidential subdivisions.  The projectedinformation disclosed herein is based on assumptions and estimates that, whileconsidered reasonable by Griffin as of the date hereof, are inherently subjectto significant business, economic, competitive and regulatory uncertainties andcontingencies, many of which are beyond the control of Griffin.**

 

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**ITEM 4.**          CONTROLS AND PROCEDURES

 

Evaluation of DisclosureControls and Procedures

 

Griffinmaintains disclosure controls and procedures that are designed to ensure thatinformation required to be disclosed in its Exchange Act reports is recorded,processed, summarized and reported within the time periods specified in theSecurities and Exchange Commission’s rules and forms, and that suchinformation is accumulated and communicated to Griffin’s management, includingits Chief Executive Officer and Chief Financial Officer, as appropriate, toallow timely decisions regarding required disclosure.  In designing and evaluating the disclosurecontrols and procedures, management recognizes that any controls andprocedures, no matter how well designed and operated, can provide onlyreasonable assurance of achieving the desired control objectives, andmanagement necessarily was required to apply its judgment in evaluating thecost-benefit relationship of possible controls and procedures.

 

**As required by SEC Rule 13a-15(b), Griffin carried out anevaluation, under the supervision and with the participation of Griffin’smanagement, including Griffin’s Chief Executive Officer and Griffin’s ChiefFinancial Officer, of the effectiveness of the design and operation of Griffin’sdisclosure controls and procedures as of the end of the fiscal period coveredby this report.  Based on the evaluationreported in Griffin’s original filing of its quarterly report on Form 10-Qfor the thirteen weeks ended February 26, 2005, Griffin’s Chief ExecutiveOfficer and Chief Financial Officer originally concluded that disclosurecontrols and procedures were effective as of the end of the period covered bythat report.**

 

**On July 25, 2005, subsequent to theoriginal evaluation, Griffin concluded that it would restate financial resultsfor the fiscal years ended November 29, 2003 and November 27, 2004and the unaudited quarterly financial information for fiscal 2003, fiscal 2004and the first quarter consolidated financial statements of fiscal 2005 tocorrect the previously reported accounting for an acquisition of real estateassets that took place in fiscal 2003 and was reported upon in its 2003 and2004 consolidated financial statements. In analyzing the effect of a lease termination in one of its officebuildings on its consolidated financial statements for the thirteen weeks endedMay 28, 2005, Griffin determined that the allocation of the purchase pricefor the acquisition in fiscal 2003 of a controlling interest in a joint venturethat owned two office buildings was incorrect. Griffin previously held a 30% interest in the joint venture.  As described in Note 11 to the consolidatedfinancial statements included in Item 1, Griffin determined that a greaterportion of the purchase price should have been allocated to intangible assetsrather than to Griffin’s tangible real estate assets and has restated itsfinancial results to reflect the correct allocation.  The effect of this change is to increasedepreciation and amortization expense for the fiscal years ended November 29,2003 and November 27, 2004, the related interim periods, and the thirteenweeks ended February 26, 2005 because of the shorter time period overwhich the intangible assets are amortized as compared to the depreciable livesof the tangible real estate assets.**

 

**In the process of preparing the restatementof its consolidated financial statements, Griffin determined that the usefullives of certain tenant improvements were not adjusted at the time a lease wasextended in fiscal 2003, the useful lives of tenant improvements related tocertain other leases were incorrectly recorded in its fixed asset system, therewas a misclassification of certain improvements as tenant improvements ratherthan as building improvements and the recording of a reimbursement from atenant for tenant improvements made by Griffin in accordance with the leaseagreement should have been recorded as deferred rental revenue instead ofreducing the amount of Griffin’s tenant improvements.  These issues resulted in errors in reportedrental revenue and depreciation and amortization expense related to certain ofGriffin’s properties prior to fiscal 2002, during fiscal 2003, fiscal 2004,related interim periods and the thirteen weeks ended February 26, 2005(the effect of this issue on previously reported results for fiscal 2002 wasimmaterial).  Accordingly, Griffinadjusted its rental revenue and depreciation and amortization expense for thoserespective periods.  Griffin alsodetermined that amortization of debt issuance costs for the periods covered bythe restatement had been misclassified in selling, general and administrativeexpenses rather than being included in interest expense.**

 

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**As a result of the error in allocation of thepurchase price for the controlling interest in the joint venture, the incorrectuseful lives used to determine depreciation expense of certain tenantimprovements, the misclassification of certain improvements as tenantimprovements rather than as building improvements, the incorrect recording of apayment received from a tenant for tenant improvements made by Griffin, and themisclassification of the amortization of debt issuance costs, Griffin’s ChiefExecutive Officer and Chief Financial Officer re-evaluated Griffin’s disclosurecontrols and procedures and concluded that such controls and procedures werenot effective at a reasonable assurance level as of the end of the periodcovered by this report because these errors resulted from material weaknessesin Griffin’s internal control over financial reporting, which are describedbelow.**

 

