<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
-------------------------------------
[ ] 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 Registrant as specified in its charter)
Florida 59-0867335
- - -------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Ident. No.)
incorporation or organization)
515 Olive Street, Suite 1400, St. Louis, Missouri 63101
- - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (314) 982-0780
---------------------------
<TABLE>
Securities registered pursuant to Section 12(b) of the Act:
<CAPTION>
Name of each Exchange
Title of Each Class on which Registered
- - -------------------------------------------- -------------------------------
<S> <C>
None None
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.10 per share
6% Convertible Subordinated Debentures due 1992
</TABLE>
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 by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of the registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendments to this
Form 10-K [X]
The aggregate market value of voting stock held by
non-affiliates of the registrant can not be determined. See page
11 of Form 10-K.
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock as of March 25, 1995.
Common Stock $.10 par value, 3,317,555 shares outstanding.
The Index to Exhibits is located on pages 57 to 64 of this report.
Page 1 of 64 pages
----
<PAGE> 2
PGI INCORPORATED AND SUBSIDIARIES
FORM 10-K - 1994
<TABLE>
Contents and Cross Reference Index
<CAPTION>
Part Item Form 10-K
No. No. Description Page No.
- - ---- ---- ----------- ---------
<C> <C><S> <C>
I 1 Business
General 3
Description of Business 3-4
Industry Segments 4
Sales and Marketing 4-5
Homesite Sales
Contracts Receivable and Cancellation Policy 5-6
Land Inventory 6
Competition 7
Engineering and Development 7
Regulation and Environmental Matters 7-9
Executive Officers of the Registrant 9
2 Properties 9
3 Legal Proceedings 10
4 Submission of Matters to a Vote of Security Holders 10
II 5 Market for Registrant's Common Equity and
Related Stockholder Matters 11
6 Selected Financial Data 11
7 Management's Discussion and Analysis
of Financial Conditions and Results of Operations 12-23
8 Financial Statements and Supplementary Data 24
9 Disagreements on Accounting and
Financial Disclosure 46
III 10 Directors and Executive Officers of The Registrant 47-48
11 Executive Compensation 48-49
12 Security Ownership of Certain Beneficial Owners
and Management 49-52
13 Certain Relationships and Related Transactions 52-53
IV 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K 54-57
Signatures and Power of Attorney 58-59
Exhibit Index 60-64
</TABLE>
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<PAGE> 3
PART I
------
Item 1. Business
- - ------- --------
GENERAL
As used in this Annual Report on Form 10-K, the "Company" refers,
unless the context otherwise requires, to PGI Incorporated and its
subsidiaries. The Company's offices are at 8120 South Suncoast
Boulevard, Homosassa, Florida 34446 and its' executive offices are
located at 515 Olive Street, Suite 1400, St. Louis, Missouri
63101, and its telephone number is (314) 982-0780.
The Company, founded in 1958, engages in the business of building
and selling homes, developing and selling homesites and selling
undeveloped or partially developed tracts of land.
The Company sells homes and homesites for cash. Substantially
all of the real estate sold or presently offered for sale by the
Company is situated within Sugarmill Woods, one of its planned
communities in west central Florida. Homesites are
offered for sale at an office located within Sugarmill Woods.
The Company obligated itself to develop its platted homesites by
specified dates in its offering statements and property reports
filed with various governmental agencies. Development of homesites
includes grading, installing streets and drainage, and where
applicable, water distribution systems, sewage collection and
treatment systems, seawalls, waterways, common grounds or other
amenities. The Company has completed the development obligations
for all sold homesites. Land and improvement inventories are
reported in the Company's financial statements at the lower of
historical cost or estimated market value.
As of January 1, 1995 the Company employed a total of 7 persons
in the capacities indicated: 6 in executive, administrative and
office capacities; 1 in sales and promotional work.
DESCRIPTION OF BUSINESS
Overview of Company Communities
- - -------------------------------
Although the Company has developed several thousand lots in
southwest Florida during its 37-year history, its current community
development activities are located in Citrus County, Florida, in
the community of Sugarmill Woods.
Sugarmill Woods is located five miles south of Homosassa Springs
and 60 miles north of Tampa. The Sugarmill Woods area consists of
rolling hills covered by cypress, oak and pine trees. Sugarmill
Woods lies within the "Nature Coast" area which offers both fresh
and salt water fishing and hunting in a state forest. There are
public beaches, picnic areas and fishing and camping facilities in
the immediate vicinity. Several rivers in the area provide access
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<PAGE> 4
Overview of Company Communities (continued)
- - -------------------------------------------
to the Gulf of Mexico. Sugarmill Woods is located on U.S. 19; U.S.
98 runs diagonally through its southern portion. Single family
homesites in Sugarmill Woods generally range in size from 10,000 to
24,000 square feet.
Sugarmill Woods commenced sales operations in 1974. The
subdivision is platted into 20,550 homesites, and as of December
31, 1994 the Company retained ownership of approximately 4,800
acres of undeveloped land or 7,236 undeveloped lots and 740 acres
of undeveloped commercial property.
In July 1992 the Company sold the remainder of its then developed
Sugarmill Woods homesite inventory to its primary bank lender (the
Secured Lender Transaction, see Item 7 and Note 2 to the
consolidated financial statements under Item 8).
In April of 1994 the Company sold the remainder of its developed
Southern Woods inventory to its primary lender (the Second Secured
Lender Transaction, see Item 7 and Note 2 to the consolidated
financial statements under Item 8).
All Sugarmill Woods homesites are subject to restrictive
covenants, including minimum building requirements, which are
designed to ensure that the homes are of high quality and well
maintained. In addition to the restrictive covenants, local
governmental entities have established zoning regulations which
stipulate minimum allowance setbacks, square footage and lot sizes,
and also require adherence to land use policies.
INDUSTRY SEGMENTS
Although in prior years the Company has operated various
amenities in support of community development activities, the
Company is currently in one dominant industry segment--community
development.
SALES AND MARKETING
The focus of the Company's ongoing sales operations has been and
will be concentrated at its Sugarmill Woods project.
The Company in the past offered resale homesites for sale only at an on-site
location. Direct mail, newspapers, magazines, radio, television
and highway signboards are utilized to advertise its homesites and
homes. Sales are generated by 6 independent contractors.
In mid-1990 the Company decided to concentrate on rebuilding an
off-site broker network to market its Sugarmill Woods developed
inventory. The Company executed non-exclusive broker agreements
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<PAGE> 5
SALES AND MARKETING (Continued)
with master brokers located in 16 states and one master broker with
sales forces in the Netherlands, Germany, Britain, Belgium,
Switzerland and France. With the sale of its developed homesite
inventory, the off-site program was terminated in July 1992. The
Company is continuing its marketing efforts to sell two of the
undeveloped, platted Sugarmill Woods Villages comprising
approximately 4,800 acres in bulk. These villages represent
approximately 7,236 undeveloped lots.
HOMESITE SALES CONTRACTS RECEIVABLE AND CANCELLATION POLICY
Historically, substantially all of the Company's homesite sales
were made pursuant to agreement for deed installment sales
contracts whereby the Company retained title to the homesite until
the contract was paid in full. However, during mid-1990 the
Company, in anticipation of requirements from the regulatory
agencies, changed to selling under a deed, note and mortgage. The
deed, note and mortgage program conveys title to the purchaser
within 60 days from the sale date, which the Company considers to
be positive from a marketing viewpoint. However, should the
purchaser default on the mortgage terms it will be necessary for
the Company to go through statutorily required foreclosure
proceedings at a considerably greater expense than incurred in
cancellation of an agreement for deed. Since the Company cannot
reasonably estimate the increase in such foreclosure costs, no
provision is made related to these sales. The Company does not
conduct a credit investigation of its purchasers because homesite
purchasers have no personal liability and the Company is not
entitled to a personal or deficiency judgment against the
purchaser.
While engaged in installment sales, the Company offered lots for
sale to residents of the United States for a 10% down-payment, 10%
interest, principal and interest payable over 10 years. Sales to
residents of foreign countries require a 20% down payment, 8.5%
interest payable over 10 years.
<TABLE>
For sales prior to 1990, the Company provided for losses on
future cancellations of contracts receivable on homesite sales by
charges to income sufficient, in the opinion of management, to
maintain an adequate allowance for such losses. The charge was
based on historical collection experience and analysis of
delinquencies. Contract receivable balances related to cancelled
contracts are charged to the allowance for cancellations.
Contractually, for sales prior to implementation of the deed, note
and mortgage, the Company may cancel a contract after the following
delinquency periods:
<CAPTION>
Percent of Contract Delinquency
Price Collected Period
--------------- -------------
<S> <C>
Less than 25%. . . . . . . . . . 90 days
25% but less than 50%. . . . . .120 days
50% and over . . . . . . . . . .150 days
</TABLE>
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<PAGE> 6
HOMESITE SALES CONTRACTS RECEIVABLE AND CONCELLATION POLICY (Continued)
Effective January 1, 1990, the Company adopted the installment
method of profit recognition for all homesite sales. The
installment method defers a portion of the gross profit at point of
sale and recognizes the deferred profit as principal payments on
contracts are received (see Item 7 and Note 3 to the consolidated
financial statements under Item 8).
The mortgage deed currently being utilized has a 30 day grace
period with notice provision for delinquent payments. Upon
expiration of the 30 days the unpaid balance of the mortgage may be
accelerated by the Company. Monies paid by the purchaser may be
retained by the Company as liquidated damages.
<TABLE>
The Company generally considers a contract delinquent if the
scheduled installment payment is over 30 days past due. Although
the Company has no formal policy for granting payment extensions,
extensions have been granted in certain instances. The following
table sets forth delinquency information with respect to homesite
contracts receivable as of December 31, 1994:
<CAPTION>
December 31, Percent of
1994 Total
---- -----
Contracts
- - ---------
($ in thousands)
<S> <C> <C>
Current. . . . . . . . . . . . $ 1,316 60.2%
--------------- ----------
31 days to 60 days delinquent. 97 4.4
u1 days to 90 days delinquent. 58 2.7
Over 90 days . . . . . . . . . 716 32.7
--------------- ----------
Total delinquency. . . . . . 871 39.8
--------------- ----------
Total contracts. . . . . . . $ 2,187 100.0%
=============== ==========
</TABLE>
With the July 1992 Secured Lender Transaction (see Item 7 and
Note 2 to the consolidated financial statements under Item 8), the
Company has sold all of its contracts receivable. The Secured
Lender Transaction was without recourse. However, in prior years
the Company sold or exchanged receivables on real estate sales.
The receivables were sold or exchanged with recourse to the Company
if a receivable becomes more than 90 to 120 days delinquent (see
Note 17 to the consolidated financial statements under Item 8).
LAND INVENTORY
The Company believes its land inventory is adequate to support
its community development activities and intends to offer for sale
all or a portion of approximately 4,800 acres of its unimproved
Citrus County land inventory.
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<PAGE> 7
COMPETITION
The Company's business is highly competitive. The Company
competes primarily on the basis of location and quality of its
homesites and homes, and the quality of related amenities. A large
supply of homesites and other subdivided land in Florida and other
states is being offered for sale. There are several land
development companies, some of which have greater sales and
financial resources than the Company, operating in the same
counties as the Company. In the sale of homes, the Company
competes with many local builders and contractors and with several
major building companies, some of which have greater sales and
financial resources than the Company.
Adverse market conditions resulting from general or local
economic conditions, increased raw material and labor costs,
increased interest rates, over-building, increased regulation and
the availability of acceptable mortgage financing, all of which
are beyond the control of the Company, may individually or
collectively have a material adverse effect on the Company's
business.
ENGINEERING AND DEVELOPMENT
The Company plans, engineers and oversees the development of its
communities. With the completion of its Sugarmill Woods Oak
Village subdivision in 1989, the Company has no remaining
contractual development obligations other than maintenance
obligations until roads are accepted by local governmental
entities.
REGULATION AND ENVIRONMENTAL MATTERS
In the Company's projects, the nature and extent of improvements,
zoning and related matters are subject to the approval of and
regulation by various governmental bodies, including city, county,
regional and other regulatory agencies of the State of Florida and
the Federal government. Sales activities are regulated not only by
the State of Florida and the Federal government, but also by the
states in which sales are made or solicited.
Prior to obtaining approval of plats for recording in a county
(a prerequisite to the sale of homesites), the Company must either
complete various improvements or post a bond with the appropriate
regulatory agency to ensure their completion.
Additionally, the Company has been required to post cash bonds
and at December 31, 1994 approximately $784,000 was held in escrow
to collateralize bonds executed by the Company in favor of various
Florida counties, the State of Florida and certain other states.
The cash bonds are required in connection with obtaining approvals
to sell homesites and maintaining water quality in certain
waterways constructed by the Company.
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<PAGE> 8
REGULATION AND ENVIRONMENTAL MATTERS (Continued)
In connection with the sale of Florida real estate, the State of
Florida Division of Land Sales, Condominiums and Mobile Homes,
("Division") requires all sales contract documents, all sales
literature and accompanying data to be filed with it. Also, the
real estate itself must be qualified for sale by the Division. All
of the Company's promotional material and all of its subdivisions
presently being offered for sale and requiring registration have
been so qualified.
In addition to Florida, certain states impose additional or
different requirements. These requirements include inspection of
properties by appropriate authorities, approval of sales
literature, disclosures to purchasers of specified information,
assurances of future improvements, approval of terms of sale and
delivery to purchasers of a report describing the property. The
Company presently has homesites registered for sale in Florida.
The remainder of Sugarmill Woods is registered in Florida and 8
other states where registration is required. Regulation of land
sales and subdivision development has become increasingly
stringent. In the past the Company has limited or refrained from
advertising and selling in certain states where the expense and
delay associated with regulatory compliance outweigh the
anticipated economic benefits.
The Company's homesite sales are also subject to Federal
regulation. The Federal Interstate Land Sales Full Disclosure Act
(the "Land Sales Act") requires developers to file with the Office
of Interstate Land Sales Registration a "Statement of Record",
including a "Property Report" disclosing material information
regarding the property offered. The Property Report must be
delivered to each purchaser prior to the execution of the sales
contract and the purchaser has seven days within which to rescind
the contract. A purchaser may also rescind any purchase contract,
or may sue to recover damages, resulting from any sale in violation
of the Land Sales Act or the Federal Consumer Credit Protection Act
(sometimes referred to as the "Truth in Lending Act"), which
requires disclosures to purchasers as to finance charges and other
matters in credit transactions.
The Company also is subject to various laws and governmental
regulations concerning environmentally related matters and is
required to obtain various permits in its development activities.
Despite the Company's success in the past in obtaining necessary
permits for its projects, it can be anticipated that increasingly
stringent requirements will be imposed upon the Company. Although
the Company cannot accurately predict the impact of these
requirements, they might result in time-consuming and costly
compliance programs, discontinuance of certain operations and
substantial expenditures for pollution and water quality control.
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<PAGE> 9
REGULATION AND ENVIRONMENTAL MATTERS (Continued)
In addition, the continued effectiveness of permits already granted
is dependent upon many factors, some of which are outside the
Company's control, such as changes in policies, rules and
regulations, and their interpretation and application, within
governmental agencies.
With the completion of the Sugarmill Woods Oak Village
development work, the Company has fulfilled its contractual
development obligations to its customers. The Company, however,
still owns approximately 4,800 acres of platted, undeveloped
property for which it may have to apply for permits in the future
should its efforts to sell all or a portion of this property not be
successful. If such permits are sought and are denied, the Company
might not be able to develop the property as planned which could
impact the property's value. However, permitting problems which
would materially adversely affect the Company are not anticipated.
