<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
/X/ EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
---------------------------------------
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 -----------------------------------------------
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)
515 OLIVE STREET, SUITE 1400; ST. LOUIS, MISSOURI 63101
----------------------------------------------------------------------
(Address of principal executive offices)
(314) 982-0780
----------------------------------------------------------------------
(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 November 14, 1995
there were 3,317,555 shares of the Registrant's common stock outstanding.
Transitional Small Business Disclosure Format (Check One):
Yes No X
------ ------
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<PAGE> 2
<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
FORM 10-QSB
For the Quarter Ended September 30, 1995
Table of Contents
-------------------------
<CAPTION>
Form 10-QSB
Page No.
-----------
<C> <S> <C>
PART I Financial Information
Item 1 Financial Statements
Consolidated Statements of Financial Position
September 30, 1995 and December 31, 1994 3
Consolidated Statements of Operations Three
and Nine Months Ended September 30, l995 and 1994 4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1995 and 1994 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 - 16
PART II Other Information
Item 1 Legal Proceedings 17
Item 2 Changes in Securities 17
Item 3 Defaults Upon Senior Securities 17
Item 4 Submission of Matters to a Vote of Security Holders 17
Item 5 Other Information 17
Item 6 Exhibits and Reports on Form 8-K 17
SIGNATURES 18
</TABLE>
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<PAGE> 3
PGI INCORPORATED AND SUBSIDIARIES
PART I Financial Information
Item 1 Financial Statements
<TABLE>
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
($ in thousands)
<CAPTION>
September 30, December 31,
1995 1994
---------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Cash, including restricted cash
of $1,136,000 and $1,235,000 $ 1,183 $ 1,261
Receivables on real estate sales - net 795 1,227
Other receivables 26 19
Land and improvement inventories 9,099 9,154
Property and equipment - net 89 119
Other assets 765 788
--------- ---------
$ 11,957 $ 12,568
========= =========
LIABILITIES
Accounts payable $ 104 $ 79
Other liabilities 1,583 1,512
Accrued interest:
Primary lender 1,350 791
Debentures 5,328 4,388
Other 1,266 1,162
Credit agreements:
Primary lender 7,002 7,002
Notes and mortgages payable 3,852 4,250
Convertible subordinated debentures payable 9,059 9,059
Convertible debentures payable 1,500 1,500
--------- ---------
31,044 29,743
--------- ---------
Commitments and contingencies
STOCKHOLDER'S 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; 3,317,555 shares
issued and outstanding 332 332
Paid in capital 13,698 13,698
Accumulated deficit (35,117) (33,205)
--------- ---------
(19,087) (17,175)
--------- ---------
$ 11,957 $ 12,568
========= =========
</TABLE>
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<PAGE> 4
<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
See accompanying notes to consolidated financial statements for Form 10-QSB.
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES
Real estate sales $ --- $ 792 $ 15 $ 3,015
Interest income 37 55 136 220
Other income 112 163 564 1,851
------- ------- ------- -------
149 1,010 715 5,086
------- ------- ------- -------
COSTS AND EXPENSES
Cost of real estate sales --- 735 11 2,565
Selling expenses 7 49 32 170
General & administrative
expenses 167 224 495 808
Interest 575 485 1,796 1,565
Other expenses 83 81 293 314
------- ------- ------- -------
832 1,574 2,627 5,422
------- ------- ------- -------
NET INCOME (LOSS) $ (683) $ (564) $(1,912) $ (336)
======= ======= ======= =======
NET INCOME (LOSS) PER SHARE <F*>
Primary and fully diluted $ (.25) $ (.22) $ (.72) $ (.25)
======= ======= ======= =======
<FN>
<F*> Considers the effect of cumulative preferred dividends in arrears for the
three and nine months ended September 30, 1995 and 1994.
