<PAGE>
<PAGE>
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, 1998
----------------------
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
-----------------------------------------------
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
November 13, 1998 there were 5,317,758 shares of the Registrant's
common stock outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes No X
--- ---
<PAGE>
<PAGE>
PGI INCORPORATED AND SUBSIDIARIES
<TABLE>
FORM 10-QSB
For the Quarter Ended September 30, 1998
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, 1998 and December 31, 1997 3
Consolidated Statements of Operations
Three and Nine Months Ended September 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1998 and 1997 5
Notes to Consolidated Financial Statements
for Form 10-QSB 6-11
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-15
PART II Other Information
Item 1 Legal Proceedings 16
Item 2 Changes in Securities 16
Item 3 Defaults Upon Senior Securities 16
Item 4 Submission of Matters to a Vote of Security Holders 16
Item 5 Other Information 16
Item 6 Exhibits and Reports on Form 8-K 16
SIGNATURES 17
</TABLE>
2<PAGE>
<PAGE>
PGI INCORPORATED AND SUBSIDIARIES
PART I Financial Information
Item 1 Financial Statements
<TABLE>
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
($ in thousands)
<CAPTION>
Sept. 30, Dec. 31,
1998 1997
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 181 $ 2
Restricted Cash 1,936 1,173
Receivables on real estate sales - net 98 156
Other receivables 55 28
Land and improvement inventories 889 8,992
Property and equipment - net 1 18
Other assets 158 759
-------- --------
$ 3,318 $ 11,128
======== ========
LIABILITIES
Accounts payable $ 12 $ 285
Other liabilities 1,305 1,727
Accrued interest:
Primary lender 11 3,461
Debentures 9,333 8,238
Other 1,625 1,629
Credit agreements -
Primary lender 1,000 7,344
Notes and mortgages payable 1,198 3,750
Convertible subordinated
debentures payable 9,059 9,059
Convertible debentures payable 1,500 1,500
-------- --------
$ 25,043 $ 36,993
-------- --------
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
shares issued and outstanding 532 532
Paid in capital 13,498 13,498
Accumulated deficit (37,755) (41,895)
-------- --------
(21,725) (25,865)
-------- --------
$ 3,318 $ 11,128
======== ========
See accompanying notes to consolidated financial statements for Form 10-QSB.
</TABLE>
3<PAGE>
<PAGE>
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,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Real Estate Sales 28 - 13,475 -
Interest income 2 3 9 23
Other income 140 137 1,461 412
----- ------ ------- -------
170 140 14,945 435
----- ------ ------- -------
COSTS AND EXPENSES
Costs of Real Estate Sales 5 - 8,432 -
Selling expenses 5 2 20 6
General & administrative expenses 52 257 395 620
Interest 438 682 1,703 2,008
Other expenses 82 91 255 316
----- ------ ------- -------
582 1,032 10,805 2,950
----- ------ ------- -------
NET INCOME (LOSS)BEFORE INCOME TAX $(412) $ (892) 4,140 (2,515)
CREDIT FOR INCOME TAX 104 - - -
----- ------ ------- -------
NET INCOME (LOSS) $(308) $ (892) $ 4,140 $(2,515)
===== ====== ======= =======
NET INCOME (LOSS) PER SHARE <F*>
Primary and fully diluted $(.09) $ (.20) $ .69 $ (.69)
===== ====== ======= =======
<FN>
<F*> Considers the effect of cumulative preferred dividends in
arrears for the three and nine months ended September 30, 1998
and 1997.
See accompanying notes to consolidated financial statements for Form 10-QSB.
</TABLE>
4
<PAGE>
<PAGE>
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,
1998 1997
-------- --------
<S> <C> <C>
Net cash provided by (used in) operating activities $ 7,686 $ (59)
------- -----
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 31 172
------- -----
Principal payments on debt (7,538) (118)
------- -----
Net cash provided by (used in) financial activities (7,507) 54
------- -----
Net increase (decrease) in cash 179 (7)
Cash at beginning of period 2 12
------- -----
Cash at end of period $ 181 $ 5
======= =====
See accompanying notes to consolidated financial statements for Form 10-QSB.
</TABLE>
5
<PAGE>
<PAGE>
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, 1997.
