UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission file number: 1-8967
ATLANTIC GULF COMMUNITIES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 59-0720444
(State or jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4800 N. FEDERAL HWY, SUITE 105 E
BOCA RATON, FLORIDA 33431
(Address of principal executive offices) (Zip Code)
(561) 620-0029
(Registrant's telephone number, including area code)
APPLICABLE ONLY TO CORPORATE ISSUERS:
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.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest date practicable:
There were 12,382,241 shares of the Registrant's common stock, $.10 par value
per share (the "Common Stock"), outstanding as of May 8, 2000.
<PAGE>
SPECIAL NOTE ABOUT FORWARD LOOKING STATEMENTS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED IN THIS QUARTERLY REPORT ON FORM
10-Q FOR THE FISCAL QUARTER ENDED MARCH 31, 2000, CERTAIN MATTERS DISCUSSED
HEREIN, INCLUDING PART II., ITEM 2., "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," CONTAIN FORWARD LOOKING
STATEMENTS BASED ON MANAGEMENT'S EXPECTATIONS REGARDING, AND EVALUATIONS OF
CURRENT INFORMATION ABOUT, THE COMPANY'S BUSINESS THAT INVOLVE RISKS AND
UNCERTAINTIES, AND ARE SUBJECT TO FACTORS THAT COULD CAUSE ACTUAL FUTURE RESULTS
TO DIFFER, BOTH ADVERSELY AND MATERIALLY, FROM CURRENTLY ANTICIPATED RESULTS,
INCLUDING, WITHOUT LIMITATION, THE EFFECT OF ECONOMIC AND MARKET CONDITIONS; THE
CYCLICAL NATURE OF THE REAL ESTATE MARKET IN LUXURY/RESORT AND NON-LUXURY/RESORT
MARKETS IN FLORIDA AND COLORADO; THE INDUSTRY AND INDUSTRY SEGMENT CONDITIONS
AND DIRECTIONS; INTEREST RATES; THE AVAILABILITY AND COST OF FINANCING REAL
ESTATE ACQUISITIONS AND DEVELOPMENTS; CONSTRUCTION COSTS; WEATHER; THE
AVAILABILITY OF HIGH QUALITY REAL ESTATE PARCELS IN FLORIDA AND COLORADO; THE
AVAILABILITY AND COST OF MATERIALS AND LABOR; CONSUMER PREFERENCES AND TASTES;
GOVERNMENTAL REGULATION; COMPETITIVE PRESSURES; THE COMPANY'S OWN DEBT AND
EQUITY STRUCTURE AND RELATED FINANCING CONTINGENCIES AND RESTRICTIONS;
MANAGEMENT LIMITATIONS; THE COMPANY'S ABILITY TO CLOSE FINANCINGS OF NEW REAL
ESTATE AT PARTICULAR TIMES RELATIVE TO THE COMPANY'S CASH FLOW NEEDS AT SUCH
TIMES; THE COMPANY'S ABILITY TO REFINANCE EXISTING INDEBTEDNESS; LEGISLATION;
RESOLUTION OF PENDING LITIGATION IN WHICH THE COMPANY IS A DEFENDANT; THE
SUCCESS OR LACK THEREOF OF THE COMPANY'S CURRENT DEVELOPMENT PROJECTS; AND THE
SUCCESS OR LACK THEREOF OF THE COMPANY'S STRATEGIC ALTERNATIVE INITIATIVE.
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999..........................................2
Consolidated Statements of Operations for the Three
Months Ended March 31, 2000 and 1999...........................3
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2000 and 1999...........................4
Notes to Consolidated Financial Statements.....................5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................21
Item 2. Changes in Securities........................................21
Item 3. Defaults Upon Senior Securities..............................21
Item 4. Submission of Matters to a Vote of Security Holders..........21
Item 5. Other Information............................................21
Item 6. Exhibits and Reports on Form 8-K.............................21
SIGNATURES...................................................................22
<PAGE>
UNLESS THE CONTEXT CLEARLY INDICATES OTHERWISE, ALL REFERENCES HEREIN TO (1)
"ATLANTIC GULF" REFER SOLELY TO ATLANTIC GULF COMMUNITIES CORPORATION, (2) THE
"COMPANY" INCLUDE ATLANTIC GULF AND ITS DIRECT AND INDIRECT WHOLLY OWNED
SUBSIDIARIES AND (3) THE "PREDECESSOR COMPANY" REFER SOLELY TO GENERAL
DEVELOPMENT CORPORATION (ATLANTIC GULF'S CORPORATE PREDECESSOR) AND ITS DIRECT
AND INDIRECT SUBSIDIARIES.