</TABLE>
-4-
<PAGE> 5
<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
See accompanying notes to consolidated financial statements for Form 10-QSB.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30, September 30,
1995 1994
<S> <C> <C>
Net cash provided by operating activities $ 319 $ 214
------- -------
Cash flows from investing activities:
Proceed from fixed asset sales 1 11
Purchase of property and equipment --- ---
------- -------
Net cash used in investing activities 1 11
------- -------
Cash flows from financing activities:
Borrowings --- 25
Principal payments on debt (398) (590)
------- -------
Net cash used in financial activities (398) (565)
------- -------
Net decrease in cash (78) (340)
Cash at beginning of period 1,261 1,521
------- -------
Cash at end of period $ 1,183 $ 1,181
======= =======
</TABLE>
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<PAGE> 6
PGI INCORPORATED AND SUBSIDIARIES
See accompanying notes to consolidated financial statements for Form 10-QSB.
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, 1994.
The Company continues to remain in default under its primary lender
agreement and the indentures governing its convertible unsecured
subordinated debentures (the "Indentures") (See Management's Discussion
and Analysis of Financial Condition and Results of Operations). As more
fully discussed in Note 10 to the Company's consolidated financial
statement for the year ended December 31, 1994, as contained in the
Company's Annual Report on Form 10-K, the Company's management is
seeking purchasers for its remaining undeveloped land.
The financial statement's do not include any adjustments relating to the
recoverability of recorded asset amounts or the amounts of liabilities
that might be necessary should the Company be unsuccessful in its sales
and refinancing efforts.
In the opinion of management, subject to the effects on the Company's
unaudited consolidated financial statements of such adjustments, if
any, as might have been required had the outcome of the matters
discussed in the preceding paragraph been known, all other 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 nine months ended September 30,
1995 are not necessarily indicative of operations to be expected for the
fiscal year ending December 31, 1995 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.
-6-
<PAGE> 7
PGI INCORPORATED AND SUBSIDIARIES
(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 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 nine
months ended September 30, 1995 and 1994. The average number of common
shares outstanding for the nine months ended September 30, 1995 and 1994
was 3,317,555, respectively.
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 nine months
ended September 30, 1995 and 1994, 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.
(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, net of amounts capitalized, for the nine
months ended September 30, 1995 and 1994 was $193,000 and $216,000,
respectively.
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
(5) Restricted Cash
Restricted cash included cash and certificates of deposit pledged to
agencies in various states and local Florida governmental units
related to land development and environmental matters, escrowed receipts
related to pledged receivables on real estate sales and the servicing of
sold receivables and, as a result of sales agreements and Company
policies, customer payments and deposits related to homesite and housing
contracts.
-7-
<PAGE> 8
PGI INCORPORATED AND SUBSIDIARIES
(6) Receivables on Real Estate Sales
<TABLE>
Net receivables on real estate sales consisted of:
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
($ in thousands)
<S> <C> <C>
Contracts receivable on homesite sales $ 1,742 $ 2,187
Other 105 123
---------- ----------
1,847 2,310
Less: Allowance for cancellations (976) (976)
Unamortized valuation discount (76) (107)
---------- ----------
$ 795 $ 1,227
========== ==========
</TABLE>
(7) Land and Improvements
<TABLE>
Land and improvement inventories consisted of:
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
($ in thousands)
<S> <C> <C>
Unimproved land $ 8,730 $ 8,730
Land being improved --- ---
Fully improved land 369 424
Completed and in progress
homes held for sale --- ---
---------- ----------
$ 9,099 $ 9,154
========== ==========
</TABLE>
(8) Property and Equipment
<TABLE>
Property and equipment consisted of:
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
($ in thousands)
<S> <C> <C>
Furniture, fixtures and other equipment $ 405 $ 407
Construction in progress --- 2
---------- ----------
405 409
Less: Accumulated depreciation (316) (290)
---------- ----------
$ 89 $ 119
========== ==========
</TABLE>
-8-
<PAGE> 9
