-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FgHWBKEOPbypRiKDP5iTWbsmbWY/sNzqF6KrX46C0vZIDKaYCIXpZ1dry5K0uoWV D+/7QZYEgh86RcWqQIL5oA== 0000950114-98-000381.txt : 19980817 0000950114-98-000381.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950114-98-000381 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PGI INC CENTRAL INDEX KEY: 0000081157 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 590867335 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-06471 FILM NUMBER: 98690016 BUSINESS ADDRESS: STREET 1: 212 SOUTH CENTRAL STREET 2: SUITE 100 CITY: ST LOUIS STATE: MO ZIP: 63105 BUSINESS PHONE: 3145128650 MAIL ADDRESS: STREET 1: 212 SOUTH CENTRAL STREET 2: SUITE 100 CITY: ST LOUIS STATE: MO ZIP: 63105 FORMER COMPANY: FORMER CONFORMED NAME: PUNTA GORDA ISLES INC DATE OF NAME CHANGE: 19900403 10QSB 1 PGI INCORPORATED FORM 10-QSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) /x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 ------------------------------- OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------ ------------------- Commission File Number 1-6471 ------------------------------------------------- PGI INCORPORATED ------------------------------------------------------------------------ (Exact name of small business issuer as specified in its charter) FLORIDA 59-0867335 ------------------------------- ------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 212 SOUTH CENTRAL, SUITE 100; ST. LOUIS, MISSOURI 63105 ------------------------------------------------------------------------ (Address of principal executive offices) (314) 512-8650 ------------------------------------------------------------------------ (Issuer's telephone number) ------------------------------------------------------------------------ (Former Name, Former Address and Former Fiscal Year, if changed since last report) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 . --- --- State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of August 14, 1998 there were 5,317,758 shares of the Registrant's common stock outstanding. Transitional Small Business Disclosure Format (Check one): Yes No X --- --- 2 PGI INCORPORATED AND SUBSIDIARIES PGI INCORPORATED AND SUBSIDIARIES FORM 10-QSB For the Quarter Ended June 30, 1998 Table of Contents -----------------
Form 10-QSB Page No. ----------- PART I Financial Information Item 1 Financial Statements Consolidated Statements of Financial Position June 30, 1998 and December 31, 1997 3 Consolidated Statements of Operations Three and Six Months Ended June 30, 1998 and 1997 4 Condensed Consolidated Statements of Cash Flows Six Months Ended June 30, 1998 and 1997 5 Notes to Consolidated Financial Statements for Form 10-QSB 6 - 11 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 12-15 PART II Other Information Item 1 Legal Proceedings 16 Item 2 Changes in Securities 16 Item 3 Defaults Upon Senior Securities 16 Item 4 Submission of Matters to a Vote of Security Holders 16 Item 5 Other Information 16 Item 6 Exhibits and Reports on Form 8-K 16 SIGNATURES 17
2 3 PGI INCORPORATED AND SUBSIDIARIES PART I Financial Information Item 1 Financial Statements CONSOLIDATED STATEMENTS OF FINANCIAL POSITION ($ in thousands)
June 30, December 31, 1998 1997 ---- ---- (unaudited) ASSETS Cash and Cash Equivalents $ 259 $ 2 Restricted Cash 2,023 1,173 Receivables on real estate sales - net 111 156 Other receivables 30 28 Land and improvement inventories 890 8,992 Property and equipment - net 12 18 Other assets 163 759 -------- -------- $ 3,488 $ 11,128 ======== ======== LIABILITIES Accounts payable $ 73 $ 285 Other liabilities 1,503 1,727 Accrued interest: Primary lender 18 3,461 Debentures 8,960 8,238 Other 1,594 1,629 Credit agreements - Primary lender 1,000 7,344 Notes and mortgages payable 1,198 3,750 Convertible subordinated debentures payable 9,059 9,059 Convertible debentures payable 1,500 1,500 -------- -------- $ 24,905 $ 36,993 -------- -------- Commitments and contingencies STOCKHOLDERS' EQUITY Preferred stock, par value $1.00 per share; authorized 5,000,000 shares; 2,000,000 Class A cumulative convertible shares issued and outstanding; (liquidation preference of $4.00 per share or $8,000,000) 2,000 2,000 Common stock, par value $.10 per share; authorized 25,000,000 shares; 5,317,758 shares issued and outstanding 532 532 Paid in capital 13,498 13,498 Accumulated deficit (37,447) (41,895) -------- -------- (21,417) (25,865) -------- -------- $ 3,488 $ 11,128 ======== ======== See accompanying notes to consolidated financial statements for Form 10-QSB.
