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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

For the fiscal year ended November 29, 2003

OR

Commission file number 0-29288

GRIFFIN LAND & NURSERIES, INC.
(Exact name of registrant as specified in its charter)

(212) 218-7910
(Registrant's Telephone Number, Including Area Code)
SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:

        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 ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes o    No ý

        Indicate by check mark whether the Registrant is an accelerated filer (as defined under Rule 12b-2 of the Securities Exchange Act of 1934) Yes o    No ý

        The aggregate market value of the Common Stock held by non-affiliates of the Registrant, was approximately $33,019,000 based on the closing sales price on the Nasdaq National Market on May 30, 2003, the last business day of the Registrant's most recently completed second quarter. Shares of Common Stock held by each executive officer, director, and persons or entities known to the Registrant to be affiliates of the foregoing have been excluded in that such persons may be deemed to be affiliates. This assumption regarding affiliate status is not necessarily a conclusive determination for other purposes.

        As of February 10, 2004, 4,882,128 shares of common stock were outstanding.

PART I

ITEM 1.    BUSINESS

        Griffin Land & Nurseries, Inc. ("Griffin") and its subsidiaries comprise principally a real estate and a landscape nursery business. Griffin is engaged in two principal lines of business: (1) the real estate business comprised of (a) the ownership, construction, leasing and management of commercial and industrial properties and (b) the development of residential subdivisions on real estate owned by Griffin in Connecticut and Massachusetts; and (2) the landscape nursery products business, comprised of the growing of containerized landscape nursery products for sale principally to retail garden center operators, landscape nursery mass merchandisers and wholesale sales and service centers, whose main customers are landscape contractors. On January 26, 2001, a portion of the landscape nursery products business which had related to the operation of wholesale sales and service centers (the "SSCs") was sold to Shemin Nurseries, Inc. ("Shemin"). Griffin holds an approximately 14% interest in the equity of Shemin Acquisition Corp. ("Acquisition"), the parent company of Shemin, acquired as part of the sale. The investment in Acquisition is accounted for under the cost method of accounting for investments. Griffin also owns an approximately 35% interest (31% fully diluted) in Centaur Communications, Ltd. ("Centaur"), a privately held magazine and information services publisher based in the United Kingdom which is accounted for under the equity method of accounting, and has a lesser interest in Linguaphone Group plc ("Linguaphone"), a designer and distributor of language teaching materials based in the United Kingdom, which is accounted for by Griffin under the cost method of accounting for investments.

Real Estate Business

        Griffin's real estate division, Griffin Land, is directly engaged in the real estate development business on portions of its land in Connecticut. Griffin Land develops portions of its properties for industrial, commercial and residential use. Griffin Land may also endeavor to sell some of its non-core land holdings either before or after obtaining development approvals. In future years, Griffin Land may seek to acquire and develop properties not presently owned. The headquarters for this operation is in Bloomfield, Connecticut.

        For several years, the real estate market in the Hartford area, particularly that in the northwest quadrant where the majority of Griffin Land's acreage is located, was depressed by a number of factors, including the decline of employment in the manufacturing and financial services industries. In 2000, there was some recovery in this market, including some recovery in the office portion of this market, which had been particularly weak. During 2001, in the area of Griffin Land's properties, there was not a significant change in the vacancy rates of office space, but Griffin Land and a joint venture, in which Griffin Land owned a 30% interest, succeeded in leasing 42,000 square feet of office space and Griffin Land delivered to tenants approximately 235,000 square feet (net of vacated space) of industrial and flex space. In 2002, an increase in the amount of industrial space leased was partially offset by a reduction in the net amount of office and flex space leased by Griffin Land. In 2003 and early 2004, Griffin Land succeeded in extending leases of 189,426 square feet of space (principally industrial), leased 31,287 square feet of space previously vacant and leased 21,800 square feet of space that was vacated by an early lease termination. There can be no assurance as to the direction of the real estate market in this region in the near future. Current projections, made by third-party analysts, show some growth for this market in the second half of 2004. Despite the employment decline in the manufacturing and financial services industries, the unemployment rate in the area is quite low. Griffin Land's development of its land is also affected by land planning issues, particularly in the town of Simsbury, Connecticut. Subdivision and other development issues may also be affected by the potential adoption of initiatives meant to concentrate growth.

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Commercial and Industrial Developments

New England Tradeport

        A significant amount of Griffin Land's current commercial and industrial development efforts are focused on a 600 acre tract owned by Griffin Land near Bradley International Airport and Interstate 91 known as the New England Tradeport. To date, approximately 512,000 square feet of warehouse and light manufacturing space has been completed by Griffin Land, of which approximately 365,000 (71%) is leased, and a bottling and distribution plant has been built by the Pepsi Bottling Group ("Pepsi") on land sold to Pepsi by Griffin Land. Leases covering 130,318 square feet were extended during 2003 and leases covering 52,243 square feet (approximately 14% of the currently leased space) in the New England Tradeport expire prior to December 31, 2004. Griffin Land has completed the shell of a new approximately 117,000 square foot warehouse (the "new shell"), which is now available for lease. In addition to the new shell, the only other vacant spaces in the New England Tradeport are a total of 29,502 square feet in two of Griffin Land's older industrial buildings. Griffin Land has been approached with regard to the sale of a substantial amount of land for the site of a major distribution facility. At present, Griffin has not entered into any agreements with regard to this proposed transaction and we make no assurances that any such transaction will occur. Additionally, any such transaction may require significant road improvements.

        Griffin Land has a state traffic control certificate for the development of 1.3 million square feet in the New England Tradeport. Griffin Land intends to continue to direct its primary efforts in the industrial properties portion of its real estate business toward construction and leasing of light industrial and warehouse facilities at the New England Tradeport. Future development in the New England Tradeport may require investment in off-site infrastructure on behalf of Windsor, Connecticut and improvement of some state or town roads. At present, $17.6 million is invested (net book value) in buildings at New England Tradeport including the new shell and $2.6 million is invested (net book value) in the undeveloped land there. As of November 29, 2003, all of Griffin Land's existing buildings at New England Tradeport, other than the new shell, are mortgaged for an aggregate of approximately $15.5 million.

Griffin Center and Griffin Center South

        Griffin's other substantial development is the combination of Griffin Center in Windsor, Connecticut and Griffin Center South in Bloomfield, Connecticut. Together these master planned developments comprise approximately 600 acres, 63% of which have been developed with approximately 2,165,000 square feet of office and industrial space.