PGI INCORPORATED AND SUBSIDIARIES
(9) Other Assets
<TABLE>
Other assets consisted of:
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
($ in thousands)
<S> <C> <C>
Guaranteed future connections related to
sale of utility plants and equipment, net $ 621 $ 621
Prepaid loan and debenture costs 19 42
Deposit with Trustee of 6-1/2% debentures 119 114
Other 6 11
---------- ----------
$ 765 $ 788
========== ==========
</TABLE>
(10) Other Liabilities
<TABLE>
Other Liabilities consisted of:
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
($ in thousands)
<S> <C> <C>
Accrued property taxes
- current $ 165 $ 238
- delinquent 515 303
Other accrued expenses 235 234
Deposits, advances and escrows 351 419
Estimated recourse liability for
receivables sold 300 300
Other 17 18
--------- ---------
$ 1,583 $ 1,512
========= =========
</TABLE>
(11) Primary Lender Credit Agreements, Notes and Mortgages Payable and
Convertible Subordinated Debentures Payable
<TABLE>
Credit agreements with the Company's primary lender and notes and
mortgages payable consisted of the following:
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
($ in thousands)
<S> <C> <C>
Credit agreements - primary lender:
(maturing July 8, 1997, bearing interest
at prime plus 1.5%):
Revolving land loan line of credit $ 4,297 $ 4,297
Receivable loan payable 2,705 2,705
---------- ----------
7,002 7,002
---------- ----------
Notes and mortgages payable - $1,893,000
bearing interest at 12-1/4%, $1,176,000
bearing interest at prime plus 2%, the
remainder bearing interest at varying
rates to 23%; maturing through 2000 3,852 4,250
---------- ----------
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<PAGE> 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
---------- ----------
$ 21,413 $ 21,811
========== ==========
</TABLE>
(12) Real Estate Sales and Other Income
<TABLE>
Real estate sales and cost of sales for the three and nine months ended
September 30, 1995 and 1994 consisted of:
<CAPTION>
Three months ended Nine nonths ended
------------------ -----------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1995 1994 1995 1994
--------- --------- --------- ---------
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Revenues:
Homesite sales $ --- $ 57 $ 15 $ 147
Home sales --- 552 --- 2,340
Acreage sales --- 183 --- 528
--------- --------- --------- ---------
$ --- $ 792 $ 15 $ 3,015
========= ========= ========= =========
Cost of Sales:
Homesite sales $ --- $ 41 $ 11 $ 69
Home sales --- 616 --- 2,341
Acreage sales --- 78 --- 155
--------- --------- --------- ---------
$ --- $ 735 $ 11 $ 2,565
========= ========= ========= =========
</TABLE>
<TABLE>
Other income for the three and nine months ended September 30, 1995 and
1994 consisted of:
<CAPTION>
Three months ended Nine nonths ended
------------------ -----------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1995 1994 1995 1994
--------- --------- --------- ---------
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Commission income $ 54 $ 60 $ 212 $ 228
Installment sale income 53 --- 151 ---
Other income 5 103 201 1,623
--------- --------- --------- ---------
$ 112 $ 163 $ 564 $ 1,851
========= ========= ========= =========
</TABLE>
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<PAGE> 11
PGI INCORPORATED AND SUBSIDIARIES
(13) Commitments and Contingencies
The aggregate outstanding balances of all receivables sold and exchanged
with recourse totaled $448,000 and $618,000 at September 30, 1995 and
December 31, 1994, respectively. Based on its collection experience
with such receivables, the Company maintained allowances at both
September 30, 1995 and December 31, 1994, classified in other
liabilities, of $300,000 for the recourse provisions related to all
receivables sold.
(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. Under the asset and
liability method, deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying enacted statutory
tax rates applicable to future years to differences between the
financial statement carrying amounts and the tax bases of existing
assets and liabilities. Under SFAS No. 109, the effect on deferred
taxes of a change in tax rates is recognized in income in the period
that includes the enactment date. Under the deferred method, deferred
taxes were recognized using the tax rate applicable to the year of the
calculation and were not adjusted for subsequent changes in tax rates.
Based on the Company's current tax status and current tax laws, adoption
of SFAS No. 109 did not have a material effect on the Company's
financial position.
At December 31, 1994, the Company had an operating loss carryforward of
approximately $28,000,000 to reduce future taxable income. These
operating losses expire at various dates through 2,009.