PART I. FINANCIAL INFORMATION
[THE REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]
1
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999
(in thousands, except share amounts and par value)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
ASSETS --------- ---------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 3,469 $ 8,148
Restricted cash and cash equivalents 1,895 2,147
Contract receivables, net 1,826 2,048
Mortgages, notes and other receivables, net 6,198 7,926
Land and residential inventory 129,466 121,116
Property, plant and equipment, net 10,097 12,750
Other assets, net 5,736 8,817
--------- ---------
Total assets $ 158,687 $ 162,952
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Accounts payable and accrued liabilities $ 20,971 $ 19,386
Other liabilities 10,363 9,778
Notes and mortgages payable 139,739 145,378
--------- ---------
171,073 174,542
Commitments and Contingencies
Redeemable Preferred Stock
Series A, 20%, $.01 par value, 2,500,000
shares authorized;
2,500,000 shares issued and outstanding,
having a liquidation
preference of $41,742 and $39,754 as of March
31, 2000
and December 31, 1999, respectively 40,517 38,310
Series B, 20%, $.01 par value; 2,000,000 shares
authorized; 2,000,000 shares issued and outstanding,
having a liquidation preference of $33,054 and
$31,480 as of March 31, 2000 and December 31, 1999,
respectively 32,241 30,531
--------- ---------
72,758 68,841
Common stockholders' deficit
Common stock, $.10 par value, 70,000,000
shares authorized; 12,382,241 and 12,821,432
shares issued and outstanding as of March
31, 2000 and December 31, 1999, respectively 1,283 1,282
Contributed capital 98,483 102,401
Accumulated deficit (178,025) (177,229)
Accumulated other comprehensive loss (6,746) (6,746)
Treasury stock, 439,191 shares, at cost (139) (139)
--------- ---------
Total common stockholders' deficit (85,144) (80,431)
--------- ---------
Total liabilities and common stockholders' deficit $ 158,687 $ 162,952
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended March 31, 2000 and 1999
(in thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
-----------------------
2000 1999
---------- ----------
Revenues:
Real estate sales:
Homesite $ 6,651 $ 7,642
Commercial 2,902 5,318
---------- ----------
Total real estate sales 9,553 12,960
Other operating revenue 2,632 2,259
Interest income 798 881
---------- ----------
Total revenues 12,983 16,100
---------- ----------
Costs and expenses:
Cost of real estate sales:
Homesite 5,789 6,887
Commercial 2,394 3,903
---------- ----------
Total cost of real estate sales 8,183 10,790
Selling expense 1,756 1,833
Operating expense 898 377
Real estate costs 653 1,737
General and administrative expense 711 3,653
Cost of borrowing, net of amounts capitalized 1,152 1,787
Other expense 1,136 190
---------- ----------
Total costs and expenses 14,489 20,367
---------- ----------
Operating loss (1,506) (4,267)
Other income:
Reorganization items 710 539
---------- ----------
Total other income 710 539
---------- ----------
Net loss (796) (3,728)
Less:
Accrued preferred stock dividends 3,562 2,931
Accretion of preferred stock to redemption
amount 356 344
Modification of preferred stock security
interest - 2,380
---------- ----------
3,918 5,655
---------- ----------
Net loss applicable to common stock $ (4,714) $ (9,383)
========== ==========
Basic and diluted net loss per common share $ (0.38) $ (0.77)
========== ==========
Weighted average common shares outstanding 12,382 12,163
========== ==========
See accompanying notes to consolidated financial statements.
3
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2000 and 1999
(in thousands of dollars)
(Unaudited)
Three Months Ended
March 31,
2000 1999
-------- --------
Cash flows from operating activities:
Net loss $ (796) $ (3,728)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 163 796
Other expense - 30
Inventory valuation reserves 1,138 -
Loss on sale of property, plant and equipment (2) -
Other net changes in assets and liabilities:
Restricted cash 252 (37)
Receivables 1,585 2,314
Land and residential inventory (5,712) (3,495)
Other assets 2,236 (4,256)
Accounts payable and accrued liabilities 5,829 (2,133)
Other liabilities (3,659) 252
-------- --------
Net cash provided by (used in) operating
activities 1,034 (10,257)
-------- --------
Cash flow from investing activities:
Additions to property, plant and equipment, net (74) (117)
-------- --------
Net cash used in investing activities (74) (117)
-------- --------
Cash flows from financing activities:
Borrowings under credit agreements 8,373 81,838
Repayments under credit agreements (14,012) (73,434)
Proceeds from issuance of common stock - 300
-------- --------
Net cash (used in) provided by financing
activities (5,639) 8,704
-------- --------
Decrease in cash and cash equivalents (4,679) (1,670)
Cash and cash equivalents at beginning of period 8,148 9,413
-------- --------
Cash and cash equivalents at end of period $ 3,469 $ 7,743
======== ========
Supplemental cash flow information:
Interest payments, net of amounts capitalized $ 384 $ 1,328
======== ========
See accompanying notes to consolidated financial statements.
4
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2000
(Unaudited)
(1) The March 31, 2000 financial statements are unaudited. In management's
opinion, the interim financial statements reflect all adjustments,
principally consisting of normal recurring accruals, necessary for a fair
presentation of the financial position and results of operations. Results
for interim periods are not necessarily indicative of results for the full
year. For a complete description of the Company's accounting policies, see
"Notes to Consolidated Financial Statements" included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999 ("1999"),
as filed with the Securities and Exchange Commission (the "SEC") on April
14, 2000 ("1999 Form 10-K"). Certain prior year amounts have been
reclassified to conform with the fiscal year 2000 ("2000") presentation.
(2) Net income (loss) per share of common stock of the Company ("Common
Stock") is computed by (a) deducting accrued preferred stock dividends,
accretion of preferred stock to redemption amount and other preferred
stock charges from net income (loss) to determine net income (loss)
applicable to Common Stock and (b) then dividing net income (loss)
applicable to Common Stock by the weighted average number of shares of
Common Stock outstanding during the periods. The effect of any outstanding
warrants and options to purchase Common Stock on the per share computation
was anti-dilutive during the periods.
(3) The Company capitalizes interest primarily on land inventory being
developed for sale which is subsequently charged to Cost of real estate
sales when the related asset is sold. Capitalized interest was $6,405,000
and $4,154,000 for the three months ended March 31, 2000 and 1999,
respectively.