        Griffin Center currently includes ten corporate office buildings built by Griffin Land. Griffin Land currently owns two office buildings which have an aggregate of 161,000 square feet and a 50,000 square foot office building shell (the "office shell"). Through fiscal 2002, the two completed buildings were owned by a joint venture in which Griffin Land held a 30% interest. Griffin Land purchased the remaining 70% interest in December 2002 for approximately $8.7 million. Occupancy in those buildings is approximately 143,000 square feet (89%). During 2001, Griffin Land completed a light manufacturing building of 165,000 square feet in Griffin Center for JDS Uniphase Corporation ("JDS") which is leased to JDS under a fifteen-year lease. Under the agreement, JDS paid for its interior improvements, which were material to the total cost of the building. At present, JDS has vacated the building, which they are seeking to sublease. In 2002, Griffin Land built the office shell, which is a single story office building that is currently ready for tenant work but is unleased. Griffin's aggregate investment (net book value) in Griffin Center, after acquiring the 70% interest in the two office buildings, is $23.3 million. Including the two office buildings acquired in December 2002, leases covering 9,208 square feet (approximately 3% of the currently leased space) in Griffin Center expire prior to December 31, 2004. As of November 29, 2003, mortgages on three of Griffin Land's buildings in

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Griffin Center, including a new mortgage on the two office buildings recently acquired, total approximately $15.6 million.

        In Griffin Center South, a 130-acre tract with sixteen buildings of flex and research and development space, Griffin Land has retained for lease 9 buildings. During 2001, Griffin Land accepted the surrender of a 57,500 square foot lease, for a termination fee, from JDS. Approximately 55% of that building was retenanted in early 2003. Griffin Land also accepted back from JDS, in 2002, 10,000 square feet in another building which is currently for lease. JDS made a payment for termination of its lease in which it had made material improvements. A third lease of 11,400 square feet was surrendered by another tenant. That space is currently not leased. The Griffin Center South buildings have an aggregate of approximately 217,000 square feet of flex and research and development space and 18,000 square feet of storage space. Leases covering 30,402 square feet (approximately 17% of the currently leased space) in Griffin Center South expire prior to December 31, 2004. Undeveloped land remaining in Griffin Center South is sufficient for some additional square footage. The aggregate investment (net book value) in Griffin Center South is $10.6 million.

Other Office and Industrial Subdivisions

        Three additional Griffin Land parcels appropriate for office or industrial uses are currently marketed for development, including 103 acres in the South Windsor Technology Center, 28 acres in the Day Hill Technology Center in Windsor and a 16 acre parcel in Windsor for smaller build-to-suit industrial buildings.

Residential Developments

Simsbury

        In November 1999, Griffin Land filed plans for the creation of a residential community of 640 homes on a 363-acre site in Simsbury. After the conclusion of the original hearings in this matter, Griffin Land reduced the number of proposed homes to 371. One quarter of these homes would be deed restricted affordable housing under Connecticut statutes. The public hearings focused on the density of the proposed development, as well as sewer, wetlands and soil contamination issues arising from prior use of the land for farming, as a result of which certain pesticides remain in the upper portion of the soil. The local commissions rejected the plan which is now before the Connecticut courts in a number of separate but related actions. See "Regulation: Environmental Matters". Griffin Land believes that its development plan for this site includes an appropriate method (which has received support from the Connecticut Department of Environmental Protection) of remediating the soils. The outcome of the pending litigation cannot be predicted. In December 2002, the trial court for two cases related to this development ruled in favor of Griffin Land. Simsbury has appealed those decisions. Those decisions would require compliance with conservation and septic decisions which would affect the development. Griffin Land has appealed an adverse decision on wetlands to, and argued before, the Supreme Court of the State of Connecticut. On November 12, 2003, Griffin Land filed a second amendment to its plans which reduced the density to 298 homes and eliminated most wetland activities. The Conservation Commission denied that application. That denial has been appealed. Its first amended plan, however, remains to be decided by the Supreme Court of Connecticut. The current book value of the land, including design and development costs to date, for this proposed development is $3.5 million. Griffin Land owns approximately another 500 acres in Simsbury, portions of which are zoned residential and other portions of which are zoned industrial. The industrial land is probably more suited to commercial use. Griffin Land may seek to develop or sell such lands if approvals can be obtained.

Windsor

        In 1988, a subsidiary of Griffin began infrastructure work at Walden Woods, a 153 acre site in Windsor, Connecticut, which was originally planned to contain approximately 435 residential units.

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Through the end of fiscal 2003, 155 homes have been built. In 2000, Griffin entered into an agreement with a developer for the sale of the balance of the development rights at Walden Woods. An application seeking approval for that developer's plans is pending before the town's land use commissions. Opposition to the development plans for the remaining undeveloped section of Walden Woods is expected from some of the current homeowners in Walden Woods. Completion of this transaction, which is subject to approvals by the town's land use commissions, would provide a significant cash flow to Griffin Land. Griffin Land's aggregate investment in Walden Woods is $2.8 million.

Suffield

        Griffin Land recently received approval for the subdivision of 97 acres of contiguous land in Suffield into a development of 50 homes. However, a suit was brought challenging the approval, and Griffin Land was subsequently informed that the required notices posted by the town were not in accordance with applicable requirements. The subdivision plans were resubmitted to the town's land use commissions in January 2004.

Other

        In addition, approximately 500 acres in Connecticut are leased for tobacco growing to General Cigar Co., Inc., at annual rentals approximating the land's annual carrying cost. The lease for these properties, which extends through February 2007, may be terminated as to 100 acres annually, on one year's prior notice.

        Griffin Land is evaluating its other properties for residential development over a period of years. Griffin Land anticipates that obtaining subdivision approvals in many of the towns where it holds land appropriate for residential subdivision will be an extended process.

Landscape Nursery Business

        The landscape nursery operations of Griffin are operated by its wholly-owned subsidiary, Imperial Nurseries, Inc. ("Imperial"). Imperial is a grower and, to a small extent, broker of wholesale landscape nursery stock. The landscape nursery industry is extremely fragmented, and Imperial believes that its sales volume places it among the twenty largest landscape nursery growers in the country. On January 26, 2001, Imperial completed the sale of its SSCs, which provided most of Imperial's operating profit in prior years. As a result of the sale, the central overhead of Imperial, which could be reduced only in part, is now borne entirely by the growing operation.

        Imperial's container growing operations are located on land owned by Griffin in Connecticut (approximately 455 acres currently used) and land owned by Imperial in northern Florida (approximately 490 acres currently used). The Florida growing operation has substantially completed its planned expansion on adjacent lands owned by Imperial. Currently, substantially all of the useable contiguous land suitable for the container growing operations in Connecticut and a large portion of such land in northern Florida are in use. The Florida farm has also improved and expanded its shipping docks and customer service facilities and has improved its irrigation and water recycling operations. In Connecticut, Imperial uses approximately 33 acres of land owned by Griffin Land to grow liners for transplantation into containers. That land may be required for industrial use. Imperial has evaluated other property held by Griffin Land for this use. Some capital expenditures would be required to convert other land for liner growing.