<TABLE>
The following summarizes the temporary differences of the Company at
December 31, 1994 at the current statutory rate:
<CAPTION>
Deferred tax asset:
<S> <C>
Net operating loss carryforward $10,352,000
Adjustments to reduce land to
net realizable value 311,000
Expenses capitalized under IRC 263(a) 57,000
ITC carryforward 731,000
Other 7,000
Valuation allowance (8,972,000)
-----------
2,486,000
-----------
Deferred tax liability
Basis difference of land and
improvement inventories 2,452,000
Excess tax over book depreciation 34,000
-----------
2,486,000
Net deferred tax asset $ 0
===========
</TABLE>
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<PAGE> 12
PGI INCORPORATED AND SUBSIDIARIES
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Preliminary Note
The description of the Company's business in the Quarterly Report on Form
10-QSB focuses on its traditional core business of selling individual homes
and homesites and the construction of residences. Readers should understand
as they read the report, however, that the Company is not presently pursuing
its core business until its debt obligations have been substantially
eliminated. 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, 1994, 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. If the Company is successful
in its sale of this undeveloped land, its remaining inventory will consist of
undeveloped commercial property. There can be no assurance that the Company
will be successful in its efforts to effect a bulk sale. Assuming a bulk sale
occurs, the Company intends to decide at that point 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.
As of September 30, 1995 the Company was in default of its primary credit
agreements with First Union. The Company was unsuccessful in consummating a
large land sale to meet its obligations and does not have funds available to
make any payments of either principal or interest.
On October 12, 1995, the Company, the other "Borrowers" and the
"Guarantors" (as those terms are defined below) entered into a Forbearance
Agreement (the "Forbearance Agreement") with PGI's primary lender, First Union
National Bank of Florida, a national banking association (the "Lender"),
pursuant to which Lender has agreed to forbear through November 15, 1995,
subject to the terms and conditions of the Forbearance Agreement, from
exercising any of its rights and remedies under its primary credit agreements
with Borrowers (the "Loans"), which Loans are currently in default. The
"Borrowers" consist of PGI and its subsidiaries, Sugarmill Woods, Inc., Burnt
Store Marina, Inc. and Gulf Coast Credit Corporation. The "Guarantors" consist
of the following PGI subsidiaries: Southern Woods, Incorporated, Punta Gorda
Isles Sales, Inc., Deep Creek Utilities, Inc., Burnt Store Utilities, Inc. and
Sugarmill Woods Sales, Inc.
On October 12, 1995, PGI also executed a Note and Loan Document Purchase
Agreement (the "Note Purchase Agreement") by and between Lender, PGIP L.L.C.,
a Missouri limited liability company (the "Purchaser") and the Borrowers. The
Forbearance Agreement and the Note Purchase Agreement provide that Lender will
accept the Discounted Payoff Amount (as defined in the
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<PAGE> 13
PGI INCORPORATED AND SUBSIDIARIES
Forbearance Agreement and Note Purchase Agreement) in immediately available
funds on or before 2:00 p.m. on November 15, 1995 as the purchase price of
the documents evidencing and securing the Loans (the "Loan Documents") in
exchange for the assignment to Purchaser of the Loan Documents without
recourse, representation or warranty (except for a warranty that Lender is
the owner of said documents and has not previously sold or assigned them).
As a condition to Lender's execution of the Forbearance Agreement,
Purchaser paid Lender a nonrefundable forbearance fee of $84,000, which is to
be applied to the purchase price of the Loan Documents. In addition, upon
execution of the Note Purchase Agreement, PGIP paid Lender a nonrefundable
initial loan purchase installment of $241,617.65 (the "Initial Loan Purchase
Payment"), which reduces the Discounted Payoff Amount. The Initial Loan
Purchase Payment paid to Lender was used by Lender to pay the Company's 1993
property tax owed to Citrus and Hernando Counties, Florida.
Purchaser has informed PGI that Purchaser's policy, though neither an
undertaking nor an obligation, will be not to proceed with collection of the
principal and interest evidenced and secured by the Loan Documents, so long as
the Borrowers pursue satisfactory efforts to market and sell the real property
that serves as the primary collateral for the Loans.