(4) Revenue from the sale of land is recognized when all the criteria for
sales pursuant to SFAS 66, Accounting for Sales of Real Estate, have been
met.
(5) On August 4, 1999, the Company amended the 1996 Non-Employee Directors'
Stock Plan to eliminate the issuance of Common Stock to its Non-Employee
Directors effective as of October 1, 1999 and to provide for the payment
of (1) an annual retainer fee of $25,000 payable quarterly in advance in
$6,250 installments, in cash, to each Non-Employee Director other than Mr.
Rutherford, Mr. Gropper and the "Apollo Directors", and (2) an annual
retainer fee of $10,000 payable quarterly in advance in $2,500
installments, in cash, to Mr. Gropper (for so long as he is a Non-Employee
Director) and the Apollo Directors. For purposes of the Stock Plan,
"Apollo Directors" are the Non-Employee Directors appointed by AP-AGC, LLC
pursuant to that certain Amended and Restated Investment Agreement dated
as of February 7, 1997, as amended. In accordance with the August 4, 1999
amendment, no common stock was issued to Non-Employee Directors for the
three months ended March 31, 2000.
5
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2000
(Unaudited)
(6) Redeemable preferred stock (which includes the Series A Preferred Stock
and the 20% Cumulative Redeemable Convertible Preferred Stock, Series B
(the "Series B Preferred Stock")) consisted of the following at March 31,
2000, December 31, 1999, and March 31, 1999 (in thousands of dollars):
March 31, December 31, March 31,
2000 1999 1999
-------- -------- --------
SERIES A PREFERRED STOCK:
Gross proceeds $ 25,000 $ 25,000 $ 25,000
Accrued dividends 16,742 14,754 9,342
-------- -------- --------
Liquidation Preference amount 41,742 39,754 34,342
Less issue costs (3,104) (3,104) (3,104)
Less warrants purchased (300) (300) (300)
Plus accretion of preferred stock to
redemption amount 2,179 1,960 1,313
-------- -------- --------
Total Series A Preferred Stock 40,517 38,310 32,251
-------- -------- --------
SERIES B PREFERRED STOCK:
Private Placement June 24, 1997:
Gross proceeds 10,000 10,000 10,000
Accrued dividends 7,170 6,352 4,126
-------- -------- --------
Liquidation Preference amount 17,170 16,352 14,126
Less issue costs (950) (950) (950)
Less warrants purchased (120) (120) (120)
Plus accretion of preferred stock to
redemption amount 702 634 434
-------- -------- --------
16,802 15,916 13,490
-------- -------- --------
Rights Offering November 19, 1997:
Gross proceeds 10,000 10,000 10,000
Accrued dividends 5,884 5,128 3,068
-------- -------- --------
Liquidation Preference amount 15,884 15,128 13,068
Less issue costs (950) (950) (950)
Less warrants purchased (120) (120) (120)
Plus accretion of preferred stock to
redemption amount 625 557 356
-------- -------- --------
15,439 14,615 12,354
-------- -------- --------
Total Series B Preferred Stock 32,241 30,531 25,844
-------- -------- --------
Total Redeemable Preferred Stock $ 72,758 $ 68,841 $ 58,095
======== ======== ========
6
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2000
(Unaudited)
(7) During the three months ended March 31, 2000 and 1999, comprehensive loss
consisted only of the net losses for those periods.
(8) Segment Reporting
THREE MONTHS ENDED MARCH 31, 2000:
Non-
Luxury/ Luxury/
Resort Resort Predecessor
Operations Operations Assets Other Total
------------------------------------------------------
Total Revenues $ 6,039 $ 2,167 $ 1,347 $ 3,430 $12,983
======= ======= ======== ======= =======
Gross Margin $ 1,222 $ 38 $ 110 $ - $ 1,370
======= ======= ======== =======
Inventory valuation reserve - - (1,138) - (1,138)
-------
Unallocated revenues
(expenses), net (1,028)
-------
Net Loss $ (796)
=======
THREE MONTHS ENDED MARCH 31, 1999:
Non-
Luxury/ Luxury/
Resort Resort Predecessor
Operations Operations Assets Other Total
------------------------------------------------------
Total Revenues $ 1,749 $ 9,324 $ 1,887 $ 3,140 $16,100
======= ======= ======== ======= =======
Gross Margin $ 308 $ 1,641 $ 221 $ - $ 2,170
======= ======= ======== =======
Unallocated revenues
(expenses), net (5,898)
-------
Net Loss $(3,728)
=======
(9) The Company is currently in default under project indebtness for the
Chenoa Project. Management of the Company is in negotiations with its
lenders to address such defaults.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CURRENT BUSINESS
The Company is a Florida-based, planned community development and asset
management company. The Company's business consists of:
- Luxury/Resort Operations, consisting of the acquisition, development
and sale of real estate projects ("Luxury/Resort Projects") in which
the Company engages in one or more of the following activities:
Homesite development, construction of Vertical Residential Units
(i.e., single family housing, condominiums and timeshare units), and
construction and operation of equity golf clubs and other amenities
("Amenities"). The Company's existing Luxury/Resort Projects are
located in Florida (the West Bay Club Project) and Colorado (the
Chenoa Project) ("Luxury/Resort Markets").