        Imperial's inventories consist of container-grown plants on its two farms. The largest volume products of Imperial are evergreens, including leyland cypress, many varieties of hollies and flowering shrubs in Florida and rhododendron, evergreens and flowering shrubs in Connecticut. Other major product categories in Florida include nandina, juniper, trees, perennials and crapemyrtle. In Connecticut, alberta spruce, perennials and trees are other major products. During 2000, a decision was

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made to reduce materially the number of azalea and juniper to be grown in Florida and to increase the number of larger plants of several varieties in Florida, including leyland cypress, hollies, some varieties of deciduous shrubs, crapemyrtle and trees. Container-grown product is held principally from one to five years prior to its sale by Imperial. Prior to 2002, Imperial substantially increased its production and sales of perennials which have a much shorter growing cycle than most of the rest of Imperial's products. Because many perennials were grown for sale by the SSCs, after the sale of the SSCs, the number of perennials being grown was reduced starting in 2002. Commencing in 2003, Imperial has been selling some smaller perennials and a number of other products as one of several licensed growers under the "Novalis" trade name, and also in association with P. Allen Smith, an author and garden show host. At present, this program is directed toward increasing Imperial's sales to retail garden centers.

        Imperial is reviewing a variety of approaches to increase the return on assets for its growing operations, including changes in the relative quantities of some products currently grown and proposed to be grown and also possible changes in the potting and growing cycle for some of its containerized production. Some of these programs are also directed at developing faster growing products and improved soil mixes. Another approach is an effort to increase the percentage of Imperial's product sold to retail garden centers. Sales to garden centers generally have more favorable gross margins than those from sales to mass merchandisers or wholesalers. Also, efforts are being directed at expanding sales in the Southeast which is closer to the Florida farm and would help reduce delivery costs. A substantial portion of the products which are part of the expanded Florida production will be of larger sizes requiring an extended growing cycle. The major investment in nursery growing assets in the current cycle of planned investment in Florida was substantially completed during 2002. Imperial is currently planning to expand its field grown liner program in Connecticut on land owned by Griffin Land and is also considering some other products and product sizes for both sales in its existing markets and expanding the market area served by the Florida farm. Any such changes, if successful, taking into account the growing cycles of the related plants, will take a substantial period to be reflected in results of operations to any material extent. Imperial incurred charges for inventory losses above normal levels of approximately $0.4 million in 2003, $1.8 million in 2002 and $0.6 million in 2001. These charges were due principally to crop failures, poor results from the propagation of new plants in Florida and incomplete sell through of certain products.

        The growing operations serve a market comprised principally of retail garden center operators, landscape nursery mass merchandisers and wholesale sales and service centers. Imperial's major markets are in the Northeast, Mid-Atlantic, the northern portion of the Southeast and the Midwest. Imperial is attempting to expand its distribution in parts of the Southeast. Nursery sales are extremely seasonal, peaking in spring, and are strongly affected by commercial and residential building activity and are also materially affected by weather conditions, particularly in the spring planting season. Excessive rain in the spring of 2003 adversely affected 2003 sales. Drought conditions in the Mid-Atlantic and Northeast areas adversely affected sales in the 2002 season as did excessive rain and cold in the Midwest. Prices and competition in 2004 are expected to be negatively affected from product grown by Imperial and others which was not sold, when expected, during the past two years. Competition may also reflect the weakened financial condition believed to exist at some growers as a result of poor selling seasons the past two years and by the weakened financial conditions of some customers of Imperial.

        Imperial's sales are made to a large variety of customers, none of whom represented more than 10% of Imperial's total sales in fiscal 2003. In fiscal 2002, sales to Shemin represented 10.1% of Imperial's total sales. Imperial's supply agreement with Shemin, entered into in conjunction with the sale of the SSCs to Shemin, expired on January 26, 2004. Imperial expects to continue to be a supplier to Shemin, although not necessarily at the same sales level as prior years. There were no other customers in fiscal 2002 and fiscal 2001 that represented more than 10% of Imperial's annual sales in those years.

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        Imperial has increased its containerized growing capacity to meet the potential volume and quality needs of its customers and to capitalize on expected growth in the Mid-Atlantic and Midwest markets. Imperial also is seeking to expand its sales in the Southeast. Shipping capacity in Florida has also been increased, but may require some additional peaking capacity. Costs of shipping from Florida have been increasing both because of increasing fuel costs and increased need to arrange for the return of empty trucks to assure an adequate supply of trucks during the peak spring shipping season. Beginning in January 2004, shipping costs may increase due to new Federal Department of Transportation regulations requiring more off duty hours for truck drivers and making shipments with multiple stops more costly. In addition, obtaining the necessary labor for Florida's spring shipping requirements may be more costly in 2004 due to the expected lack of availability of local seasonal labor. In coming years, Imperial expects that a higher portion of its shipping will be made on trucks outfitted with shelves, which will increase shipping expenses. Also, additional store service support is being required to be provided to mass merchandiser customers.

        During 2000, Imperial operated seven SSCs which sold a wide range of plant material, including a large portion purchased from growers other than Imperial, and horticultural tools and products to the trade. The largest portion of the sales of the SSCs were to professional landscapers. The SSCs, all of which were owned by Imperial, were located in Windsor, Connecticut; Aston and Pittsburgh, Pennsylvania; Columbus and Cincinnati, Ohio; White Marsh, Maryland; and Manassas, Virginia. The SSCs had become the principal contributor to the operating profit of Imperial. In January 2001, the SSCs were sold to Shemin for cash and stock in Shemin Acquisition Corporation. Griffin reported a pretax profit of approximately $9.5 million on this transaction. See Note 2 to the consolidated financial statements included in Item 8.

Investments

Centaur Communications, Ltd.

        Griffin owns approximately 35% (31% fully diluted) of the outstanding common stock of Centaur, a privately-held publisher of business magazines in the United Kingdom and a compiler and supplier of computerized financial information through a subsidiary, Perfect Information, Ltd. As a result of a repurchase of common stock by Centaur and an additional investment by Griffin in 1998, Griffin's interest in Centaur was increased to its present level. Griffin's equity share of Centaur's results in fiscal 2002 include Centaur's sale, at a substantial gain, of its Lawtel division in August 2002 and Centaur's write down of goodwill in its engineering division. Griffin's equity share of Centaur's results in fiscal 2003 reflects the weakness in the British market for business advertising which is continuing.

        On January 15, 2004, Griffin and the other principal shareholders of Centaur executed a heads of agreement (a preliminary agreement) providing for the sale of their entire interest in Centaur. Based on the pricing included in that agreement Griffin's gain on the proposed sale of its investment would be in excess of $7.00 per share. Completion of the sale is subject to numerous contingencies, including without limitation, the satisfactory completion of due diligence and the receipt of sufficient financing by the buyer. The form of consideration to be received by Griffin would be principally cash, but would include some securities of the buyer. The non-cash portion of the gain may require deferral. There can be no assurance that the transaction contemplated by the heads of agreement will be consummated although the current schedule calls for completion of the transaction in March.

