Griffin Land & Nurseries Inc. Reports Operating Results (10-Q)

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Jul 12, 2012
Griffin Land & Nurseries Inc. (GRIF, Financial) filed Quarterly Report for the period ended 2012-06-02.

Griffin Land & Nurseries, Inc. has a market cap of $142.3 million; its shares were traded at around $27.77 with and P/S ratio of 3.8. The dividend yield of Griffin Land & Nurseries, Inc. stocks is 0.7%.

Highlight of Business Operations:

Net sales and other revenue at Imperial decreased from approximately $9.3 million in the 2011 second quarter to approximately $8.3 million in the 2012 second quarter. Imperials landscape nursery business is highly seasonal, with sales peaking in the spring months of March, April and May which comprise Griffins second quarter. The decrease in net sales in the 2012 second quarter, as compared to the 2011 second quarter, reflects a 12% decrease in unit sales volume as Imperial had fewer units available for sale in the 2012 second quarter than the 2011 second quarter. The decrease in units available for sale is attributed to production changes made over the past three years to bring Imperials inventory more in line with expected demand and to change Imperials product mix to include more color items with longer bloom time. Additionally, some of the product that was planned to be sold in spring 2012, particularly larger size rhododendron, became unsaleable as a result of an unusually early season snowfall at Imperials Connecticut farm in the 2011 fourth quarter. The product lost in that storm had a sales value of approximately $0.5 million. Imperial did recover most of the sales value of the inventory lost from an insurance settlement. Partially offsetting the effect of the lower unit sales volume in the 2012 second quarter was approximately $0.3 million from improved pricing in the 2012 second quarter as compared to the 2011 second quarter. The improved pricing reflects Imperials more balanced inventory on hand in fiscal 2012 as compared to prior years, thus avoiding the need to heavily discount certain items in order to liquidate excess inventories. In addition, Imperial continued the trend over the past several years of increasing the percentage of its sales to its garden center customer segment, which generally has higher pricing than sales to Imperials other customer segments. Sales to the garden center customer segment accounted for approximately 69% of Imperials total net sales in the 2012 second quarter as compared to 64% in the 2011 second quarter.

The essentially unchanged operating results of Imperial in the 2012 second quarter as compared to the 2011 second quarter reflect an approximately $0.1 million decrease in gross profit substantially offset by an approximately $0.1 million decrease in selling, general and administrative expenses. Imperials lower gross profit in the 2012 second quarter as compared to the 2011 second quarter principally reflects the lower net sales in the 2012 second quarter as compared to the 2011 second quarter and the inclusion of an approximately $0.2 million credit in cost of goods sold in the 2011 second quarter. The credit of approximately $0.2 million in the 2011 second quarter cost of goods sold reflects an adjustment to the estimated charge recorded in the 2011 first quarter for plants that became unsaleable from winter storm damage. Excluding the effect of the $0.2 million credit in cost of goods sold in the 2011 second quarter, Imperials gross profit in the 2012 second quarter would have been essentially unchanged from the gross profit in the 2011 second quarter. Imperials margins on sales from its Connecticut farm, including the effect of the $0.2 million credit in cost of goods sold in the 2011 second quarter, decreased from 13.1% in the 2011 second quarter to 13.0% in the 2012 second quarter. Excluding the effect of the $0.2 million credit in cost of goods sold in the 2011 second quarter, margins in the 2012 second quarter would have increased by approximately 1.6% in the 2012 second quarter as compared to the 2011 second quarter. Imperials selling, general and administrative expenses were slightly lower in the 2012 second quarter as compared to the 2011 second quarter principally due to lower payroll expense and lower bad debt expense.

Griffins consolidated total revenue decreased from approximately $18.3 million in the 2011 six month period to approximately $17.3 million in the 2012 six month period. The net decrease of approximately $0.9 million reflects a decrease of approximately $1.0 million in revenue at Imperial, partially offset by an increase of approximately $0.1 million in revenue at Griffin Land.

Total revenue at Griffin Land increased from approximately $8.8 million in the 2011 six month period to approximately $8.9 million in the 2012 six month period. The increase of approximately $0.1 million was due to an increase in rental revenue, reflecting approximately $0.2 million of rental revenue from space under lease in the 2012 six month period that was vacant for part or all of the 2011 six month period partially offset by an approximately $0.1 million reduction in rental revenue as a result of leases that expired subsequent to the 2011 six month period and were not renewed. Griffin Lands results from continuing operations did not include any property sales in either the 2012 or the 2011 six month periods. Property sales occur periodically and changes in revenue from year to year from those transactions may not be indicative of any trends in the real estate business.

Griffin incurred a consolidated operating loss, including general corporate expense, of approximately $1.3 million in the 2012 six month period as compared to a consolidated operating loss, including general corporate expense, of approximately $2.8 million in the 2011 six month period. The lower operating loss in the 2012 six month period, as compared to the 2011 six month period, principally reflects an increase of approximately $0.7 million in operating profit at Griffin Land, a decrease of approximately $0.5 million in the operating loss incurred by Imperial and a decrease of approximately $0.2 million in general corporate expense.

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