- Other Operations, consisting principally of:
-- Non-Luxury/Resort Operations, formerly referred to as Primary
Market Operations, consisting of the development and sale of
existing real estate projects containing residential Homesite
components such as single-family lots, multi-family lots/units
and residential tract sales ("Homesites") and/or non-residential
components such as commercial, industrial, office and
institutional ("Commercial Development") in primary markets in
Florida ("Primary Markets").
-- Receivables Portfolio Management, consisting of portfolio
management of Mortgage Receivables (as defined below) and
Contract Receivables (as defined below) resulting principally
from the sale or other disposition of Predecessor Assets (as
defined below).
As of March 31, 2000, the Company owned outright interest in two
Luxury/Resort Projects and three Non-Luxury/Resort Projects, and partial
ownership interest in one other Non-Luxury/Resort Projects.
The Company is also engaged in the orderly disposition of scattered
Predecessor Homesites (as defined below) and Predecessor Tracts (as defined
below) located in secondary markets in Florida and Tennessee (collectively,
"Predecessor Assets"). As discussed below, the continuing disposition of
Predecessor Assets is a run-off business and not part of the Company's Core
Business.
8
<PAGE>
CORE BUSINESS
GENERAL. The Company's Core Business consists of two principal business
lines:
- Development of Luxury/Resort Projects; and
- Other Operations, principally including Receivables Portfolio
Management and the sale of Non-Luxury/Resort Projects.
LUXURY/RESORT PROJECTS. The Company is engaged in the development and sale
of master planned Luxury/Resort Projects in Luxury/Resort Markets in Florida and
Colorado. A Luxury/Resort Market is typically not a Primary Market in terms of
the volume of new single family home construction permits, but relative demand
is usually strong and the average retail price of new construction is usually
much higher. Also, there is much less focus in a Luxury/Resort Market on
industrial or employment growth in the area or the quality of schools, and more
focus on natural and/or man-made amenities.
REMAINING UNSOLD LOTS/UNITS/ACRES IN THE LUXURY/RESORT PROJECTS, BY
PROJECT. The following table summarizes the number of remaining unsold
lots/units/acres at the Company's Luxury Resort Projects, by Project, as of
March 31, 2000:
<TABLE>
<CAPTION>
Lots/Units/Acres at March 31, 2000 (1)
----------------------------------------------------------------------------------
Homesites Vertical Residential Units Commercial
Single Family Single Family Multi-Family Timeshare Cabins Development
Total Total Total Total Total Total Total Total Total Total
Lots Entitled Units Entitled Units Entitled Units Entitled Acres Entitled
----------------------------------------------------------------------------------
OWNED PROPERTIES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
West Bay Club....... 172 172 59 59 416 416 - - 5 5
Chenoa.............. 412 - - - 41 - 75 - 5 -
----------------------------------------------------------------------------------
Owned Properties.... 584 172 59 59 457 416 75 - 10 5
----------------------------------------------------------------------------------
</TABLE>
(1) Varying from Project to Project, unsold units are developed, under
development or to be developed in the future.
9
<PAGE>
OTHER OPERATIONS.
NON-LUXURY/RESORT PROJECTS. The Company is engaged in the sale of
Non-Luxury/Resort Projects in Florida. The Company defines a Non-Luxury/Resort
Market as a geographic market in which more than 5,000 single family home
construction permits are issued annually.
REMAINING UNSOLD LOTS/UNITS IN THE NON-LUXURY/RESORT PROJECTS, BY
PROJECT. The following table summarizes the number of remaining unsold
lots/units at the Company's Non-Luxury Resort Projects, by Project, as of March
31, 2000:
Lots/Units at March 31, 2000 (1)
--------------------------------
Single Family
Total Total
Lots Entitled
OWNED PROPERTIES --------------------------------
Lakeside Estates (2)............... 287 287
Saxon Woods ....................... 350 350
West Meadows ...................... 477 477
--------------------------------
Subtotal Owned Properties.......... 1,114 1,114
-------------------------------
JOINT VENTURE PROPERTIES
Falcon Trace (3)................... 28 28
--------------------------------
Subtotal Joint Venture Properties.. 28 28
--------------------------------
Total All Properties............... 1,142 1,142
================================
(1) Varying from Project to Project, unsold units are developed, under
development or to be developed in the future.
(2) This Project was sold in April 2000.
(3) This Project was sold in March 2000, except for 28 remaining units
expected to close during the second quarter 2000.
RECEIVABLES PORTFOLIO MANAGEMENT. The Company is actively engaged in
the management and collection of a portfolio of (1) contract receivables
originated by the Predecessor Company's homesite installment sales program (the
"Contract Receivables") and (2) mortgage receivables generated primarily from
the Company's sales of Predecessor Tracts (the "Mortgage Receivables," which,
together with the Contract Receivables, are collectively referred to as the
"Receivables Portfolio"). As of March 31, 2000 and December 31, 1999, the
portfolio of Contract Receivables had a net book value of approximately $1.8
million and $2.0 million, respectively. As of March 31, 2000 and December 31,
1999, the portfolio of Mortgage Receivables had a net book value of $4.3 million
and $6.2 million, respectively.