Linguaphone Group plc

        In 1997, Griffin received from Centaur, a 25% interest in Linguaphone. In early 1999, a recapitalization of Linguaphone resulted in Griffin's interest being reduced to approximately 14% (11% fully diluted). Further transactions by Linguaphone have reduced Griffin's ownership interest to approximately 8%. Accordingly, Griffin now accounts for Linguaphone under the cost method of accounting for investments. Griffin's 2001 statement of operations includes a charge of approximately

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$2.2 million to write down its investment in Linguaphone to less than $100,000 due to Linguaphone's financial results. Griffin invested $145,000 in Linguaphone in fiscal 2002.

Shemin Acquisition Corporation

        In connection with Imperial's sale of the SSCs, Griffin holds approximately 14% of the outstanding common stock of Shemin Acquisition Corporation, a privately held company that is the parent company of Shemin Nurseries, Inc. Imperial accounts for its investment in Acquisition under the cost method of accounting for investments. In January 2004, Griffin invested an additional $143,000 in Shemin Acquisition Corporation.

Financial Information Regarding Industry Segments

        See Note 3 to the consolidated financial statements of Griffin included elsewhere herein for certain financial information regarding the landscape nursery business and the real estate business.

Employees

        As of November 29, 2003, Griffin employed 219 persons on a full-time basis, including 15 in its real estate division and 200 in its landscape nursery business. At present, none of Griffin's employees are represented by a union. Griffin believes that its relations with its employees are satisfactory.

Competition

        The landscape nursery business is competitive, and Imperial competes against a number of other companies, including national, regional and local landscape nursery businesses. Some of Imperial's competitors in the landscape nursery industry are larger than Imperial. Growers of landscape nursery products compete on the bases of price, product and service quality and product availability.

        Numerous real estate developers operate in the portion of Connecticut and Massachusetts in which Griffin's holdings are concentrated. Some of such businesses may have greater financial resources than Griffin. Griffin's real estate business competes on the bases of location, price, availability of space, convenience and amenities.

Regulation: Environmental Matters

        Under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances or petroleum product releases at such property and may be held liable to a governmental entity or to third parties for property damage and for investigation and clean-up costs incurred by such parties in connection with contamination. The cost of investigation, remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to remediate properly such substances, may adversely affect the owner's ability to sell or rent such property or to borrow using such property as collateral. In connection with the ownership (direct or indirect), operation, management and development of real estate properties, Griffin Land may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and, therefore, potentially liable for removal or remediation costs, as well as certain other related costs, including governmental fines and injuries to persons and property. The value of Griffin's land may be affected by the presence of chlordane on a portion of the land which is intended for residential use. Although Griffin Land believes its proposed method of reducing chlordane contamination to levels below those that would impede residential development of such properties is appropriate and feasible, the acceptance of the method by any town commission has not yet been obtained. In the event that Griffin Land is unable to adequately remediate this property, its ability to develop such property for its intended purposes would be materially affected.

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        Griffin Land periodically reviews its properties for the purpose of evaluating such properties' compliance with applicable state and federal environmental laws. Griffin Land does not anticipate experiencing, in the next twelve months, material expense in complying with such laws other than in connection with development operations which may require additional clean up expenses.

ITEM 2.    PROPERTIES

Land Holdings

        Griffin is a major landholder in the State of Connecticut, owning approximately 4,100 acres, and also owns approximately 450 acres of land in Massachusetts. In addition, Griffin owns approximately 1,100 acres in northern Florida, most of the useable portion of which is used for Imperial's growing operations or is contiguous to such operations.

        The book value of undeveloped land holdings, including land improvements, owned by Griffin, principally in the Hartford, Connecticut area, is approximately $16 million. Griffin believes the fair market value of such land is substantially in excess of its book value, including land improvements.

        A listing of the locations of Griffin's real estate held for development or sale, a portion of which, principally in Bloomfield, East Granby and Windsor, Connecticut has been developed, and nursery real estate, is as follows:

Real Estate Held For Development or Sale

Nursery Real Estate

        Griffin also leases approximately 2,100 square feet in New York City for its executive offices.

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ITEM 3.    LEGAL PROCEEDINGS

        As discussed in Item 1, certain parts of Griffin's property in Simsbury, Connecticut, are affected by the presence of chlordane. Although the various federal, state and local agencies may have an interest in the matter, there are no proceedings known by Griffin to be contemplated by any of these agencies in connection with possible chlordane exceedences on such land.

        As a result of the denials by the Town of Simsbury's land use commissions in 2000 on Griffin Land's proposed residential development called Meadowood, 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 is appealing those decisions. Griffin Land has appealed an adverse decision on wetlands matters to the Supreme Court of the State of Connecticut. A decision on that appeal is pending. In November 2003, Griffin Land filed an amended wetlands application with the town's wetlands commission. That application was recently denied by the commission, and Griffin Land has filed suit appealing that denial.

        Several current homeowners of Walden Woods have brought suit challenging Griffin Land's declarant control of the Walden Woods Conservancy, the association that manages the Walden Woods development. The suit claims that Griffin Land's declarant control should be terminated because it has not properly declared a new Walden Woods unit within the required time frame. Griffin Land is contesting this action, which is currently before the court. Loss of declarant control would not prohibit the sale by Griffin Land of the remaining Walden Woods development rights, but could make such a transaction more difficult.

        Griffin is involved, as a defendant, in various litigation matters arising in the ordinary course of business. In the opinion of management, based on the advice of legal counsel, the ultimate liability, if any, with respect to these matters will not be material to Griffin's financial position, results of operations or cash flows.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        None.

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PART II

ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS

Market Information

        The following are the high and low prices of common shares of Griffin Land & Nurseries, Inc. as traded on the Nasdaq National Market:

        On February 10, 2004, the number of record holders of common stock of Griffin was approximately 477, which does not include beneficial owners whose shares are held of record in the names of brokers or nominees. The closing market price as quoted on the Nasdaq National Market on such date was $17.50 per share. See Item 12 "Security Ownership of Certain Beneficial Owners and Management" for information on our equity compensation plan.

Dividend Policy

        Griffin's current policy is to retain any earnings to finance the operation and expansion of its businesses.

ITEM 6.    SELECTED FINANCIAL DATA

        The following table sets forth selected statement of operations data for fiscal years 1999 through 2003 and balance sheet data as of the end of each fiscal year.

(a)

Loss before equity investment for fiscal 2002 includes an income tax benefit of $1.5 million for the reversal of an accrual for income taxes as a result of the favorable settlement of tax examinations of prior years. See Note 4 to the consolidated financial statements included in Item 8.

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(b)

Income before equity investment in fiscal 2001 includes a pretax charge of $2.2 million to write-down the value of Griffin's investment in Linguaphone Group plc.

(c)

Griffin's investment in Centaur and additional paid-in capital were restated effective at the beginning of fiscal 1999. The restatement reduced Griffin's investment in Centaur and additional paid-in capital by $216 in all prior years presented above, reflecting an adjustment, by Centaur, of its income tax expense related to transactions at Centaur which occurred prior to July 3, 1997, the date that all of the common stock of Griffin was distributed by Culbro Corporation ("Culbro") to Culbro's stockholders.