Many of the Federal and State regulatory authorities having
jurisdiction over the Company's activities have broad discretionary
powers to enforce and interpret the statutes and regulations which
they administer, including powers to: enjoin or suspend sales
advertising and other sales practices; require additional
disclosures in sales literature and property reports; require
construction and installation of additional facilities; and revoke
licenses and permits relating to the Company's business activities.
The issuance of orders of suspension by one or more of such
regulatory authorities simultaneously affecting all or a major
portion of the Company's properties would materially adversely
affect the Company's operations. In addition, the orders of one
regulatory authority may conflict with those of another, thereby
complicating compliance.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding executive officers of the Company is
contained in Item 10 of Part III of this Annual Report on Form 10-K
(General Instruction G).
Item 2. Properties
- - ------- ----------
The Company's primary investments in properties relates to its
Sugarmill Woods project. The Company generally has fee simple
title to these properties, but substantially all of the Company's
properties are encumbered by mortgages under either its primary
lender agreement or other financing arrangements (see Item 7 and
Note 10 to the consolidated financial statements under Item 8).
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<PAGE> 10
Item 3. Legal Proceedings
- - ------- -----------------
The Company is a party to a number of lawsuits incidental to the
normal operation of its business. Based upon information presently
available, the Company does not believe that the resolution of any
of the suits individually, or collectively, will have a material
adverse effect on its financial position (see Note 17 of Item 8).
Item 4. Submission of Matters to a Vote of Security Holders
- - ------- ---------------------------------------------------
A shareholders meeting was not held during the year 1994.
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<PAGE> 11
PART II
-------
Item 5. Market for Registrant's Common Equity and Related
- - ------- -------------------------------------------------
Stockholder Matters
-------------------
The Company's Common Stock was traded on the American Stock
Exchange, Inc. ("AMEX") (trading symbol--PGA) until January 4, 1991
at which time the Company consented to the removal of its Common
Stock and 6% Convertible Subordinated Debentures from the AMEX.
Subsequent to the AMEX de-listing the Company attempted to
establish relations with a brokerage firm who would serve as a
market maker for the Common Stock. Based on information received
from The National Quotation Bureau, Inc., there have been no
reported transactions in the Company's Common Stock since January
29, 1991. During the period January 1, 1991 through January 29,
1991 the high and low bid price for the Common Stock was $.03 and
the high and low offer price was $.10. No dividends have ever been
paid on the Common Stock, and payment of dividends is restricted
under the terms of the two indentures pursuant to which the
Company's outstanding debentures are issued. As of December 31,
1994 there were 712 holders of record of the Company's Common Stock
and 518 debenture holders.
<TABLE>
<CAPTION>
1994 1993
Quarter High Low Quarter High Low
-------------------------- --------------------------
<S> <C>
(Trade information not available (Trade information not available
for 1994) for 1993)
</TABLE>
Item 6. Selected Financial Data
- - ------- -----------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
($ in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenue $ 5,465 $ 4,854 $10,184 $11,316 $17,214
Net loss $(1,307) $(3,039) $(2,931) $(5,452) $(2,002)
Net loss per share:
Primary <F1> $ (.59) $ (1.11) $ (1.08) $ (1.84) $ (.80)
Total assets $12,568 $16,023 $18,011 $36,226 $40,194
Notes, mortgages and
debentures payable $21,811 $24,932 $25,406 $37,420 $37,526
Stockholders' deficiency $(17,175) $(15,868) $(12,829) $(9,918) $(4,466)
<FN>
- - --------------------------
<F1> Primary per share amounts have been computed based on the
weighted average number of common shares outstanding during
each year.
</TABLE>
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<PAGE> 12
Item 7. Management's Discussion and Analysis of Financial
- - ------- -------------------------------------------------
Condition and Results of Operations
-----------------------------------
PRELIMINARY NOTE
The description of the Company's business in this Annual Report on
Form 10-K 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 at
such time 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 its 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.
RESULTS OF OPERATIONS
Due to the low level of real estate sales, the Company was unable
to make the interest payments scheduled to begin in August 1993.
The Company experienced a serious threat to its ability to continue
operations because of the Company's inability to generate
sufficient sales from its new Southern Woods community.
Fortunately, the Company was able to close a major transaction
during 1994 with its secured lender, more fully discussed below,
which enabled the Company to obtain an extension and reduction of
its primary debt.
Revenues for the year ended December 31, 1994 increased by $611
thousand to $5.5 million compared to revenues of $4.9 million for
the year ended December 31, 1993. Revenues for the year ended
December 31, 1993 decreased by $5.3 million to $4.9 million
compared to revenues of $10.2 million for the year ended December
31, 1992. A net loss of $1.3 million ($.59 per share) was incurred
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<PAGE> 13
RESULTS OF OPERATIONS (continued)
for 1994 compared to a net loss of $3.0 million ($1.11 per share)
for 1993 and a net loss of $2.9 million ($1.08 per share) for 1992.
Included in the 1994, 1993 and 1992 earnings per share computation
is $640,000 ($.19 per share of Common Stock) of annual cumulative
preferred stock dividends in arrears.
In April 1994 the Company entered into a series of agreements
wherein the Company sold the remainder of its 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 (the "Second Secured Lender Transaction"). Included in other
income for 1994 is $1.5 million gain related to the sale of the
Southern Woods development which represents the excess fair market
value over carrying value.
The resulting principal and interest payable to its primary lender,
due to the sale of Southern Woods, retains a maturity date of July 8, 1997.
Effective with the closing, the Company's interest rate has been reduced from
the default rate of prime plus 5% to prime plus 1.5%. The primary lender has
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 must pay all accrued interest due as of that date
as well as pay the 1993 and 1994 property taxes owed on any properties
serving as collateral for the primary debt, estimated in total at
approximately $700,000. Failure to remit these amounts on May 1, 1995
will result in an event of default under the loan documents.
Included in the 1992 earnings is a $1.4 million gain related to
the sale of the remainder of its Citrus County developed homesite
inventory (approximately 1,300 homesites), 440 acres of Citrus
County undeveloped property, its Sugarmill Woods sales office and
$4.7 million in receivables on homesite sales in exchange for a
$13.7 million reduction in collateralized liabilities and a $2.2
million reduction in uncollateralized liabilities to the Company's
primary lender (the "Secured Lender Transaction").
During the Secured Lender Transaction 350 acres were conveyed to
Love-PGI Partners, L.P., holders of a portion of the Company's
collateralized convertible debentures. The remainder of the assets
sold within the Secured Lender Transaction and the Second Secured
Lender Transaction (referred to jointly as the Secured Lender
Transactions) were sold without recourse to subsidiaries of the
Company's primary lender, BancFlorida, a Naples, Florida based
federal savings and loan association ("BancFlorida").
During 1994 the Company's primary lender merged with First Union
Corporation of Florida ("First Union").
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<PAGE> 14
RESULTS OF OPERATIONS (continued)
The $1.5 million and $1.4 million gain associated with these
transactions are included in other income in the December 31, 1994
and December 31, 1992 consolidated statement of operations,
respectively.
Real Estate Activities
- - ----------------------
<TABLE>
Sales revenues by major components for real estate operations
(excluding improvement revenues related to prior sales) for the
years 1992 through 1994 were:
<CAPTION>
1994 1993 1992
---- ---- ----
($ in thousands)
<S> <C> <C> <C>
Home sales $ 2,340 $3,470 $5,306
Homesite sales-gross 240 499 2,596
Acreage sales 528 - -
------- -------- --------
$ 3,108 $ 3,969 $ 7,902
======= ======== ========
</TABLE>
<TABLE>
Cost by major component for real estate operations (excluding
improve costs related to prior sales) for the years 1992 through
1994 were:
<CAPTION>
1994 1993 1992
---- ---- ----
($ in thousands)
<S> <C> <C> <C>
Home sales $ 2,324 $ 3,379 $ 4,931
Homesite sales-gross 291 140 1,056
Acreage sales 155 - -
------- -------- --------
$ 2,770 $ 3,519 $ 5,987
======= ======== ========
</TABLE>
<TABLE>
Gross profit margins by major components for real estate
operations for the years 1992 through 1994 were:
<CAPTION>
1994 % 1993 % 1992 %
---- - ---- - ---- -
($ in thousands)
<S> <C> <C> <C> <C> <C> <C>
Home sales $ 16 .68 % $91 2.6% $375 7.0%
Homesite sales-gross (51) (21.1)% 359 71.9% 1,540 59.3%
Acreage sales 373 70.6 % - - - -
---- ------ ----- ----- ----- -----
$ 338 10.9 % $450 11.3% $1,915 24.2%
</TABLE>
Home Sales
- - ----------
Home sales are recorded at closing. Consequently, there is a several month
time lag between contract date and revenue recognition.
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<PAGE> 15
Home Sales (continued)
- - ----------------------
<TABLE>
Data related to home contracts and closings for the periods
indicated were:
<CAPTION>
1994 1993 1992
---- ---- ----
($ in thousands)
<S> <C> <C> <C>
Number of units closed 22 32 48
Average closed unit price $106 $108 $111
Number of home sales contracts 14 27 34
Year-end construction backlog $ - $1,774 $2,771
</TABLE>
New home sales decreased from 34 for 1992 to 27 in 1993 and to
14 in 1994, reflecting the impact of the recession on home sales as
well as increased competition from other builders in Sugarmill
Woods and Southern Woods.
Home sales gross profit margins for the years ended December 31,
1994, 1993 and 1992 were .68%, 2.6% and 7.0%, respectively. The
1994 and 1993 gross profit decline is due to a higher overhead
percentage allocated to jobs as total construction volume decreased
while overhead remained fairly constant.
The Company believes the current economic conditions and
increased competition will continue to negatively impact housing
sales during 1995 and that the Company will not experience a
substantial improvement in either home sales volume or gross profit
margins. In response to this outlook, the Board of Directors
approved to temporarily suspend the new home construction operation
in Sugarmill Woods.
Effective July 1, 1994, the Company assigned its interest in the
remaining home contracts to another builder in the Sugarmill Woods
area, retaining only the rental and resale homesite division as an
operating entity. Since the home building division required a
substantial amount of accounting and administrative support which
was not treated as direct overhead, the Company was able to reduce
its work force by 9 people.
Homesite Sales
- - --------------
With the closing of the Second Secured Lender Transaction, the
Company's homesite sales efforts came to an end during the middle
part of 1994. After the sale of the Southern Woods development the
Company was left with only a few undeveloped homesites. As a
result homesite sales decreased $259,000 from $499,000 in 1993 to
$240,000 during 1994. The Company does not expect significant
homesite sale income for 1995.
Also, 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
- 15 -
<PAGE> 16
Homesite Sales (continued)
- - --------------------------
Sales of Real Estate" (see Item 1 and Note 3 to the consolidated
financial statements under Item 8.). This method is being
utilized for all installment sales regardless of the down-payment
percentage. With the Secured Lender Transaction non-recourse sale
of receivables, all previously deferred profits were recognized
during 1992.
Acreage Sales
- - -------------
Other than the Secured Lender Transactions during 1992 and 1994,
no significant bulk sales were generated in 1994, 1993 and 1992.
The acreage sales reported for 1994 include miscellaneous lots and
out-parcels located in Charlotte County.
The Company intends to continue its efforts to sell a portion or
all of its remaining 4,800 acres of undeveloped platted property
and 600 acres of undeveloped commercial property.
Other Activities
- - ----------------
The decrease in 1994, 1993 and 1992 interest income is
attributable to the July 1992 Secured Lender Transaction which
included the sale of $4.7 million of the Company's receivables on
real estate. Additionally, the Company's cash accounts are
substantially smaller given the decrease in operations. Interest
income in 1994 decreased by $119,000 compared to a 1993 decrease of
$401,000 from 1992.
Included in 1994 and 1992 other income is a $1.5 million and $1.4
million gain related to the Secured Lender Transactions. Other
income increased in 1994 as the result of the Second Secured Lender
Transaction. The Company expects other income to decrease in 1995
as the Company's operating activities continue to downsize.
Costs and Expenses
- - ------------------
<TABLE>
The relationship of selling expenses and real estate sales was
as follows:
<CAPTION>
1994 1993 1992
---- ---- ----
($ in thousands)
<S> <C> <C> <C>
Selling expenses $ 178 $ 356 $ 1,236
Selling expenses as a
percentage of gross
sales revenues for real
estate operations 5.7% 9.0% 15.6%
</TABLE>
Selling expenses decreased by $178,000 (50.0%) during 1994
compared to 1993 and in 1993 they decreased by $880,000 (71.2%)
compared to 1992. The decrease in 1994 is a result of the
reduction in selling activity after the Secured Lender Transaction
closed.
- 16 -
<PAGE> 17
Costs and Expenses (continued)
- - ------------------------------
<TABLE>
The relationship of general and administrative expenses and real
estate sales was as follows:
<CAPTION>
1994 1993 1992
---- ---- ----
($ in thousands)
<S> <C> <C> <C>
General and administrative
expenses $ 1,065 $ 1,285 $ 2,116
General and administrative
expenses as a percentage
of gross sales revenues for
real estate operations 34.3% 32.4% 26.7%
</TABLE>
In an effort to conserve cash and reduce overhead, the Company
consolidated its administrative office functions in St. Louis,
Missouri. The Company has contracted out the services to Love Real
Estate Company ("LREC"), an affiliate of Love-PGI Partners, the
Company's Preferred Shareholder (see note 18), to handle the day-
to-day accounting for a fee. As a result general and administrative expenses
decreased by $220,000 (17.1%) in 1994 compared to 1993. The decrease
reflects lower costs associated with fewer personnel required to operate the
downsized Company. General and administrative expenses will continue to
decline in 1995.
<TABLE>
Gross and net interest expense for the three years ended December
31, 1994 was:
<CAPTION>
1994 1993 1992
---- ---- ----
($ in thousands)
<S> <C> <C> <C>
Interest expense $ 2,119 $ 2,269 $ 3,097
Interest capitalized - - (25)
----- ----- -----
Net interest expense $ 2,119 $ 2,269 $ 3,072
======= ======= =======
</TABLE>
Interest expense in 1994 decreased by $150,000 (6.6%) compared
to 1993 and decreased by $828,000 (26.7%) in 1993 compared to 1992
due to the Secured Lender Transaction.
Other expenses increased by $77,000 (16.6%) in 1994 compared to
1993 due to real estate valuation adjustments as discussed in note
16. Other expenses decreased by $50,000 (9.7%) in 1993 compared to
1992.
During 1994 and 1992 the Company made adjustments of $99,000 and
$190,000, respectively, to reduce the carrying value of various
parcels of land located in Charlotte and Citrus County, Florida.
The Company recognized the loss in value of the property because of
a down zoning required by the State of Florida Division of
Community Affairs and a sluggish real estate market.
- 17 -
<PAGE> 18
FINANCIAL CONDITION
<TABLE>
Assets totaled $12.6 million at December 31, 1994 compared to
$16.0 million at December 31, 1993 reflecting the following
changes:
<CAPTION>
Increase
1994 1993 (Decrease)
---- ---- ----------
($ in thousands)
<S> <C> <C> <C>
Cash $ 1,261 $1,521 $ (260)
Receivables 1,246 1,990 (744)
Land and improvement
inventories 9,154 11,214 (2,060)
Net property and equipment 119 234 (115)
Other assets 788 1,064 (276)
------ ------- -------
$12,568 $16,023 $(3,455)
======= ======= ========
</TABLE>
The Company's cash position at December 31, 1994 decreased by
$260,000 compared to December 31, 1993 as a result of a lower level of
funds related to home construction.