PGIP is managed by Love Savings Holding Company ("LSHC"), Andrew S. Love,
Jr. and Laurence A. Schiffer. Messrs. Love and Schiffer are directors and
executive officers of LSHC and own slightly more than half of all the issued
and outstanding voting stock of LSHC. Messrs. Love and Schiffer serve as
executive officers and directors of PGI and the other Borrowers and the
Guarantors.
Results of Operations
Revenues for the first nine months of 1995 decreased by $4.4 million to
$715,000 from $5.1 million for the comparable 1994 period. A net loss of $1.9
million was incurred for the first nine months of 1995 compared to a net loss
of $336,000 for the first nine months of 1994. After consideration of
cumulative preferred dividends in arrears, totaling $480,000 for each of the
nine months ended September 30, 1995 and 1994 ($.15 per share of common
stock), net losses per share of $.72 and $.25, respectively, were reported for
the nine month periods ended September 30, 1995 and 1994.
With the completion of the Second Secured Lender Transaction more
specifically described below, the Company has sold all of its developed
Sugarmill Woods inventory. It retains 4,800 acres of undeveloped property
planned and platted into 8,000 single family homesites and a 50-acre
undeveloped commercially zoned tract (all acreage numbers are approximate).
Additionally, the Company has a small scattering of unsold lots remaining in
its Charlotte County developments which it is selling in the normal course of
business through the local broker network.
In 1994 the Company successfully completed the Second Secured Lender
Transaction. The transaction was comprised of a series of agreements executed
in April 1994 wherein the Company sold the remainder of its
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<PAGE> 14
PGI INCORPORATED AND SUBSIDIARIES
Southern Woods developed homesites inventory (approximately 72 homesites),
the remainder of the undeveloped acreage of Southern Woods (approximately 200
acres) and 162 prepaid water and sewer connections in exchange for a $2.4
million reduction in the principal due to its primary lender, a net $310,000
reduction in accrued interest due to the primary lender, the satisfaction of
$362,000 in other liabilities and additional closing costs of $71,000.
Included in the 1994 earnings is a $1.5 million gain related to the sale of
the Southern Woods development. The 1994 Secured lender Transaction has been
treated as a non-cash transaction in the Company's Statement of Cash Flows.
The resulting principal and interest due to its primary lender retains a
maturity date of July 8, 1997. Effective with the closing, the Company's
interest rate was reduced from the default rate of prime plus 5% to prime plus
1.5%. The primary lender had granted the Company a moratorium until May 1995
on any principal and interest payments other than release payments associated
with the sale of properties. On May 1, 1995, the Company failed to pay all
accrued interest due as of that date, as well as, pay the 1993 property taxes
owed on any properties serving as collateral for the primary debt.
Sales revenue by major components for real estate operations, excluding the
effect of the Company's adoption of the installment method of reporting
homesite sales for the three and nine month periods ended September 30, 1995
and 1994, excluding the effect of the Company's adoption of the installment
method of reporting homesite sales for the three and nine month periods ended
September 30, 1995 and 1994, were:
<TABLE>
Real estate sales and cost of sales for the three and nine months ended
September 30, 1995 and 1994 consisted of:
<CAPTION>
Three months ended Nine nonths ended
------------------ -----------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1995 1994 1995 1994
--------- --------- --------- ---------
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Revenues:
Homesite sales $ --- $ 57 $ 15 $ 147
Home sales --- 552 --- 2,340
Acreage sales --- 183 --- 528
--------- --------- --------- ---------
$ --- $ 792 $ 15 $ 3,015
========= ========= ========= =========
Cost of Sales:
Homesite sales $ --- $ 41 $ 11 $ 69
Home sales --- 616 --- 2,341
Acreage sales --- 78 --- 155
--------- --------- --------- ---------
$ --- $ 735 $ 11 $ 2,565
========= ========= ========= =========
</TABLE>
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<PAGE> 15
PGI INCORPORATED AND SUBSIDIARIES
<TABLE>
Other income for the three and nine months ended September 30, 1995 and
1994 consisted of:
<CAPTION>
Three months ended Nine nonths ended
------------------ -----------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1995 1994 1995 1994
--------- --------- --------- ---------
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Commission income $ 54 $ 60 $ 212 $ 228
Installment sale income 53 --- 151 ---
Other income 5 103 201 1,623
--------- --------- --------- ---------
$ 112 $ 163 $ 564 $ 1,851
========= ========= ========= =========
</TABLE>
With the completion of the Second Secured Lender Transaction the Company
has sold all of its developed Sugarmill Woods inventory. The homesite sales
sold in the first quarter of 1995 represent various lot sales from the
Charlotte County inventory.