10
<PAGE>
PREDECESSOR ASSETS
The following table summarizes the Company's Predecessor Homesite
Inventory by secondary market area as of March 31, 2000:
<TABLE>
<CAPTION>
PREDECESSOR HOMESITE INVENTORY
------------------------------
(IN HOMESITES)
Other Total
Market Area Standard Developed Buildable Other Predecessor
Buildable Lots (1) Reserved (2) Restricted (3) Homesites
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
North Port 3,403 9 70 128 3,610
Port Charlotte 482 67 1,667 334 2,550
Port St. Lucie 171 27 316 48 562
Port Malabar 49 1 1,756 1,545 3,351
Port Labelle 740 - 32 1,052 1,824
Silver Springs Shores 2,345 79 228 278 2,930
Cumberland Cove 179 - - 8 187
Other 28 - 30 3 61
----------------------------------------------------------------
Total 7,397 183 4,099 3,396 15,075
================================================================
</TABLE>
(1) Includes commercial/industrial and other premium lots.
(2) Includes 3,795 lots held for Utility Reserves.
(3) Represents Predecessor Homesites which may not be buildable due to
lack of utility availability or engineering or title issues, and may
only be sold under certain conditions. The Company's inventory of
Predecessor Homesites that are not buildable has declined and is
expected to decline further as currently non-buildable Predecessor
Homesites become buildable. These Predecessor Homesites become
buildable as the communities in which these lots are located grow
and extend utility services to these lots and the Company satisfies
title or engineering issues with respect to these lots. The
Company's plans are to continue to take the appropriate actions to
convert these lots to buildable Predecessor Homesites consistent
with market demand and to monetize these assets and repay debt.
11
<PAGE>
The following table summarizes the Company's Predecessor Commercial Development
Inventory by secondary market area as of March 31, 2000:
PREDECESSOR COMMERCIAL DEVELOPMENT INVENTORY
--------------------------------------------
Total
Market Area Acres
---------------------- -----------
North Port 307
Port Charlotte 847
Port St. Lucie 218
Port Malabar 756
Port Labelle 230
Silver Springs Shores 31
Cumberland Cove 685
Other 39
-----------
Total 3,113
===========
The decrease in inventory from December 31, 1999 is primarily a result of
sales activity during the intervening period in accordance with the Company's
plan of disposal of Predecessor Assets. See PART I, ITEM 1. BUSINESS -
PREDECESSOR ASSETS of the 1999 Form 10-K for information concerning the
Predecessor Homesite and Predecessor Commercial Development Inventory.
12
<PAGE>
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
The Company's results of operations for the three months ended March 31,
2000 and 1999, respectively, are summarized below:
COMBINING RESULTS OF REAL ESTATE OPERATIONS
-------------------------------------------
Three Months Ended March 31, 2000
(in thousands)
Non-
Luxury/ Luxury/
Resort Resort Predecessor
Operations Operations Assets Total
--------------------------------------------
Revenues:
Real estate sales
Homesite............... $ 3,986 $ 2,167 $ 498 $ 6,651
Commercial............. 2,053 - 849 2,902
--------------------------------------------
Total real estate sales... 6,039 2,167 1,347 9,553
Costs and expenses:
Cost of real estate sales
Homesite............... 3,209 2,129 451 5,789
Commercial............. 1,608 - 786 2,394
--------------------------------------------
Total cost of real estate
sales........................ 4,817 2,129 1,237 8,183
--------------------------------------------
Gross margin real estate
sales ....................... $ 1,222 $ 38 $ 110 $ 1,370
============================================
Results of Joint Venture
Operations(1)................ $ - $(1,138) $ - $(1,138)
============================================
(1) Included in "other expense" in the Consolidated Statements of Operations.
13
<PAGE>
COMBINING RESULTS OF REAL ESTATE OPERATIONS
-------------------------------------------
Three Months Ended March 31, 1999
(in thousands)
Non-
Luxury/ Luxury/
Resort Resort Predecessor
Operations Operations Assets Total
--------------------------------------------
Revenues:
Real estate sales
Homesite............... $ 1,749 $ 4,824 $ 1,069 $ 7,642
Commercial............. - 4,500 818 5,318
--------------------------------------------
Total real estate sales... 1,749 9,324 1,887 12,960
Costs and expenses:
Cost of real estate sales
Homesite............... 1,441 4,444 1,002 6,887
Commercial............. - 3,239 664 3,903
--------------------------------------------
Total cost of real estate
sales........................ 1,441 7,683 1,666 10,790
--------------------------------------------
Gross margin real estate
sales ....................... $ 308 $ 1,641 $ 221 $ 2,170
============================================
Results of Joint Venture
Operations(1)................ $ (115) $ (75) $ - $ (190)
============================================
(1) Included in "other expense" in the Consolidated Statements of Operations.
OVERVIEW. The Company reported a net loss applicable to Common Stock of
approximately $4.7 million in the first three months of 2000, compared to a net
loss of $9.4 million applicable to Common Stock in the first three months of
1999. The decrease in net loss of approximately $4.7 million was due primarily
to (1) a $2.9 million decrease in general and administrative expenses, (2) a
$1.7 million decrease in total preferred stock charges, (3) a $1.1 million
decrease in real estate costs and (4) a $635,000 decrease in the cost of
borrowing, partially offset by (6) a $1.1 million reserve charge reducing the
carrying value of the Falcon Trace Joint Venture Project and (7) a $800,000
decrease in sales gross margin.
LUXURY/RESORT OPERATIONS.
HOMESITES. Revenues from Homesite sales increased by approximately
$2.3 million to $4.0 million in the first three months of 2000, compared to $1.7
million in the first three months of 1999. The $2.3 million increase was due
primarily to the increase in marketing and public awareness for the West Bay
Club Project. Homesite sales began at the West Bay Club Project during the first
three months of 1999. The Homesite sales gross margin percentage was
approximately 19.5% in the first three months of 2000, compared to 17.6% in the
first three months of 1999. The 1.9% increase in Homesite sales gross margin was
due primarily to the increase in unit sales prices at the West Bay Club Project.