3 4 PGI INCORPORATED AND SUBSIDIARIES PART I Financial Information (Continued) CONSOLIDATED STATEMENTS OF OPERATIONS ($ in thousands) (Unaudited)
Three Months Ended Six Months Ended ----------------------- ------------------------ June 30, June 30, June 30, June 30, 1998 1997 1998 1997 -------- -------- -------- -------- REVENUES Real Estate Sales 13,447 - 13,447 - Interest income 3 9 7 20 Other income 1,232 141 1,321 275 ------- ----- ------- ------- 14,682 150 14,775 295 ------- ----- ------- ------- COSTS AND EXPENSES Costs of Real Estate Sales 8,427 - 8,427 - Selling expenses 10 2 15 4 General & administrative expenses 131 213 343 363 Interest 596 672 1,265 1,326 Other expenses 98 99 173 225 ------- ----- ------- ------- 9,262 986 10,223 1,918 ------- ----- ------- ------- NET INCOME (LOSS)BEFORE INCOME TAX $ 5,420 $(836) 4,552 (1,623) PROVISION FOR INCOME TAX 104 - 104 - ------- ----- ------- ------- NET INCOME (LOSS) $ 5,316 $(836) $ 4,448 $(1,623) ======= ===== ======= ======= NET INCOME (LOSS) PER SHARE Primary and fully diluted $ .97 $(.23) $ .78 $ (.51) ======= ===== ======= ======= Considers the effect of cumulative preferred dividends in arrears for the three and six months ended June 30, 1998 and 1997. See accompanying notes to consolidated financial statements for form 10-QSB.
4 5 PGI INCORPORATED AND SUBSIDIARIES PART I Financial Information (Continued) CONSOLIDATED STATEMENTS OF CASH FLOWS ($ in thousands) (Unaudited)
Six Months Ended ------------------- June 30, June 30, 1998 1997 ------------------- Net cash provided by (used in) operating activities $ 7,764 $ (1) ------- ----- Cash flows from financing activities: Proceeds from borrowings 31 117 Principal payments on debt (7,538) (103) ------- ----- Net cash provided by (used in) financial activities (7,507) 14 ------- ----- Net increase in cash 257 13 Cash at beginning of period 2 12 ------- ----- Cash at end of period $ 259 $ 25 ======= ===== See accompanying notes to consolidated financial statements for Form 10-QSB.
5 6 PGI INCORPORATED AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-QSB and therefore do not include all disclosures necessary for fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. The Company's independent accountants included an explanatory paragraph regarding the Company's ability to continue as a going concern in their opinion on the Company's consolidated financial statements for the year ended December 31, 1997. The Company remains in default under the indentures governing its convertible unsecured subordinated debentures and in default of its primary debt obligations. A significant payment on the primary debt obligation occurred with the sale of the undeveloped land in Citrus County upon closing May 13, 1998. (See Management's Discussion and Analysis of Financial Condition and Results of Operations and Notes 10 and 11 to the Company's consolidated financial statements for the year ended December 31, 1997, as contained in the Company's Annual Report on Form 10-KSB). All adjustments (consisting of only normal recurring accruals) necessary for fair presentation of financial position, results of operations and cash flows have been made. The results for the three and six months ended June 30, 1998 are not necessarily indicative of operations to be expected for the fiscal year ending December 31, 1998 or any other interim period. (2) Recognition of Real Estate Sales The Company has adopted the installment method of profit recognition for all homesite sales effective January 1, 1990 and thereafter. For sales consummated prior to January 1, 1990, the Company recognized profit under the full accrual or percentage-of-completion methods as appropriate. The full accrual method recognizes the entire profit when minimum down payments and other requirements are met. Under the percentage-of- completion method, profit is recognized by the relationship of costs incurred to total estimated costs to be incurred. The installment method recognizes gross profit as down payments and principal payments on contracts are received. (3) Per Share Data Primary per share amounts are computed by dividing net income (loss), after considering cumulative dividends in arrears on the Company's preferred stock, by the average number of common shares and common stock equivalents outstanding. For this purpose, the Company's cumulative convertible preferred stock, convertible subordinated debentures and collateralized convertible debentures are not deemed to be common stock equivalents, but outstanding vested stock 6 7 PGI INCORPORATED AND SUBSIDIARIES options are considered as such. However, under the treasury stock method, no vested stock options were assumed to be exercised, and therefore no common stock equivalents existed, for the calculation of primary per share amounts for the six months ended June 30, 1998 and 1997. The average number of common