The $1.2 million in receivables on real estate sales at December 31,
1994 related to a 1988 receivable sale with recourse to Greyhound Real
Estate Finance ("Greyhound") treated as a financing transaction for
accounting purposes. As a result of the Secured Lender Transaction,
the Company does not have receivables available for replacement and is
therefore unable to meet its recourse obligations. However, the
Company has requested that Greyhound permit the Company to satisfy its
replacement obligation by cancelling or foreclosing the delinquent
accounts and reselling the property for the lender. Greyhound has not
yet responded to this request, and the Company has no assurance that
it will receive a favorable response. The $744,000 decrease in
receivables reflects the continuing paydown of the Greyhound portfolio.
<TABLE>
A comparison of the contracts receivable delinquency status at
December 31, 1994 and 1993 follows:
<CAPTION>
December 31, December 31,
1994 % 1993 %
---- - ---- -
($ in thousands)
<S> <C> <C> <C> <C>
Current $ 1,316 60.2% $ 2,041 70.4%
------- ----- ------- -----
31 days to 60 days delinquent 97 4.4 280 9.7
61 days to 90 days delinquent 58 2.7 76 2.6
Over 90 days 716 32.7 501 17.3
--------- --------- ------- ---------
Total delinquency 871 39.8 857 29.6
--------- --------- ------- ---------
Total contracts $ 2,187 100.0% $ 2,898 100.0%
======= ====== ======= ======
</TABLE>
The Company has experienced a deterioration in the quality of the
contracts receivable portfolio over the past several years. The
Company believes the deterioration is the result of the decline in the
economy, the adverse publicity regarding community developers as a
result of the GDC bankruptcy, as well as the difficulty of implementing
foreign contract collection activities.
- 18 -
<PAGE> 19
FINANCIAL CONDITION (continued)
Other assets at December 31, 1994 decreased by $276,000 compared to
year end 1993 primarily as a result of the normal amortization of
prepaid financing costs and lower prepaid expenses related to
receivable exchanges.
<TABLE>
Liabilities were $29.7 million at December 31, 1994 compared to
$31.9 million at December 31, 1993, reflecting the following changes:
<CAPTION>
Increase
1994 1993 (Decrease)
---- ---- ----------
($ in thousands)
<S> <C> <C> <C>
Accounts payable $ 79 $ 329 $ (250)
Other liabilities 1,512 1,811 (299)
Accrued interest 6,341 4,819 1,522
Credit agreements - primary lender 7,002 9,444 (2,442)
Notes and mortgages payable 4,250 4,929 (679)
Convertible subordinated debentures payable 9,059 9,059 -
Convertible debentures payable 1,500 1,500 -
------- ------- --------
$ 29,743 $ 31,891 $(2,148)
======== ======== ========
</TABLE>
<TABLE>
The $1.5 million increase in accrued interest at December 31, 1994
compared to year end 1993 reflects changes in the following:
<CAPTION>
Increase
1994 1993 (Decrease)
---- ---- ----------
($ in thousands)
<S> <C> <C> <C>
Primary lender $ 791 $ 378 $ 413
Debentures 4,388 3,376 1,012
Other 1,162 1,065 97
------ ------ ------
$ 6,341 $ 4,819 $ 1,522
======= ======= =======
</TABLE>
The increase is primarily due to the nonpayment of interest on the
company's debentures (see Note 11 to the consolidated financial
statements under Item 8).
The $2,442,000 decrease in primary lender credit agreements is
principally related to the reduction achieved as a result of the
previously discussed Second Secured Lender Transaction. The $679,000
reduction in notes and mortgages payable primarily represents normal
principal reductions required to amortize the Greyhound mortgage. As
a result of decreased operations the Company was able to attain further
reductions in notes payable by paying off equipment leases at
substantial discounts.
The Company's capital deficiency increased to $17.1 million at
December 31, 1994 from a $15.9 million capital deficiency at December
31, 1993, reflecting the 1994 operating loss.
To fund operations during the three years ended December 31, 1994,
the Company relied upon a combination of borrowings, sales of land and
improvement inventories and contracts receivables.
- 19 -
<PAGE> 20
FINANCIAL CONDITION (continued)
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
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 has been reduced from the default rate of
prime plus 5% to prime plus 1.5%. The primary lender has 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 must pay all accrued interest
due as of that date, as well as, pay the 1993 and 1994 property taxes
owed on any properties serving as collateral for the primary debt.
The Company is attempting to work out an extension of these requirements
but there can be no assurance that it will occur. If no extension is granted
the Company will be in default.
In 1992 the Company sold approximately 1,300 fully developed
homesites, 90 acres, its Sugarmill Woods sales office and $4.7 million
in receivables on real estate to subsidiaries of the Company's primary
lender, BancFlorida. The sale was made without recourse for delinquent
receivables. In addition, the Company conveyed 350 acres to Love-PGI
Partners, L.P., holders of a portion of the Company's collateralized
convertible debentures for a $1.2 million principal and interest
reduction in the amount due to convertible debenture holders as well
as a $1.0 million decrease in accrued management fees. The 1992
Secured Lender Transaction has been treated as a non-cash transaction
in the Company's Statement of Cash Flows.
During the three year period ended December 31, 1994, the Company's
financial condition remained weak and it experienced liquidity
shortages, which were at times severe. During the three year period
the economic recession severely impacted the Company's ability to
achieve sales, further reducing its cash flow.
Declining levels of business activities are reflected in declining
cash balances, which at year end 1994, 1993 and 1992 were $1.3, $1.5
and $2.2 million, respectively.
- 20 -
<PAGE> 21
FINANCIAL CONDITIONS (continued)
Cash decreased by $200,000 to $1.3 million at December 31, 1994
compared to $1.5 million at December 31, 1993. Net cash flow provided
by operations decreased by $140,000 million to $339,000 for the year
ended December 31, 1994 from cash provided by operations of $539,000
for the 1993 year.
Cash received from operations during 1994 was $3.4 million, a $2.9
million decrease from cash received during 1993. The majority of the
decrease is attributable to reduced principal and interest collections
from real estate sales and receivables.
During 1993, cash received from operations decreased by $2.6 million
primarily reflecting a $2.2 million reduction in collections from real
estate sales and receivables.
Cash expended for operations decreased by $2.8 million to $3.0
million during 1994 from $5.8 million in 1993, reflecting decreases in
the following classifications; payments for real estate operations
($2.3 million), land improvements ($55,000), general and administrative
($213,000), interest expense ($91,000), and other of ($83,000).
Cash expended for operations decreased by $3.9 million to $5.8
million during 1993 from $9.7 million in 1992, reflecting decreases in
the following classifications; payments for real estate operations
($1.4 million), land improvements ($800,000), general and
administrative ($1.5 million), interest expense ($125,000), and other
of $193,000.
The $704,000 and $1.2 million utilized during 1994 and 1993 by
financing activities represents payments to Greyhound from collections
on the receivables on real estate sold to Greyhound in 1988.
In connection with the 1994 Second Secured Lender Transaction, the
Company received the following:
- $2.4 million reduction in the principal due its primary lender
a five year extension of the maturity date on the $7.0 million
remaining First Union debt.
- $310,000 net reduction in accrued interest due to the primary
lender.
- Satisfaction of $362,000 in other liabilities and additional
closing costs of $71,000.
- The Company's interest rate has been reduced from the default
rate of prime plus 5% to prime plus 1.5%.
- 21 -
<PAGE> 22
FINANCIAL CONDITION (continued)
- The primary lender has 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 must pay all accrued interest due as of that date,
as well as pay the 1993 and 1994 property taxes owed on any
properties serving as collateral for the primary debt. The
Company is attempting to work out an extension of these requirements
but there can be no assurance that it will occur. If no extension
is granted the Company will be in default.
In connection with the 1992 Secured Lender Transaction, the Company
received the following:
- A five year extension of the maturity date on the $9.1 million
remaining BancFlorida debt.
- Scheduled release payments for the Company's remaining Citrus
County inventory.
- Utilization of certain assets for working capital, including up
to $670,000 in funds to be remitted by BancFlorida to the Company
as receivable payments are collected by BancFlorida on the
acquired receivable portfolio.
- Interest rate reduction on the remaining debt from prime plus 5%
to prime plus 1.5% with an interest moratorium until August 1,
1993.
- Substantial reduction in the negative covenants contained in the
Loan Agreement with BancFlorida, reducing BancFlorida's ability
to impact the Company's decision making ability. BancFlorida's
approval is no longer needed for the Company to sell its assets,
incur additional indebtedness, acquire additional property,
obtain working capital or merge with another company.
In connection with the portion of the Secured Lender Transaction
related to Love-PGI Partners, L.P., the Company reduced its
collateralized debenture debt by $782,000 and other liabilities by $1.4
million, including accrued interest and management fees. The maturity
date of the remaining collateralized debenture debt was extended from
April 30, 1992 to July 8, 1997.
<TABLE>
As of the date of this filing, the Company is in default of the
entire principal plus interest on its convertible subordinated
debentures payable in amounts indicated in the following table:
<CAPTION>
Principal Unpaid
Amount Due Interest
---------- --------
($ in thousands)
<S> <C> <C>
Convertible subordinated debentures due June 1, 1991 $ 1,034 $ 325
Convertible subordinated debentures due May 1, 1992 8,025 2,447
------ ------
$ 9,059 $ 2,772
======= =======
</TABLE>
- 22 -
<PAGE> 23
FINANCIAL CONDITION (continued)
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 in the
normal course of business (see Notes 10 and 11 to the consolidated
financial statements under Item 8).
On May 1, 1995 a payment is due to the Company's primary lender
which if not paid will be a default under the loan agreement. At that
time approximately $700,000 will be due. This amount represents the
interest accumulated since the April 1994 Second Secured Lender
Transaction plus the 1993 and 1994 real estate taxes on the Citrus
County Property. After this date, the Company will be required to pay
interest of approximately $40,000 to $50,000 monthly until July, 1997
when the loan will be due in full. These interest payments are in
addition to principal payments that are required as major land sales
take place. The Company continues to discuss an extension of the May
1, 1995 deadline with its primary lender. There can be no assurance that
an extension or restructuring will occur and if that does not happen then
the Company will be in default of the loan agreement with its primary
lender.
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 First Union (formerly known as BancFlorida), the
Company's Primary Lender, Greyhound and secured debenture debt.
Management believes that a bankruptcy filing would prompt all secured
lenders to initiate foreclosure proceedings. Since Company assets are
encumbered by mortgages, the secured lenders have a perfected security
interest and priority over the unsecured debenture holders.
- 23 -
<PAGE> 24
Item 8. Financial Statements and Supplementary Data
- - ------- -------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
PGI, Incorporated
St. Louis, Missouri
We have audited the accompanying consolidated statement of financial position
of PGI, Incorporated as of December 31, 1994, and the related consolidated
statements of operations, stockholders' deficiency and cash flows for the
year ended December 31, 1994. We have also audited the 1994 schedule listed
in the accompanying index. These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
schedule are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements and schedule. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the financial statements
and schedule. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PGI,
Incorporated at December 31, 1994, and the results of its operations and
its cash flows for the year ended December 31, 1994 in conformity with
generally accepted accounting principles.
Also in our opinion, the schedule presents fairly, in all material respects,
the information set forth therein.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 11 to the
financial statements, the Company is currently in default of certain sinking
fund and interest payments on its convertible subordinated debentures. As
discussed in Note 10, on May 1, 1995, the Company must pay all accrued
interest on obligations to its primary lender which is due as of that date,
as well as the 1993 and 1994 property taxes owed on properties serving as
collateral for the Company's obligations to this lender. In addition, the
Company has an accumulated deficit. These matters raise substantial doubt
about the Company's ability to continue as a going concern. Management's
plans in this regard are described in Notes 10 and 11. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
St. Louis, Missouri
April 4, 1995
- 24 -
<PAGE> 25
REPORT OF INDEPENDENT ACCOUNTANTS (continued)
To the Stockholders and Board of Directors
of PGI Incorporated
We have audited the accompanying consolidated statement of financial
position of PGI Incorporated and subsidiaries as of December 31, 1993 and
the related consolidated statements of operations, stockholders' deficiency
and cash flows for the two years in the period ended December 31, 1993. These
financial statements are the responsibility of the management of PGI
Incorporated. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of PGI
Incorporated and subsidiaries as of December 31, 1993 and the consolidated
results of their operations and their cash flows for the two years in the
period ended December 31, 1993 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in note 10,
the Company is in default on the payments of interest on its primary lender
credit agreements. As discussed in note 11, the Company is in default on the
payment of principal and interest on its convertible subordinated debentures.
The Company does not currently have the availability of funds to pay the
primary lender accrued interest, to retire the convertible subordinated
debentures or to pay the related accrued interest. These factors raise
substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also discussed
in notes 10 and 11. The financial statements do not include any adjustments
that might result from the outcome of these uncertainty.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Fort Myers, Florida
February 11, 1994
REPORT OF INDEPENDENT ACCOUNTS
Our report on the consolidated financial statements of PGI
Incorporated and subsidiaries is included on page _ of this Annual Report
on Form 10-K. In connection with our audits of such financial statements,
we have also audited the related financial statement schedule for the
years ended December 31, 1993 and 1992 listed in the index on page _ of
this Annual Report on Form 10-K.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information required
to be included therein.
The accompanying financial statement schedule has been prepared
assuming that the Company will continue as a going concern. As discussed
in note 10, the Company is in default on the payment of interest on its
primary lender credit agreements. As discussed in note 11, the Company
is in default on the payment of principal and interest on its convertible
subordinated debentures. The Company does not currently have the
availability of funds to pay the primary lender accrued interest, to
retire the convertible subordinated debentures or to pay the related
accrued interest. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans
in regard to these matters are also discussed in notes 10 and 11.
The financial statement schedule does not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Fort Myers, Florida
February 11, 1994
- 25 -
<PAGE> 26
<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31, 1994 and 1993
------------
<CAPTION>
ASSETS
======
1994 1993
---- ----
<S> <C> <C>
Cash, including restricted cash of
$1,235,000 and $1,449,000 (Note 4) $ 1,261,000 $1,521,000
Receivables on real estate sales -
net (Note 5) 1,227,000 1,906,000
Other receivables 19,000 84,000
Land and improvement inventories (Note 6) 9,154,000 11,214,000
Property and equipment - net (Note 7) 119,000 234,000
Other assets (Note 8) 788,000 1,064,000
$ 12,568,000 $16,023,000
============ ===========
<CAPTION>
LIABILITIES
===========
<S> <C> <C>
Accounts payable $ 79,000 $329,000
Other liabilities (Note 9) 1,512,000 1,811,000
Accrued interest:
Primary lender 791,000 378,000
Debentures 4,388,000 3,376,000
Other 1,162,000 1,065,000
Credit agreements - (Note 10)
Primary lender 7,002,000 9,444,000
Notes and mortgages payable 4,250,000 4,929,000
Convertible subordinated
debentures payable (Note 11) 9,059,000 9,059,000
Convertible debentures
payable (Note 12) 1,500,000 1,500,000
--------- ---------
29,743,000 31,891,000
---------- ----------
Commitments and
contingencies (Note 17)
STOCKHOLDERS'
DEFICIENCY
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) (Note 14) 2,000,000 2,000,000
Common stock, par value $.10
per share; authorized
25,000,000 shares; 3,317,555
shares issued and outstanding (Note 14) 332,000 332,000
Paid-in capital 13,698,000 13,698,000
Accumulated deficit (33,205,000) (31,898,000)
------------ ------------
(17,175,000) (15,868,000)
------------ ------------
$ 12,568,000 $ 16,023,000
============= =============
See accompanying notes to consolidated financial statements.