The Company remains in default under the indentures governing its
convertible unsecured subordinated debentures and in default of
its primary debt obligations. A significant payment on the primary
debt obligation occurred with the sale of the undeveloped land in
Citrus County upon closing May 13, 1998. (See Management's
Discussion and Analysis of Financial Condition and Results of
Operations and Notes 10 and 11 to the Company's consolidated
financial statements for the year ended December 31, 1997, as
contained in the Company's Annual Report on Form 10-KSB).
All 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, 1998 are not necessarily
indicative of operations to be expected for the fiscal year ending
December 31, 1998 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.
(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, 1998 and 1997. The average number of common
shares outstanding for the nine months ended September 30, 1998
and 1997 was 5,317,758 and 4,335,973, 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.
6
<PAGE>
<PAGE>
PGI INCORPORATED AND SUBSIDIARIES
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, 1998 and
1997, 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.
The following is a summary of the calculations used in computing
basic and diluted income(loss) per share for the three and nine
months ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Income (Loss) (308,000) (892,000) 4,140,000 (2,515,000)
Preferred Dividends (160,000) (160,000) (480,000) (480,000)
--------- ---------- --------- ----------
Income (Loss) Avail-
able to Common
Shareholders (468,000) (1,052,000) 3,660,000 (2,995,000)
========= ========== ========= ==========
Weighted Amount of
Shares Outstanding 5,317,758 5,317,758 5,317,758 4,335,973
Basic and Diluted
Income (Loss) Per
Share (.09) (.20) .69 (.69)
</TABLE>
7
<PAGE>
<PAGE>
PGI INCORPORATED AND SUBSIDIARIES
(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, 1998 and 1997 was $231,000 and
$121,000, respectively.
For purposes of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of
three months or less to be cash equivalents.
(5) Restricted Cash
Restricted cash included cash pledged to agencies in various
states and local Florida governmental units related to land
development and environmental matters, real estate taxes in
litigation, collateral for primary lender debt, the servicing of
sold receivables and, as a result of sales agreements and Company
policies, customer payments and deposits related to homesite and
housing contracts.
(6) Receivables on Real Estate Sales
Net receivables on real estate sales consisted of:
<TABLE>
<CAPTION>
Sept. 30, December 31,
1998 1997
--------- ------------
($ in thousands)
<S> <C> <C>
Contracts receivable on homesite sales $ 760 $ 816
Other 83 89
----- -----
843 905
Less: Allowance for cancellations (706) (706)
Unamortized valuation discount (39) (43)
----- -----
$ 98 $ 156
===== =====
</TABLE>
(7) Land and Improvements
Land and improvement inventories consisted of:
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1998 1997
--------- --------
($ in thousands)
<S> <C> <C>
Unimproved land $629 $8,724
Fully improved land 260 268
---- ------
$889 $8,992
==== ======
</TABLE>
8<PAGE>
<PAGE>
PGI INCORPORATED AND SUBSIDIARIES
(8) Property and Equipment
Property and equipment consisted of:
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1998 1997
--------- --------
($ in thousands)
<S> <C> <C>
Furniture, fixtures and other equipment $ 93 $ 212
Less: Accumulated depreciation (92) (194)
---- -----
$ 1 $ 18
==== =====
</TABLE>
(9) Other Assets
Other assets consisted of:
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1998 1997
--------- --------
($ in thousands)
<S> <C> <C>
Guaranteed future connections, net $ - $621
Deposit with Trustee of 6-1/2% debentures 137 131
Other 21 7
---- ----
$158 $759
==== ====
</TABLE>
(10) Other Liabilities
Other Liabilities consisted of:
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1998 1997
--------- --------
($ in thousands)
<S> <C> <C>
Accrued property taxes
- current $ 35 $ 230
- delinquent 679 745
Other accrued expenses 322 342
Deposits, advances and escrows 215 336
Estimated recourse liability for
receivables sold 38 58
Other 16 16
------ ------
$1,305 $1,727
====== ======
</TABLE>
(11) Primary Lender Credit Agreements, Notes and Mortgages Payable and
Convertible Subordinated Debentures Payable
Credit agreements with the Company's primary lender and notes and
mortgages payable consisted of the following:
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1998 1997
--------- --------
($ in thousands)
<S> <C> <C>
Credit agreements - primary lender:
(maturing July 8, 1997, bearing interest
at prime plus 5%) $ 1,000 $ 7,344
Notes and mortgages payable - certain
balances at December 31, 1997 were
paid in the second quarter of 1998.