shares outstanding for the six months ended June 30, 1998 and 1997 was 5,317,758 and 3,836,945, respectively. On May 15, 1997, preferred dividends accrued through April 25, 1995 were paid in the form of 2,000,203 shares of common stock. Fully diluted per share amounts are computed by dividing net income (loss) by the average number of common shares outstanding, after adjusting both for the estimated effects of the assumed exercise of stock options and the assumed conversion of all cumulative convertible preferred stock, convertible subordinated debentures and collateralized convertible debentures into shares of common stock. For the six months ended June 30, 1998 and 1997, no stock options were assumed to be exercised and the effect of the assumed exercise of stock options and the assumed conversion of all cumulative convertible preferred stock, convertible subordinated debentures and collateralized convertible debentures would have been anti-dilutive. The following is a summary of the calculations used in computing basic and diluted income (loss) per share for the three and six months ended June 30, 1998 and 1997:
Three Months Ended Six Months Ended ------------------ ---------------- June 30, June 30, June 30, June 30, 1998 1997 1998 1997 Net Income (Loss) 5,316,000 (836,000) 4,448,000 (1,623,000) Preferred Dividends (160,000) (160,000) (320,000) (320,000) --------- --------- --------- ---------- Income (Loss) Avail- able to Common Shareholders 5,156,000 (996,000) 4,128,000 (1,943,000) ========= ========= ========= ========== Weighted Amount of Shares Outstanding 5,317,758 4,350,627 5,317,758 3,836,945 Basic and Diluted Income (Loss) Per Share .97 (.23) .78 (.51)
7 8 PGI INCORPORATED AND SUBSIDIARIES (4) Statement of Cash Flows The Financial Accounting Standards Board issued Statement No. 95, "Statement of Cash Flows", which requires a statement of cash flows as part of a full set of financial statements. For quarterly reporting purposes, the Company has elected to condense the reporting of its net cash flows. Interest paid for the six months ended June 30, 1998 and 1997 was $190,000 and $82,000, respectively. For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. (5) Restricted Cash Restricted cash included cash pledged to agencies in various states and local Florida governmental units related to land development and environmental matters, real estate taxes in litigation, collateral for primary lender debt, the servicing of sold receivables and, as a result of sales agreements and Company policies, customer payments and deposits related to homesite and housing contracts. (6) Receivables on Real Estate Sales Net receivables on real estate sales consisted of:
June 30, December 31, 1998 1997 -------- ------------ ($ in thousands) Contracts receivable on homesite sales $ 773 $ 816 Other 84 89 ----- ----- 857 905 Less: Allowance for cancellations (706) (706) Unamortized valuation discount (40) (43) ----- ----- $ 111 $ 156 ===== =====
(7) Land and Improvements Land and improvement inventories consisted of:
June 30, December 31, 1998 1997 -------- ------------ ($ in thousands) Unimproved land $629 $8,724 Fully improved land 261 268 ---- ------ $890 $8,992 ==== ======
8 9 PGI INCORPORATED AND SUBSIDIARIES (8) Property and Equipment Property and equipment consisted of:
June 30, December 31, 1998 1997 -------- ------------ ($ in thousands) Furniture, fixtures and other equipment $ 212 $ 212 Less: Accumulated depreciation (200) (194) ----- ----- $ 12 $ 18 ===== =====
(9) Other Assets
Other assets consisted of: June 30, December 31, 1998 1997 -------- ------------ ($ in thousands) Guaranteed future connections, net $ - $621 Deposit with Trustee of 6-1/2% debentures 135 131 Other 28 7 ---- ---- $163 $759 ==== ====
(10) Other Liabilities Other Liabilities consisted of:
June 30, December 31, 1998 1997 -------- ------------ ($ in thousands) Accrued property taxes - current $ 23 $ 230 - delinquent 679 745 Other accrued expenses 341 342 Income Taxes Payable 104 - Deposits, advances and escrows 282 336 Estimated recourse liability for receivables sold 58 58 Other 16 16 ------ ------ $1,503 $1,727 ====== ======
(11) Primary Lender Credit Agreements, Notes and Mortgages Payable and Convertible Subordinated Debentures Payable Credit agreements with the Company's primary lender and notes and mortgages payable consisted of the following:
June 30, December 31, 1998 1997 -------- ------------ ($ in thousands) Credit agreements - primary lender: (maturing July 8, 1997, bearing interest at prime plus 5%): $1,000 $7,344 Notes and mortgages payable - certain balances at December 31, 1997 were paid in the second quarter of 1998. The balance at June 30, 1998 primarily consists of $1,176,000 bearing interest at prime plus 2% 1,198 3,750 ------ ------