</TABLE>
- 26 -
<PAGE> 27
<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
years ended December 31, 1994, 1993 and 1992
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Revenues:
Real estate sales $ 3,108,000 $3,969,000 $7,498,000
Interest income 271,000 390,000 791,000
Other income 2,086,000 495,000 1,895,000
--------- ------- ---------
5,465,000 4,854,000 10,184,000
--------- --------- ----------
Costs and expenses:
Cost of real estate sales 2,770,000 3,519,000 5,987,000
Selling expenses 178,000 356,000 1,236,000
General and administrative expenses 1,065,000 1,285,000 2,116,000
Interest 2,119,000 2,269,000 3,097,000
Interest capitalized - - (25,000)
Other expenses 541,000 464,000 514,000
Provision for land and property cost reduction to
net realizable value 99,000 - 190,000
---------- ---------- -------
6,772,000 7,893,000 13,115,000
--------- --------- ----------
Net loss $ 1,307,000 $ 3,039,000 $ 2,931,000
=========== =========== ===========
Loss per share of common stock and common stock
equivalents after considering preferred dividends
of $640,000 for 1994, 1993 and 1992:
Primary net loss per share $ .59 $ 1.11 $ 1.08
===== ====== ======
See accompanying notes to consolidated financial statements.
</TABLE>
- 27 -
<PAGE> 28
<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
years ended December 31, 1994, 1993 and 1992
--------------
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from operations:
Collections from real estate sales and
receivables on such sales $ 2,670,000 $ 5,165,000 $ 7,396,000
Interest on homesite and acreage contracts 203,000 299,000 634,000
Collections from amenity and other operations 283,000 401,000 233,000
Other interest received 39,000 29,000 88,000
Other receipts 246,000 432,000 582,000
---------- ---------- -----------
3,441,000 6,326,000 8,933,000
--------- --------- ----------
Cash expended for operations:
Payments to subcontractors and vendors for real estate
operations and sale and marketing activities 1,791,000 4,078,000 5,513,000
Land purchases and improvements 5,000 60,000 859,000
Payments for amenity and other operations 268,000 764,000 199,000
General and administrative costs 551,000 764,000 2,248,000
Interest paid 319,000 410,000 535,000
Other disbursements 108,000 191,000 384,000
---------- ---------- -----------
3,042,000 5,787,000 9,738,000
--------- --------- ----------
Net cash flow provided by (used in) operating activities 399,000 539,000 (805,000)
--------- --------- ---------
Cash flows from investing activities:
Proceeds from fixed asset sales 11,000 9,000 -
Purchases of property and equipment (1,000) (14,000) -
---------- ---------- -----------
Net cash flow used in investing activities 10,000 (5,000) -
--------- ---------- -----------
Cash flows from financing activities:
Proceeds from borrowings 35,000 - -
Principal payments on debt (704,000) (1,165,000) (1,313,000)
--------- ----------- -----------
Net cash flow used in financing activities (669,000) (1,165,000) (1,313,000)
--------- ----------- -----------
Net decrease in cash (260,000) (631,000) (2,118,000)
Cash at beginning of year 1,521,000 2,152,000 4,270,000
---------- ---------- -----------
Cash at end of year $ 1,261,000 $ 1,521,000 $ 2,152,000
=========== =========== ============
See accompanying notes to consolidated financial statements.
- 28 -
<PAGE> 29
PGI INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
years ended December 31, 1994, 1993 and 1992
--------------
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Reconciliation of net loss to net cash provided by
(used in) operating activities:
Net loss $(1,307,000) $(3,039,000) $(2,931,000)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization 51,000 36,000 483,000
Net allowance and valuations related to real estate sales (68,000) (56,000) 1,112,000
interest capitalized to primary lender loan - 668,000 -
Provision for land and property cost reduction to net
realizable value 99,000 - 190,000
Gain on disposition of assets (1,463,000) - 1,397,000
Loss on sale of property, plant & equipment 17,000 - -
(Increase) decrease in:
Contracts and mortgages receivable 712,000 884,000 1,748,000
Other receivables 100,000 315,000 71,000
Land and improvement inventories - net 601,000 (352,000) 1,530,000
Loan costs and other prepaid expenses 43,000 102,000 134,000
Increase (decrease) in:
Accounts payable (250,000) 123,000 (318,000)
Accrued interest 1,801,000 1,190,000 (584,000)
Other accrued expenses 301,000 282,000 (362,000)
Deposits and advances (238,000) 386,000 (481,000)
---------- --------- -----------
1,706,000 3,578,000 2,126,000
--------- --------- -----------
Net cash flow provided by (used in) operating activities $ 399,000 $ 539,000 $ (805,000)
========= ========= ===========
</TABLE>
Supplemental schedule of non-cash investing and financing activities:
In 1994 a former employee compensation and related party
transaction was completed through the exchange of assets. See Note 18.
In 1994 and 1992 the Company reduced secured lender debt through
the exchange of assets. See Note 2.
Accrued interest of $668,000 was added to the primary lender debt
balance during 1993.
See accompanying notes to consolidated financial statements.
- 29 -
<PAGE> 30
<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
years ended December 31, 1994, 1993 and 1992
--------------
<CAPTION>
Preferred Stock Common Stock Retained
--------------- ------------ Paid-In Earnings
Shares Par Value Shares Par value Capital (Deficit)
------ --------- ------ --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balances at
January 1, 1992 2,000,000 $ 2,000,000 3,316,530 $ 332,000 $13,678,000 $(25,928,000)
Net loss
Conversion of debentures
to common stock - - 1,025 - 20,000 -
Net loss - - - - - (2,931,000)
----------- ----------- --------- --------- ----------- -------------
Balances at
December 31, 1992 2,000,000 $ 2,000,000 3,317,555 $ 332,000 $13,698,000 $(28,859,000)
Net loss - - - - - (3,039,000)
----------- ----------- --------- --------- ----------- -------------
Balances at
December 31, 1993 2,000,000 $ 2,000,000 3,317,555 $ 332,000 $13,698,000 $(31,898,000)
Net loss - - - - - (1,307,000)
----------- ----------- --------- --------- ----------- -------------
Balances at
December 31, 1994 2,000,000 $ 2,000,000 3,317,555 $ 332,000 $13,698,000 $(33,205,000)
=========== =========== ========= ========= =========== =============
See accompanying notes to consolidated financial statements.
</TABLE>
- 30 -
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies:
--------------------------------
Principles of Consolidation
- - ---------------------------
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries after eliminating all
significant intercompany transactions.
Revenue and Profit Recognition
- - ------------------------------
Homesites
---------
Prior to July 1992, homesites were generally sold under contracts for
deed or deed, note and mortgage which provide for a down payment and
monthly installments, including interest, for periods up to ten years.
Prior to 1990 income from sales of homesites was recorded when minimum
down payment (including interest) and other requirements were met.
However, because of collectibility problems with certain off-site
broker/foreign sales programs, effective January 1, 1990, the Company
adopted the installment method of profit recognition in accordance with
Statement of Financial Accounting Standard No. 66 "Accounting for Sales
of Real Estate".
Homes Units
-----------
Home sales are recorded at closing.
Acreage
-------
Sales of undeveloped and developed acreage tracts are recognized, net
of any deferred revenue and valuation discount, when minimum down
payment and other requirements are met.
Provision for Cancellations
- - ---------------------------
For sales prior to January 1, 1990, the Company provided for
estimated future cancellations of receivables on real estate sales by
charges to operations based on historical collection experience and
analysis of delinquencies. Balances related to cancelled receivables
are charged to the allowance for cancellations.
Land and Improvement Inventories
- - --------------------------------
Land held for sale to customers is stated at cost, which is not in
excess of estimated net realizable value. Homesite costs are allocated
to projects based on area methods, which consider square footage,
future improvement costs and frontage.
- 31 -
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Property and Equipment
- - ----------------------
Property and equipment are stated at cost. Depreciation is provided
principally by the straight-line method over the estimated useful lives
of the related assets. Gains or losses resulting from the disposition
of property and equipment are respectively included in other income or
other expense.
Per Share Data
- - --------------
Primary loss per share is computed by dividing net loss, after
including dividends on the Company's preferred stock, by the average
number of common shares. For this purpose, the Company's cumulative
convertible preferred stock and convertible debentures are not deemed to be
common stock equivalents but outstanding vested stock options are considered
as such. The average number of common shares outstanding was 3,317,216 for
1994, 1993 and 1992.
Cash and Cash Equivalents
- - -------------------------
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.
Reclassifications
- - -----------------
Certain amounts have been reclassified in the 1992 financial
statements to conform to the 1993 presentation.
2. Secured Lender Transactions:
----------------------------
In April 1994 the Company entered into a series of agreements (the
Second Secured Lender Transaction) wherein the Company sold the
remainder of its 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
(the "Second Secured Lender Transaction"). Included in other income for 1994
is a $1.5 million gain related to the sale of the Southern Woods
development which represents the excess of fair market value over
carrying value of assets exchanged.
In July 1992 the Company entered into a series of agreements (the
Second Secured Lender Transaction) executed on July 8, 1992 and closed
on July 11, 1992, wherein the Company sold the remainder of its Citrus
County developed homesite inventory (approximately 1,300 homesites),
440 acres of Citrus County undeveloped property, its Sugarmill Woods
sales office and $4.7 million in receivables on homesite sales in
exchange for a $13.7 million reduction in collateralized liabilities
and a $2.2 million reduction in uncollateralized liabilities.
- 32 -
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Secured Lender Transactions: (Continued)
----------------------------------------
The 1,300 homesites, 90 acres, the sales office and the receivables
were sold without recourse to subsidiaries of the Company's primary
lender, BancFlorida, a Naples, Florida based federal savings and loan
association ("BancFlorida"). The remaining 350 acres were conveyed to
Love-PGI Partners, L.P., holders of a portion of the Company's
collateralized convertible debentures. In addition to the closing
proceeds, the Company has received $649,000 as of December 31, 1994
with $11,000 yet to be received for working capital from BancFlorida as
receivable payments were collected by BancFlorida on the acquired
portfolio and remitted to the Company. The $1.4 million gain
associated with these transactions is included in other income in the
December 31, 1992 consolidated statement of operations.
3. Real Estate Sales - and Other Income:
-------------------------------------
<TABLE>
Real estate sales and cost of sales consisted of:
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Revenues:
Gross homesite sales $ 240,000 $ 499,000 $ 2,596,000
Less: Deferred gross profit - - (722,000)
----------- ---------- ------------
Net homesite sales 240,000 499,000 1,874,000
Profit recognized - installment sales - - 318,000
Home sales 2,340,000 3,470,000 5,306,000
Acreage sales 528,000 - -
------------ ------------ ------------
$ 3,108,000 $ 3,969,000 $ 7,498,000
=========== =========== ===========
Cost of Sales:
Homesites $ 291,000 $ 140,000 $ 1,056,000
Homes 2,324,000 3,379,000 4,931,000
Acreage 155,000 - -
---------- ------------ ------------
$2,770,000 $ 3,519,000 $ 5,987,000
========== =========== ===========
Other income consisted of:
Gain on disposition of assets $1,463,000 $ - $ 1,397,000
Commission income 270,000 329,000 220,000
Other income 353,000 166,000 278,000
---------- ----------- ------------
$2,086,000 $ 495,000 $ 1,895,000
========== =========== ===========
</TABLE>
4. 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 home site and
housing contracts.
- 33 -
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Receivables on Real Estate Sales:
---------------------------------
<TABLE>
Net receivables on real estate sales consisted of:
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Contracts receivable on homesite sales $ 2,187,000 $ 2,898,000
Other 123,000 159,000
------- -------
2,310,000 3,057,000
Less: Allowance for cancellations (976,000) (976,000)
Unamortized valuation discount (107,000) (175,000)
--------- ---------
$ 1,227,000 $ 1,906,000
============ ============
</TABLE>
Stated interest rates for contracts receivable on homesite sales,
as well as contracts and mortgages receivable on acreage sales,
ranged up to 10% with payment terms varying from seven to ten years.
The weighted average interest rate for such receivables outstanding
at December 31, 1994 and 1993 was 9.4% and 8.9%, respectively.
The Company generally considers receivables on real estate sales
delinquent if the scheduled installment payment is over 30 days past
due. At December 31, 1994 and 1993 delinquent receivables
approximated $871,000 and $857,000, respectively.
Contracts receivable on homesite sales and contracts and
mortgages receivable on acreage sales have been discounted to yield
an effective interest rate of 14%. Contracts receivable on homesite
sales recorded under the installment method have not been
discounted.
<TABLE>
The estimated scheduled principal collections for receivables on
real estate sales at December 31, 1994 are:
<S> <C>
1995 $ 990,000
1996 689,000
1997 395,000
1998 130,000
1999 39,000
Thereafter 67,000
-------------
$ 2,310,000
===========
</TABLE>
- 34 -
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Receivables on Real Estate Sales: (Continued)
---------------------------------------------
In March 1988 the Company sold contracts receivable on homesite
sales totaling approximately $9,246,000, before consideration of a
related unamortized valuation discount of approximately $1,197,000
at the time of the sale. For financial reporting purposes this
transaction has been treated as a financing transaction (see Note
10), since the Company may be required to repurchase the contracts
receivable on homesite sales under conditions other than the
recourse provision of the sales agreement. At December 31, 1994,
and 1993, contracts receivable on homesite sales of approximately
$2,187,000 and $2,898,000, respectively, and related unamortized
valuation discount of approximately $107,000 and $175,000,
respectively, related to this transaction have been included in the
Company's reported receivables on real estate sales.
At December 31, 1994, 63% of the Company's gross receivables from
real estate sales were generated by a broker in two geographic
regions, certain districts in New York City and Taiwan. These sales
were under contract for deed with terms similar to sales to other
customers. This concentration of credit risk has been considered
by management in determining the allowance for cancellations.
6. Land and Improvements:
----------------------
<TABLE>
Land and improvement inventories consisted of:
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Unimproved land $ 8,730,000 $ 8,735,000
Land being improved - 643,000
Fully improved land 424,000 1,677,000
Completed and in progress homes held
for sale - 159,000
----------- -------
$ 9,154,000 $11,214,000
=========== ===========
</TABLE>
7. Property and Equipment:
-----------------------
<TABLE>
Property and equipment consisted of:
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Furniture, fixtures and other equipment $407,000 $ 569,000
Construction in progress 2,000 2,000
---------- ----------
409,000 571,000
Less accumulated depreciation (290,000) (337,000)
--------- ---------
$119,000 $ 234,000
========= ==========
</TABLE>
<TABLE>
Depreciation was:
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Charged to expense $ 46,000 $ 49,000 $ 91,000
Cost of sales 5,000 10,000 19,000
-------- -------- ---------
$ 51,000 $ 59,000 $ 110,000
======== ======== =========
</TABLE>
- 35 -
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Other Assets:
-------------
<TABLE>
Other assets consisted of:
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Guaranteed future connections related to
sale of utility plants and equipment, net $621,000 $821,000
Prepaid loan and debenture costs 42,000 80,000
Deposit with Trustee of 6-1/2% debentures 114,000 112,000
Other 11,000 51,000
-------- ----------
$788,000 $1,064,000
======== ==========
</TABLE>
The guaranteed future connections are reflected net of discount
of $274,000 and $363,000 and deferred gain of $101,000 and $134,000
in 1994 and 1993, respectively.