The balance at September 30, 1998 primarily
consists of $1,176,000 bearing interest
at prime plus 2%. 1,198 3,750
------- -------
9
<PAGE>
<PAGE>
PGI INCORPORATED AND SUBSIDIARIES
Convertible subordinated debentures payable:
At 6-1/2% interest; due June 1991; convertible
into shares of common stock at
$18.00 per share $ 1,034 $ 1,034
At 6% interest; due May 1, 1992; convertible
into shares of common stock at
$19.50 per share 8,025 8,025
------- -------
$ 9,059 $ 9,059
------- -------
Collateralized convertible debentures payable:
At 14% interest; due July 8, 1997, convertible
into share of common stock at
$1.72 per share 1,500 1,500
------- -------
$12,757 $21,653
======= =======
</TABLE>
(12) Real Estate Sales and Other Income
Real Estate Sales and Cost of Sales consisted of:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------- ----------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1998 1997 1998 1997
--------- --------- --------- ---------
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Sales:
Homesite Sales $28 - $ 28 $ -
Acreage Sales - 13,447 -
--- --- ------- ---
28 - $13,475 $ -
=== === ======= ===
Cost of Sales:
Homesite Sales $ 5 5
Acreage Sales - $ - 8,427 $ -
--- --- ------- ---
$ 5 $ 8,432
=== === ======= ===
</TABLE>
Other income consisted of:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------- ----------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1998 1997 1998 1997
--------- --------- --------- ---------
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Commission income $ 80 $ 91 $ 247 $292
Reduction of previously accrued
property taxes - - 248 -
Debt release settlement - - 870 -
Other income 60 46 96 120
---- ---- ------ ----
$140 $137 $1,461 $412
==== ==== ====== ====
</TABLE>
(13) Commitments and Contingencies
The aggregate outstanding balances of all receivables sold and
exchanged with recourse totaled $83,000 and $145,000 at September
30, 1998 and December 31, 1997, respectively. Based on its
collection experience with such receivables, the Company
maintained allowances at September 30, 1998 and December 31, 1997,
classified in other liabilities, of $38,000 and $58,000
respectively for the recourse provisions related to all
receivables sold.
10
<PAGE>
<PAGE>
PGI INCORPORATED AND SUBSIDIARIES
(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.
At December 31, 1997, the Company had an operating loss
carryforward of approximately $37,000,000 to reduce future taxable
income. These operating losses expire at various dates through
2,012.
The following summarizes the temporary differences of the Company
at December 31, 1997 at the current statutory rate:
<TABLE>
<S> <C>
Deferred tax asset:
Net operating loss carryforward $ 13,690,000
Adjustments to reduce land to
net realizable value 12,000
Expenses capitalized under IRC 263(a) 56,000
ITC carryforward 215,000
Valuation allowance (11,510,000)
------------
2,463,000
------------
Deferred tax liability
Basis difference of land and
improvement inventories 2,453,000
Excess tax over book depreciation 10,000
------------
2,463,000
------------
Net deferred tax asset $ 0
============
</TABLE>
11
<PAGE>
<PAGE>
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. 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. The sale of this undeveloped land occurred on May 13, 1998,
its remaining inventory now consists of undeveloped commercial property.
The Company intends to make a decision as to 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 was owned by the Company, and 350 acres was owned by L-PGI.
Shareholder approval of the sale of the property was obtained at the
Annual Meeting of the Company on December 22, 1997. The Company
consummated the transaction on May 13, 1998.
Results of Operations
Revenues for the first nine months of 1998 increased by $14.5
million to $14.9 million from $435,000 for the comparable 1997 period
due to the sale of approximately 4,890 acres on May 13, 1998. A net
gain of $4.1 million was realized for the first nine months of 1998
compared to a net loss of $2,515,000 for the first nine months of 1997.