9 10 PGI INCORPORATED AND SUBSIDIARIES Convertible subordinated debentures payable: At 6-1/2% interest; due June 1991; convertible into shares of common stock at $18.00 per share $ 1,034 $ 1,034 At 6% interest; due May 1, 1992; convertible into shares of common stock at $19.50 per share 8,025 8,025 ------- ------- $ 9,059 $ 9,059 ------- ------- Collateralized convertible debentures payable: At 14% interest; due July 8, 1997, convertible into share of common stock at $1.72 per share 1,500 1,500 ------- ------- $12,757 $21,653 ======= =======
(12) Real Estate Sales and Other Income Real Estate Sales and Cost of Sales consisted of:
Three Months Ended Six Months Ended ------------------------- ----------------------- June 30, June 30, June 30, June30, 1998 1997 1998 1997 -------- -------- -------- ------- ($ in thousands) ($ in thousands) Sales - Acreage in Bulk $13,447 $ - $13,447 $ - ======= ===== ======= ===== Cost of Sales-Acreage in Bulk $ 8,427 $ - $ 8,427 $ - ======= ===== ======= =====
Other Income consisted of:
Three Months Ended Six Months Ended ------------------------ ---------------------- June 30, June 30, June 30, June 30, 1998 1997 1998 1997 -------- -------- -------- -------- ($ in thousands) ($ in thousands) Commission income $ 88 $ 99 $ 167 $201 Reduction of previously accrued property taxes 248 - 248 - Debt release settlement 870 - 870 - Other income 26 42 36 74 ------ ---- ------ ---- $1,232 $141 $1,321 $275 ====== ==== ====== ====
(13) Commitments and Contingencies The aggregate outstanding balances of all receivables sold and exchanged with recourse totaled $101,000 and $145,000 at June 30, 1998 and December 31, 1997, respectively. Based on its collection experience with such receivables, the Company maintained allowances at both June 30, 1998 and December 31, 1997, classified in other liabilities, of $58,000 for the recourse provisions related to all receivables sold. 10 11 PGI INCORPORATED AND SUBSIDIARIES (14) Income Taxes Effective January 1, 1993 the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," which requires a change from the deferred method to the asset and liability method of accounting for income taxes. At December 31, 1997, the Company had an operating loss carryforward of approximately $37,000,000 to reduce future taxable income. These operating losses expire at various dates through 2,012. The following summarizes the temporary differences of the Company at December 31, 1997 at the current statutory rate: Deferred tax asset: Net operating loss carryforward $ 13,690,000 Adjustments to reduce land to net realizable value 12,000 Expenses capitalized under IRC 263(a) 56,000 ITC carryforward 215,000 Valuation allowance (11,510,000) ------------ 2,463,000 ------------ Deferred tax liability Basis difference of land and improvement inventories 2,453,000 Excess tax over book depreciation 10,000 ------------ 2,463,000 ------------ Net deferred tax asset $ 0 ============
The provision for income taxes at June 30, 1998 consists of non-refundable alternative minimum tax. 11 12 PGI INCORPORATED AND SUBSIDIARIES Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Preliminary Note Readers should understand as they read this report that the Company is not presently pursuing its core business. The reason the Company is no longer pursuing its core business is set forth with more particularity below. During the fiscal year ended December 31, 1996, the Company's business focus and emphasis changed substantially as it concentrated its sales and marketing efforts almost exclusively on the disposition in bulk of its undeveloped, platted, residential real estate. This change was prompted by it's continuing financial difficulties due to the principal and interest owed on its debt and managements' conclusion that a bulk sale was the best way to reduce the Company's debt service obligations. The sale of this undeveloped land occurred on May 13, 1998, its remaining inventory now consists of undeveloped commercial property. The Company intends to make a decision as to whether it will pursue the development and sale of the commercial property in accordance with its traditional core business plans or whether it will attempt to sell such property in bulk. That decision will depend, in part, on whether the Company believes it can generate more revenue by developing and selling individual commercial properties or by selling in bulk. On January 31, 1997, Sugarmill Woods, Inc., a Florida corporation and a wholly-owned subsidiary of the Company, and Love-PGI Partners, L.P. ("L-PGI") (collectively as "Seller"), entered into an Option Agreement For Sale and Purchase ("Sale Agreement") with The Nature Conservancy, Inc., an unrelated nonprofit District of Columbia corporation ("Purchaser"), for the sale of and purchase of approximately 5,240 acres of certain undeveloped real estate located in Citrus County and Hernando County, Florida ("Property"). Approximately 4,890 acres of the Property was owned by the