<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
-----------------------------------------
OR
/X/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------ --------------------
Commission File Number 1-6471
-------------------------------------------------
PGI INCORPORATED
------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
FLORIDA 59-0867335
-------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
212 SOUTH CENTRAL, SUITE 100; ST. LOUIS, MISSOURI 63105
------------------------------------------------------------------------
(Address of principal executive offices)
(314) 512-8650
------------------------------------------------------------------------
(Issuer's telephone number)
------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if changed since
last report)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
----- -----
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: As of August 14, 1997
there were 5,317,758 shares of the Registrant's common stock outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes No X
----- -----
-1-
<PAGE> 2
PGI INCORPORATED AND SUBSIDIARIES
FORM 10-QSB
For the Quarter Ended September 30, 1997
<TABLE>
Table of Contents
-----------------
<CAPTION>
Form 10-QSB
Page No.
-----------
<S> <C>
PART I Financial Information
Item 1 Financial Statements
Consolidated Statements of Financial Position
September 30, 1997 and December 31, 1996 3
Consolidated Statements of Operations
Three and Nine Months Ended September 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1997 and 1996 5
Notes to Consolidated Financial Statements
for Form 10-QSB 6-10
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-14
PART II Other Information
Item 1 Legal Proceedings 15
Item 2 Changes in Securities 15
Item 3 Defaults Upon Senior Securities 15
Item 4 Submission of Matters to a Vote of Security Holders 15
Item 5 Other Information 15
Item 6 Exhibits and Reports on Form 8-K 17-19
SIGNATURES 16
</TABLE>
-2-
<PAGE> 3
PGI INCORPORATED AND SUBSIDIARIES
PART I Financial Information
Item 1 Financial Statements
<TABLE>
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
($ in thousands)
<CAPTION>
September 30, December 31,
1997 1996
------------ -----------
(unaudited)
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 5 $ 12
Restricted Cash 1,131 1,140
Receivables on real estate sales - net 131 318
Other receivables 35 26
Land and improvement inventories 9,003 9,016
Property and equipment - net 21 46
Other assets 763 759
-------- --------
$ 11,089 $ 11,317
======== ========
LIABILITIES
Accounts payable $ 193 $ 78
Other liabilities 1,661 1,428
Accrued interest:
Primary lender 3,207 2,461
Debentures 7,887 6,880
Other 1,581 1,449
Credit agreements -
Primary lender 7,343 7,307
Notes and mortgages payable 3,685 3,667
Convertible subordinated
debentures payable 9,059 9,059
Convertible debentures payable 1,500 1,500
-------- --------
$ 36,116 $ 33,829
-------- --------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, par value $1.00 per share;
authorized 5,000,000 shares; 2,000,000 Class A
cumulative convertible shares issued and
outstanding; (liquidation preference
of $4.00 per share or $8,000,000) 2,000 2,000
Common stock, par value $.10 per share;
authorized 25,000,000 shares; 5,317,758 and
3,317,555 shares issued and outstanding 532 332
Paid in capital 13,498 13,698
Accumulated deficit (41,057) (38,542)
-------- --------
(25,027) (22,512)
-------- --------
$ 11,089 $ 11,317
======== ========
See accompanying notes to consolidated financial statements for Form 10-QSB.
</TABLE>
-3-
<PAGE> 4
PGI INCORPORATED AND SUBSIDIARIES
PART I Financial Information (Continued)
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------- -------------------------
Sept.30, Sept.30, Sept.30, Sept.30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Interest income 3 19 23 73
Other income 137 219 412 388
------ ----- ------- -------
140 238 435 461
------ ----- ------- -------
COSTS AND EXPENSES
Selling expenses 2 1 6 10
General & administrative expenses 257 162 620 654
Interest 682 646 2,008 1,857
Other expenses 91 109 316 282
------ ----- ------- -------
1,032 918 2,950 2,803
------ ----- ------- -------
NET INCOME (LOSS) $ (892) $(680) $(2,515) $(2,342)
====== ===== ======= =======
NET INCOME (LOSS) PER SHARE (F*)
Primary and fully diluted $ (.20) $(.25) $ (.69) $ (.85)
====== ===== ======= =======
<FN>
(F*) Considers the effect of cumulative preferred dividends in arrears for the three
and nine months ended September 30, 1997 and 1996.
See accompanying notes to consolidated financial statements for form 10-QSB.
</TABLE>
-4-
<PAGE> 5
PGI INCORPORATED AND SUBSIDIARIES
PART I Financial Information (Continued)
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
--------------------------
Sept. 30, Sept. 30,
1997 1996
--------- ---------
<S> <C> <C>
Net cash provided by (used in) operating activities $ (59) $ 136
----- -----
Cash flows from investing Activities:
Purchase of property and equipment (2) --
----- -----
Net cash used in investing activities (2) --
----- -----
Cash flows from financing activities:
Proceeds from borrowings 172 150
Principal payments on debt (118) (340)
----- -----
Net cash provided by (used in) financial activities 54 (190)
----- -----
Net increase (decrease) in cash (7) (54)
Cash at beginning of period 12 63
----- -----
Cash at end of period $ 5 $ 9
===== =====
See accompanying notes to consolidated financial statements for Form 10-QSB.
</TABLE>
-5-
<PAGE> 6
PGI INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10QSB and
therefore do not include all disclosures necessary for fair
presentation of financial position, results of operations and cash
flows in conformity with generally accepted accounting principles. The
Company's independent accountants included an explanatory paragraph
regarding the Company's ability to continue as a going concern in their
opinion on the Company's consolidated financial statements for the year
ended December 31, 1996.
The Company continues, however, to remain in default under the
indentures governing its convertible unsecured subordinated debentures
(the "Indentures") (See Management's Discussion and Analysis of
Financial Condition and Results of Operations). However, as more fully
discussed in Note 10 to the Company's consolidated financial statements
for the year ended December 31, 1996, as contained in the Company's
Annual Report on Form 10KSB/A, the Company's management is seeking
purchasers for its remaining undeveloped land.
The financial statements do not include any adjustments relating to the
recoverability of recorded asset amounts or the amounts of liabilities
that might be necessary should the Company be unsuccessful in its sales
and refinancing efforts.
In the opinion of management, subject to the effects on the Company's
unaudited consolidated financial statements of such adjustments, if
any, as might have been required had the outcome of the matters
discussed in the preceding paragraph been known, all other adjustments
(consisting of only normal recurring accruals) necessary for fair
presentation of financial position, results of operations and cash
flows have been made. The results for the three and nine months ended
September 30, 1997 are not necessarily indicative of operations to be
expected for the fiscal year ending December 31, 1997 or any other
interim period.
(2) Recognition of Real Estate Sales
The Company has adopted the installment method of profit recognition
for all homesite sales effective January 1, 1990 and thereafter. For
sales consummated prior to January 1, 1990, the Company recognized
profit under the full accrual or percentage of completion methods as
appropriate. The full accrual method recognizes the entire profit when
minimum down payments and other requirements are met. Under the
percentage of completion method, profit is recognized by the relationship
of costs incurred to total estimated costs to be incurred. The
installment method recognizes gross profit as down payments and
principal payments on contracts are received.
-6-
<PAGE> 7
PGI INCORPORATED AND SUBSIDIARIES
(3) Per Share Data
Primary per share amounts are computed by dividing net income (loss),
after considering cumulative dividends in arrears on the Company's
preferred stock, by the average number of common shares and common
stock equivalents outstanding. For this purpose, the Company's
cumulative convertible preferred stock, convertible subordinated
debentures and collateralized convertible debentures are not deemed to
be common stock equivalents, but outstanding vested stock options are
considered as such. However, under the treasury stock method, no
vested stock options were assumed to be exercised, and therefore no
common stock equivalents existed, for the calculation of primary per
share amounts for the nine months ended September 30, 1997 and 1996.
The average number of common shares outstanding for the nine months
ended September 30, 1997 and 1996 was 4,335,973 and 3,317,555,
respectively. On May 15, 1997, preferred dividends accrued through
April 25, 1995 were paid in the form of 2,000,203 shares of common
stock.
Fully diluted per share amounts are computed by dividing net income
(loss) by the average number of common shares outstanding, after
adjusting both for the estimated effects of the assumed exercise of
stock options and the assumed conversion of all cumulative convertible
preferred stock, convertible subordinated debentures and collateralized
convertible debentures into shares of common stock. For the nine months
ended September 30, 1997 and 1996, no stock options were assumed to be
exercised and the effect of the assumed exercise of stock options and
the assumed conversion of all cumulative convertible preferred stock,
convertible subordinated debentures and collateralized convertible
debentures would have been antidilutive.
(4) Statement of Cash Flows
The Financial Accounting Standards Board issued Statement No. 95,
"Statement of Cash Flows", which requires a statement of cash flows as
part of a full set of financial statements. For quarterly reporting
purposes, the Company has elected to condense the reporting of its net
cash flows. Interest paid for the nine months ended September 30, 1997
and 1996 was $121,000 and $149,000, respectively.
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
(5) Restricted Cash
Restricted cash included cash and certificates of deposit pledged to
agencies in various states and local Florida governmental units related
to land development and environmental matters, escrowed receipts
related to pledged receivables on real estate sales and the servicing
of sold receivables and, as a result of sales agreements and Company
policies, customer payments and deposits related to homesite and
housing contracts.
-7-
<PAGE> 8
PGI INCORPORATED AND SUBSIDIARIES
(6) Receivables on Real Estate Sales
Net receivables on real estate sales consisted of:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
($ in thousands)
<S> <C> <C>
Contracts receivable on homesite sales $ 855 $1,076
Other 91 98
----- ------
946 1,174
Less: Allowance for cancellations (771) (806)
Unamortized valuation discount (44) (50)
----- ------
$ 131 $ 318
===== ======
</TABLE>
(7) Land and Improvements
Land and improvement inventories consisted of:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
($ in thousands)
<S> <C> <C>
Unimproved land $8,724 $8,724
Fully improved land 279 292
------ ------
$9,003 $9,016
====== ======
</TABLE>
(8) Property and Equipment
Property and equipment consisted of:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
($ in thousands)
<S> <C> <C>
Furniture, fixtures and other equipment $ 212 $ 363
Less: Accumulated depreciation (191) (317)
----- -----
$ 21 $ 46
</TABLE> ===== =====
(9) Other Assets
Other assets consisted of:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
($ in thousands)
<S> <C> <C>
Guaranteed future connections, net $621 $621
Deposit with Trustee of 6-1/2%
debentures 130 125
Other 12 13
---- ----
$763 $759
==== ====
</TABLE>
-8-
<PAGE> 9
PGI INCORPORATED AND SUBSIDIARIES
(10) Other Liabilities
Other Liabilities consisted of:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
($ in thousands)
<S> <C> <C>
Accrued property taxes
- current $ 154 $ 208
- delinquent 778 476
Other accrued expenses 331 316
Deposits, advances and escrows 316 346
Estimated recourse liability for
receivables sold 66 66
Other 16 16
------ ------
$1,661 $1,428
====== ======
</TABLE>
(11) Primary Lender Credit Agreements, Notes and Mortgages Payable and
Convertible Subordinated Debentures Payable
Credit agreements with the Company's primary lender and notes and
mortgages payable consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
($ in thousands)
<S> <C> <C>
Credit agreements - primary lender:
(maturing July 8, 1997, bearing interest
at prime plus 5%): $ 7,343 $ 7,307
Notes and mortgages payable - $1,267,000
bearing interest at 12-1/4%, $1,176,000
bearing interest at prime plus 2%, the
remainder bearing interest at varying
rates to 23%; maturing through 2000 3,685 3,667
------- -------
Convertible subordinated debentures payable:
At 6-1/2% interest; due June 1991; convertible
into shares of common stock at $18.00 per
share $ 1,034 $ 1,034
At 6% interest; due May 1, 1992; convertible
into shares of common stock at $19.50 per
share 8,025 8,025
------- -------
$ 9,059 $ 9,059
------- -------
Collateralized convertible debentures payable:
At 14% interest; due July 8, 1997, convertible
into share of common stock at $1.72 per
share 1,500 1,500
------- -------
$21,587 $21,533
======= =======
</TABLE>
-9-
<PAGE> 10
PGI INCORPORATED AND SUBSIDIARIES
(12) Real Estate Sales and Other Income
There were no real estate sales for the nine months ended
September 30, 1997 and 1996.
Other income for the three and nine months ended September 30, 1997
and 1996 consisted of:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------- ---------------------
Sept. 30, Sept.30, Sept. 30, Sept. 30,
1997 1996 1997 1996
--------- -------- --------- ---------
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Commission income $ 91 $107 $292 $245
Other income 46 112 120 143
---- ---- ---- ----
$137 $219 $412 $388
==== ==== ==== ====
</TABLE>
(13) Commitments and Contingencies
The aggregate outstanding balances of all receivables sold and
exchanged with recourse totaled $157,000 and $246,000 at September 30,
1997 and December 31, 1996, respectively. Based on its collection
experience with such receivables, the Company maintained allowances at
both September 30, 1997 and December 31, 1996, classified in other
liabilities, of $66,000 for the recourse provisions related to all
receivables sold.
(14) Income Taxes
Effective January 1, 1993 the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
which requires a change from the deferred method to the asset and
liability method of accounting for income taxes. Under the asset and
liability method, deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying enacted statutory
tax rates applicable to future years to differences between the
financial statement carrying amounts and the tax bases of existing
assets and liabilities. Under SFAS No. 109, the effect on deferred
taxes of a change in tax rates is recognized in income in the period
that includes the enactment date. Under the deferred method deferred
taxes were recognized using the tax rate applicable to the year of the
calculation and were not adjusted for subsequent changes in tax rates.
Based on the Company's current tax status and current tax laws,
adoption of SFAS No. 109 did not have a material effect on the
Company's financial position.
At December 31, 1996, the Company had an operating loss carryforward of
approximately $34,000,000 to reduce future taxable income. These
operating losses expire at various dates through 2,009.
The following summarizes the temporary differences of the Company at
December 31, 1996 at the current statutory rate:
<TABLE>
<S> <C>
Deferred tax asset:
Net operating loss carryforward $ 12,531,000
Adjustments to reduce land to
net realizable value 12,000
Expenses capitalized under IRC 263(a) 56,000
ITC carryforward 215,000
Other 2,000
Valuation allowance (10,347,000)
------------
2,469,000
Deferred tax liability ------------
Basis difference of land and
improvement inventories 2,453,000
Excess tax over book depreciation 16,000
------------
2,469,000
------------
Net deferred tax asset $ 0
============
</TABLE>
-10-
<PAGE> 11
PGI INCORPORATED AND SUBSIDIARIES
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Preliminary Note
Readers should understand as they read this report that the Company is
not presently pursuing its core business 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, 1996, the Company's business
focus and emphasis changed substantially as it concentrated its sales and
marketing efforts almost exclusively on the disposition in bulk of its
undeveloped, platted, residential real estate. This change was prompted by
it's continuing financial difficulties due to the principal and interest owed
on its debt and managements' conclusion that a bulk sale was the best way to
reduce the Company's debt service obligations. 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.
On January 31, 1997, Sugarmill Woods, Inc., a Florida corporation and a
wholly-owned subsidiary of the Company, and Love-PGI Partners, L.P. ("L-PGI")
(collectively as "Seller"), entered into an Option Agreement For Sale and
Purchase ("Sale Agreement") with The Nature Conservancy, Inc., an unrelated
nonprofit District of Columbia corporation ("Purchaser"), for the sale of and
purchase of approximately 5,240 acres of certain undeveloped real estate
located in Citrus County and Hernando County, Florida ("Property").
Approximately 4,890 acres of the Property is owned by the Company, and 350
acres is owned by L-PGI. A First Amendment and a Second Amendment to the
Option Agreement For Sale and Purchase have been executed extending the
option expiration date to March 3, 1998 and extending the date for PGI
shareholder approval to October 31, 1997. For various reasons, the Company
was unable to hold the Annual Meeting on or prior to October 31, 1997.
The Company intends nevertheless to submit the sale of such property to the
vote of the Company's shareholders at an annual meeting which the Company
hopes to hold later this year. The Company views the October 31, 1997 date as
a condition of the Option Agreement as Amended which the Purchaser has the
power to waive. In other words, if the Company's shareholders approve the sale
of the property and the Purchaser exercises the option and purchases the
property, the Purchaser could close the purchase of the property regardless of
when shareholder approval is obtained.
Results of Operations
Revenues for the first nine months of 1997 decreased by $26,000 to
$435,000 from $461,000 for the comparable 1996 period. A net loss of
$2,515,000 was incurred for the first nine months of 1997 compared to a net
loss of $2,342,000 for the first nine months of 1996. After consideration of
cumulative preferred dividends in arrears, totaling $480,000 for each of the
nine months ended September 30, 1997 and 1996 ($.15 per share of common
stock), net losses per share of $.69 and $.85, respectively, were reported
for the nine month periods ended September 30, 1997 and 1996.
On March 28, 1996, the Company's primary lender, First Union National
Bank of Florida, a national banking association ("First Union") assigned to
PGIP L.L.C., a Missouri limited liability company ("PGIP") all of First
Union's right, title and interest in and to the documents (the "Loan
Documents") evidencing and securing its primary credit agreements with the
Company and the Company's subsidiaries, Sugarmill Woods, Inc., Burnt Store
Marina, Inc. and Gulf Coast Credit Corporation (collectively, the
"Borrowers"), which credit agreements are in default and the maturity of the
indebtedness secured thereby has been accelerated.
-11-
<PAGE> 12
PGI INCORPORATED AND SUBSIDIARIES
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company has been advised by PGIP that it will be the policy of PGIP
not to proceed with collection of the principal and interest evidenced and
secured by the Loan Documents so long as PGI pursues satisfactory efforts to
market and sell the Property. PGIP's policy, but not its contractual
obligation, will be to facilitate sales of the Property by agreeing to the
release of Property to be sold from the lien of the Loan Documents against
disposition of the net sale proceeds therefrom, after all expenses, closing
costs and the like incurred by PGI in connection with any such sale, in a
manner to be agreed upon by PGIP and PGI.
The largest investor in PGIP is Love Savings Holding Company ("LSHC")
which holds approximately a 72% interest. Messrs. Love and Schiffer own
approximately 52% of LSHC and serve as the only directors and executive
officers of LSHC. Messrs. Love, Schiffer and LSHC are the managers of PGIP.
Messrs. Love and Schiffer serve as executive officers and directors of the
Company and the other Borrowers and the Guarantors.
Company management has determined that the Company's primary activity
must concentrate on one goal - the sale of sufficient additional acreage as
soon as possible to again substantially reduce the primary lender debt.
There were no real estate sales for the nine months ended September 30,
1997 and 1996.
Other income for the three and nine months ended September 30, 1997 and
1996 consisted of:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------- ---------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1997 1996 1997 1996
--------- --------- --------- ---------
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Commission income $ 91 $107 $292 $245
Other income 46 112 120 143
---- ---- ---- ----
$137 $219 $412 $388
==== ==== ==== ====
</TABLE>
The Company suspended the construction of homes and sale of homes and
homesites in 1994. Starting in January 1996, the Company began concentrating
on disposing in bulk of its undeveloped, platted, residential real estate in
order to decrease its debt obligations. The Company envisioned selling off
such property and retaining its undeveloped commercial real estate for future
development or bulk sales depending on the profitability. The Company has
not been successful in selling off its undeveloped residential real estate
and is constantly seeking new opportunities to sell this property and to
decrease its debt and stay in operation.
Effective January 1, 1990 the Company implemented the installment
method of homesite sales reporting in accordance with Statement of Financial
Accounting Standard No. 66 "Accounting for Sales of Real Estate" (see Item I
Note 2 Recognition of Real Estate Sales). This method will be utilized for
all installment sales regardless of the down payment percentage. As a result
of the Secured Lender Transaction nonrecourse sale of receivables, all
previously deferred profits were recognized
-12-
<PAGE> 13
PGI INCORPORATED AND SUBSIDIARIES
during 1992.
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Cash used in operating activities for the nine months ended September
30, 1997 was $59,000 compared to $136,000 cash provided by operating
activities for the comparable 1996 period. During the first nine months of
1997, financing activities provided $54,000 in cash flow with $172,000 in
proceeds from borrowings. Net cash used in financing activities was $118,000
for normal debt repayment as compared to $340,000 for the same period in
1996.
Analysis of Financial Condition
Assets totaled $11.1 million at September 30, 1997 compared to $11.3
million at December 31, 1996, reflecting the following changes:
<TABLE>
<CAPTION>
September 30, December 31, Increase
1997 1996 (Decrease)
------------- ------------ ----------
($ in thousands)
<S> <C> <C> <C>
Cash and Cash Equivalents $ 5 $ 12 $ (7)
Restricted Cash 1,131 1,140 (9)
Receivables 166 344 (178)
Land and improvement inventories 9,003 9,016 (13)
Net property and equipment 21 46 (25)
Other assets 763 759 4
------- ------- -----
$11,089 $11,317 $(228)
======= ======= =====
-13-
<PAGE> 14
PGI INCORPORATED AND SUBSIDIARIES
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liabilities were $36.1 million at September 30, 1997 compared to $33.8
million at December 31, 1996, reflecting the following changes among
categories.
</TABLE>
<TABLE>
<CAPTION>
September 30, December 31, Increase
1997 1996 (Decrease)
------------- ------------ ----------
($ in thousands)
<S> <C> <C> <C>
Accounts payable $ 193 $ 78 $ 115
Other liabilities 1,661 1,428 233
Accrued interest 12,675 10,790 1,885
Credit agreements - primary lender 7,343 7,307 36
Notes and mortgages payable 3,685 3,667 18
Convertible subordinated
debentures payable 9,059 9,059 --
Convertible debentures payable 1,500 1,500 --
------- ------- ------
$36,116 $33,829 $2,287
======= ======= ======
</TABLE>
The Company has aggressively taken steps to curtail and simplify
operations as well as concentrate on major bulk sales of its undeveloped
acreage. The Company remains totally dependent upon the sale of property to
fund its operations and debt service requirements.
The Company remains in default of the entire principal plus interest on
its convertible subordinated debentures. The amounts due are as indicated in
the following table:
<TABLE>
<CAPTION>
September 30, 1997
--------------------------
Principal Unpaid
Amount Due Interest
---------- --------
($ in thousands)
<S> <C> <C>
Convertible subordinated debentures due June 1, 1991 $1,034 $ 522
Convertible subordinated debentures due May 1, 1992 8,025 4,316
------ ------
$9,059 $4,838
====== ======
</TABLE>
The Company does not have funds available to make any payments of
either principal or interest on the above debentures. 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.
-14-
<PAGE> 15
PGI INCORPORATED AND SUBSIDIARIES
PART II Other Information
Item 1 Legal Proceedings
In 1994, the Citrus County Tax Appraiser denied agricultural exemption
status for the undeveloped Sugarmill Woods property and the Company was
forced to sue the County to reclaim the tax benefit. In 1995, the Citrus
County Tax Appraiser again denied agricultural exemption status for the
undeveloped Sugarmill Woods property, but was overruled by the Value
Adjustment Board. As a result, the Tax Appraiser sued Sugarmill Woods, and
was again successful in denying the agricultural exemption for the property.
The Company has filed an appeal to reinstate the exemption. At this time the
outcome of the appeal cannot be determined.
Item 2 Changes in Securities
Not applicable.
Item 3 Defaults Upon Senior Securities
See discussion in Item 2 with respect to defaults on the Company's
convertible subordinated debentures and collateralized convertible
debentures, which discussion is incorporated herein by this reference.
Item 4 Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5 Other Information
Not applicable.
Item 6 Exhibits and Reports on Form 8K
(a) Exhibits reference is made to the Exhibit Index contained on
page 18 herein for a list of exhibits filed under this Item.
(c) No report on Form 8-K was filed during the quarter ended
September 30, 1997.
-15-
<PAGE> 16
PGI INCORPORATED AND SUBSIDIARIES
SIGNATURES
In accordance with the requirement of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
PGI INCORPORATED
---------------------------
(Registrant)
Date: November 14, 1997 /s/ Laurence A. Schiffer
------------------------------- ------------------------------
Laurence A. Schiffer
President
-16-
<PAGE> 17
PGI INCORPORATED AND SUBSIDIARIES
<TABLE>
EXHIBIT INDEX
- -------------
<CAPTION>
Sequential
Page Number
<S> <C>
2. Inapplicable.
3. Inapplicable.
4. Inapplicable.
10. Inapplicable.
11. Statements re: Computations of Per Share Earnings, filed
herewith................................................. 19
15. Inapplicable.
18. Inapplicable.
19. Inapplicable.
22. Inapplicable.
23. Inapplicable.
24. Inapplicable.
27. Financial Data Schedule.................................. 20
</TABLE>
-17-
<PAGE> 1
<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
FACTS FOR COMPUTATION OF NET LOSS PER SHARE
<CAPTION>
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
---------------------------- ------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
1) Net loss for period $ (892,000) $ (680,000) $(2,515,000) $(2,342,000)
2) Average shares outstanding before assumed exercise
of stock options and conversion of preferred stock
and debentures 5,317,758 3,317,555 4,335,973 3,317,555
=========== ========== =========== ===========
3) Average shares outstanding from assumed exercise
of stock options:
Primary -- -- -- --
=========== ========== =========== ===========
Fully diluted -- -- -- --
=========== ========== =========== ===========
4) Average shares outstanding from assumed conversion
of preferred stock 3,760,000 3,760,000 3,760,000 3,760,000
=========== ========== =========== ===========
5) Average shares outstanding from assumed conversion
of debenture 1,341,076 1,341,076 1,341,076 1,341,076
=========== ========== =========== ===========
6) Cumulative preferred dividends in arrears $ 160,000 $ 160,000 $ 480,000 $ 480,000
=========== ========== =========== ===========
7) Interest and amortization charged against income
for debentures during period $ 190,000 $ 190,000 $ 569,000 $ 569,000
=========== ========== =========== ===========
ADJUSTMENT OF NET LOSS:
- -----------------------
Primary
Net loss for period (Line 1) $ (892,000) $ (680,000) $(2,515,000) $(2,342,000)
Less cumulative preferred dividends in arrears
(Line 6) ( 160,000) (160,000) (480,000) (480,000)
----------- ---------- ----------- -----------
8) Adjusted net loss for primary net loss per share $(1,052,000) $ (840,000) $(2,995,000) $(2,822,000)
=========== ========== =========== ===========
Fully Diluted
-------------
Adjusted net loss for primary net loss per
share (Line 8) $(1,052,000) $ (840,000) $(2,995,000) $(2,822,000)
Add cumulative preferred dividends in arrears
on preferred stock assumed converted (Line 6) 160,000 160,000 480,000 480,000
Add interest and amortization charged against
income for debentures during period (Line 7) 190,000 190,000 569,000 569,000
Tax effect on Line 7 --<FA> --<FA> --<FA> --<FA>
----------- ---------- ----------- -----------
9) Adjusted net loss for fully diluted net loss per
share $ (702,000) $ (490,000) $(1,946,000) $(1,773,000)
=========== ========== =========== ===========
ADJUSTMENT OF AVERAGE SHARES OUTSTANDING
- ----------------------------------------
Primary
- -------
Average shares outstanding (Line 2) 5,317,758 3,317,555 4,335,973 3,317,555
Average shares outstanding (Line 3) -- -- -- --
----------- ---------- ----------- -----------
10) Shares assumed outstanding for primary net loss
per share 5,317,758 3,317,555 4,335,973 3,317,555
=========== ========== =========== ===========
Fully Diluted
- -------------
Average shares outstanding (Line 2) 5,317,758 3,317,555 4,335,973 3,317,555
Average shares outstanding from assumed exercise
of stock options (Line 3) -- -- -- --
Average shares outstanding from assumed conversion
of preferred stock (Line 4) 3,760,000 3,760,000 3,760,000 3,760,000
Average shares outstanding from assumed conversion
of debentures (Line 5) 1,341,076 1,341,076 1,341,076 1,341,076
----------- ---------- ----------- -----------
11) Shares assumed outstanding for fully diluted net
loss per share 10,418,834 8,418,631 9,437,049 8,418,631
=========== ========== =========== ===========
NET LOSS PER SHARE:
- -------------------
Before Adjustment
- -----------------
(Line 1 divided by Line 2) $ (.17) $ (.20) $ (.58) $ (.71)
====== ====== ====== ======
Primary
- -------
Net loss
(Line 8 divided by Line 10) $ (.20) $ (.25) $ (.69) $ (.85)
====== ====== ====== ======
Fully Diluted<FB>
- -------------
Net loss<FB> $ (.20) $ (.25) $ (.69) $ (.85)
====== ====== ====== ======
<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 antidilutive effect of assumed exercise of stock options
and conversion of preferred stock and debentures to common stock.
</TABLE>
-18-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,136,000
<SECURITIES> 0
<RECEIVABLES> 937,000
<ALLOWANCES> (771,000)
<INVENTORY> 9,003,000
<CURRENT-ASSETS> 0<F1>
<PP&E> 212,000
<DEPRECIATION> (191,000)
<TOTAL-ASSETS> 11,089,000
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 21,587,000
<COMMON> 532,000
0
2,000,000
<OTHER-SE> (27,559,000)
<TOTAL-LIABILITY-AND-EQUITY> 11,089,000
<SALES> 0
<TOTAL-REVENUES> 140,000
<CGS> 0
<TOTAL-COSTS> 2,000
<OTHER-EXPENSES> 257,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 682,000
<INCOME-PRETAX> (892,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (892,000)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
<FN>
<F1>CURRENT ASSETS AND CURRENT LIABILITIES VALUES
ARE ZERO BECAUSE OF AN UNCLASSIFIED BALANCE SHEET.
</TABLE>