With the assignment of the remaining building contracts to another
Sugarmill Woods builder during 1994, the Company's activity related to home
construction has been suspended during the first nine months of 1995 and
subsequent reporting periods. As a result there were no home sales during
the first nine months of 1995.
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 nine months ended September
30, 1995 was $319,000 compared to $214,000 for the comparable 1994 period.
During the first nine months of 1995, financing activities utilized $398,000
in cash flow for normal debt repayment as compared to $590,000 for the same
period in 1994.
Analysis of Financial Condition
<TABLE>
Assets totaled $12.0 million at September 30, 1995 compared to $12.6
million at December 31, 1994, reflecting the following changes:
<CAPTION>
September 30, December 31, Increase
1995 1994 (Decrease)
------------- ------------ ----------
($ in thousands)
<S> <C> <C> <C>
Cash $ 1,183 $ 1,261 $ (78)
Receivables 821 1,246 (425)
Land and improvement inventories 9,099 9,154 (55)
Net property and equipment 89 119 (30)
Other assets 765 788 (23)
--------- --------- -------
$ 11,957 $ 12,568 $ (611)
========= ========= =======
</TABLE>
-15-
<PAGE> 16
PGI INCORPORATED AND SUBSIDIARIES
<TABLE>
Liabilities were $31.0 million at September 30, 1995 compared to $29.7
million at December 31, 1994, reflecting the following changes among
categories.
<CAPTION>
September 30, December 31, Increase
1995 1994 (Decrease)
------------- ------------ ----------
($ in thousands)
<S> <C> <C> <C>
Accounts payable $ 104 $ 79 $ 25
Other liabilities 1,583 1,512 71
Accrued interest 7,944 6,341 1,603
Credit agreements - primary lender 7,002 7,002 ---
Notes and mortgages payable 3,852 4,250 (398)
Convertible subordinated
debentures payable 9,059 9,059 -
Convertible debentures payable 1,500 1,500 -
-------- -------- --------
$ 31,044 $ 29,743 $ 1,301
======== ======== ========
</TABLE>
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.
As was stated earlier, the Company has entered into a Forbearance Agreement
with its primary lender, First Union. The Company continues to market its
undeveloped acreage in an effort to consummate a bulk sale but has been
unsecured to date.
<TABLE>
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:
<CAPTION>
September 30, 1995
------------------
Principal Unpaid
Amount Due Interest
---------- --------
($ in thousands)
<S> <C> <C>
Convertible subordinated debentures due June 1, 1991 $ 1,034 $ 379
Convertible subordinated debentures due May 1, 1992 8,025 2,996
------- -------
$ 9,059 $ 3,375
======= =======
</TABLE>
The Company does not have funds available to make any payments of either
principal or interest on the above debentures. If a debenture holder or
Trustee institutes action to collect on the debentures, such action could
prohibit the Company from continuing to operate, (see Notes 10 and 11 to the
consolidated financial statements under Item 8 as contained in the Company's
1994 Form 10-K) which would cause an acceleration of the primary lender debt
and could result in a bankruptcy filing. The Company has investigated the
consequences of a bankruptcy filing and believes that such an event is not in
the best interest of either the debenture or equity holders because a
bankruptcy filing would negatively impact the Company's business, as well as
cause an acceleration of the primary lender ("First Union") debt, certain
other notes and mortgages, and secured debenture debt.
-16-
<PAGE> 17
PGI INCORPORATED AND SUBSIDIARIES
PART II Other Information
Item 1 Legal Proceedings
Not applicable.