14
<PAGE>
As of March 31, 2000, the Company had under contract approximately 153
Homesites for $10.3 million in the West Bay Club Project. As of December 31,
1999 and March 31, 1999, the Company had under contract approximately 156 and 13
Homesites for $8.3 million and $3.1 million, respectively, in the West Bay Club
Project.
COMMERCIAL DEVELOPMENT. Revenues from Commercial Development were
approximately $2.1 million in the first three months of 2000, compared to $0 in
the first three months of 1999. The $2.1 million increase was primarily due to
the Albertson's sale at the West Bay Project during the first three months of
2000. Homesite sales began at the West Bay Club Project during the first three
months of 1999. The Commercial Development sales gross margin percentage was
approximately 21.7% in the first three months of 2000.
JOINT VENTURES. Results of Joint Ventures in the first three months of
2000 were $0, compared to a net loss of $115,000 for the first three months of
1999. The $115,000 decrease in Joint Venture net loss was due to the sale of the
Jupiter Ocean Grande Project during 1999.
NON-LUXURY/RESORT OPERATIONS.
HOMESITES. Revenues from Homesite sales decreased by approximately
$2.6 million to $2.2 million in the first three months of 2000, compared to $4.8
million in the first three months of 1999. The $2.6 million decrease was due
primarily to a declining inventory balance in 2000 as compared to 1999. Total
inventory decreased significantly from the final sale of The Trails of West
Frisco Project in December 1999. The Homesite sales gross margin decreased by
approximately 6.1% to 1.8% in the first three months of 2000, compared to 7.9%
in the first three months of 1999. The 6.1% decrease in Homesite sales gross
margin was due primarily to a decline in the gross margin associated with the
Lakeside Estates Project. The higher than expected development costs at the
Lakeside Estates Project resulted in less than break-even margins.
As of March 31, 2000, the Company had under contract approximately 66
Homesites for $2.1 million in the West Meadows Project. As of December 31, 1999,
the Company had under contract approximately 72 Homesites for $3.2 in the
Lakeside Estates, the Saxon Woods and the West Meadows Projects. And, as of
March 31, 1999, the Company had under contract approximately 648 Homesites for
$19.8 million in the Lakeside Estates, the Saxon Woods, the West Meadows and The
Trails of West Frisco Projects.
As of March 31, 2000, the Company was party to a contract to sell its
Lakeside Estates and West Meadows Projects. The closing of the sales are
scheduled to occur during the second quarter of 2000. See ITEM 2. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
BUSINESS DEVELOPMENTS IN 2000 for further details on the sale of the Lakeside
Estates Project.
15
<PAGE>
COMMERCIAL DEVELOPMENT. Revenues from Commercial Development were $0
in the first three months of 2000, compared to $4.5 million in the first three
months of 1999. The $4.5 million decrease in revenues from Commercial
Development was due to the lack of inventory for sale. In January 1999, the
Company sold the remaining 26 acres of Non-Luxury/Resort property, located at
the West Meadows Project, for $4.5 million.
JOINT VENTURES. Results from Joint Ventures decreased by
approximately $1.0 million to $(1.1) million in the first three months of 2000,
compared to $(75,000) in the first three months of 1999. The $1.0 million
additional loss on JV Projects was primarily due to an investment valuation
reserve charge of approximately $1.1 million, related to the Falcon Trace JV
Project. In March 2000, the Company sold the Falcon Trace JV Project for
approximately $6.4 million, of which no gain or loss was realized.
As of March 31, 2000, the Company's JV projects had 28 remaining Homesites
under contract, as a bulk sale, for approximately $1.0 million. As of December
31, 1999 and March 31, 1999, the Company's JV Projects had six and 1,322
Homesites under contract for approximately $282,000 and $63.7 million,
respectively, in future gross revenue, a portion of which is allocable to the
Company as a joint venturer.
Investment valuation reserve charges of $1.1 million were recognized in
the first quarter of 2000 and represent a reduction in the carrying value of the
Company's joint venture investments, based upon a review of the fair value of
the Falcon Trace JV Project.
PREDECESSOR ASSETS.
PREDECESSOR HOMESITES. Revenues from Predecessor Homesite sales
decreased by approximately $571,000 to $498,000 in the first three months of
2000, compared to $1.1 million in the first three months of 1999. The $571,000
decrease was due primarily to the elimination of sales staff responsible for the
sale of Predecessor Homesites during 1999. The Predecessor Homesite sales gross
margin percentage increased by approximately 3.1% to 9.4% in the first three
months of 2000, compared to 6.3% in the first three months of 1999. The 3.1%
increase in Predecessor Homesite sales gross margin is due primarily to an
increase in the average sales price.
As of March 31, 2000, the Company had under contract 1,109 Predecessor
Homesites for approximately $1.2 million. As of December 31, 1999 and March 31,
1999, the Company had under contract 1,103 and 111 Predecessor Homesites for
$1.6 million and $958,000, respectively.
PREDECESSOR TRACTS. Revenues from Predecessor Tract sales of
approximately $849,000 in the first three months of 2000 were comparable to
$818,000 in the first three months of 1999. A comparable number of Predecessor
Tracts were sold in the first quarter of 2000, compared to the first quarter of
1999. The Predecessor Tract sales gross margin percentage decreased by
approximately 11.5% to 7.4% in the first three months of 2000, compared to 18.9%
in the first three months of 1999. The 7.4% decrease in Predecessor Tracts sales
gross margin was consistent with the Company's accelerated plan of disposal of
its Predecessor Assets.