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

        The consolidated financial statements of Griffin include the accounts of Griffin's subsidiary in the landscape nursery business, Imperial Nurseries, Inc. ("Imperial"), and Griffin's Connecticut and Massachusetts based real estate business ("Griffin Land"). Griffin also has an equity investment in Centaur Communications, Ltd. ("Centaur"), a privately held magazine publishing business based in the United Kingdom.

        The notes to Griffin's consolidated financial statements included in Item 8 contain a summary of the significant accounting policies and methods used in the preparation of Griffin's consolidated financial statements. In the opinion of management, Griffin does not have any individual accounting policy that is critical to the preparation of its consolidated financial statements. This is due principally to the definitive nature of the accounting requirements for the landscape nursery and real estate businesses in which Griffin is engaged. Also, in many cases, Griffin must use an accounting policy or method because it is the only policy or method permitted under accounting principles generally accepted in the United States of America. Preparation of Griffin's financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the period reported. Actual results could differ from those estimates. The following is a review of the more significant accounting estimates used by Griffin:

Accounts receivable:    Management estimates future recoverability of its accounts receivable based on an accounts aging, payment history and financial condition.

Inventories:    In applying the principle of the lower of cost or market using the average cost method to nursery stock, management must estimate the future recoverability of certain plants within the inventory that have not matured as planned. Such estimates are based on the physical characteristics of the nursery stock in question and potential sales outlets.

Deferred tax assets:    In applying SFAS No. 109 "Accounting for Income Taxes," management estimates future taxable income from operations, the sale of appreciated assets and tax planning strategies in determining if it is more likely than not that Griffin will realize the benefits of its deferred tax assets.

Impairment of Long-Lived Assets:    Griffin evaluates the carrying value of its long-lived assets in relation to their operating performance and future undiscounted cash flows.

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Summary

        Griffin's results in fiscal 2003 reflect moderate improvement of the operating results of its landscape nursery and real estate businesses, offset by higher interest expense and lower results from its equity income in Centaur. The lower operating loss in the landscape nursery business reflects a lower charge for inventory disposals above normal amounts (expected overall plant loss rates that are included in cost of goods sold), offset by lower gross profit due to weaker pricing. Griffin Land's operations reflect an increase in operating profit due principally to the results of the two office buildings in which Griffin Land acquired the remaining 70% from a joint venture at the beginning of the year. Griffin Land previously held a 30% interest in those properties. The higher interest expense principally reflects the costs of borrowing funds to acquire the remaining 70% interest in the two office buildings, finance construction of a new facility built on speculation by Griffin Land and operate the landscape nursery business. The lower results at Centaur reflect the net benefit of certain one-time items included in fiscal 2002. A detailed discussion of fiscal 2003 results is included below.

        Effective for the earliest year reported in the accompanying financial statements, Griffin restated its investment in Centaur and its additional paid-in capital as the result of an error by Centaur pertaining to its fiscal year ended June 30, 1996. The effect of the restatement was to reduce Griffin's investment in Centaur and reduce Griffin's additional paid-in capital each by $216,000. See Note 1 to the consolidated financial statements in Item 8.

Results of Operations

Fiscal 2003 Compared to Fiscal 2002

        Griffin's consolidated net sales and other revenue increased from $34.0 million in fiscal 2002 to $38.2 million in fiscal 2003. The increase of $4.2 million reflects increases in net sales and other revenue of $2.6 million at Griffin Land and $1.6 million at Imperial.

        Net sales and other revenue at Griffin Land increased from $8.8 million in fiscal 2002 to $11.4 million in fiscal 2003, reflecting an increase of $3.1 million in revenue from Griffin Land's leasing operations partially offset by not having any land sales in fiscal 2003 as compared to revenue of $0.5 million from land sales in fiscal 2002. The increase in revenue from leasing operations was due to (a) $2.4 million from the two office buildings that Griffin Land acquired in the 2003 first quarter; (b) a $0.3 million increase from new leases of existing space, net of revenue decreases from vacancies; (c) $0.3 million from leasing space that was completed and leased mid year in fiscal 2002 but leased for the entire year in fiscal 2003; and (d) $0.1 million from increased billings to tenants for expense reimbursements. Revenue from the early termination of leases was $0.1 million in both fiscal 2003 and fiscal 2002. At November 30, 2003, Griffin Land owned 1,130,000 square feet of office, flex and industrial space for lease, with 858,000 (76%) leased. At November 30, 2002, Griffin Land had 1,013,000 square feet of office, flex and industrial space available for lease of which 885,000 square feet (87%) was leased. The increase in the amount of total square feet in Griffin Land's portfolio reflects the completion in the fiscal 2003 fourth quarter of the shell of an 117,000 square foot industrial building that is ready for tenant work but not yet leased. Leasing in the industrial, flex and office markets where Griffin Land's properties are located was slower in fiscal 2003 as compared to the previous two years. Inquiries from prospective tenants have increased in the latter part of fiscal 2003 and the early part of fiscal 2004 as compared to earlier in fiscal 2003, which management believes indicates that leasing activity may strengthen in the second half of fiscal 2004.

        Net sales and other revenue at Imperial increased from $25.2 million in fiscal 2002 to $26.8 million in fiscal 2003. The increase in Imperial's net sales principally reflects a 4% increase in unit sales volume and the effect of selling, on average, larger sized material in fiscal 2003 as compared to fiscal 2002. The increase in sales of larger sized plants reflects changes in Imperial's product mix made over the past several years. These were offset by overall lower pricing, as product available from growers

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appeared to exceed demand. Management believes that net sales in fiscal 2003 and fiscal 2002 were hampered by unfavorable weather conditions, particularly during Imperial's peak spring selling season in both years. In fiscal 2003, cold weather in March and early April, including snow in some areas, followed by excessive rain in the latter part of spring resulted in customers delaying and, in many cases, canceling orders. These factors particularly affected Imperial's garden center and wholesaler customer segments. In fiscal 2002, net sales were negatively affected by poor spring weather, which included drought conditions in the Mid-Atlantic area and excessive rain and cold in the Midwest. Imperial's spring net sales accounts for approximately 70% of Imperial's annual net sales.

        Griffin's consolidated operating loss decreased from $2.3 million in fiscal 2002 to $1.8 million in fiscal 2003. The lower consolidated operating loss reflects an increase of $0.4 million in operating profit at Griffin Land and a decrease of $0.3 million in the operating loss at Imperial, partially offset by an increase of $0.2 million in Griffin's general corporate expense.