After consideration of cumulative preferred dividends in arrears,
totaling $480,000 for each of the nine months ended September 30, 1998
and 1997 ($.15 per share of common stock), net income (loss) per share
of $.69 and $(.69), respectively, were reported for the nine month
periods ended September 30, 1998 and 1997.
12
<PAGE>
<PAGE>
PGI INCORPORATED AND SUBSIDIARIES
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
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.
The sale of acreage on May 13, 1998 resulted in a payment of first
mortgage principal and interest to PGIP of $10,362,193. At closing, the
Company and PGIP executed an escrow agreement (the "Escrow Agreement").
The Escrow Agreement provides that $1,000,000 of the PGI Purchase Price
would not be used to repay the First Mortgage Indebtedness, so that
$1,000,000 (the "Remaining Indebtedness") of the First Mortgage
Indebtedness would remain in place. The $1,000,000 was placed in escrow
with PGIP as the escrow agent. Pursuant to the Escrow Agreement, the
escrowed funds are to be paid out (i) as requested by PGI and agreed to
by PGIP, or (ii) as deemed necessary and appropriate by PGIP, in either
case, to protect PGIP's interest in the Retained Acreage (as hereinafter
defined), including PGIP's right to receive principal and interest under
the First Mortgage securing the Remaining Indebtedness, or (iii) to PGIP
to pay any other obligations owed to PGIP by the Company. The real
estate owned by the Company which was not sold to the Purchaser
(approximately 370 acres) (the "Retained Acreage") remains subject to
the First Mortgage.
Real Estate Sales and Cost of Sales consisted of:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ ------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1998 1997 1998 1997
--------- --------- --------- ---------
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Sales:
Homesite Sales $28 - $ 28 $ -
Acreage Sales - 13,447 -
--- ---- ------- ----
28 - $13,475 $ -
=== ==== ======= ====
Cost of Sales:
Homesite Sales $ 5 5
Acreage Sales - $ - 8,427 $ -
--- ---- ------- ----
$ 5 $ 8,432
=== ==== ======= ====
</TABLE>
Other income consisted of:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ ------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1998 1997 1998 1997
--------- --------- --------- ---------
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Commission income $ 80 $ 91 $ 247 $292
Reduction of previously
accrued property taxes - - 248 -
Debt release settlement - - 870 -
Other income 60 46 96 120
---- ---- ------ ----
$140 $137 $1,461 $412
==== ==== ====== ====
</TABLE>
13<PAGE>
<PAGE>
PGI INCORPORATED AND SUBSIDIARIES
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
The stock of Sugarmill Woods Sales, Inc., a subsidiary of
Sugarmill Woods Inc. was sold September 15, 1998 to the president of
Sugarmill Woods Sales, Inc. for a price of $25,000. Assets at the time
of sale included the personal property, escrows and rental contracts of
the entity. A promissory note for $24,000 was taken back by Sugarmill
Woods, Inc. secured by a lien on the stock being purchased and evidenced
by a security agreement. The company realized a gain of $18,000 on this
transaction.
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's management closed on the
sale of its undeveloped land in Citrus County on May 13, 1998.
Effective January 1, 1990 the Company implemented the installment
method of homesite sales reporting in accordance with Statement of
Financial Accounting Standard No. 66 "Accounting for Sales of Real
Estate" (see Item I - Note 2 - Recognition of Real Estate Sales). This
method will be utilized for all installment sales regardless of the down
payment percentage. As a result of the Secured Lender Transaction
non-recourse sale of receivables, all previously deferred profits were
recognized during 1992.
Cash provided by operating activities for the nine months ended
Septmeber 30, 1998 was $7.7 million compared to cash used of $59,000 for
the comparable 1997 period due to the bulk acreage sale in the second
quarter of 1998. During the first nine months of 1998, financing
activities used $7.5 million in cash flow with $31,000 in proceeds from
borrowings. Net cash used in financing activities was primary lender
for debt repayment as well as repayments of other notes and mortgages
payable.