16
<PAGE>
As of March 31, 2000, there were pending Predecessor Tract sales
contracts or letters of intent totaling approximately $266,000. As of December
31, 1999 and March 31, 1999, there were pending Predecessor Tract sales
contracts or letters of intent totaling approximately $1.3 million and $901,000,
respectively.
OTHER RESULTS OF OPERATIONS.
OTHER OPERATING REVENUE. Other operating revenue increased by
$373,000 to approximately $2.6 million in the first three months of 2000,
compared to $2.3 million in the first three months of 1999. The $373,000
increase was primarily due to (1) $1.5 million received from the sale of land,
previously recorded in lieu of payment for a loan receivable, (2) a $595,000
increase in commission income received from the various property sales offices
and (3) a $432,000 increase in resort revenue related to the West Bay Club
Project, partially offset by (4) a $1.8 million decrease in management fee
revenue related to the Country Lakes and Sunset Lakes Joint Venture Projects
sold in 1999 and (5) a $360,000 decrease in environmental service revenue
related to the EQ Labs subsidiary sold in 1999.
OPERATING EXPENSE. Operating expense increased by approximately
$521,000 to $898,000 in the first three months of 2000, compared to $377,000 in
the first three months of 1999. The $521,000 increase was primarily due to the
growth in Amenities at the West Bay Club Project, which is directly related to
an increase in club memberships. Homesite sales began at the West Bay Club
Project during the first three months of 1999.
REAL ESTATE COSTS. Real estate costs decreased by approximately $1.1
million to $653,000 in the first three months of 2000, compared to $1.7 million
in the first three months of 1999. The $1.1 million decrease was due primarily
to the combined savings of salaries, property taxes and other administrative
expenses, which resulted from the bulk sales of Predecessor Assets in 1999.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
decreased by approximately $2.9 million to $711,000 in the first three months of
2000, compared to $3.7 million in the first three months of 1999. The $2.9
million decrease was due primarily to the combined savings in corporate
salaries, outside services, occupancy costs, utilities and other administrative
expenses, which resulted from the corporate restructuring plan implemented in
1999.
COST OF BORROWING, NET OF AMOUNTS CAPITALIZED. Cost of borrowing, net
of amounts capitalized, decreased by approximately $635,000 to $1.2 million in
the first three months of 2000, compared to $1.8 million in the first three
months of 1999. The $635,000 decrease was due primarily to the reduction of the
non-capitalized portion of corporate debt outstanding. Corporate debt decreased
from approximately $66.0 million as of December 31, 1998 to $49.8 million as of
December 31, 1999 and to $43.3 million as of March 31, 2000.
OTHER EXPENSE. Other expense increased by approximately $1.0 million
to $1.1 million in the first three months of 2000, compared to $190,000 in the
first three months of 1999. The $1.0 million increase was primarily due to a
valuation allowance recorded for Falcon Trace JV Project, based upon a review of
17
<PAGE>
fair values. Inventory reserve charges represent a reduction in the carrying
value of the Company's inventory based upon a review of the fair values.
OTHER INCOME. Other income increased by approximately $171,000 to
$710,000 in the first three months of 2000, compared to $539,000 in the first
three months of 1999. The $170,000 increase was primarily due to a $709,000
utility trust payout in March 2000.
PREFERRED STOCK CHARGES. During the first three months of 2000, the
Company recorded a $3.6 million accrual for dividends associated with its
Preferred Stock. The dividends were accumulated, but unpaid, as of March 31,
2000. The dividend rate is 20% of the liquidation preference value of the
Preferred Stock. The liquidation preference value of the Preferred Stock is $10
per share, plus accumulated and unpaid dividends. In addition, the Company
accreted $355,000 of the value of its Preferred Stock to the redemption amount
in the first three months of 1999.
In connection with the closing of the Senior Loan Facilities in February
1999, the Company issued notes totaling $1.85 million and 500,000 shares of
Common Stock at a price of $1.06 per share to AP-AGC, LLC ("Apollo") in exchange
for Apollo's (a) consent to the Company entering into the new Senior Loan
Facilities and agreement to subordinate its collateral interest in certain of
the Company's assets, (b) agreement to certain amendments to the Secured
Agreement and Investment Agreement and (c) agreement to enter into the new
Intercreditor Agreement with the lenders party to the new Senior Loan
Facilities. The total value of the consideration paid to Apollo was $2.4
million. The total of approximately $3.9 million of preferred stock charges was
charged to contributed capital in the accompanying March 31, 2000 consolidated
balance sheet.
LIQUIDITY AND CAPITAL RESOURCES
Atlantic Gulf is currently in default under project indebtedness for the
Chenoa Project. Senior management is in negotiations with its lenders to address
these defaults.
The Company's financial strategy is to generate sufficient funds from the
sale of non-Luxury/Resort Projects and Predecessor assets to retire any
remaining corporate debt and to redeem any outstanding Preferred Stock. If the
Company's financial strategy does not generate sufficient funds to retire
corporate debt and outstanding Preferred Stock and provide sufficient operating
cash flow, the Company will need to consider other alternatives, including but
not limited, a capital or debt restructuring and/or a federal bankruptcy filing.