        Operating profit at Griffin Land increased from $1.1 million in fiscal 2002 to $1.5 million in fiscal 2003, reflecting the following (amounts in millions):

        Griffin Land's profit (before depreciation and interest) from its leasing activities increased from $5.1 million in fiscal 2002 to $6.7 million in fiscal 2003, due principally to the increase of $3.1 million in leasing revenue discussed above, partially offset by an increase of $1.5 million in operating expenses of Griffin Land's buildings. The higher operating expenses principally reflect $1.1 million related to the two office buildings acquired in the 2003 first quarter, $0.1 million from buildings that were online for the entire year in fiscal 2003 as compared to part of the year in fiscal 2002 and $0.2 million of higher expenses throughout all buildings, due principally to higher snow removal costs, utility expenses and real estate taxes. Land sales generated a profit of $0.3 million in fiscal 2002, however there were no land sales in fiscal 2003. Depreciation and amortization expense at Griffin Land increased in fiscal 2003 as compared to fiscal 2002 due principally to depreciation on the two office buildings acquired in the fiscal 2003 first quarter and a full year's depreciation on buildings completed in fiscal 2002, which included only a partial year's depreciation on those assets. Griffin Land's general and administrative expenses, including real estate taxes on undeveloped land, increased from $2.1 million in fiscal 2002 to $2.2 million in fiscal 2003, due principally to real estate tax increases.

        Imperial's operating loss decreased from $1.9 million in fiscal 2002 to $1.6 million in fiscal 2003. The lower operating loss reflects an increase in Imperial's gross profit from $2.5 million in fiscal 2002 to $2.8 million in fiscal 2003. The higher gross profit was due to a lower charge for unsaleable inventory in fiscal 2003 as compared to fiscal 2002 partially offset by the effect of lower pricing. In fiscal 2003, cost of goods sold included a $0.4 million charge for inventory losses above normal amounts as compared to a $1.8 million charge included in fiscal 2002 cost of goods sold. The inventory charge in fiscal 2002 reflected failures in certain crops, poor results from the propagation of new plants at Imperial's northern Florida operation and failure to sell certain parts of the inventory which subsequently became unsaleable. The significantly lower inventory charge in fiscal 2003 was due to

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improved operations at Imperial's Florida facility partially offset by the effect of certain disease issues at Imperial's Connecticut operations.

        Excluding the effect of the inventory charges of $1.8 million in fiscal 2002 and $0.4 million in fiscal 2003, Imperial's gross profit decreased from $4.3 million in fiscal 2002 to $3.2 million in fiscal 2003. Imperial's gross margins on sales (excluding the effect of the inventory charges) decreased from 17.1% in fiscal 2002 to 11.9% in fiscal 2003. The lower gross profit and lower margins reflect the effect of the weakened pricing in fiscal 2003 and higher fiscal 2003 freight costs that could not be passed on to customers, which more than offset the effect of the increase in unit sales volume. The higher freight costs, due principally to shipments from Imperial's northern Florida facility, reflect the cost of ensuring that a sufficient quantity of common carrier trucks was available to Imperial to meet the demand for deliveries during Imperial's peak spring selling season. Management is continuing to seek new vendor relationships to ensure continued availability of trucks in sufficient quantity to meet expected demand and to reduce these costs in the future.

        Imperial's selling, general and administrative expenses were $4.4 million in fiscal 2002 and fiscal 2003, but as a percentage of net sales, these expenses decreased from 17.5% of net sales in fiscal 2002 to 16.3% of net sales in fiscal 2003. Imperial's marketing expense (included in selling, general and administrative expense) increased by $0.1 million in fiscal 2003 due principally to promotion of products sold under the new "Novalis" trade name. Overall lower expenses in other areas, due in part to a headcount reduction and efforts to maintain expenses at prior year's level, offset the effect of the higher marketing expenses.

        Griffin's general corporate expense increased from $1.5 million in fiscal 2002 to $1.7 million in fiscal 2003. The increase principally reflects $0.1 million due to higher compensation expenses and $0.1 million of general expense increases.

        Griffin's consolidated interest expense increased from $1.6 million in fiscal 2002 to $2.6 million in fiscal 2003. The increase reflects the overall higher amount of borrowings outstanding in fiscal 2003 as compared to fiscal 2002. Griffin's average amount of debt outstanding in fiscal 2003 was $39.7 million as compared to average outstanding debt of $23.2 million in fiscal 2002. The higher amount of outstanding debt in fiscal 2003 includes the $9.75 million nonrecourse mortgage completed in the 2003 first quarter to finance the acquisition of the 70% interest in two Griffin Center office buildings and other borrowings needed to supplement operating cash flow to finance Griffin's working capital requirements and real estate development activities.

        Griffin's effective rate of its income tax benefit in fiscal 2003 was 37% as compared to an effective income tax benefit rate of 82% in fiscal 2002. Griffin's effective rate of its income tax benefit in fiscal 2003 reflects a 34% rate for a federal income tax benefit, adjusted for state income tax benefits. Griffin has net deferred tax assets of $2.1 million that would be realized upon recognition of taxable income of approximately $5.0 million. Based on projected future taxable income from operations, the sale of appreciated assets in the near future, tax planning strategies and the future periods in which net operating loss carryforwards may be utilized, management believes it is more likely than not that Griffin will realize the benefits of its deferred tax assets currently reported. Therefore, a valuation allowance is not included in Griffin's results for fiscal 2003. The high effective income tax benefit rate in fiscal 2002 reflects the tax benefit on Griffin's pretax loss and the release of a liability of $1.5 million for income taxes as a result of a favorable outcome during fiscal 2002 of tax examinations for earlier years. The tax examinations were made on tax returns filed by Culbro Corporation ("Culbro"), Griffin's parent company prior to the distribution (the "Distribution") of Griffin common stock to Culbro's shareholders in 1997. Under a Tax Sharing Agreement, the liability for income taxes was assumed by Griffin from Culbro at the time of the Distribution.

        Griffin's equity income from Centaur decreased from $3.6 million in fiscal 2002 to $0.4 million in fiscal 2003. The lower equity income in fiscal 2003 reflects several nonrecurring items included in

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Centaur's results in fiscal 2002. Results from Griffin's equity investment in Centaur would have been substantially unchanged had it not been for the following nonrecurring items. These included the gain at Centaur from the sale of its Lawtel operation, of which Griffin's equity share was $8.4 million. Partially offsetting the gain on the sale of Lawtel was a goodwill impairment charge at Centaur, of which Griffin's equity share was $5.0 million. Griffin's equity income from Centaur in fiscal 2002 also included the effect of Centaur reversing a valuation allowance on certain of its deferred tax assets, of which Griffin's equity share was $0.7 million. Griffin's fiscal 2003 equity income includes the effect of a charge, of which Griffin's equity share is $0.5 million, for future costs of a lease for office space no longer being used. Griffin's equity income from Centaur in fiscal 2003 also benefited from discontinuing the amortization of goodwill at the beginning of fiscal 2003 in accordance with Griffin's adoption of SFAS No. 142 (see Note 1 to the financial statements included in Item 8). The effect of this accounting change was approximately $0.5 million in fiscal 2003. The increase in net sales at Centaur from fiscal 2002 to fiscal 2003 was substantially offset by higher costs and expenses.