9. Other Liabilities:
------------------
<TABLE>
Other liabilities consisted of:
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Accrued property taxes - current $ 238,000 $238,000
Other accrued expenses - delinquent 303,000 303,000
Deposits, advances and escrows 419,000 659,000
Estimated recourse liability for
receivables sold 300,000 300,000
Other 18,000 36,000
---------- ----------
$1,512,000 $1,811,000
========== ==========
</TABLE>
10. Credit Agreements - Primary Lender and Notes and Mortgages
----------------------------------------------------------
Payable:
--------
<TABLE>
Credit agreements with the Company's primary lender and notes and
mortgages payable consisted of the following:
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Credit agreements - primary lender
(maturing July 8, 1997, bearing
interest at prime plus 1.5%):
Revolving land loan line of credit $4,297,000 $6,739,000
Receivable loan payable 2,705,000 2,705,000
--------- ---------
7,002,000 9,444,000
--------- ---------
Notes and mortgages payable -
$2,253,000 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 4,250,000 4,929,000
----------- -----------
$11,252,000 $14,373,000
=========== ===========
The prime rate at December 31, 1994 was 8.5%.
</TABLE>
- 36 -
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Credit Agreements - Primary Lender and Notes and Mortgages
----------------------------------------------------------
Payable: (Continued)
--------------------
At December 31, 1994 assets collateralizing the Company's credit
agreements with its primary lender and notes and mortgages payable
were carried at $11,406,000, of which $2,310,000 represented gross
receivables on real estate sales, $19,000 represented other
receivables, $8,958,000 represented land and improvement
inventories, and $119,000 represented property and equipment.
The overall weighted average interest rate for the Company's
credit agreements with its primary lender and all remaining notes
and mortgages was approximately 9.6% for 1994 and 8.9% for 1993.
As discussed in Note 5, the Company's March 1988 sale of
receivables on real estate sales has been treated as a financing
transaction for financial reporting purposes since the Company may
be required to repurchase these receivables under conditions other
than the recourse provision of the sales agreement. Principal and
interest payments are recorded by the Company based on the
collections from receivables applicable to the sale and the
application of the 12 1/4% interest rate used to calculate this
sale's discounted present value. At December 31, 1994 and 1993, the
outstanding principal balance for this financing transaction was
approximately $ 2,253,000 and $2,855,000, respectively, and based on
estimated collections of the associated receivables on real estate
sales, full repayment should be made by 1999.
The Company's credit agreement with its primary lender matured May
30, 1991. Effective July 1, 1991, the primary lender began charging
the Company at the default rate, prime plus 5%. In July 1992 the
Company sold to its primary lender the remainder of its Citrus
County undeveloped property, its Sugarmill Woods sales office and
$4.7 million in receivables on homesite sales in exchange for a $9.7
million principal reduction and the payment of $2.7 million in
interest due on its primary lender debt. In addition to the debt
reduction, the Company received a 5-year extension of the maturity
date of the remaining debt, an interest rate reduction to prime plus
1-1/2% with an interest moratorium until August 1, 1993 and the
utilization of up to $670,000 for working capital as receivable
payments are collected by BancFlorida on the acquired portfolio and
remitted to the Company.
In August of 1993 the Company was unable to make its debt payment
and again defaulted on its primary lender debt. In April 1994 the
Company entered into a series of agreements wherein the Company sold
the remainder of its 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
- 37 -
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Credit Agreements - Primary Lender and Notes and Mortgages
----------------------------------------------------------
Payable: (Continued)
--------------------
$71,000 (the "Second Secured Lender Transaction"). Included in other
income for 1994 is $1.5 million gain related to the sale of the
Southern Woods development which represents the excess fair market
value over carrying value.
Although substantially all of the Company's real and personal
property including all of the stock of the Company's wholly-owned
subsidiaries remains pledged as collateral, the Company negotiated
agreements with it's mortgage holders to allow the Company to sell
part of it's land holdings without requiring full payment of the
secured debt.
<TABLE>
Scheduled payments applicable to the reduction of principal
amounts of all primary lender debt based on the terms of the
Company's primary lender credit agreements, and all other notes and
mortgages payable (without giving effect to various cross-default
provisions which could, upon formal notice, accelerate payment of
substantially all of the Company's debt) will be required
approximately as follows:
<S> <C>
1995 $ 2,178,000
1996 692,000
1997 7,412,000
1998 147,000
1999 741,000
Thereafter 82,000
-----------
$ 11,252,000
============
</TABLE>
The resulting principal and interest payable to its primary
lender, due to the sale of Southern Woods, retains a maturity date
of July 8, 1997. Effective with the closing, the Company's
interest rate has been reduced from the default rate of prime plus
5% to prime plus 1.5%. The primary lender has 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 must pay all accrued interest due as of
that date as well as pay the 1993 and 1994 property taxes owed on
any properties serving as collateral for the primary debt,
estimated in total of approximately $700,000. Failure to remit
these amounts on May 1, 1995 will result in an event of default
under the loan documents.
On May 1, 1995 a payment is due to the Company's primary
lender which if not paid will be a default under the loan
agreement. At that time approximately $700,000 will be due. This
amount represents the interest accumulated since the April 1994
Second Secured Lender Transaction plus the 1993 and 1994 real
estate taxes on the Citrus County Property. After this date, the
Company will be required to pay interest of approximately $40,000
to $50,000 monthly until July, 1997 when the loan will be due in
full. These interest payments are in addition to principal
payments that are required as major land sales take place. The
Company continues to discuss an extension of the May 1, 1995
deadline with its primary lender or a third party investor/buyer
but has not been able to structure an agreement.
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 its continuing financial difficulties due to the principal
and interest owed on its debt and managements' realization 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 proeprty.
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.
- 38 -
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. Convertible Subordinated Debentures Payable:
--------------------------------------------
<TABLE>
Convertible subordinated debentures payable consisted of:
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
6-1/2%, due June 1991, convertible into
shares of common stock at $18.00 per
share $1,034,000 $1,034,000
6%, due May 1992, convertible into
shares of common stock at $19.50 per
share 8,025,000 8,025,000
--------- ---------
$9,059,000 $ 9,059,000
========== ===========
</TABLE>
Since issuance, $650,000 and $152,000 of the 6-1/2% and 6%
debentures, respectively, have been converted.
The Company is currently in default of certain sinking fund and
interest payments on both convertible subordinated debentures,
$9,059,000 in principal plus accrued and unpaid interest totaling
$2,772,000 at December 31, 1994.
The debentures are not collateralized and are not subordinated
to each other, but are subordinated to senior indebtedness
($12,752,000 at December 31, 1994). Payment of dividends on the
Company's common stock is restricted under the terms of the two
indentures pursuant to which the outstanding debentures are issued.
In order to satisfy the obligation to debenture holders, the
Company has been and intends to continue to:
- actively seek buyers for all or a portion of the undeveloped
acreage;
- search for additional sources of equity; and
- determine if potential merger or joint venture candidates
exist.
No assurances can be made that the Company can achieve any of the
three above alternatives.
12. Convertible Debentures Payable:
-------------------------------
In July and September 1989, the Company sold $1,282,000 and
$1,000,000, respectively, of convertible debentures to a
partnership affiliated with the Company's preferred shareholder.
In connection with the July 1992 Secured Lender Transaction in
partial consideration for the conveyance of 350 acres of property,
the principal amount due to convertible debenture holders was
reduced by $782,000 and accrued interest thereon was reduced by
$389,000 leaving a balance of $1,500,000. The debentures, with a
maturity of July 8, 1997 accrue interest at 14% compounded quarterly.
The Company's primary lender credit agreements, however, prohibit the
payment of interest until such time as the primary lender loans are
repaid. Each month, to the extent interest on the Convertible
- 39 -
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. Convertible Debentures Payable (continued):
-------------------------------------------
Debentures is not paid in cash, the number of shares into which the
Convertible Debentures are convertible will increase. If no interest is
paid prior to maturity, at maturity the Convertible Debentures purchased on
July 24, 1989, will be convertible into 868,788 shares and those purchased on
September 29, 1989, will be convertible into 1,726,568 shares, or a total of
2,595,356 shares of common stock. The debentures are convertible into common
stock at an initial conversion price of $1.72 per share. The conversion
price may be adjusted upon the occurrence of certain events.
Accrued interest was $1,616,000 and $1,215,000 at December 31,
1994 and 1993, respectively. The debentures are collateralized by
a second mortgage on an approximately 650 acre tract of land in
Citrus County, Florida.
13. Income Taxes:
-------------
<TABLE>
Reconciliation of the statutory federal income tax rates, 34% for
the years ended December 31, 1994, 1993 and 1992, to the Company's
effective income tax rates follows:
<CAPTION>
1994 1993 1992
---- ---- ----
($ in thousands) ($ in thousands) ($ in thousands)
Percent of Percent of Percent of
---------- ---------- ----------
Amount of Pre-tax Amount of Pre-tax Amount of Pre-tax
--------- ------- --------- ------- --------- -------
Tax Loss Tax Loss Tax Loss
--- ---- --- ---- --- ---
<S> <C> <C> <C> <C> <C> <C>
"Expected tax (credit) $(444) (34.0%) $(1,033) (34.0%) $(997) (34.0%)
State income taxes, net of federal tax benefits (47) (3.6) (110) (3.6) (106) (3.6)
Current year unused book operating loss 491 37.6 1,143 37.6 1,103 37.6
---- ------ ------ ------ ------ ------
$ - - % $ - -% $ - -%
</TABLE>
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 the 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 which will expire at various dates through
2009. In addition, the Company had unused investment tax credits of
approximately $731,000 which will expire at varying dates through 2000.
- 40 -
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. Income Taxes: (Continued)
-------------------------
<TABLE>
The following summarizes the temporary differences of the Company
at the current statutory rate:
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Deferred tax asset:
Net operating loss carryover $ 10,352,000 $ 9,904,000 $ 8,783,000
Revenue recognition differences on homesite sales - - -
Adjustments to reduce land to net realizable value 311,000 343,000 343,000
Expenses capitalized under IRC 263(a) 57,000 105,000 86,000
ITC carryforward 731,000 731,000 778,000
Other 7,000 12,000 40,000
Valuation allowance (8,972,000) (8,550,000) (7,508,000)
----------- ----------- -----------
2,486,000 2,545,000 2,522,000
Deferred tax liability:
Basis difference of land and improvement inventories 2,452,000 2,498,000 2,468,000
Excess tax over book depreciation 34,000 47,000 54,000
----------- ----------- -----------
2,486,000 2,545,000 5,522,000
Net deferred tax asset $ 0 $ 0 $ 0
</TABLE>
14. Capital Stock:
--------------
In March 1987 the Company sold in a private placement 1,875,000
shares of its Class A cumulative convertible preferred stock to a
limited partnership ("Partnership") for a purchase price of
$7,500,000 cash ($4.00 per share). The Company also converted
$500,000 of indebtedness owed to a corporation owned by the
Company's former Chairman of the Board of Directors and members of
his family into 125,000 shares of the cumulative convertible
preferred stock.
The holders of the preferred stock are entitled to one vote per
share and, except as provided by law, will vote as one class with
the holders of the common stock. Class A preferred stockholders
are also entitled to receive cumulative dividends at the annual
rate of $.32 per share, an effective yield of 8%. Dividends
accrued for an initial two year period and, at the expiration of
this period, preferred stockholders had the option of receiving
accumulated dividends, when and if declared by the Board of
Directors, in cash (unless prohibited by law or contract) or common
stock. At December 31, 1994 cumulative preferred dividends in
arrears totaled $4,056,000 ($640,000 of which related to the year
ended December 31, 1994).
The preferred stock was convertible at the option of the holders
into common stock at an initial conversion price of $2.41 per share
(equivalent to 1.66 shares of common stock for each share of
preferred stock), subject to adjustment in certain events. As a
result of the 1989 issuance of the convertible debentures payable,
the conversion price was adjusted to $2.13 per share.
- 41 -
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. Capital Stock: (Continued)
--------------------------
Prior to March 25, 1995 the Company shall not have the right to
call or redeem the preferred stock without the consent of 66-2/3%
of all the shares of preferred stock at the time outstanding. On
or after March 25, 1995 the preferred stock will be callable or
redeemable at the option of the Company at $4.00 per share plus
accrued and unpaid dividends. In addition, the preferred stock
will be entitled to preference of $4.00 per share plus accrued and
unpaid dividends in the event of liquidation of the Company.
At December 31, 1994 the Company had reserved 6,684,341 common
shares for the conversion of preferred stock and debentures, and
for the exercise of stock options.
15. Stock Options:
--------------
The Company has an incentive stock option plan which provides for
the granting of options to officers and key employees to purchase
up to an aggregate of 350,000 shares of the Company's common stock
at not less than the fair market value of the stock at the time
such incentive stock options are granted.
The Company has also adopted a non-qualified stock option and
stock appreciation rights plan which provides for the granting of
options and/or stock appreciation awards to key employees to
purchase up to an aggregate of 500,000 shares of the Company's
common stock at not less than 50% of the fair market value of the
stock at the time such non-qualified stock options and/or
appreciation awards are granted.
At December 31, 1992 10,000 options granted at an exercise price of $2.50
per share were outstanding. These 10,000 options expired during 1993. There
were no remaining stock options outstanding at December 31, 1994.
16. Quarterly Results:
------------------
During the fourth quarter of 1994, the Company made the following
adjustments:
- The Primary Lender principal and accrued interest balance
was increased by $79,000 and $69,000 to accurately reflect
the Company's liability after the Second Secured Lender
Transaction during 1994.
- Prepaid water and sewer costs were increased by $121,000 to
properly reflect the remaining assets after the Second
Secured Lender Transaction. An additional $88,000 was
adjusted to adequately reflect a devaluation of the water
and sewer utility asset.
- 42 -
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16. Quarterly Results: (Continued)
------------------------------
- As a result of reduced land (see note 18) prices, local competition
and the McQueen Transaction the Company has provided $250,000
for land cost reductions. This includes a $99,000 adjustment
to the 1994 Net Realizable Value of land in Charlotte County,
Florida. Further, the Company has reduced by $78,000 a
contingent contract asset account which has been uncollected
since the 1992 Secured Lender Transaction.
17. Commitments and Contingencies:
------------------------------
The Company is a party to a number of lawsuits incidental to the
normal operation of its business. Two of these lawsuits filed in
1994 involve Sugarmill Woods, Inc. This first case involves a home
Sugarmill Woods, Inc. built in 1991 that has a potential claim
against Sugarmill Woods, Inc. of $65,000. At this time the outcome
of the litigation cannot be determined.
The second case involves Sugarmill Woods, Inc. and Citrus County
County Tax Collector. In 1994, Citrus County County Tax Collector denied
agricultural exemption status for the undeveloped Sugarmill Woods property
and the Company was forced to sue the County to reclaim the tax benefit. At
this time the outcome of the litigation cannot be determined.
The aggregate outstanding balances of receivables sold or
exchanged with recourse by the Company, not including those
receivables associated with the March 1988 financing transaction
previously discussed in Notes 5 and 9, totaled approximately
$618,000, $872,000, and $1,970,000 at December 31, 1994, 1993 and
1992, respectively. Based on its collection experience with such
receivables, the Company maintained an allowance at December 31,
1994, 1993 and 1992 classified in other liabilities, of
approximately $300,000 for the recourse provisions related to all
receivables sold.
Under the terms of the receivables sale agreements the Company
must repurchase contracts greater than 90 days past due or exchange
current contracts owned by the Company. The repurchase price is
equal to the outstanding principal balance of the delinquent
contract plus accrued interest. At December 31, 1994, sold
contracts receivable greater than 90 days past due totaled
approximately $32,000. The related accrued interest is considered
immaterial.
The Company currently leases office space for its corporate
headquarters and its administrative operations, certain office
equipment, and model homes under operating leases. During 1994,
1993 and 1992 the Company incurred expenses of $113,000, $216,000,
and $240,000, respectively, related to these leases.
- 43 -
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. Related Party Transactions:
---------------------------
In January, 1994 the Company's President, Paula McQueen (see Note 16),
retired after 28 years of employment. Pursuant to the terms of an Employment
Agreement executed on March 27, 1987, the Company owed termination pay in the
amount of $50,000, $13,000 for services rendered during the month of January
1994, as well as reimbursement for business expenses incurred by the
employee. In order to conserve its operating cash, the Company negotiated an
agreement whereby property was transferred at its appraised value in full
satisfaction of the amount due. The property transferred was subject to
approximately $11,000 in delinquent and current year taxes, as well as
closing costs. The Company transferred additional Lots and $6,400 in
furniture in lieu of the cash payment of these closing costs. The
additional lots were transferred at the same value as that paid by
third party purchasers of comparable property. The value of the
furniture was equal to 50% of its 1989 acquisition cost and exceed
that which the Company would have realized in a sale of the
furniture to a third party purchaser.
The Company continued to utilize the services of the retired
President subsequent to her termination. During 1994 a certified
public accounting firm in which the former President is a partner
rendered services totaling $47,437. Again, to conserve operating
cash, the Company negotiated an agreement whereby property was
transferred at the same prices paid by third party purchasers for
comparable property. Additional property to cover the cost of
delinquent and current year taxes, as well as transfer costs was
also conveyed at the same value paid by third party purchasers for
comparable property.
The Company has moved its administration and accounting
offices to the offices of LREC in St. Louis, Missouri. LREC, which
is an affiliate of Love-PGI, the Company's preferred shareholder,
is located at 515 Olive Street, Suite 1400, St. Louis, Missouri
63101. A fee of $9,166 per month is paid to LREC as reimbursement
and compensation.
The following services are provided to the Company by LREC:
1. Maintain books of original entry;
2. Prepare quarterly and annual SEC filings;
3. Coordinate the annual audit;
4. Assemble information for tax filing, review reports as
prepared by tax accountants and file same;
5. Track shareholder records through transfer agent;
6. Maintain policies of insurance against property and
liability exposure;
7. Handle payroll and benefits for Sugarmill location; and
8. Handle day-to-day accounting requirements.
In addition, the Company receives office space, telephone service
and computer service from LREC.
- 44 -
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. Related Party Transactions: (Continued)
---------------------------------------
In August, September and October of 1994 an affiliate of Love-
PGI, the Company's Preferred Shareholder, Love Investment Company
made three uncollateralized loans to the Company, which at December
31, 1994 had a total outstanding balance, excluding accrued
interest of $35,000.
In August of 1994 the Company sold a Promissory note and Mortgage
with a principal balance of $36,000 to Love Real Estate Company
Profit Sharing Plan (1994), an affiliate company of Love-PGI
Partners, the Company's Preferred Shareholder.
In August of 1994 the Company sold a Promissory note and Mortgage
with a principal balance of $100,000 to Love Group Joint Venture,
an affiliate company of Love-PGI Partners, the Company's Preferred
Shareholder.
Pursuant to the terms of the 1987 preferred stock private
placement agreement, the Company accrued but did not pay $54,000,
$69,000, and $108,000 in management consulting fees during 1994,
1993 and 1992, respectively, to a company affiliated with the
Partnership's managing general partner. See Secured Lender
Transaction under Note 2.
During 1994, 1993 and 1992 the Company made payments of $21,000,
$38,000, and $63,000, respectively, for insurance premiums to an
agency whose Executive Vice President and major stockholder was a
Director of the Company until his resignation in June 1993.
In 1985 a corporation owned by the former Chairman of the Board
and his family made an uncollateralized loan to the Company which
at December 31, 1994 had an outstanding balance, including accrued
interest, of $320,000.
In April 1985 the Company sold its former administration
building, located in Punta Gorda, Florida, to a corporation owned
and operated by the husband of the Company's former President,
Secretary-Treasurer and subsequently entered into a leaseback of a
portion of the building on terms similar to those negotiated by
other tenants. During 1994, 1993 and 1992 the Company paid
$58,000, $135,000, and $200,000, respectively, in rent, common area
cost and utilities related to this leased office space.
- 45 -
<PAGE> 46
Item 9. Disagreements on Accounting and Financial Disclosure
- - ------- ----------------------------------------------------
There were no disagreements on accounting and financial
disclosure for the year ended December 31, 1994.
- 46 -
<PAGE> 47
PART III
--------
Item 10. Directors and Executive Officers of the Registrant
- - -------- --------------------------------------------------
IDENTIFICATION OF DIRECTORS
<TABLE>
The following table indicates Directors of the Company as of
March 25, 1995:
<CAPTION>
Position with Company and Business
Name and Age Experience During Last Five Years
- - ------------ ---------------------------------
<C> <S>
Andrew S. Love, Jr. (age 51) <F1> Chairman of the Company's Board of Directors since
May 1987; Secretary since February 1994; Chairman of
the Board of Love Real Estate Company and Secretary of
Love Investment Company since 1973; Partner in St.
Louis based law firm of Bryan, Cave, McPheeters &
McRoberts until 1991; Director of Heartland Savings
Bank since December 1985.
David J. Mathies, Jr. (age 47) <F1><F2> President, Dilmun Investments since April 1988; prior
thereto Vice President, Mellon Bank, N.A.; Director of
the Company since 1989.
Laurence A. Schiffer (age 55) <F1> Vice Chairman of the Company's Board of Directors
since May 1987; President and Chief Executive Officer
since February 1994; President and Chief Executive
Officer of Love Real Estate Company and Love
Investment Company since 1973; Member of the Real
Estate Board of Metropolitan St. Louis and the
National Association of Real Estate Boards; Chairman
of Heartland Savings Bank since December 1985.
<FN>
- - --------------------------------
<F1> Member of the Executive Committee.
<F2> Member of the Audit Committee.
</TABLE>
- 47 -
<PAGE> 48
EXECUTIVE OFFICERS OF THE REGISTRANT
The following information, regarding executive officers of the
Company at March 25, 1995, is provided pursuant to Instruction 3 to
Item 401(b) of Regulation S-K, as amended, and General Instruction
G(3) to Form 10-K.
<TABLE>
<CAPTION>
Position with Company and Business
Name and Age Experience During Last Five Years
------------ ----------------------------------
<C> <S>
Laurence A. Schiffer Director of the Company since April 1987; President and Chief Executive Officer
(age 55) of the Company since February 1994; Vice Chairman of the Board since May 1987;
President and Chief Executive Office of Love Real Estate Company and
Love Investment Company since 1973.
Andrew S. Love, Jr. Chairman of the Company's Board of Directors since May 1987; Secretary
(age 51) since February 1994; Chairman of the Board of Love Real Estate Company
and Secretary of Love Investment Company since 1973; Partner in St.
Louis based law firm of Bryan, Cave, McPheeters & McRoberts until
1991; Director of Heartland Savings Bank since December 1985.
</TABLE>
Executive officers of the Company are appointed annually by the
Board of Directors to hold office until their successors are appointed
and qualify.
Item 11. Executive Compensation
- - -------- ----------------------
<TABLE>
The following table summarizes the total compensation paid to the
Chief Executive Officer for fiscal year 1994, as well as total
compensation paid for the Company's two previous fiscal years:
<CAPTION>
Other Annual Long Term All Other
Name & Position Year Salary Bonus Compensation Compensation Compensation
--------------- ---- ------ ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Laurence A. Schiffer 1994 -0- -0- -0- -0- -0-
Paula F. McQueen 1994 $ 13,000 -0- -0- -0- $ 47,000
President , CEO 1993 $104,000 -0- -0- -0- -0-
1992 $156,000 -0- -0- -0- -0-
</TABLE>
The Company has both a qualified and a non-qualified stock option
plan and a stock appreciation rights plan. No options under either
plan or stock appreciation rights are outstanding at December 31,
1994.
On March 25, 1987, the Company entered into an Employment
Agreement with Paula F. McQueen. Mrs. McQueen's Employment
Agreement provided that the Company would employ her in the
capacity of Senior Vice President and Secretary-Treasurer for
a period of one year commencing March 25, 1987, at a base salary
of $100,000 per year. Mrs. McQueen's Agreement was renewed for
another year in March 1988, 1989, 1990, 1991 and 1992 on
substantially the same terms. In March 1990, Mrs. McQueen
- 48 -
<PAGE> 49
Item 11. Executive Compensation (continued)
- - -------- ----------------------------------
was appointed President of the Company and her compensation was increased to
$156,000 shortly thereafter. A portion of Mrs. McQueen's 1993 compensation
was not paid until 1994.
No fees were paid to directors for attending meetings during
1994.
Item 12. Security Ownership of Certain Beneficial Owners and
- - -------- ---------------------------------------------------
and Management Ownership of Certain Beneficial
----------------------------------------------
Owners
------
The table below sets forth as of March 25, 1995 the names and
addresses of the only persons of whom the Company is aware
beneficially own more than 5% of the outstanding Common Stock, par
value $.10, of the Company, except that certain brokerage houses may
hold of record more than 5% of such outstanding shares for the
accounts of their various customers. It also contains as of the same
date, the names and addresses of the only persons of whom the Company
is aware beneficially own more than 5% of the outstanding Preferred
Stock, $1.00 par value, of the Company.
<TABLE>
<CAPTION>
Amount and
----------
Nature of Percent of
--------- ----------
Beneficial Percent of Company
---------- ---------- -------
Title of Class Name and Address of Beneficial Owner Ownership Class Vote
- - --------------- ------------------------------------ --------- ----- ----
<C> <S> <C> <C> <C>
Common Stock Estate of Harold Vernon 998,777<F1><F2> 30.1% 18.8%
($.10 par value) 3201 W. Rolling Hills Circle
Fort Lauderdale, FL 33328
Alfred M. Johns 312,401<F3> 9.4% 5.9%
One Woodland Drive
Punta Gorda, FL 33950
Love-PGI Partners, L.P. 385,516<F4> 11.6% 7.3%
515 Olive Street, Suite 1400
St. Louis, MO 63101
All officers and directors as a group (3 persons) 385,516 11.6% 7.9%
Preferred Stock Love-PGI Partners, L.P. 1,875,000<F4> 93.75% 35.3%<F5>
(Class A) ($1.00 515 Olive Street, Suite 1400
par value) St. Louis, MO 63101
Alfred M. Johns 125,000<F6> 6.25% 2.4%
One Woodland Drive
Punta Gorda, FL 33950
<FN>
- - ----------------------------
<F1> The executor of the Estate of Harold Vernon has sole voting and
investment power. The shares are currently in the possession of
the Federal Deposit Insurance Corporation ("FDIC") which is the
receiver for First American Bank and Trust, Lake Worth, Florida
("First American"). First American previously made a loan to Mr.
Vernon which was secured by these shares. The loan is in default and
the Company understands the FDIC has the right, pursuant to a pledge
- 49 -
<PAGE> 50
Item 12. Security Ownership of Certain Beneficial Owners and
- - -------- ---------------------------------------------------
and Management Ownership of Certain Beneficial
----------------------------------------------
Owners (Continued)
------------------
agreement, to vote the shares at any annual or special
meeting of shareholders. The Company has been advised that the
FDIC does not intend to exercise this right and vote these shares.
<F2> Information obtained from filings made with the Securities
and Exchange Commission.
<F3> Shared voting and investment power. Includes 10,100 shares
owned by Mr. Johns' wife. Does not include the shares
listed in Note 6 below.
<F4> The shares of Preferred Stock were sold pursuant to the
terms of a Preferred Stock Purchase Agreement (the
"Agreement") entered into between Love Development and
Investment Company ("LDIC") and the Company in 1987. LDIC
subsequently assigned its rights under the Agreement to
Love-PGI Partners, L.P. ("Love"). Andrew S. Love, Jr.,
Chairman of the Board of the Company, is the Chairman and
the principal stockholder of Love Investment Company
("LIC"), the managing general partner of Love. The shares
are convertible into 3,537,735 shares of Common Stock which
are not reflected in the above table. The shares of
Preferred Stock are subject to a pledge agreement in favor
of and the shares are consequently held by, a savings and
loan association which is currently in receivership.
In 1989, the Company also sold an aggregate $2,282,451 of its
Convertible Secured Debentures due April 30, 1991 (the "1989
Debentures"), to Love-1989 Florida Partners, L.P. ("Love-1989"),
and affiliate of Love. Love-1989 has since transferred a portion of
the 1989 Debentures to Love in repayment of a debt and a portion
was transferred to a limited partner of Love-1989 upon its
withdrawal from the limited partnership. In connection with the
July 1992 Secured Lender Transaction (See Item 7 and Note 2 to the
consolidated financial statements under Item 8), the outstanding
balance was reduced by $782,000. The 1989 Debentures, as of March
25, 1994, were convertible into 1,631,090 shares of Common Stock,
which are not reflected in the above table. See "Certain
Relationships and Related Transactions" below. However, because of
the relationship among the former limited partner, Love-1989 and
Love, it is assumed for the purposes hereof that if any 1989
Debentures were converted, all would be converted and all such
Common Stock into which the 1989 Debentures would be converted
would vote similarly. If the conversion rights of the Preferred
Stock and the 1989 Debentures were exercised in full, Love,
Love-1989 and the former limited partner together would directly
control 63.0% of the Company's voting shares assuming the other
holder of the Preferred Stock did not convert its shares into
Common Stock.
- 50 -
<PAGE> 51
Item 12. Security Ownership of Certain Beneficial Owners and
- - -------- ---------------------------------------------------
and Management Ownership of Certain Beneficial Owners
-----------------------------------------------------
(Continued)
-----------
<F5> As part of the Agreement, the Company granted Love the
option to purchase as many shares of Common Stock as the
Company had reserved under options, warrants, calls,
conversion privileges or other rights as of March 25, 1987
("Purchase Rights"), the date the Agreement was closed. As
of that date the Company had Purchase Rights covering
676,900 shares at prices ranging from $3.375 to $19.50 per
share. These option shares are not included in the "Percent
of Company Vote" column because they only become exercisable
to the extent the Purchase Rights are exercised.
<F6> Shared voting and investment power with his wife. These
shares are convertible into 235,849 shares of Common Stock
which are not reflected in the above table. If the
conversion rights of the Preferred Stock were exercised in
full, these shares, plus the shares of Common Stock shown as
beneficially owned by Mr. Johns above, would represent 10.1%
of the Company vote assuming the other holder of the
Preferred Stock did not convert its shares into Common
Stock.
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of March 25, 1995 the amount and
nature of beneficial ownership of the Common Stock and Preferred Stock
of the Company held by the Company's directors and by all executive
officers and directors as a group.
<TABLE>
<CAPTION>
Amount and Nature of Amount and Nature of
Beneficial Ownership of Beneficial Ownership
Common Stock At % of of Preferred Stock At % of % of Company
Name and Age March 25, 1995 Class March 25, 1995 Class Vote
- - ------------ -------------- ----- -------------- ----- ----
<S> <C> <C> <C> <C> <C>
Andrew S. Love, Jr. <F1> 385,516 <F2> 11.6% 1,875,000 <F3> 93.75% 42.5% <F3>
David J. Mathies, Jr. <F1><F6> None - None - <F4>
Laurence A. Schiffer <F1> None <F5> - None <F5> - -
All Officers and Directors as
a Group (3 persons) 385,516 <F5> 11.6% 1,875,000 93.75% 42.6%
<FN>
- - ---------------------------
<F1> Member of the Executive Committee.
<F2> Shares of Common Stock owned by Love. See Note 4 of "Voting
Securities and Principal Holders Thereof."
<F3> Shares of Preferred Stock owned by Love. The 1,875,000
shares of Preferred Stock are convertible into 3,537,735
shares of Common Stock. If the right to convert these
shares were fully exercised, these shares, added to the
385,516 shares of Common Stock owned by Love, would
represent 57.2% of all the Common Stock.
<F4> Less than 1%.
- 51 -
<PAGE> 52
SECURITY OWNERSHIP OF MANAGEMENT (continued)
<F5> Excludes 1,875,000 shares of Preferred Stock which are
convertible into 3,537,735 shares of Common Stock owned by
Love, and any shares of Common Stock into which the 1989
Debentures are convertible. See Note 4 of "Voting
Securities and Principal Holders Thereof".
<F6> Member of the Audit Committee.
</TABLE>
Item 13. Certain Relationships and Related Transactions
- - -------- ----------------------------------------------
The Company in order to conserve cash and permit management to
concentrate on achieving a sale of all or a portion of the acreage
prior to May 1995 has moved its administration and accounting offices
to the offices of the Love Real Estate Company in St. Louis, Missouri.
Love Real Estate Company ("Love"), which is an affiliate of Love-PGI,
the Company's preferred shareholder, is located at 515 Olive Street,
Suite 1400, St. Louis, Missouri 63101. A fee of $9,166 per month is
paid to the Love Companies as reimbursement and compensation.
The following services are provided to the Company by Love:
1. Maintain books of original entry;
2. Prepare quarterly and annual SEC filings;
3. Coordinate the annual audit;
4. Assemble information for tax filing, review reports as
prepared by tax accountants and file same;
5. Track shareholder records through transfer agent;
6. Maintain policies of insurance against property and
liability exposure;
7. Handle payroll and benefits for Sugarmill location; and
8. Handle day-to-day accounting requirements.
In addition, the Company receives office space, telephone service
and computer service from Love.
Effective as of March 25, 1987, the Company entered into a
Management Consulting Agreement with Love Real Estate Company ("Love
Company"), a Missouri corporation affiliated with Love. As a
consultant to the Company, Love Company provides services which may
include, but are not limited to, strategic planning, marketing and
financing, as requested by the Company. In consideration for these
consulting services, the Company will pay Love Company a quarterly
consulting fee of one-tenth of one percent of the book value of the
Company's assets, plus reasonable out-of-pocket expenses. As of
December 31, 1994 the book value of the Company's assets was
approximately $16.0 million. Consulting fees totaling $54,000,
$69,000, and $108,000 were accrued during 1994, 1993, and 1992 but
have not yet been paid. In connection with the July 1992 Secured
Lender Transaction, accrued management fees were reduced by $1,042,000
as partial consideration for the conveyance of the 350 acres of
property transferred to Love-PGI Partners, L.P. ("L-PGI"). The
consulting agreement will continue in effect until terminated upon 90
days prior written notice by a majority vote of the Company's
directors who have no financial interest in Love Company or in any
Love Company affiliated entity.
- 52 -
<PAGE> 53
Item 13. Certain Relationships and Related Transactions (Continued)
- - -------- ----------------------------------------------------------
Love-1989 Florida Partners, L.P., a Missouri limited partnership
("New Partnership"), which is affiliated with L-PGI, purchased
$1,282,000 of the Company's convertible debentures at face amount on
July 24, 1989. The convertible debentures, and all accrued interest
at 14% per annum thereon, are convertible into common stock at an
initial conversion price of $1.72 per share. Upon issuance, the
convertible debentures were convertible into 745,611 shares of common
stock. On September 29, 1989, the New Partnership purchased an
additional $1,000,000 of convertible debentures at face amount which
were convertible into 581,395 shares of common stock. The convertible
debentures are collateralized by a second mortgage on approximately
650 acres of Company owned property.
The Company's primary lender credit agreements, however, prohibit
the payment of interest on the convertible debentures until such time
as the primary lender loans are repaid. Each month, to the extent
interest on the convertible debentures are not paid in cash, the
number of shares into which the convertible debentures are convertible
will increase. If no interest is paid prior to maturity, at maturity
the convertible debentures purchased by the New Partnership on July
24, 1989, will be convertible into 868,788 shares and those purchased
on September 29, 1989, will be convertible into 1,726,568 shares, or
a total of 2,595,356 shares of common stock.
The New Partnership's purchase of the convertible debentures was
funded by a loan from L-PGI. The New Partnership has since repaid the
debt in full, in part by transferring $782,000 of the convertible
debentures purchased on July 24, 1989, to L-PGI. In connection with
the July 1992 Secured Lender Transaction as partial consideration for
the conveyance of 350 acres of property, L-PGI's convertible debenture
was reduced by $782,000 principal and $389,000 accrued interest. The
maturity date on all of the remaining Convertible Debentures was
extended to July 8, 1997.
During 1994, 1993 and 1992, the Company made payments of $21,000,
$38,000 and $63,000, respectively, for insurance premiums to Hilb,
Rogal & Hamilton Company of Tampa Bay, whose Executive Vice President
and major stockholder, John W. Veghte, was a director of the Company
until his resignation in June 1993.
In April 1985 the Company sold its former administration building
located in Punta Gorda, Florida to McCo, Inc. ("McCo"), a corporation
owned and operated by the husband of Mrs. Paula McQueen, the Company's
former President and Secretary and Treasurer and subsequently entered
into a leaseback of a portion of the building on terms similar to
those negotiated by other tenants. During 1994, 1993 and 1992 the
Company paid $58,000, $135,000 and $200,000 to McCo for rent, common
area costs and utilities related to this leased office space.
In 1985 a corporation owned by Alfred M. Johns, the former
Chairman, and his family made an uncollateralized loan to the Company
which at December 31, 1994 had an outstanding balance, excluding
accrued interest, of $176,000.
The Company believes that the foregoing transactions were on terms
comparable to those which would have been obtained from unaffiliated
persons.
- 53 -
<PAGE> 54
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- - -------- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Form 10-K
Page No.
--------
<C> <S> <C>
(a) 1. Financial Statements
Report of Independent Accountants 24-25
Consolidated Statements of Financial Position -----
December 31, 1994 and 1993 26
Consolidated Statements of Operations Years Ended -----
December 31, 1994, 1993 and 1992 27
Consolidated Statements of Cash Flows Years Ended -----
December 31, 1994, 1993 and 1992 28-29
Consolidated Statements of Stockholders' Deficiency -----
years Ended December 31, 1994, 1993 and 1992 30
-----
Notes to Consolidated Financial Statements 31-45
-----
(a) 2. Financial Statement Schedules
Report and Consent of Independent Accounts 55-56
Schedule II - Valuation and Qualifying Accounts and -----
Reserves Years Ended December 31, 1994, 1993 and 1992 57
Schedules Omitted - Other schedules have been omitted -----
because of the absence of conditions under which they
are required.
(a) 3. Exhibits
Reference is made to the Exhibit Index contained on pages 57 to
61 herein for a list of exhibits filed under this Item.
(b) Reports on Form 8-K
None were filed in the fourth quarter of 1994.
(c) See the Exhibit Index contained on pages 57 to 61 herein for a
list of each management contract, compensatory plan or
arrangement required to be filed pursuant to Item 14(c) of this
report: Exhibits 10.1, 10.2, 10.4, and 10.5.
(d) None
</TABLE>
- 54 -
<PAGE> 55
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement of PGI Incorporated and subsidiaries on Form S-8 (File
2-77149) of our report, dated April 4, 1995 relating to the
consolidated financial statements and financial statement schedule of
PGI Incorporated and subsidiaries, which report is included in this
Annual Report on Form 10-K. Our report contains an explanatory
paragraph regarding uncertainty as to the ability of the company to
continue as a going concern.
St. Louis, Missouri
April 4, 1995
/s/ BDO Seidman
BDO Seidman
REPORT OF INDEPENDENT ACCOUNTANTS
Our report on the consolidated financial statements of PGI
Incorporated and subsidiaries is included on page 25 of this Annual
Report on Form 10-K. In connection with our audits of such financial
statements, we have also audited the related financial statement
schedules listed in the index on page 60 of this Annual Report on
Form 10-K.
In our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial statements
taken as a whole, present fairly, in all material respects, the
information required to be included therein.
The accompanying financial statement schedule have been prepared
assuming that the Company will continue as a going concern. As
discussed in note 10, the Company is in default on the payment of
interest on its primary lender credit agreements. As discussed in
note 11, the Company is in default on the payment of principal and
interest on its convertible subordinated debentures. The Company does
not currently have the availability of funds to pay the primary lender
accrued interest, to retire the convertible subordinated debentures
or to pay the related accrued interest. These factors raise
substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also
discussed in notes 10 and 11. The financial statement schedules do
not include any adjustments that might result from the outcome of this
uncertainty.
Fort Meyers, Florida Coopers & Lybrand L.L.P.
February 11, 1994
- 55 -
<PAGE> 56
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement of PGI Incorporated and subsidiaries on Form S-8 (File
2-77149) of our report, which includes an explanatory paragraph that
there is substantial doubt about the Company's ability to continue as
a going concern, dated February 11, 1994 on our audits of the consolidated
financial statements and financial statement schedule of PGI Incorporated
and subsidiaries as of December 31, 1993 and for the two years ended
December 31, 1993 which report is included in this Annual Report on Form
10-K.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Fort Myers, Florida
February 11, 1994
- 56 -
<PAGE> 57
Schedule II
-----------
<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
--------------
<CAPTION>
Column A Column B Column C Column D Column E Column F
Charged To
---------- Other Changes
Balance At Cost and ------------- Balance At
---------- -------- Add (Deduct)<F2> ----------
Description Beginning Expenses Deductions<F1> ---------------- End
- - ----------- --------- -------- -------------- ---
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1994:
Reserve deducted from
contracts receivable:
Allowance for Cancellations $ 976,000 $ - $ - $ - $ 976,000
Year Ended December 31,
1993:
Reserve deducted from
contracts receivable:
Allowance for cancellations $ 975,000 $ - $ - $ 1,000 $ 976,000
Year Ended December 31, 1992:
Reserve deducted from
contracts receivable:
Allowance for cancellations $ 1,644,000 $ - $ 267,000 $ (402,000) $ 975,000
<FN>
- - ------------------------------
<F1> Contract balances of cancelled sales.
<F2> Other changes include the following:
<CAPTION>
1992 1993 1994
---- ---- ----
<C> <C> <C> <S>
$ 5,000 $ 1,000 $ - Reclassification of other reserves
(407,000) - - Allowance for land cost recovery
--------- ----- -----
$(402,000) $ 1,000 $ -
</TABLE>
- 57 -
<PAGE> 58
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of St. Louis, State of
Missouri, on this 15th day of April, 1995.
PGI INCORPORATED
(Registrant)
By: /s/Laurence A. Schiffer
---------------------------------
Laurence A. Schiffer, President
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Laurence A. Schiffer and
Andrew S. Love, Jr., and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
re-substitution, for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments to this Report,
and to file the same, with all exhibits thereto, and other
documents in connection there with, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as they might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute
or substitutes, may lawfully do or cause to be done by virtue
hereof.
- 58 -
<PAGE> 59
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- - --------- ----- ----
<C> <S> <C>
/s/ Andrew S. Love, Jr. Chairman of the Board April 15, 1995
- - ----------------------------- Secretary
Andrew S. Love, Jr.
/s/ Laurence A. Schiffer Vice Chairman of the Board April 15, 1995
- - ----------------------------- President
Laurence A. Schiffer Principal Executive Officer
since February 1994
/s/ David J. Mathies, Jr. Director April 15, 1995
- - -----------------------------
David J. Mathies, Jr.
/s/ Gloria D. Clement Chief Financial April 15, 1995
- - ----------------------------- Officer
Gloria D. Clement
/s/ Annette M. Webb Chief Accounting April 15, 1995
- - ----------------------------- Officer
Annette M. Webb
</TABLE>
- 59 -
<PAGE> 60
<TABLE>
EXHIBIT INDEX
- - -------------
<CAPTION>
Sequential
Page Number
<C> <S> <C>
3.1 Articles of Incorporation (filed as Exhibit 3.1 to
Registrant's Form 10-K Annual Report for the year
ended December 31, 1980 and incorporated herein by
reference).
3.2 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, of
the Class A Cumulative Convertible Preferred Stock,
effective as of March 24, 1987 (filed as Exhibit 3.2
to Registrant's Form 10-K Annual Report for the year
ended December 31, 1986 ("1986 Form 10-K") and
incorporated herein by reference).
3.3 Bylaws of Registrant, as amended September 1987
(filed as Exhibit 3.3 to Registrant's original Form
10-K Annual Report for the year ended December 31,
1987 ("Original 1987 Form 10-K") dated as of March
29, 1987 and incorporated herein by reference).
3.4 Amendments to the Articles of Incorporation
effective March 13, 1990 and July 27, 1990, dated as
of November 13, 1990 (filed as Exhibit 19 to the
September 30, 1990 Form 10-Q and incorporated herein
by reference).
4.1 Extension and Forbearance Agreement among PGI
Incorporated, Punta Gorda Developers, Inc., Burnt
Store Marina, Inc., and Gulf Coast Credit
Corporation and BancFlorida (formerly Naples Federal
Savings and Loan Association), dated as of March 25,
1987 (filed as Exhibit 4.4 to the 1986 Form 10-K and
incorporated herein by reference).
4.2 Seventh Mortgage and Loan Modification Agreement
among PGI Incorporated, Punta Gorda Developers,
Inc., Burnt Store Marina, Inc., and Gulf Coast
Credit Corporation and BancFlorida, dated as of
March 25, 1987 (filed as Exhibit 4.5 to the 1986
Form 10-K and incorporated herein by reference).
4.3 Eighth Mortgage and Loan Modification Agreement
among PGI Incorporated, Punta Gorda Developers,
Inc., Burnt Store Marina, Inc., and Gulf Coast
Credit Corporation and BancFlorida, dated as of
March 25, 1987 (filed as Exhibit 4.6 to the 1986
Form 10-K and incorporated herein by reference).
- 60 -
<PAGE> 61
EXHIBIT INDEX (Continued)
- - -------------------------
<CAPTION>
Sequential
Page Number
<C> <S> <C>
4.4 Restated Loan and Security Agreement among PGI
Incorporated, Punta Gorda Developers, Inc., Burnt
Store Marina, Inc., and Gulf Coast Credit
Corporation and BancFlorida, as well as Restated
Consolidating Substituted Renewal Note and Future
Advance Mortgage Note related thereto, dated as of
March 25, 1987 (filed as Exhibit 4.7 to the 1986
Form 10-K and incorporated herein by reference).
4.5 Forbearance Agreement among PGI Incorporated, Punta
Gorda Developers, Inc., Burnt Store Marina, Inc.,
and Gulf Coast Credit Corporation and BancFlorida
(Restated Loan Agreement No. 1), dated as of October
19, 1985 (filed as Exhibit 4.1 to the Registrant's
Form 10-Q Quarterly Report for the quarter ended
September 30, 1985 and incorporated herein by
reference).
4.6 Amendment to Restated Loan Agreement No. 1
(Receivables Loan), as well as Restated
Consolidating Substituted Renewal Note relating
thereto, dated as of March 25, 1987 (filed as
Exhibit 4.9 to the 1986 Form 10-K and incorporated
herein by reference).
4.7 Extension, Forbearance and Modification Agreement
between PGI Incorporated, Punta Gorda Developers,
Inc., Burnt Store Marina, Inc. and Gulf Coast Credit
Corporation, and BancFlorida, dated as of May 20,
1988 (filed as Exhibit 4.1 to Registrant's Form 10-Q
Quarterly Report for the quarter ended June 30, 1988
and incorporated herein by reference).
4.8 Ninth Mortgage and Loan Modification Agreement
between PGI Incorporated, Punta Gorda Developers,
Inc., Burnt Store Marina, Inc. and Gulf Coast Credit
Corporation, and BancFlorida, dated as of May 20,
1988 (filed as Exhibit 4.2 to Registrant's Form 10-Q
Quarterly Report for the quarter ended June 30, 1988
and incorporated herein by reference).
4.9 Purchase Agreement among Greyhound Real Estate
Finance Company, PGI Incorporated and Punta Gorda
Developers, Inc., as well as certain Exhibits and
the Mortgage related thereto, dated March 15, 1988
(filed as Exhibit 1 to Registrant's Form 8-K dated
as of March 28, 1988 and incorporated herein by
reference).
- 61 -
<PAGE> 62
EXHIBIT INDEX (Continued)
- - -------------------------
<CAPTION>
Sequential
Page Number
<C> <S> <C>
4.10 Tenth Mortgage and Loan Modification Agreement
between PGI Incorporated, Punta Gorda Developers,
Inc., as well as certain Exhibits and the Mortgage
related thereto, dated May 30, 1989 (filed as
Exhibit 1 to Registrant's Form 8-K dated as of June
8, 1989 and incorporated herein by reference).
4.11 Eleventh Mortgage and Loan Modification among PGI
Incorporated (formerly Punta Gorda Isles, Inc.),
Sugarmill Woods, Inc. (formerly Punta Gorda
Developers, Inc.), Burnt Store Marina, Inc. and Gulf
Coast Credit Corporation and BancFlorida (formerly
Naples Federal Savings and Loan Association), dated
as of June 1, 1990 (filed as Exhibit 4.2 to
Registrant's Form 10-Q Quarterly Report for the
quarter ended June 30, 1990 and incorporated herein
by reference).
4.12 Loan Forbearance Agreement among PGI Incorporated
(formerly Punta Gorda Isles, Inc.), Sugarmill Woods,
Inc. (formerly Punta Gorda Developers, Inc.), Burnt
Store Marina, Inc. and Gulf Coast Credit Corporation
and BancFlorida (formerly Naples Federal Savings and
Loan Association), dated as of October 17, 1991
(filed as Exhibit 4.12 to Registrants Form 10-K
dated March 30, 1994 and incorporated herein by
reference).
4.13 Twelfth mortgage and loan modification among PGI
Incorporated, Sugarmill Woods, Inc., Burnt Store
Marina, Inc. and Gulf Coast Credit Corporation and
BancFlorida, dated as of July 8, 1992 (filed as
Exhibit 4.1 to Registrant's Form 8-K dated as of
July 24, 1992, and incorporated herein by
reference).
4.14 Thirteenth mortgage and loan modification agreement
among PGI Incorporated, Sugarmill Woods, Inc., Burnt
Store Marina, Inc., Gulf Coast Credit Corporation
and First Union, dated as of May 13, 1994 (filed as
Exhibit 4.1 to Registrant's Form 8-K dated May 27,
1994 and incorporated herein by reference).
9. Inapplicable.
10.1 PGI Incorporated Restated 1981 Incentive Stock
Option Plan, as amended (filed as Exhibit 10.1 to
the Original 1987 Form 10-K and incorporated herein
by reference).
- 62 -
<PAGE> 63
EXHIBIT INDEX (Continued)
- - -------------------------
<CAPTION>
Sequential
Page Number
<C> <S> <C>
10.2 PGI Incorporated 1987 Non-Qualified Stock Option and
Stock Appreciation Rights Plan (filed as Exhibit
10.2 to the Original 1987 Form 10-K and incorporated
herein by reference).
10.3 Preferred Stock Purchase Agreement by and between
PGI Incorporated and Love Development and Investment
Company, dated as of February 16, 1987 (filed as
Exhibit (i) to the Registrant's Form 8-K Current
Report dated February 25, 1987 and incorporated
herein by reference).
10.4 Employment Agreement between PGI Incorporated and
Paula F. McQueen, dated as of March 25, 1987 (filed
as Exhibit 10.6 to the 1986 Form 10-K and
incorporated herein by reference).
10.5 Consulting Agreement between PGI Incorporated and
Love Real Estate Company, dated as of March 25, 1987
(filed as Exhibit 10.7 to the 1986 Form 10-K and
incorporated herein by reference).
10.6 Asset Purchase Agreement, as amended, between PGI
Incorporated, Punta Gorda Developers, Inc., Burnt
Store Utilities, Inc., Deep Creek Utilities, Inc.,
Twin County Utility Company and Southern States
Utilities, Inc., dated as of August 16, 1988 (filed
as Exhibit 28.1 to the Registrant's Form 10-Q
Quarterly Report for the quarter ended September 30,
1988 and incorporated herein by reference).
10.7 Form of Convertible Debenture Agreement due April
30, 1992 between PGI Incorporated and Love-1989
Florida Partners, L.P. and Mortgage and Security
Agreement dated July 28, 1989 between Sugarmill
Woods, Inc. and Love-1989 Florida Partners, L.P.
(filed as Exhibit 10.9 to the Registrant's Form 10-K
Annual Report for the year ended December 31, 1989
and incorporated herein by reference).
11. Statements re: Computation of Per Share Earnings,
filed herein on pages 63 and 64 of this Annual
Report on Form 10-K.
12. Inapplicable.
- 63 -
<PAGE> 64
EXHIBIT INDEX (Continued)
- - -------------------------
<CAPTION>
Sequential
Page Number
<C> <S> <C>
13. Inapplicable. No information in Registrant's Annual
Report to Stockholders for the year ended December
31, 1988 has been incorporated by reference as part
of this Amended Annual Report on Form 10-K.
16. Coopers and Lybrand's letter to the SEC dated
February 9, 1995 (filed as Exhibit 16 to the
Registrant's From 8-K dated February 9, 1995 and
incorporated herein by reference).
18. Inapplicable.
19. Inapplicable.
21. Subsidiaries of the Registrant, filed herein on page
61 of this Annual Report on Form 10-K.
23. Consent of Independent Accountants, filed herein on
page 53 of this Annual Report on Form 10-K.
24. Power of Attorney for Directors filed herein on page
55 of this Annual Report on Form 10-K.
27. Financial Data Schedule
28. Inapplicable.
29. Inapplicable.
</TABLE>
The Registrant agrees to furnish to the Securities and
Exchange Commission upon request, pursuant to Item
601(b)(4)(iii) of the Regulation S-K, copies of Registrant
and its consolidated subsidiaries.
- 64 -
<PAGE> 65
PAGE 1 OF 2
<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
FACTS FOR COMPUTATION OF NET LOSS PER SHARE
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
1) Loss before extraordinary item: $(1,307,000) $ (3,039,000) $ (2,931,000)
2) Extraordinary item:
Tax benefit from utilization of
loss carryforward for financial accounting
purposes - - -
3) Net loss for period $(1,307,000) $ (3,039,000) $ (2,931,000)
============ ============= =============
4) Average common shares outstanding 3,317,555 3,317,555 3,317,216
========= ========= =========
5) Shares outstanding at beginning of period 3,317,555 3,317,555 3,316,530
6) Shares issued on stock options exercised
and preferred stock and debentures converted
during period, weighted - - 686
7) Treasury stock transactions, net, weighted - - -
-------- -------- --------
8) Average shares outstanding before assumed
exercise of stock options and conversion of
preferred stock and debentures 3,317,555 3,317,555 3,317,216
========= ========= =========
9) Average shares outstanding from assumed
exercise of stock options:
Primary - - -
======== ======== ========
Fully diluted - - -
======== ======== ========
10) Average shares outstanding from assumed
conversion of preferred stock 3,760,000 3,760,000 3,760,000
========= ========= =========
11) Average shares outstanding from assumed
conversion of debentures 1,341,076 1,341,076 1,580,574
========= ========= =========
12) Cumulative preferred dividends in
arrears $ 640,000 $ 640,000 $ 640,000
========= ========= =========
13) Interest and amortization charged against
income for debentures during period $ 759,000 $ 759,000 $ 830,000
========= ========= =========
ADJUSTMENT OF NET LOSS:
- - -----------------------
Primary
-------
Loss before extraordinary item (Line 1) $(1,307,000) $ (3,039,000) $ (2,931,000)
Less cumulative preferred dividends in
arrears (Line 12) (640,000) (640,000) (640,000)
--------- --------- ---------
14) Adjusted loss before extraordinary item
for primary net loss per share (1,947,000) (3,679,000) (3,571,000)
Extraordinary item (Line 2) - - -
--------- --------- ---------
15) Adjusted net loss for primary net
loss per share $(1,947,000) $ (3,679,000) $ (3,571,000)
============ ============= =============
Fully Diluted
-------------
Adjusted loss before extraordinary item
for primary net loss per share (Line 14) $(1,947,000) $ (3,679,000) $ (3,571,000)
Add cumulative preferred dividends in
arrears on preferred stock assumed converted
(Line 12) 640,000 640,000 640,000
Add interest and amortization charged against
income for debentures during period (Line 13) 759,000 759,000 759,000
Tax effect on Line 13 - <FA> - <FA> - <FA>
------ ------ ------
16) Adjusted loss before extraordinary item
for fully diluted net loss per share (548,000) (2,280,000) (2,101,000)
--------- ----------- -----------
17) Extraordinary item (Line 2) plus tax effect
on Line 13 - - -
--------- --------- ---------
18) Adjusted net loss for fully diluted net loss
per share $ (548,000) $ (2,280,000) $ (2,101,000)
============ ============= =============
ADJUSTMENT OF AVERAGE SHARES OUTSTANDING
- - ----------------------------------------
Primary
- - -------
Average shares outstanding (Line 8) 3,317,555 3,317,555 3,317,555
Average shares outstanding (Line 9) - - -
-------- -------- --------
19) Shares assumed outstanding for primary
net loss per share 3,317,555 3,317,555 3,317,555
========= ========= =========
Fully Diluted
- - -------------
Average shares outstanding (Line 8) 3,317,555 3,317,555 3,317,555
Average shares outstanding from assumed
exercise of stock options (Line 9) - - -
Average shares outstanding from assumed
conversion of preferred stock (Line 10) 3,760,000 3,760,000 3,760,000
Average shares outstanding from assumed
conversion of debentures (Line 11) 1,341,076 1,341,076 1,341,076
--------- --------- ---------
20) Shares assumed outstanding for fully
diluted net loss per share 8,418,631 8,418,631 8,657,790
========= ========= =========
- 65 -
<PAGE> 66
Page 2 of 2
NET LOSS PER SHARE:
- - -------------------
Before Adjustment
- - -----------------
(Line 1 + Line 4) $ (.39) $ (.92) $ (.88)
======= ======= =======
Primary
- - -------
Adjusted loss before extraordinary item
(Line 14 + Line 19) $ (.59) $(1.11) $(1.08)
Extraordinary item
(Line 2 + Line 19) - - -
-------- -------- --------
Net loss
(Line 15 + Line 19) $ (.59) $(1.11) $(1.08)
======= ======= =======
Fully Diluted <FB>
- - -------------
Adjusted loss before extraordinary item $ (.59) $(1.11) $(1.08)
Extraordinary item - - -
-------- -------- --------
Net loss (B) $ (.59) $(1.11) $(1.08)
<FN> ======= ======= =======
- - -----------------------------
<FA> No tax calculation has been made because of full utilization
of all available tax benefits for financial account purposes.
<FB> Fully diluted net loss per share is the same as primary net
loss per share due to anti-dilutive effect of assumed exercise
of stock options and conversion of preferred stock and
debentures to common stock.
</TABLE>
- 66 -
<PAGE> 1
Exhibit 21 Page 1 of 1
- - ----------
<TABLE>
PGI INCORPORATED
SUBSIDIARIES
<CAPTION>
State of Relationship
-------- ------------
Incorporation
-------------
<S> <C> <C>
Sugarmill Woods, Inc. Florida Wholly owned <F1>
Sugarmill Woods Management, Inc. Florida Wholly owned <F1>
Deep Creek Utilities, Inc. Florida Wholly owned <F1>
Southern Woods, Incorporated Florida Wholly owned by Sugarmill Woods, Inc.
Burnt Store Marina, Inc. Florida Wholly owned <F1>
Punta Gorda Isles Sales, Inc. Florida Wholly owned <F1>
Burnt Store Utilities, Inc. Florida Wholly owned <F1>
Gulf Coast Credit Corporation Florida Wholly owned <F1>
Sugarmill Woods Sales, Inc. Florida Wholly owned by Sugarmill Woods, Inc.
Sugarmill Construction, Inc. Florida Wholly owned by Sugarmill Woods, Inc.
<FN>
- - ---------------------------------------
<F1> Included in the Company's consolidated financial statements.
</TABLE>
- 67 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 1,261,000
<SECURITIES> 0
<RECEIVABLES> 2,222,000
<ALLOWANCES> 976,000
<INVENTORY> 9,154,000
<CURRENT-ASSETS> 0<F1>
<PP&E> 409,000
<DEPRECIATION> 290,000
<TOTAL-ASSETS> 12,568,000
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 21,811,000
<COMMON> 332,000
0
2,000,000
<OTHER-SE> 19,507,000
<TOTAL-LIABILITY-AND-EQUITY> 12,568,000
<SALES> 3,108,000
<TOTAL-REVENUES> 5,465,000
<CGS> 2,770,000
<TOTAL-COSTS> 2,948,000
<OTHER-EXPENSES> 1,705,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,119,000
<INCOME-PRETAX> 1,307,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,307,000
<EPS-PRIMARY> .59
<EPS-DILUTED> .59
<FN>
<F1>Current Assets and current liabilities values are zero because of an
unclassified balance sheet.
</FN>
</TABLE>