GENERAL. As of March 31, 2000, the Company's (1) cash and cash equivalents
totaled approximately $3.5 million and (2) restricted cash and cash equivalents
totaled $1.9 million, consisting primarily of (a) escrows for the sale or
development of real estate properties, (b) funds held in trust to pay certain
bankruptcy claims and (c) various other escrow accounts. Of the $4.7 million
decrease in cash and cash equivalents during the first three months of 2000, (i)
$1.0 million was provided by operating activities, offset by (ii) $74,000 used
in investing activities and (iii) $5.6 million used in financing activities.
Cash provided by operating activities included approximately (1) $2.5
million from mortgage and commercial receivable payoffs, (2) $2.0 million from
the sale of the Falcon Trace JV Project, (3) $2.0 million from the sale of
18
<PAGE>
Predecessor Assets and other land and (4) $1.6 million in other operating
revenues, partially offset by (5) $4.5 million for construction and development
expenditures, (6) $1.6 million for interest payments and (7) $1.0 million for
corporate overhead and other operating expenses.
Cash used in investing activities consisted of approximately $74,000 of
property, plant and equipment additions.
Cash used in financing activities consisted primarily of principal
reductions of approximately $14.0 million partially offset by net borrowings of
$8.4 million under various project financings. Principal reductions of $14.0
million included $6.5 million used to payoff the Revolving Loan Facility balance
and $7.5 million used to payoff various project loans, as projects units were
sold.
OTHER MATERIAL OBLIGATIONS COMING DUE IN 2000. In addition to the $7.5
million due at the expiration of the Revolving Loan Facility on August 1, 2000,
Atlantic Gulf's other material obligations coming due in 2000 include
Project-specific debt which comes due as units in or a Project are/is sold. The
Company's 2000 business plan contemplates approximately $12 million of
expenditures for development, construction and other capital improvements, a
substantial portion of which will be funded through individual Project
development loans or joint venture arrangements, many of which are already in
place. If the Company is unable to obtain the capital resources to fund these
obligations and expenditures, the implementation of the Company's business plan
will be adversely affected, slowing the Company's anticipated revenue growth and
increasing the time necessary to achieve profitability. However, management
believes that the Company, through a combination of sources, will be able to
obtain the funds necessary to continue to implement its business plan and, at
the same time, satisfy its debt obligations as they become due.
CHENOA PROJECT FINANCING. Chenoa, formerly known as Aspen Springs Ranch,
is the Company's 5,906-acre Luxury Resort Project located in the Roaring Fork
Valley of Colorado. The Company was unable to obtain approval of its pending
amendment to the existing PUD for the project (the "PUD Approval") within the
time limits set forth in its development loan agreement. The senior lender
notified the Company that it was in default under the terms of its agreement and
ceased funding. Neither the senior lender nor the mezzanine lender have pursued
any remedies to date. The Company continues to pursue the PUD Approval, and the
Company is funding Project costs out of cash flow and other Company funds.
BUSINESS DEVELOPMENTS IN 2000
- - In March 2000, the Company sold all the property and assets (except for 28
lots) in the Falcon Trace JV Project, a jointly owned Non-Luxury/Resort
Project, for $6.4 million. The Project, which was located near Orlando,
Florida, was purchased through a joint venture formed in 1996. The
Company's share of the proceeds was $2.8 million, of which $800,000
remains in escrow until the joint venture is dissolved. The remaining 28
lots were under contract to be sold during the second quarter 2000 for
$960,000. No gain or loss was recognized from the sale of the Project.
19
<PAGE>
- - In April 2000, the Company sold the remaining 287 lots in its Lakeside
Estates Project, a wholly owned Non-Luxury/Resort Project, for $2.7
million. The Company acquired the Project, comprised of 1,379 lots and
located near Orlando, Florida, in 1994. The Lakeside Estates Project sale
resulted in a loss of approximately $3.1 million, which was charged
against "Inventory valuation reserve" in the statement of operations as of
December 31, 1999.
As of May 8, 2000, the Company had under contract the West Meadows Project
and has received offers to purchase the Saxon Woods.
While the Company intends to diligently pursue all Project sale
opportunities, there can be no assurance that any such sales (including Projects
currently under contract) will be consummated or, if consummated, that the
Company will realize the anticipated (1) amount of sales proceeds therefrom
and/or (2) overhead cost savings therefrom.
20
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There were no new developments since April 14, 2000, with respect to the
legal proceedings referenced in the Company's Annual Report on Form 10-K for the
year ended December 31, 1999, as filed with the Securities and Exchange
Commission (the "SEC") on April 14, 2000 (the "1999 Form 10-K").
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
See PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - LIQUIDITY AND CAPITAL RESOURCES - CHENOA
PROJECT FINANCING above for a discussion regarding the senior and mezzanine
loans in default.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K (consecutive numbering,
see the 1999 Form
10-K)
None.
(b) Current Reports on Form 8-K
1. Current Report on Form 8-K, filed with the SEC on March 13, 2000,
describing the principal terms of the Broad River LLC Service
Agreement, which became effective as of March 1, 2000.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATLANTIC GULF COMMUNITIES CORPORATION
/s/ RICHARD S. ACKERMAN
--------------------------------
Richard S. Ackerman
President and Chief Executive Officer
Dated: May 15, 2000
/s/ EUGENE M. GIBLIN
--------------------------------
Eugene M. Giblin
Vice President and Chief Accounting Officer
Dated: May 15, 2000
22
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