Fiscal 2002 Compared to Fiscal 2001

        Griffin's consolidated net sales and other revenue increased from $32.0 million in fiscal 2001 to $34.0 million in fiscal 2002. The increase of $2.0 million reflects an increase in net sales and other revenue of $1.6 million at Imperial and an increase in net sales and other revenue of $0.4 million at Griffin Land.

        Net sales and other revenue at Griffin Land increased from $8.4 million in fiscal 2001 to $8.8 million in fiscal 2002. The increase of $0.4 million in net sales and other revenue at Griffin Land reflects an increase of $0.6 million of revenue from its leasing operations partially offset by a decrease of $0.2 million on revenue from property sales. The higher net sales and other revenue from Griffin Land's leasing operations was due to (a) an increase of $0.6 million in rental revenue from two buildings that were built and partially leased in fiscal 2001 and leased for the entire year in fiscal 2002; (b) a net increase of $0.5 million in rental revenue from leasing space that was previously vacant, net of previously leased space that was vacated in the current year; and (c) an increase of $0.2 million in rental revenue from the 57,000 square foot building in the New England Tradeport that was completed in fiscal 2002 and leased for a portion of the year; which was partially offset by a decrease of $0.7 million in other revenue in fiscal 2002 as compared to fiscal 2001 due to $0.5 million received in fiscal 2001 in connection with an agreement to terminate early a lease and $0.2 million from construction management fees received in fiscal 2001.

        Net sales and other revenue at Imperial increased from $23.6 million in fiscal 2001 to $25.2 million in fiscal 2002. The increase in net sales and other revenue at Imperial of $1.6 million reflects an increase in net sales of Imperial's container grown plants of $3.5 million in fiscal 2002 partially offset by the inclusion in fiscal 2001 of $1.9 million of net sales from the SSCs prior to their sale in January 2001. The increase in net sales of container grown plants reflects an increase in sales of larger sized plants, which have a higher per unit sales price, which more than offset a 2% decline in unit sales volume in fiscal 2002 as compared to fiscal 2001. The increase in sales of larger sized plants reflects changes in Imperial's product mix made over the past several years. Management believes that fiscal 2002 net sales were hampered by unfavorable weather conditions in Imperial's markets during the spring, its peak selling season. Drought conditions in the Mid-Atlantic area and excessive rain and cold in the Midwest negatively affected sales in those areas.

        Griffin's consolidated operating loss decreased from $3.2 million in fiscal 2001 to $2.3 million in fiscal 2002. Griffin's consolidated operating loss in fiscal 2001 included an operating loss of $0.8 million from Imperial's SSCs prior to their sale in January 2001. Excluding the operating loss from the SSCs in fiscal 2001, Griffin's overall operating results were substantially unchanged in fiscal 2002 as compared to fiscal 2001.

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        Operating profit at Griffin Land increased from $1.0 million in fiscal 2001 to $1.1 million in fiscal 2002, reflecting the following (amounts in millions):

        Although profit from leasing remained unchanged, fiscal 2001 included the benefit of $0.5 million from a lease termination. Excluding the early lease termination payment, profit from Griffin Land's commercial properties increased by $0.5 million in fiscal 2002 due to an increase in the amount of space leased in fiscal 2002 as compared to fiscal 2001. At November 30, 2002, Griffin Land had 1,013,000 square feet of office, flex and industrial space available for lease (including 50,000 square feet in the office building shell that was recently completed and is now ready for tenant work and the 160,000 square feet of office space in the two buildings owned by the joint venture in which Griffin held a 30% interest as of November 30, 2002), of which 885,000 square feet (87%) was occupied. At December 1, 2001 Griffin had 906,000 square feet of office and industrial space available for lease with 826,000 square feet (91%) occupied at that time. The increase in the amount of square feet available reflects the completion in fiscal 2002 of a 57,000 square foot facility in the New England Tradeport that is fully leased and the completion of the shell of a 50,000 square foot office building that is not yet leased.

        Profit from property sales at Griffin Land increased by $0.3 million in fiscal 2002 as compared to fiscal 2001 despite the decrease in property sales revenue in fiscal 2002 as compared to fiscal 2001. The increased profitability reflects the substantially lower cost basis of the land sold in fiscal 2002 compared to the cost basis of the land sold in the prior year. The increase in depreciation expense in fiscal 2002 as compared to fiscal 2001 reflects a full year of depreciation expense in fiscal 2002, as compared to a partial year of depreciation expense in fiscal 2001, on tenant improvements on two buildings totaling 205,000 square feet placed in service during fiscal 2001 and the start of depreciation on the 57,000 square foot building that was completed in fiscal 2002. The lower general and administrative expenses reflects a decrease of $0.1 million in donations expense in fiscal 2002 as compared to fiscal 2001 and a decrease of $0.1 million in employee recruitment expenses partially offset by higher insurance expenses.

        Imperial incurred an operating loss of $1.9 million in both fiscal 2002 and fiscal 2001 (excluding the loss from the SSC operations of $0.8 million before they were sold in January 2001). The increase in gross profit generated from the higher net sales in fiscal 2002 was substantially offset by higher charges for unsaleable inventory, which were $1.8 million in fiscal 2002 as compared to $0.6 million in fiscal 2001. The charges for unsaleable inventory in the current year were caused principally by failures in certain crops, poor results from the propagation of new plants in Florida and failure to sell certain parts of the inventory which then became unsaleable. As a result of these issues, management has made changes in certain horticultural practices and changes of certain personnel. Imperial's gross margin on sales, excluding the charges for unsaleable inventory, was 17% in fiscal 2002 as compared to 15% in fiscal 2001. The higher gross margin on sales was principally due to changes in Imperial's product mix. Imperial's operating expenses in fiscal 2002 were $4.4 million, or 17.5% of net sales, as compared to $4.6 million, or 21.2% of net sales, in fiscal 2001, excluding the effect of the SSCs in fiscal

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2001. The lower operating expenses in fiscal 2002 reflect principally lower central overhead expenses at Imperial due to headcount reductions as a result of the sale of the SSCs in fiscal 2001.

        Griffin's interest expense increased from $0.9 million in fiscal 2001 to $1.6 million in fiscal 2002. The higher interest reflects increased borrowings outstanding in fiscal 2002 as compared to fiscal 2001. Borrowings in the current year were used to support the working capital needs at Griffin's businesses, and investment in Griffin Land's real estate operation and capital expenditures at Imperial. Griffin's financing requirements in fiscal 2001 were met using the proceeds from the sale of the SSCs that remained after paying down the balance then outstanding of Griffin's revolving credit agreement. Griffin's average amount of debt outstanding in fiscal 2002 was $23.2 million as compared to $15.0 million in fiscal 2001. In addition, in fiscal 2002 Griffin had capitalized interest of $0.1 million as compared to capitalized interest of $0.4 million in fiscal 2001. The lower amount of capitalized interest in fiscal 2002 reflects the lower amount of construction activity in fiscal 2002 as compared to fiscal 2001.