Company, and 350 acres was owned by L-PGI. Shareholder approval of the sale of the property was obtained at the Annual Meeting of the Company on December 22, 1997. The Company consummated the transaction on May 13, 1998. Results of Operations Revenues for the first six months of 1998 increased by $14.5 million to $14.8 million from $295,000 for the comparable 1997 period due to the sale of approximately 4,890 acres on May 13, 1998. A net gain of $4.4 million was realized for the first six months of 1998 compared to a net loss of $1,623,000 for the first six months of 1997. After consideration of cumulative preferred dividends in arrears, totaling $320,000 for each of the six months ended June 30, 1998 and 1997 ($.10 per share of common stock), net income (loss) per share of $.78 and $(.51), respectively, were reported for the six month periods ended June 30, 1998 and 1997. 12 13 PGI INCORPORATED AND SUBSIDIARIES Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) On March 28, 1996, the Company's primary lender, First Union National Bank of Florida, a national banking association ("First Union") assigned to PGIP L.L.C., a Missouri limited liability company ("PGIP") all of First Union's right, title and interest in and to the documents (the "Loan Documents") evidencing and securing its primary credit agreements with the Company and the Company's subsidiaries, Sugarmill Woods, Inc., Burnt Store Marina, Inc. and Gulf Coast Credit Corporation (collectively, the "Borrowers"), which credit agreements are in default and the maturity of the indebtedness secured thereby has been accelerated. The sale of acreage on May 13, 1998 resulted in a payment of first mortgage principal and interest to PGIP of $10,362,193. At closing, the Company and PGIP executed an escrow agreement (the "Escrow Agreement"). The Escrow Agreement provides that $1,000,000 of the PGI Purchase Price would not be used to repay the First Mortgage Indebtedness, so that $1,000,000 (the "Remaining Indebtedness") of the First Mortgage Indebtedness would remain in place. The $1,000,000 was placed in escrow with PGIP as the escrow agent. Pursuant to the Escrow Agreement, the escrowed funds are to be paid out (i) as requested by PGI and agreed to by PGIP, or (ii) as deamed necessary and appropriate by PGIP, in either case, to protect PGIP's interest in the Retained Acreage (as hereinafter defined), including PGIP's right to receive principal and interest under the First Mortgage securing the Remaining Indebtedness, or (iii) to PGIP to pay any other obligations owed to PGIP by the Company. The real estate owned by the Company which was not sold to the Purchaser (approximately 370 acres) (the "Retained Acreage") remains subject to the First Mortgage. Real Estate Sales and Cost of Sales consisted of:
Three Months Ended Six Months Ended ------------------------ ------------------------ June 30, June 30, June 30, June 30, 1998 1997 1998 1997 -------- -------- -------- -------- ($ in thousands) ($ in thousands) Sales - Acreage in Bulk $13,447 $ - $13,447 $ - ======= ===== ======= ===== Cost of Sales-Acreage in Bulk $ 8,427 $ - $ 8,427 $ - ======= ===== ======= =====
Other income consisted of:
Three Months Ended Six Months Ended ------------------------- ------------------------ June 30, June 30, June 30, June 30, 1998 1997 1998 1997 -------- -------- -------- -------- ($ in thousands) ($ in thousands) Commission income $ 88 $ 99 $ 167 $201 Reduction of previously accrued property taxes 248 - 248 - Debt release settlement 870 - 870 - Other income 26 42 36 74 ------ ---- ------ ---- $1,232 $141 $1,321 $275 ====== ==== ====== ====
13 14 PGI INCORPORATED AND SUBSIDIARIES Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) The Company suspended the construction of homes and sale of homes and homesites in 1994. Starting in January 1996, the Company began concentrating on disposing in bulk of its undeveloped, platted, residential real estate in order to decrease its debt obligations. The Company envisioned selling off such property and retaining its undeveloped commercial real estate for future development or bulk sales depending on the profitability. The Company's management closed on the sale of its undeveloped land in Citrus County on May 13, 1998. Effective January 1, 1990 the Company implemented the installment method of homesite sales reporting in accordance with Statement of Financial Accounting Standard No. 66 "Accounting for Sales of Real Estate" (see Item I - - Note 2 - Recognition of Real Estate Sales). This method will be utilized for all installment sales regardless of the down payment percentage. As a result of the Secured Lender Transaction non-recourse sale of receivables, all previously deferred profits were recognized during 1992. Cash provided by operating activities for the six months ended June 30, 1998 was $7.8 million compared to cash used of $1,000 for the comparable 1997 period due to the bulk acreage sale in the second quarter of 1998. During the first six months of 1998, financing activities used $7.5 million in cash flow with $31,000 in proceeds from borrowings. Net cash used in financing activities was primary lender for debt repayment as well as repayments of other notes and mortgages payable. Analysis of Financial Condition Assets totaled $3.5 million at June 30, 1998 compared to $11.13 million at December 31, 1997, reflecting the following changes:
June 30, December 31, Increase 1998 1997 (Decrease) -------- ------------ ---------- ($ in thousands) Cash and Cash Equivalents $ 259 $ 2 $ 257 Restricted Cash 2,023 1,173 850 Receivables 141 184 (43) Land and improvement inventories 890 8,992 (8,102) Net property and equipment 12 18 (6) Other assets 163 759 (596) ------ ------- ------- $3,488 $11,128 $(7,640) ====== ======= =======
Liabilities were $24.9 million at June 30, 1998 compared to $37.0 million at December 31, 1997, reflecting the following changes among categories. 14 15 PGI INCORPORATED AND SUBSIDIARIES Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
June 30, December 31, Increase 1998 1997 (Decrease) -------- ------------ ---------- ($ in thousands) Accounts payable $ 73 $ 285 $ (212) Other liabilities 1,503 1,727 (224) Accrued interest 10,572 13,328 (2,756) Credit agreements - primary lender 1,000 7,344 (6,344) Notes and mortgages payable 1,198 3,750 (2,552) Convertible subordinated debentures payable 9,059 9,059 - Convertible debentures payable 1,500 1,500 - ------- ------- -------- $24,905 $36,993 $(12,088) ======= ======= ========
The Company has aggressively taken steps to curtail and simplify operations as well as concentrate on major bulk sales of its undeveloped acreage. The Company remains totally dependent upon the sale of property to fund its operations and debt service requirements. The Company remains in default of the entire principal plus interest on its convertible subordinated debentures. The amounts due are as indicated in the following table:
June 30, 1998 ------------------------ Principal Unpaid Amount Due Interest ---------- -------- ($ in thousands) Convertible subordinated debentures due June 1, 1991 $1,034 $ 575 Convertible subordinated debentures due May 1, 1992 8,025 4,841 ------ ------ $9,059 $5,416 ====== ======
The Company does not have funds available to make any payments of either principal or interest on the above debentures. 15 16 PGI INCORPORATED AND SUBSIDIARIES PART II Other Information Item 1 Legal Proceedings In 1994, the Citrus County Tax Assessor denied agricultural exemption status for the undeveloped Sugarmill Woods property and the Company was forced to sue the County to reclaim the tax benefit. In 1995, the Citrus County Tax Assessor again denied agricultural exemption status for the undeveloped Sugarmill Woods property, but was overruled by the Value Adjustment Board. As a result, the Tax Assessor sued Sugarmill Woods, and was again successful in denying the agricultural exemption for the property. The Company won on appeal, but the Tax Assessor appealed to the Supreme Court of Florida to reinstate the exemption. At this time the outcome of the appeal cannot be determined. At the closing of the bulk acreage sale a restricted escrow was established in the amount of $557,000 for payment of the taxes upon settlement of the litigation. Item 2 Changes in Securities Not applicable. Item 3 Defaults Upon Senior Securities See discussion in Item 2 with respect to defaults on the Company's convertible subordinated debentures and collateralized convertible debentures, which discussion is incorporated herein by this reference. Item 4 Submission of Matters to a Vote of Security Holders Not applicable. Item 5 Other Information Not applicable. Item 6 Exhibits and Reports on Form 8-K (a) Exhibits - reference is made to the Exhibit Index contained on page 18 herein for a list of exhibits filed under this Item. (c) Form 8-K, with exhibits, related to the Company's sale of substantial acreage, was filed May 28, 1998. 16 17 PGI INCORPORATED AND SUBSIDIARIES SIGNATURES In accordance with the requirement of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PGI INCORPORATED ------------------------- (Registrant) Date: August 14, 1998 /s/Laurence A. Schiffer ------------------------------ -------------------------------- Laurence A. Schiffer President 17 18 PGI INCORPORATED AND SUBSIDIARIES
EXHIBIT INDEX - ------------- 2. Inapplicable. 3.1 Articles of Incorporation of PGI, Inc. as amended through December 22, 1997. 4. Inapplicable. 10. Inapplicable. 11. Statements re: Computations of Per Share Earnings. (See Note 3 to the consolidated financial statements.) 15. Inapplicable. 18. Inapplicable. 19. Inapplicable. 22. Inapplicable. 23. Inapplicable. 24. Inapplicable. 27. Financial Data Schedule