Analysis of Financial Condition
Assets totaled $3.32 million at September 30, 1998 compared to
$11.13 million at December 31, 1997, reflecting the following changes:
<TABLE>
<CAPTION>
Sept. 30, Dec. 31, Increase
1998 1997 (Decrease)
--------- -------- ----------
($ in thousands)
<S> <C> <C> <C>
Cash and Cash Equivalents $ 181 $ 2 $ 179
Restricted Cash 1,936 1,173 763
Receivables 153 184 (31)
Land and improvement inventories 889 8,992 (8,103)
Net property and equipment 1 18 (17)
Other assets 158 759 (601)
------ ------- -------
$3,318 $11,128 $(7,810)
====== ======= =======
</TABLE>
Liabilities were $25.0 million at September 30, 1998 compared to
$37.0 million at December 31, 1997, reflecting the following changes
among categories.
14
<PAGE>
<PAGE>
PGI INCORPORATED AND SUBSIDIARIES
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
<TABLE>
<CAPTION>
Sept. 30, Dec. 31, Increase
1998 1997 (Decrease)
--------- -------- ----------
($ in thousands)
<S> <C> <C> <C>
Accounts payable $ 12 $ 285 $ (273)
Other liabilities 1,305 1,727 (422)
Accrued interest 10,969 13,328 (2,359)
Credit agreements - primary lender 1,000 7,344 (6,344)
Notes and mortgages payable 1,198 3,750 (2,552)
Convertible subordinated
debentures payable 9,059 9,059 -
Convertible debentures payable 1,500 1,500 -
------- ------- --------
$25,043 $36,993 $(11,950)
======= ======= ========
</TABLE>
The Company has aggressively taken steps to curtail and simplify
operations as well as concentrate on major bulk sales of its undeveloped
acreage. The Company remains totally dependent upon the sale of
property to fund its operations and debt service requirements.
The Company remains in default of the entire principal plus
interest on its convertible subordinated debentures. The amounts due
are as indicated in the following table:
<TABLE>
<CAPTION>
Sept. 30, 1998
-----------------------
Principal Unpaid
Amount Due Interest
---------- --------
($ in thousands)
<S> <C> <C>
Convertible subordinated debentures due June 1, 1991 $1,034 $ 593
Convertible subordinated debentures due May 1, 1992 8,025 5,019
------ ------
$9,059 $5,612
====== ======
</TABLE>
The Company does not have funds available to make any payments of
either principal or interest on the above debentures.
15
<PAGE>
<PAGE>
PGI INCORPORATED AND SUBSIDIARIES
PART II Other Information
Item 1 Legal Proceedings
In 1994, the Citrus County Tax Assessor 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 Assessor again denied agricultural exemption status
for the undeveloped Sugarmill Woods property, but was overruled by the
Value Adjustment Board. As a result, the Tax Assessor sued Sugarmill
Woods, and was again successful in denying the agricultural exemption
for the property. The Company won on appeal, but the Tax Assessor
appealed to the Supreme Court of Florida to reinstate the exemption. At
this time the outcome of the appeal cannot be determined. At the
closing of the bulk acreage sale a restricted escrow was established in
the amount of $557,000 for payment of the taxes upon settlement of the
litigation.
Item 2 Changes in Securities
Not applicable.
Item 3 Defaults Upon Senior Securities
See discussion in Item 2 with respect to defaults on the
Company's convertible subordinated debentures and collateralized
convertible debentures, which discussion is incorporated herein by this
reference.
Item 4 Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5 Other Information
Not applicable.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits - reference is made to the Exhibit Index contained on
page 18 herein for a list of exhibits filed under this Item.
(c) No report on Form 8-K was filed during the quarter ended
September 30, 1998.
16
<PAGE>
<PAGE>
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 13, 1998 /s/Laurence A. Schiffer
----------------------- ---------------------------
Laurence A. Schiffer
President
17
<PAGE>
<PAGE>
PGI INCORPORATED AND SUBSIDIARIES
EXHIBIT INDEX
- -------------
2. Inapplicable.
3.1 Restated Articles of Incorporation of PGI, Inc. executed
September 4, 1998 with certificate from the State of Florida
dated October 27, 1998
3.2 Inapplicable.
4. Inapplicable.
10. Inapplicable.
11. Statements re: Computations of Per Share Earnings.
(See Note 3 to the consolidated financial statements.)