**A material weakness is a control deficiency,or combination of control deficiencies, that results in more than a remotelikelihood that a material misstatement of the annual or interim financialstatements will not be prevented or detected. As of February 26, 2005, Griffin did not maintain effectivecontrols over (i) the accounting for acquisitions;  (ii) the recording of depreciation andamortization expense and the recording of deferred rental revenue from tenants and(iii) accounting for amortization of debt issuance costs.  Specifically, controls over the allocation ofthe purchase price and the recording of tenant improvement information intoGriffin’s fixed asset system were ineffective. The purchase price was incorrectly allocated between intangible andtangible real estate assets, the useful lives of certain tenant improvementswere incorrect, certain improvements were misclassified as tenant improvementsrather than as building improvements and a payment received from a tenant fortenant improvements made by Griffin was not properly recorded as deferredrental revenue, resulting in misstatements to rental revenue and depreciationand amortization expense.  Finally,Griffin’s accounting for the amortization of debt issuance costs wasincorrect.  These control deficienciesresulted in the restatement of Griffin’s 2002, 2003 and 2004 consolidatedfinancial statements, for each of the unaudited quarterly interim financialinformation of 2003 and 2004, as well as the 2005 first quarter consolidatedfinancial statements.  Additionally,these control deficiencies could result in a misstatement of the aforementionedaccounts that would result in a material misstatement to the annual or interimconsolidated financial statements that would not be prevented or detected.  Accordingly, management has concluded thateach of these internal control deficiencies constitutes a material weakness.  Because of these material weaknesses,management has concluded that Griffin did not maintain effective internalcontrol over financial reporting as of February 26, 2005, based oncriteria established in the Internal Control - Integrated Framework issued bythe Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).**

 

**Although Griffin has not entered into anytransactions similar to the acquisition of real estate assets in fiscal 2003, Griffin’smanagement has educated its accounting staff regarding the proper methodologyof allocating the purchase price of future acquisitions.  In addition, Griffin has changed itsprocedures for the recording, reviewing, approving and documenting ofinformation entered into its real estate asset depreciation system to ensurethat the correct information is used in calculating depreciation andamortization expense.  Griffin has also educatedits accounting staff regarding the proper procedures for the recording ofpayments received from tenants for tenant improvements made by Griffin and theproper recording of the amortization expense of debt issuance costs.**

 

**Changes in Internal Control over FinancialReporting**

 

**Each of the changes to Griffin’s internalcontrol over financial reporting discussed above occurred subsequent to thefiscal 2005 first quarter.  There was nochange in Griffin’s internal control over financial reporting during the 2005first quarter that has materially affected, or is reasonably likely tomaterially affect, Griffin’s internal control over financial reporting.**

 

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| **PART II** | ** ** | **OTHER INFORMATION**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| ITEM 1.          |       | Legal Proceedings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|             |       | In 1999, Griffin Land filed land  use applications with the land use commissions of Simsbury, Connecticut for  Meadowood, a proposed residential development on approximately 363 acres of  land. In 2000, Simsbury’s land use commissions issued denials of Griffin  Land’s Meadowood application. As a result of those denials, Griffin Land  brought several separate, but related, suits appealing those decisions. In  2002, the trial court upheld two of Griffin Land’s appeals and ordered the  town’s Planning and Zoning Commissions to approve the Meadowood application.  The town appealed those decisions. In 2004, the Connecticut Supreme Court  ordered the Zoning Commission to approve the zoning regulations proposed by  Griffin Land for Meadowood. The Connecticut Supreme Court also ruled that the  denial of the Meadowood application by the Planning Commission can be upheld  because Griffin Land had not obtained the required sewer usage permits at the  time the application was made to the Planning Commission. The required sewer  usage permits for Meadowood have been subsequently obtained. Also in 2004,  the Connecticut Supreme Court reversed a lower court decision that had denied  Griffin Land a wetlands permit, and remanded the case to Superior Court for  further proceedings to determine if a wetlands permit must be issued. On  June 6, 2005, the Superior Court ruled that Griffin Land must again  apply to the town’s Conservation and Inland Wetlands Commission for a  wetlands permit for its proposed Meadowood development. This ruling is not  final as of this date, because Griffin Land has petitioned the Appellate  Court to review and reverse this decision. |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|             |       | In 2004, the Planning and Zoning  Commission of Suffield, Connecticut approved Griffin Land’s proposed  residential development known as Stratton Farms. An owner of certain land  adjacent to Stratton Farms then filed an appeal of the approval issued by the  town’s land use commission. On September 26, 2005, the Superior Court of  Hartford, Connecticut denied the appeal by the adjoining landowner, however,  the landowner has requested a rehearing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| ITEMS 2 - 5.     |       | Not  Applicable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| ITEM  6.         |       | Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| ** **       | ** ** | **Exhibit No.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | ** ** | **Description** |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |
|             |       | 31.1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a),  as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |
|             |       | 31.2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | Certifications of Chief Financial Officer Pursuant to Rule 13a-14(a),  as Adopted Pursuant to Section 302 of the Sarbanes Oxley Act of 2002 |
|             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |
|             |       | 32.1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | Certifications of Chief Executive Officer Pursuant to 18  U.S.C |

 

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|   |   |   |   | Section 1350, as Adopted Pursuant to Section 906  of the Sarbanes-Oxley Act of 2002                                                                 |
|--------|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |                                                                                                                                                          |
|   |   | 32.2   |   | Certifications of Chief Financial Officer Pursuant to 18  U.S.C Section 1350, as Adopted Pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002 |

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Actof 1934, the Registrant has duly caused this report to be signed on its behalfby the undersigned thereunto duly authorized.

 

 
| ** **                  | ** ** | **GRIFFIN LAND &  NURSERIES, INC.**           |
|-----------------------------|------------|--------------------------------------------------------|
| ** **                  | ** ** | ** **                                             |
|                        |       |                                                   |
|                        |       |                                                   | /s/ FREDERICK M. DANZIGER |
| DATE: November 1, 2005 |       | Frederick M. Danziger                                  |
|                        |       | President and Chief Executive  Officer                 |
|                        |       |                                                   |
|                        |       |                                                   |
|                        |       |                                                   | /s/ ANTHONY J. GALICI |
| DATE: November 1, 2005 |       | Anthony J. Galici                                      |
|                        |       | Vice President, Chief Financial  Officer and Secretary |
|                             |            |                                                        |  |  |

 

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