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) No report on Form 8-K was filed during the quarter ended September 30,
1995.
-17-
<PAGE> 18
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: November 14, 1995 /s/Laurence A. Schiffer
--------------------------------- ------------------------------
Laurence A. Schiffer
President
-18-
<PAGE> 19
PGI INCORPORATED AND SUBSIDIARIES
<TABLE>
EXHIBIT INDEX
- -------------
<CAPTION>
Sequential
Page
Number
<C> <S> <C>
2. Inapplicable.
3. Inapplicable.
4. (i) Forbearance Agreement dated as of October 12, 1995 by First Union
National Bank of Florida, PGI Incorporated, Sugarmill Woods, Inc., Burnt
Store Marina, Inc., Gulf Coast Credit Corporation, Southern Woods,
Incorporated, Punta Gorda Isles Sales, Inc., Deep Creek Utilities, Inc.,
Burnt Store Utilities, Inc. and Sugarmill Woods Sales, Inc., incorporated
herein by reference to Exhibit 4(i) to the Company's Form 8-K filed with
the Securities and Exchange Commission on October 31, 1995.
(ii) Note and Loan Document Purchase Agreement dated as of October 12,
1995, by First Union National Bank of Florida, PGIP, L.L.C., PGI
Incorporated, Sugarmill Woods, Inc., Burnt Store Marine, Inc., and Gulf
Coast Credit Corporation, incorporated herein by reference to Exhibit
4(ii) to the Company's Form 8-K filed with the Securities and Exchange
Commission on October 31, 1995.
10. Inapplicable.
11. Statements re: Computations of Per Share Earnings, filed
herewith 20 - 22
15. Inapplicable.
18. Inapplicable.
19. Inapplicable.
22. Inapplicable.
23. Inapplicable.
24. Inapplicable.
27. Financial Data Schedule 23
</TABLE>
-19-
<PAGE> 20
PGI INCORPORATED AND SUBSIDIARIES
EXHIBIT 11
<TABLE>
Page 1 of 3 FACTS FOR THE COMPUTATIONS OF NET INCOME/(LOSS) PER SHARE
<CAPTION>
Three Months Ended Nine Months ended
-------------------------- ---------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1995 1994 1995 1994
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
1) Net income/(loss) for period $ (683,000) $(564,000) $(1,912,000) $ (336,000)
========== ========= =========== ==========
2) Average common shares outstanding 3,317,555 3,317,555 3,317,555 3,317,555
========== ========= =========== ==========
3) Shares outstanding at beginning of
period 3,317,555 3,317,555 3,317,555 3,317,555
4) Shares issued on stock options
exercised and preferred stock
and debentures converted
during period, weighted --- --- --- ---
5) Treasury stock transactions,
net, weighted --- --- --- ---
---------- --------- ----------- ----------
6) Average shares outstanding
before assumed exercise of
stock options and conversions
of preferred stock and debentures 3,317,555 3,317,555 3,317,555 3,317,555
========== ========= =========== ==========
7) Average shares outstanding
from assumed exercise of stock
options:
Primary --- --- --- ---
---------- --------- ----------- ----------
Fully diluted --- --- --- ---
========== ========= =========== ==========
8) Average shares outstanding from
assumed conversion of
preferred stock 3,760,000 3,760,000 3,760,000 3,760,000
========== ========= =========== ==========
9) Average shares outstanding from
assumed conversion of debentures 1,341,076 1,341,076 1,341,076 1,341,076
========== ========= =========== ==========
10) Cumulative preferred dividends
in arrears for period $ 160,000 $ 160,000 $ 480,000 $ 480,000
========== ========= =========== ==========
11) Interest and amortized charge
against income for debentures
during period $ 190,000 $ 190,000 $ 569,000 $ 569,000
========== ========= =========== ==========
ADJUSTMENT OF NET INCOME/(LOSS):
Primary
Net income/(loss) for
period (Line 1) $ (683,000) $(564,000) $(1,912,000) $ (336,000)
Less cumulative preferred