18 EX-3.1 2 ARTICLES OF INCORPORATION 1 The undersigned, Laurence A. Schiffer, hereby certifies that set forth below is a true, accurate, correct and complete copy of the Articles of Incorporation of PGI Incorporated, as amended through December 22, 1997 (except for the Certificate of the Designation, Powers, Preferences and Relative Rights and the Qualifications, Limitations or Restrictions thereof which have not been set forth in the Articles of Incorporation as amended, of the Class A Cumulative Preferred Stock, effective as of March 24, 1987 (filed as Exhibit 3.2 to the Registrant's Form 10-K Annual Report for the year ended December 31, 1986)), and that there have been no other amendments thereto through the date hereof and that such Articles of Incorporation as amended remain in full force and effect on and as of the date hereof. /s/ Laurence A. Schiffer ------------------------------------------ Laurence A. Schiffer, Secretary, PGI Incorporated August 14, 1998 ARTICLES OF INCORPORATION OF PGI INCORPORATED AS AMENDED THROUGH DECEMBER 22, 1997 ARTICLE I --------- The name of this corporation shall be: PGI Incorporated. ARTICLE II ---------- The general nature of the business to be transacted shall be: (a) To acquire, by purchase or in any other manner, own, hold, maintain, work, develop, sell, convey, lease, mortgage, exchange, improve and in any other manner to deal in and with property, real, personal and mixed, tangible and intangible, of every kind, nature and description wherever located, and any interest or right therein of any kind, nature or description. (b) To engage in the business of a holding company and to acquire by purchase or in any other manner any mercantile, commercial or other business, trade or enterprise, and any interest therein, to enter into and engage in any such business, trade or enterprise, and to do all things appropriate thereto. (c) To engage in the general contracting, construction, and manufacturing business for the construction and manufacture of any and all types of buildings, structures and products of every kind, nature and description, and to buy, sell, manufacture, trade in and otherwise deal with any and all types of buildings, structures and products. (d) To do any and all of the above activities, directly or indirectly, alone or in combination with others, through participation in partnerships, joint ventures, trusts or any other form of business entity, as principal or as agent or broker for others. (e) To carry on any business, occupation, undertaking or enterprise and to exercise any power of authority which may be done by a private corporation organized and existing under and by virtue of Chapter 608, Florida Statute, 1967, and it being the intention that this corporation may conduct and transact any business lawfully authorized and not prohibited by Chapter 608, Florida Statute, 1967. 2 ARTICLE III ----------- The maximum number of shares of capital stock which this corporation is authorized to issue or to have outstanding at any time shall be Thirty Million (30,000,000) shares of which Twenty Five Million (25,000,000) shares shall be common stock of $.10 par value, and Five Million (5,000,000) shares shall be preferred stock of $1.00 par value. Each holder of common stock shall have one vote for each share of stock held. At all elections of directors of the corporation each holder of stock possessing voting power shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected and for whose election he has a right to vote, but shall not have the right to cumulate such votes. The whole or any part of the capital stock of this corporation shall be payable in lawful money of the United States of America, property, or services at a valuation to be fixed by the directors of the corporation, provided, however, that such valuation be at least equivalent to the full par value of the stock so to be issued. No holder of shares of any class of stock of this corporation shall have any preemptive or preferential right to subscribe for, purchase, or otherwise acquire or receive any shares of any class of stock hereafter issued by this corporation, whether now or hereafter authorized, or any shares of any class of stock of this corporation now or hereafter acquired and held by this corporation as treasury stock and subsequently reissued and sold or otherwise disposed of, or any bonds, certificates of indebtedness, notes, or any other securities convertible into or exchangeable for, or any warrants or rights to purchase or otherwise acquire, any shares of any class of stock of this corporation, whether now or hereafter authorized. The preferred stock may be issued from time to time in one or more series, upon resolution or resolutions providing for such series adopted by the Board of Directors, with such distinctive designations as shall be stated in such resolution or resolutions. The resolution or resolutions