INDUS REALTY TRUST, INC. - Quarter Report: 2010 August (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED August 28, 2010
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM              TO

 

Commission File No. 1-12879

 

GRIFFIN LAND & NURSERIES, INC.

(Exact name of registrant as specified in its charter)

 

 

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

 

 

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

 

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

 

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

 

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

 

 

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

 

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

 

 

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GRIFFIN LAND & NURSERIES, INC.

FORM 10-Q

Index

 

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

 

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PART I          FINANCIAL INFORMATION

 

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,						For the 39 Weeks Ended,
		August 28, 2010			August 29, 2009			August 28, 2010			August 29, 2009
Landscape nursery net sales and other revenue		$	2,620		$	3,528		$	13,767		$	19,545
Rental revenue and property sales		4,912			4,246			14,062			12,570
Total revenue		7,532			7,774			27,829			32,115
Costs of landscape nursery sales and other revenue		3,381			3,715			13,320			18,429
Costs related to rental revenue and property sales		3,126			3,021			9,790			9,350
Total costs of goods sold and costs related to rental revenue and property sales		6,507			6,736			23,110			27,779
Gross profit		1,025			1,038			4,719			4,336
Selling, general and administrative expenses		2,071			2,596			7,957			8,725
Operating loss		(1,046		)	(1,558		)	(3,238		)	(4,389		)
Interest expense		(1,173		)	(880		)	(3,355		)	(2,506		)
Investment income		20			28			194			152
Loss before income tax benefit		(2,199		)	(2,410		)	(6,399		)	(6,743		)
Income tax benefit		886			974			2,457			2,512
Net loss		$	(1,313	)	$	(1,436	)	$	(3,942	)	$	(4,231	)
Basic net loss per common share		$	(0.26	)	$	(0.28	)	$	(0.77	)	$	(0.83	)
Diluted net loss per common share		$	(0.26	)	$	(0.28	)	$	(0.77	)	$	(0.83	)

 

See Notes to Consolidated Financial Statements.

 

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GRIFFIN  LAND & NURSERIES, INC.

Consolidated Balance Sheets

(dollars in thousands, except per share data)

(unaudited)

 

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

 

See Notes to Consolidated Financial Statements.

 

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GRIFFIN LAND & NURSERIES, INC.

Consolidated Statements of Changes in Stockholders’ Equity

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

(dollars in thousands)

(unaudited)

 

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

 

See Notes to Consolidated Financial Statements.

 

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GRIFFIN LAND & NURSERIES, INC.

Consolidated Statements of Cash Flows

(dollars in thousands)

(unaudited)

 

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

 

See Notes to Consolidated Financial Statements.

 

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GRIFFIN LAND & NURSERIES, INC.

Notes to Consolidated Financial Statements

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

(unaudited)

 

1.     Summary of Significant Accounting Policies

 

Basis of Presentation

 

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

 

The accompanying financial statements have been prepared in accordance with the accounting policies stated in Griffin’s audited financial statements for the fiscal year ended November 28, 2009 included in Griffin’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission, and should be read in conjunction with the Notes to Consolidated Financial Statements appearing in that report. All adjustments, comprising only normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of results for the interim periods, have been reflected and all intercompany transactions have been eliminated.  The consolidated balance sheet data as of November 28, 2009 was derived from Griffin’s audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.

 

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

 

In fiscal 2009, Griffin entered into two interest rate swap agreements to hedge interest rate exposures.  Griffin does not use derivatives for speculative purposes.  Griffin applied FASB ASC 815-10, “Derivatives and Hedging,” (“ASC 815-10”) as amended, which establishes accounting and reporting standards for derivative instruments and hedging activities.  ASC 815-10 requires Griffin to recognize all derivatives as either assets or liabilities on its consolidated balance sheet and measure those instruments at fair value.  The changes in the fair values of the interest rate swap agreements are assessed in accordance with ASC 815-10 and reflected in the carrying values of the interest rate swap agreements on Griffin’s consolidated balance sheet.  The estimated fair values are based primarily on projected future swap rates.