dividends in arrears (Line 10) 160,000 160,000 480,000 480,000
---------- --------- ----------- ----------
-20-
<PAGE> 21
PGI INCORPORATED AND SUBSIDIARIES
EXHIBIT 11
Page 2 of 3 FACTS FOR THE COMPUTATIONS OF NET INCOME/(LOSS) PER SHARE
12) Adjusted net income/(loss) for
primary net income/(loss)
per share (843,000) (724,000) (2,392,000) (816,000)
Fully Diluted
Add cumulative preferred
dividends in arrears on
preferred stock assumed
converted (Line 10) 160,000 160,000 480,000 480,000
Add interest and amortization
charged against income for
debentures (Line 11) 190,000 190,000 569,000 569,000
Less tax effect on Line 11 ---<FA> ---<FA> ---<FA> ---<FA>
---------- --------- ----------- ----------
13) Adjusted net income/(loss) for
fully diluted net income/(loss)
per share $ (493,000) $(374,000) $(1,343,000) $ 233,000
========== ========= =========== ==========
ADJUSTMENT OF AVERAGE SHARES OUTSTANDING:
Primary
Average shares outstanding
(Line 6) 3,317,555 3,317,555 3,317,555 3,317,555
Add average shares outstanding
from assumed exercise of
stock options (Line 7) --- --- --- ---
---------- --------- ----------- ----------
14) Shares assumed outstanding for
primary net income/(loss)
per share 3,317,555 3,317,555 3,317,555 3,317,555
========== ========= =========== ==========
Fully Diluted
Average shares outstanding
(Line 6) 3,317,555 3,317,555 3,317,555 3,317,555
Add average shares outstanding
from assumed exercise of
stock options (Line 7) --- --- --- ---
Add average shares outstanding
from assumed conversion of
preferred stock (Line 8) 3,760,000 3,760,000 3,760,000 3,760,000
Add average shares outstanding
from assumed conversion of
debentures (Line 9) 1,341,076 1,341,076 1,341,076 1,341,076
---------- --------- ----------- ----------
15) Shares assumed outstanding for
fully diluted net income/(loss)
per share 8,418,631 8,418,631 8,418,631 8,418,631
========== ========= =========== ==========
-21-
<PAGE> 22
PGI INCORPORATED AND SUBSIDIARIES
EXHIBIT 11
Page 3 of 3 FACTS FOR THE COMPUTATIONS OF NET INCOME/(LOSS) PER SHARE
NET INCOME/(LOSS) PER SHARE:
Before Adjustment
(Line 1/Line 2) $ (.21) $ (.17) $ (.58) $ (.10)
========== ========= =========== ==========
Primary
(Line 12/Line 14) $ (.25) $ (.22) $ (.72) $ (.25)
========== ========= =========== ==========
Fully Diluted <FB> $ (.25) $ (.22) $ (.72) $ (.25)
========== ========= =========== ==========
<FN>
- ----------------------------------
<FA> No tax calculation has been made because of full utilization of all
available tax benefits for financial accounting purposes.
<FB> Fully diluted net loss per share is the same as primary net income/(loss)
per share due to anti-dilutive effect of assumed exercise of stock options
and conversions of preferred stock and debentures to common stock.
</TABLE>
-22-
<PAGE> 23
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE>
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-Q for the quarterly period ended September 30, 1995, and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,183,000
<SECURITIES> 0
<RECEIVABLES> 1,797,000
<ALLOWANCES> (976,000)
<INVENTORY> 9,099,000
<CURRENT-ASSETS> 0<F1>
<PP&E> 405,000
<DEPRECIATION> (316,000)
<TOTAL-ASSETS> 11,957,000
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 21,413,000
<COMMON> 332,000
0
2,000,000
<OTHER-SE> (21,087,000)
<TOTAL-LIABILITY-AND-EQUITY> 11,957,000
<SALES> 0
<TOTAL-REVENUES> 149,000
<CGS> 0
<TOTAL-COSTS> 7,000
<OTHER-EXPENSES> 250,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 575,000
<INCOME-PRETAX> (683,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (683,000)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
<FN>
<F1>Current assets and current liabilities values are zero because of an unclassified balance sheet.
</TABLE>