providing for the issue of shares of a particular series shall fix, subject to applicable laws and provisions of this Article III, the designation, rights, preferences and limitations of the shares of each such series. The authority of the Board of Directors with respect to each series shall include, but not be limited to, determination of the following: (a) the number of the shares constituting such series, including the authority to increase or decrease such number, and the distinctive designation of such series; (b) the dividend rate of the shares of such series, whether the dividends shall be cumulative and, if so, the date from which they shall be cumulative, and the relative rights of priority, if any, of payment of dividends on shares of such series; -2- 3 (c) the right, if any, of the corporation to redeem shares of such series and the terms and conditions of such redemption including the redemption price; (d) the rights of shares in case of a voluntary or involuntary liquidation, dissolution or winding up of the corporation, and the relative rights of priority, if any, of payment of shares of such series; (e) the voting rights, if any, for such series and the terms and conditions under which such voting rights may be exercised; (f) the obligation, if any, of the corporation to retire shares of such series pursuant to a retirement or sinking fund or fund of a similar nature and the terms and conditions of such obligation; (g) the terms and conditions, if any, upon which shares of such series shall be convertible into or exchangeable for shares of stock of any other class or classes or of any other series of preferred stock, including the price or prices or the rate or rates of conversion or exchange and the terms of adjustment, if any; and (g) any other rights, preferences or limitations of the shares of such series as may be permitted by law. ARTICLE IV ---------- The amount of capital with which this corporation will begin business will be not less than Five Hundred Dollars ($500.00). ARTICLE V --------- This Corporation is to have perpetual existence. ARTICLE VI ---------- The principal office of the corporation shall be at 1796 West Marion Avenue, Punta Gorda, Florida. ARTICLE VII ----------- The Board of Directors of the corporation shall be comprised of eight (8) members, all of whom shall be elected annually. The number of directors may be increased or decreased from time to time in the manner provided in the By-Laws. Whenever any vacancy on the Board of -3- 4 Directors shall occur due to death, resignation, retirement, removal, increase in the number of directors or otherwise, a majority of directors in office, although less than a majority of the entire Board, may fill the vacancy or vacancies for the balance of the unexpired term or terms, at which time a successor or successors shall be duly elected by the shareholders and shall qualify. ARTICLE VIII ------------ The names and post office addresses of the first Board of Directors, who, subject to the provisions of the Certificate of Incorporation, the by-laws and the corporation laws of the State of Florida, shall hold office for the first year of the corporation's existence, or until their successors are elected and have qualified, are as follows: NAME ADDRESS Wilber H. Cole 6021 Maynada Street Coral Gables, Florida Mark Marks 1905 N. E. 124th Street North Miami, Florida Beatrice M. Marks 1905 N. E. 124th Street North Miami, Florida ARTICLE IX ---------- The names and post office addresses of each subscriber to the Certificate of Incorporation and the number of shares that each agree to take are as follows, to-wit: NAME ADDRESS SHARES Wilber H. Cole 6021 Maynada Street 667 Common - Coral Gables, Florida No par $167.00 Mark Marks 1905 N. E. 124th Street 667 Common - North Miami, Florida No par $167.00 Beatrice M. Marks 1905 N. E. 124th Street 666 Common - North Miami, Florida No par $167.00 The proceeds of the stock subscribed for will be at least as much as the amount necessary to begin business. -4- 5 ARTICLE X --------- No shareholder shall have a pre-emptive right to purchase any new or additional shares of the corporation, whenever issued by the corporation, whether sold for cash or issued for other consideration, and whether of the same kind, class or series which the shareholder already holds. ARTICLE XI ---------- The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. -5- EX-27 3 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1998 APR-01-1998 JUN-30-1998 2,282,000 0 847,000 (706,000) 890,000 0 212,000 (200,000) 3,488,000 0 12,757,000 532,000 0 2,000,000 (23,417,000) 3,488,000 13,447,000 14,682,000 8,427,000 8,437,000 229,000 0 596,000 5,420,000 104,000 0 0 0 0 5,316,000 .97 .97 CURRENT ASSETS AND CURRENT LIABILITIES VALUES ARE ZERO BECAUSE OF AN UNCLASSIFIED BALANCE SHEET.
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