        Griffin's effective rate of the income tax benefit in fiscal 2002 is 82% as compared to an effective income tax rate of 55% in fiscal 2001. The high effective benefit rate in fiscal 2002 reflects the tax benefit on its pretax loss and the release of a liability of $1.5 million for income taxes as a result of a favorable outcome of tax examinations for earlier years. The tax examinations were made on tax returns filed by Culbro Corporation ("Culbro"), Griffin's parent company prior to the distribution (the "Distribution") of Griffin common stock to Culbro's shareholders in 1997. Under a Tax Sharing Agreement, the liability for income taxes was assumed by Griffin from Culbro at the time of the Distribution. The high effective tax rate in fiscal 2001 reflects a basis difference in the writedown of an investment.

        Griffin's equity income from Centaur was $3.6 million in fiscal 2002 as compared to an equity loss of $0.4 million in fiscal 2001. The higher equity income in fiscal 2002 reflects the gain at Centaur from the sale of its Lawtel operation, of which Griffin's allocable share was $8.4 million. There was no cash received by Griffin from the sale because Centaur used the proceeds to pay down its debt. Partially offsetting the gain on the sale of Lawtel was a goodwill impairment charge at Centaur, of which Griffin's allocable share was $5.0 million. Griffin's equity income from Centaur in fiscal 2002 also benefited from the reversal by Centaur of a valuation allowance on certain of its deferred tax assets, of which Griffin's allocable share was $0.7 million. The equity loss in fiscal 2001 included a charge, of which Griffin's allocable share was $0.9 million, for expenses related to a proposed stock offering or sale that did not take place. Excluding the effect of these items, Griffin's equity results from Centaur were lower in fiscal 2002 as compared to fiscal 2001, reflecting a weakened economy in the United Kingdom which has resulted in lower revenue and lower operating results at Centaur.

Off Balance Sheet Arrangements

        Griffin does not have any material off balance sheet arrangements.

Liquidity and Capital Resources

        In fiscal 2003, net cash used in operating activities was $0.9 million as compared to net cash used in operating activities of $2.2 million in fiscal 2002. The decrease of $1.3 million of net cash used in operating activities principally reflects an increase of $0.6 million in accounts payable and current liabilities in fiscal 2003 as compared to a decrease of $1.8 million in fiscal 2002, reflecting timing of payments, particularly for construction work at Griffin Land. Partially offsetting the effect of the favorable change in accounts payable and accrued liabilities were net unfavorable changes in accounts receivable and inventories. Included in fiscal 2003 operating activities was a $1.2 million lease inducement payment related to a lease extension with a major tenant in one of Griffin Land's industrial buildings. The terms of the lease extension require Griffin Land to make certain improvements to the

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property. The cost to Griffin Land of the incentive payment and tenant improvements, in total, is not expected to exceed $2.5 million. Most of the expenditures for the improvements will be in the first half of fiscal 2004. The new lease rates consider the inducement payment and tenant improvements, including an interest factor, to provide Griffin Land an appropriate return on its investment of these initial costs over the term of the lease. Griffin Land has received a commitment from the mortgage holder on this building and another property in the New England Tradeport for an additional $1.5 million mortgage on those buildings. The mortgage is expected to be completed in the 2004 second quarter after completion and acceptance of the tenant improvements.

        Net cash used in investing activities increased from $7.0 million in fiscal 2002 to $14.6 million in fiscal 2003. The increase of $7.6 million reflects $7.7 million used in fiscal 2003 for the acquisition of the remaining 70% interest in a joint venture that owned two office buildings aggregating approximately 160,000 square feet in which Griffin Land held a 30% interest. A deposit of $1.0 million, made in fiscal 2002, was applied against the purchase price of the 70% interest of the joint venture. Additions to real estate held for sale or lease increased from $3.4 million in fiscal 2002 to $6.2 million in fiscal 2003. The increase of $2.8 million principally reflects a $1.3 million increase in spending on new construction in fiscal 2003, due to the shell of an approximately 117,000 square foot facility in the New England Tradeport built in fiscal 2003 on speculation and a $0.9 million increase in fiscal 2003 capital spending for building improvements and infrastructure improvements in Griffin Land's office and industrial parks. Additions to real estate held for sale or lease in fiscal 2002 principally included construction, on speculation, of the shell of a 50,000 square foot office building.

        Additions to property and equipment, principally for Imperial, decreased from $2.5 million in fiscal 2002 to $0.7 million in fiscal 2003. The decrease of $1.8 million principally reflects the completion, in early fiscal 2003, of the expansion of Imperial's northern Florida growing operation that had been ongoing during the past four years. Over that time, Imperial has expanded and improved its facilities in Connecticut and northern Florida at a total cost of $7.6 million. Capital expenditures at Imperial in fiscal 2004 are expected to be less than $1.0 million, consistent with capital spending in fiscal 2003 but substantially lower than the earlier three years, because the expansion of Imperial's growing operations was completed in fiscal 2003.

        Net cash provided by financing activities increased from $9.3 million in fiscal 2002 to $15.5 million in fiscal 2003. The increase of $6.2 million reflects the completion in fiscal 2003 of a $9.75 million nonrecourse mortgage on the two office buildings that Griffin Land acquired the remaining 70% interest from a joint venture in December 2002. Additionally, borrowings under Griffin's revolving credit agreement (the "Credit Agreement") with Fleet National Bank ("Fleet") increased by $6.5 million from $4.2 million at November 30, 2002 to $10.7 million at November 29, 2003. The proceeds from the increase in debt were used to (a) acquire the 70% interest in the real estate joint venture; (b) finance construction and development activities in the real estate business; and (c) fund operations in the landscape nursery business.

        In fiscal 2004, Griffin is planning to continue to invest in its real estate business. In addition to the improvements that will be made in conjunction with the lease extension described above, additional amounts will be required to complete the interiors of the shells of the office and the industrial buildings that were recently built on speculation. The buildout of the interiors of these buildings will be started when leases are obtained. Griffin Land will also continue to seek approval for its proposed residential developments, including a newly proposed 50 lot subdivision in Suffield, Connecticut, the proposed development in Simsbury, Connecticut that is currently in litigation and the sale of the remaining development rights of Griffin Land's Walden Woods development in Windsor, Connecticut. Griffin Land has an agreement for the sale of those development rights, but completion of the transaction is subject to the purchaser receiving approval of their plans by the town's land use commissions. Based on the terms currently contemplated, proceeds from that sale are expected to be approximately $3.0 million, although completion of this transaction is not expected to take place in fiscal 2004. Griffin Land intends to proceed with residential development plans on other of its lands that are also appropriate for that use.

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        Griffin's payments (including principal and interest) under contractual obligations as of November 29, 2003 are as follows: