<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 June 30, 1997
------------------------------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------- -------------------
Commission File Number 1-6471
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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
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(Issuer's telephone number)
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(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 June 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
June 30, 1997 and December 31, 1996 3
Consolidated Statements of Operations
Three and Six Months Ended June 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 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>
June 30, December 31,
1997 1996
----------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Cash, including restricted cash of $1,134,000
and $1,140,000 $ 1,159 $ 1,152
Receivables on real estate sales - net 147 318
Other receivables 32 26
Land and improvement inventories 9,005 9,016
Property and equipment - net 23 46
Other assets 757 759
---------- ----------
$ 11,123 $ 11,317
========== ==========
LIABILITIES
Accounts payable $ 140 $ 78
Other liabilities 1,537 1,428
Accrued interest:
Primary lender 2,954 2,461
Debentures 7,544 6,880
Other 1,536 1,449
Credit agreements -
Primary lender 7,343 7,307
Notes and mortgages payable 3,645 3,667
Convertible subordinated
debentures payable 9,059 9,059
Convertible debentures payable 1,500 1,500
---------- ----------
35,258 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 (40,165) (38,542)
---------- ----------
(24,135) (22,512)
---------- ----------
$ 11,123 $ 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 Six Months Ended
---------------------- ------------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
-------- ------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Interest income 9 24 20 54
Other income 141 77 275 169
-------- -------- -------- --------
150 101 295 223
-------- -------- -------- --------
COSTS AND EXPENSES
Selling expenses 2 3 4 9
General & administrative expenses 213 388 363 492
Interest 672 638 1,326 1,211
Other expenses 99 74 225 173
-------- -------- -------- --------
986 1,103 1,918 1,885
-------- -------- -------- --------
NET INCOME (LOSS) $ (836) $ (1,002) $ (1,623) $ (1,662)
======== ======== ======== ========
NET INCOME (LOSS) PER SHARE <F*>
Primary and fully diluted $ (.19) $ (.35) $ (.37) $ (.60)
======== ======== ======== ========
<FN>
<F*> Considers the effect of cumulative preferred dividends in arrears for
the three and six months ended June 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>
Six Months Ended
-------------------------
June 30, June 30,
1997 1996
---------- ----------
<S> <C> <C>
Net cash provided by (used in) operating activities $ (7) $ 88
---------- ----------
Cash flows from financing activities:
Proceeds from borrowings 117 115
Principal payments on debt (103) (253)
---------- ----------
Net cash provided by (used in) financial activities 14 (138)
---------- ----------
Net increase (decrease) in cash 7 (50)
Cash at beginning of period 1,152 1,165
---------- ----------
Cash at end of period $ 1,159 $ 1,115
========== ==========
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 10-QSB and therefore
do not include all disclosures necessary for fair presentation of
financial position, results of operations and cash flows in conformity
with generally accepted accounting principles. The Company's independent
accountants included an explanatory paragraph regarding the Company's
ability to continue as a going concern in their opinion on the Company's
consolidated financial statements for the year ended December 31, 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 10-KSB, 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 six months ended June 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
Notes to Consolidated Financial Statements (continued)
(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 six
months ended June 30, 1997 and 1996. The average number of common
shares outstanding for the six months ended June 30, 1997 and 1996 was
5,317,758 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 six months
ended June 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 anti-dilutive.
(4) Statement of Cash Flows
The Financial Accounting Standards Board issued Statement No. 95,
"Statement of Cash Flows", which requires a statement of cash flows as
part of a full set of financial statements. For quarterly reporting
purposes, the Company has elected to condense the reporting of its net
cash flows. Interest paid for the six months ended June 30, 1997 and
1996 was $82,000 and $103,000, respectively.
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents.
(5) Restricted Cash
Restricted cash included cash and certificates of deposit pledged to
agencies in various states and local Florida governmental units related
to land development and environmental matters, escrowed receipts related
to pledged receivables on real estate sales and the servicing of sold
receivables and, as a result of sales agreements and Company policies,
customer payments and deposits related to homesite and housing
contracts.
-7-
<PAGE> 8
PGI INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(6) Receivables on Real Estate Sales
Net receivables on real estate sales consisted of:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- -------------
($ in thousands)
<S> <C> <C>
Contracts receivable on homesite sales $ 907 $ 1,076
Other 92 98
---------- ----------
999 1,174
Less: Allowance for cancellations (806) (806)
Unamortized valuation discount (46) (50)
---------- ----------
$ 147 $ 318
========== ==========
</TABLE>
(7) Land and Improvements
Land and improvement inventories consisted of:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ------------
($ in thousands)
<S> <C> <C>
Unimproved land $ 8,724 $ 8,724
Fully improved land 281 292
---------- ----------
$ 9,005 $ 9,016
========== ==========
</TABLE>
(8) Property and Equipment
Property and equipment consisted of:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ------------
($ in thousands)
<S> <C> <C>
Furniture, fixtures and other equipment $ 211 $ 363
Less: Accumulated depreciation (188) (317)
---------- ----------
$ 23 $ 46
========== ==========
</TABLE>
(9) Other Assets
Other assets consisted of:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ------------
($ in thousands)
<S> <C> <C>
Guaranteed future connections related to
sale of utility plants and equipment, net $ 621 $ 621
Deposit with Trustee of 6-1/2% debentures 128 125
Other 8 13
---------- ----------
$ 757 $ 759
========== ==========
</TABLE>
-8-
<PAGE> 9
PGI INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(10) Other Liabilities
Other Liabilities consisted of:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ------------
($ in thousands)
<S> <C> <C>
Accrued property taxes
- current $ 103 $ 208
- delinquent 690 476
Other accrued expenses 340 316
Deposits, advances and escrows 322 346
Estimated recourse liability for
receivables sold 66 66
Other 16 16
---------- ----------
$ 1,537 $ 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>
June 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 - $1,283,000
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 3,645 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 shares of common stock at
$1.72 per share 1,500 1,500
---------- ----------
$ 21,547 $ 21,533
========== ==========
</TABLE>
-9-
<PAGE> 10
PGI INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(12) Real Estate Sales and Other Income
There were no real estate sales for the six months ended June 30, 1997 and
1996.
Other income for the three and six months ended June 30, 1997 and 1996
consisted of:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- -------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
--------- --------- --------- --------
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Commission income $ 99 $ 60 $ 201 $ 138
Other income 42 17 74 31
--------- --------- --------- ---------
$ 141 $ 77 $ 275 $ 169
========= ========= ========= =========
</TABLE>
(13) Commitments and Contingencies
The aggregate outstanding balances of all receivables sold and exchanged
with recourse totaled $173,000 and $246,000 at June 30, 1997 and
December 31, 1996, respectively. Based on its collection experience
with such receivables, the Company maintained allowances at both June
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
Notes to Consolidated Financial Statements (continued)
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. The Option has expired, but the Company and the
Nature Conservancy are negotiating the terms of a similar Option Agreement
and the Company expects this will be signed in the near future.
Results of Operations
Revenues for the first six months of 1997 increased by $62,000 to
$295,000 from $223,000 for the comparable 1996 period. A net loss of
$1,623,000 was incurred for the first six months of 1997 compared to a net
loss of $1,662,000 for the first six months of 1996. After consideration of
cumulative preferred dividends in arrears, totaling $320,000 for each of the
six months ended June 30, 1997 and 1996 ($.10 per share of common stock), net
losses per share of $.37 and $.60, respectively, were reported for the six
month periods ended June 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.
PGIP is owned and managed by Love Savings Holding Company ("LSHC"),
Andrew S. Love, Jr. and Laurence A. Schiffer. Messrs. Love and Schiffer are
directors and executive officers of LSHC and own slightly more than half of
all the issued and outstanding voting stock of LSHC. Messrs. Love and
Schiffer serve as executive officers and directors of 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 six months ended June 30, 1997
and 1996.
Other income for the three and six months ended June 30, 1997 and 1996
consisted of:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------- -------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
-------- -------- -------- --------
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Commission income $ 99 $ 60 $ 201 $ 138
Other income 42 17 74 31
-------- -------- -------- --------
$ 141 $ 77 $ 275 $ 169
======== ======== ======== ========
</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 non-recourse sale of receivables,
all previously deferred profits were recognized during 1992.
-12-
<PAGE> 13
PGI INCORPORATED AND SUBSIDIARIES
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Cash used in operating activities for the six months ended June 30,
1997 was $7,000 compared to $88,000 cash provided by operating activities for
the comparable 1996 period. During the first six months of 1997, financing
activities provided $14,000 in cash flow with $117,000 in proceeds from
borrowings. Net cash used in financing activities was $103,000 for normal debt
repayment as compared to $253,000 for the same period in 1996.
Analysis of Financial Condition
Assets totaled $11.1 million at June 30, 1997 compared to $11.3 million
at December 31, 1996, reflecting the following changes:
<TABLE>
<CAPTION>
June 30, December 31, Increase
1997 1996 (Decrease)
---------- ------------ ----------
($ in thousands)
<S> <C> <C> <C>
Cash $ 1,159 $ 1,152 $ 7
Receivables 179 344 (165)
Land and improvement inventories 9,005 9,016 (11)
Net property and equipment 23 46 (23)
Other assets 757 759 (2)
---------- ---------- ----------
$ 11,123 $ 11,317 $ (194)
========== ========== ==========
</TABLE>
-13-
<PAGE> 14
PGI INCORPORATED AND SUBSIDIARIES
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liabilities were $35.3 million at June 30, 1997 compared to $33.8
million at December 31, 1996, reflecting the following changes among
categories.
<TABLE>
<CAPTION>
June 30, December 31, Increase
1997 1996 (Decrease)
---------- ------------ ----------
($ in thousands)
<S> <C> <C> <C>
Accounts payable $ 140 $ 78 $ 62
Other liabilities 1,537 1,428 109
Accrued interest 12,034 10,790 1,244
Credit agreements - primary lender 7,343 7,307 36
Notes and mortgages payable 3,645 3,667 (22)
Convertible subordinated
debentures payable 9,059 9,059 -
Convertible debentures payable 1,500 1,500 -
---------- ---------- ----------
$ 35,258 $ 33,829 $ 1,429
========== ========== ==========
</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>
June 30, 1997
----------------------
Principal Unpaid
Amount Due Interest
---------- --------
($ in thousands)
<S> <C> <C>
Convertible subordinated debentures due June 1, 1991 $ 1,034 $ 504
Convertible subordinated debentures due May 1, 1992 8,025 4,145
---------- ---------
$ 9,059 $ 4,649
========== =========
</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 8-K
(a) Exhibits - reference is made to the Exhibit Index contained on page 18
herein for a list of exhibits filed under this Item.
(c) No report on Form 8-K was filed during the quarter ended June 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: August 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 June 30, Six Months Ended June 30,
--------------------------- ----------------------------
1997 1996 1997 1996
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1) Net loss for period $ (836,000) $(1,002,000) $(1,623,000) $(1,662,000)
2) Average shares outstanding before assumed exercise of
stock options and conversion of preferred stock
and debentures 5,317,758 3,317,555 5,317,758 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
debentures 1,341,076 1,341,076 1,341,076 1,341,076
========== =========== =========== ===========
6) Cumulative preferred dividends in arrears $ 160,000 $ 160,000 $ 320,000 $ 320,000
========== =========== =========== ===========
7) Interest and amortization charged against income for
debentures during period $ 190,000 $ 190,000 $ 380,000 $ 380,000
========== =========== =========== ===========
ADJUSTMENT OF NET LOSS:
- - -----------------------
Primary
-------
Net loss for period (Line 1) $ (836,000) $(1,002,000) $(1,623,000) $(1,662,000)
Less cumulative preferred dividends in arrears (Line 6) (160,000) (160,000) (320,000) (320,000)
---------- ----------- ----------- -----------
8) Adjusted net loss for primary net loss per share $ (996,000) $(1,162,000) $(1,943,000) $(1,982,000)
========== =========== =========== ===========
Fully Diluted
-------------
Adjusted net loss for primary net loss per share
(Line 8) $ (996,000) $(1,162,000) $(1,943,000) $(1,982,000)
Add cumulative preferred dividends in arrears on
preferred stock assumed converted (Line 6) 160,000 160,000 320,000 320,000
Add interest and amortization charged against income
for debentures during period (Line 7) 190,000 190,000 380,000 380,000
Tax effect on Line 7 -<FA> -<FA> -<FA> -<FA>
---------- ----------- ----------- -----------
9) Adjusted net loss for fully diluted net loss per share $ (646,000) $ (812,000) $(1,243,000) $(1,282,000)
========== =========== =========== ===========
ADJUSTMENT OF AVERAGE SHARES OUTSTANDING:
- - -----------------------------------------
Primary
-------
Average shares outstanding (Line 2) 5,317,758 3,317,555 5,317,758 3,317,555
Average shares outstanding (Line 3) - - - -
---------- ----------- ----------- -----------
10) Shares assumed outstanding for primary net loss per
share 5,317,758 3,317,555 5,317,758 3,317,555
========== =========== =========== ===========
Fully Diluted
-------------
Average shares outstanding (Line 2) 5,317,758 3,317,555 5,317,758 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 10,418,834 8,418,631
========== =========== =========== ===========
NET LOSS PER SHARE:
- - -------------------
Before Adjustment
-----------------
(Line 1 divided by Line 2) $(.16) $(.30) $(.31) $(.50)
===== ===== ===== =====
Primary
-------
Net loss
(Line 8 divided by Line 10) $(.19) $(.35) $(.37) $(.60)
===== ===== ===== =====
Fully Diluted<FB>
-------------
Net loss<FB> $(.19) $(.35) $(.37) $(.60)
===== ===== ===== =====
<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>
-18-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,159,000
<SECURITIES> 0
<RECEIVABLES> 985,000
<ALLOWANCES> (806,000)
<INVENTORY> 9,005,000
<CURRENT-ASSETS> 0<F1>
<PP&E> 211,000
<DEPRECIATION> (188,000)
<TOTAL-ASSETS> 11,123,000
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 21,547,000
<COMMON> 532,000
0
2,000,000
<OTHER-SE> (26,667,000)
<TOTAL-LIABILITY-AND-EQUITY> 11,123,000
<SALES> 0
<TOTAL-REVENUES> 150,000
<CGS> 0
<TOTAL-COSTS> 2,000
<OTHER-EXPENSES> 312,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 672,000
<INCOME-PRETAX> (836,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (836,000)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
<FN>
<F1> CURRENT ASSETS AND CURRENT LIABILITIES VALUES ARE
ZERO BECAUSE OF AN UNCLASSIFIED BALANCE SHEET.
</TABLE>