 

Griffin applies cash flow hedge accounting to its interest rate swap agreements that are designated as hedges of the variability of future cash flows from floating rate liabilities based on the benchmark interest rates.  The change in fair values of Griffin’s interest rate swap agreements are recorded as

 

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

 

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

 

Recent Accounting Pronouncements

 

In February 2010, the FASB issued Accounting Standards Update No. 2010-09, “Subsequent Events,” which amends the previous guidance on subsequent events and no longer requires Securities and Exchange Commission filers to disclose the date through which subsequent events have been evaluated.  The subsequent event provisions were effective for Griffin in the 2010 first quarter.  This guidance did not impact Griffin’s consolidated financial statements.

 

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

 

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

 

2.     Industry Segment Information

 

Griffin defines its reportable segments by their products and services, which are comprised of the landscape nursery and real estate segments.  Management operates and receives reporting based upon

 

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these segments.  Griffin has no operations outside the United States.  Griffin’s export sales and transactions between segments are not material.

 

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

 

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

 

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

 

3.     Fair Value

 

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

 

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

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, such as quoted prices for similar assets or liabilities in active markets; quoted prices for assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.  Level 2 liabilities include Griffin’s two interest rate swap derivatives (see Note 8).  The fair values of Griffin’s interest rate swap derivative instruments are determined based on discounted cash flow models that incorporate the cash flows of the derivatives as well as the current LIBOR rate and swap curve along with other market data.  As these inputs are readily available in public markets or can be derived from information available in publicly quoted markets, Griffin has categorized these derivative instruments as Level 2 within the fair value hierarchy.

 

On January 8, 2010, Griffin closed on the acquisition of an approximate 120,000 square foot industrial building located in Breinigsville, Pennsylvania (see Note 5).  The acquisition was accounted for in accordance with ASC 805-10 whereby the assets acquired were recorded at their fair values. The fair value of the real estate assets acquired was based upon an independent appraisal, which included the utilization of publicly available data for similar properties.  Therefore, Griffin has categorized the real estate assets acquired as Level 2 within the fair value hierarchy.

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.  As of August 28, 2010, Griffin’s consolidated balance sheet includes acquired intangible assets related to the building acquisition in Breinigsville, Pennsylvania.  These intangible assets are comprised of the value of the in-place lease and the associated tenant relationship.  Griffin derived these values based on a discounted cash flow analysis using assumptions that included the rental rate of the in-place lease, the commission percentage expected to be paid on the lease up of vacant space and other data contained in the independent appraisal.  Therefore, Griffin categorized the acquired intangible assets related to this transaction as Level 3 within the fair value hierarchy.  As of November 28, 2009, Griffin’s financial statements did not include any Level 3 assets or liabilities.

 

During the 2010 nine month period, Griffin did not transfer any assets or liabilities in or out of Levels 1 and 2.  The following are Griffin’s financial assets and liabilities carried at fair value and measured at fair value on a recurring basis:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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in connection with this acquisition.  These assets were initially recorded at fair value but will not be re-measured at fair value on a recurring basis.

 

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

 

4.     Inventories

 

Inventories consist of:

 

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

 

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

 

5.     Real Estate Assets

 

Building and Undeveloped Land Acquisitions

 

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

 

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

 

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On March 17, 2010, Griffin Land closed on the purchase of approximately 51 acres of undeveloped land in Lower Nazareth, Pennsylvania.  The undeveloped land was acquired from the bankruptcy estate of the sole owner of the property.  The purchase price was $1.8 million plus acquisition expenses, with approximately $0.3 million paid as a deposit in the 2009 fourth quarter.  The undeveloped land is located in a major industrial area of Pennsylvania’s Lehigh Valley and has approvals for the development of two industrial buildings totaling approximately 530,000 square feet.

 

Real estate held for sale or lease consists of:

 

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

 

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

 

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

 

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

 

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

 

6.     Investments

 

Short-Term Investments

 

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

 

		Cost			Fair Value
U.S. Treasury securities		$	453		$	454

 

Investment income in the 2010 and 2009 third quarters and the 2010 and 2009 nine month periods consists of:

 

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

 

Centaur Media plc

 

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

 

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

 

7.     Property and Equipment

 

Property and equipment consist of:

 

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