15. Inapplicable.
18. Inapplicable.
19. Inapplicable.
22. Inapplicable.
23. Inapplicable.
24. Inapplicable.
27. Financial Data Schedule
18
<PAGE> 1
[FLORIDA STATE SEAL]
FLORIDA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
October 28, 1998
MRS. LORRIE MAAG
720 OLIVE ST., STE. 2400
ST. LOUIS, MO 63101
Re: Document Number 211808
The Restated Articles of Incorporation for PGI INCORPORATED, a Florida
corporation, were filed on October 27, 1998.
The certification you requested is enclosed.
Should you have any questions concerning this matter, please telephone
(850) 487-6050, the Amendment Filing Section.
Velma Shepard
Corporate Specialist
Division of Corporations Letter Number: 498A00052847
Division of Corporations - P.O. BOX 6327 - Tallahassee, Florida 32314
<PAGE>
<PAGE>
STATE OF FLORIDA
[LOGO]
DEPARTMENT OF STATE
I certify the attached is a true and correct copy of the Restated
Articles of Incorporation, filed on October 27, 1998, for PGI
INCORPORATED, a Florida corporation, as shown by the records of this
office.
The document number of this corporation is 211808.
Given under my hand and the
Great Seal of the State of Florida
at Tallahassee, the Capitol, this the
Twenty-eighth day of October, 1998
[FLORIDA STATE SEAL] /s/ Sandra B. Mortham
CR2E022 (2-95)
Sandra B. Mortham
Secretary of State
<PAGE>
<PAGE>
CERTIFICATE OF THE VICE CHAIRMAN
OF THE BOARD OF DIRECTORS
AND THE PRESIDENT OF
PGI INCORPORATED
The undersigned, Laurence A. Schiffer, the Vice Chairman of the
Board of Directors and the President of PGI Incorporated, a Florida
corporation ("PGI"), makes this certificate pursuant to the requirements
of Section 607.1007 of the Florida Business Corporation Act (the
"Florida Act") in connection with the restatement of the Articles of
Incorporation of PGI as amended to date (the "Articles of Incorporation
as Amended") and the filing thereof with the Secretary of State of the
State of Florida:
1. Attached hereto as Attachment A is a true, correct, accurate
and complete copy of the Articles of Incorporation as Amended, restated
as so amended (the "Restated Articles") (excluding the Certificate of
Designation setting forth the rights, preferences, privileges, and
designations creating and establishing the Class A Cumulative Preferred
Stock of PGI Incorporated which remain in effect but are filed
separately with the Secretary of State of the State of Florida).
2. The Restated Articles do not contain an amendment to the
Articles of Incorporation as Amended requiring shareholder approval
which has not previously been obtained and filed with the Secretary of
State of the State of Florida.
3. The Board of Directors of PGI adopted the Restated Articles
by those certain Resolutions of the Board of Directors by Unanimous
Written Consent and dated as of September 4, 1998.
IN WITNESS WHEREOF, the undersigned have executed this Certificate
as of the 4th day of September 1998.
/s/ Laurence A. Schiffer
---------------------------------------
Laurence A. Schiffer
Vice Chairman of the Board and President
September 4, 1998
<PAGE>
<PAGE>
EXHIBIT A
- ---------
RESTATED ARTICLES OF INCORPORATION
OF
PGI INCORPORATED
ARTICLE I
---------
The name of this corporation shall be: PGI Incorporated.
ARTICLE II
----------
The general nature of the business to be transacted shall be:
(a) To acquire, by purchase or in any other manner, own, hold,
maintain, work, develop, sell, convey, lease, mortgage,
exchange, improve and in any other manner to deal in and
with property, real, personal and mixed, tangible and
intangible, of every kind, nature and description wherever
located, and any interest or right therein of any kind,
nature or description.
(b) To engage in the business of a holding company and to
acquire by purchase or in any other manner any mercantile,
commercial or other business, trade or enterprise, and any
interest therein, to enter into and engage in any such
business, trade or enterprise, and to do all things
appropriate thereto.
(c) To engage in the general contracting, construction, and
manufacturing business for the construction and manufacture
of any and all types of buildings, structures and products
of every kind, nature and description, and to buy, sell,
manufacture, trade in and otherwise deal with any and all
types of buildings, structures and products.
(d) To do any and all of the above activities, directly or
indirectly, alone or in combination with others, through
participation in partnerships, joint ventures, trusts or
any other form of business entity, as principal or as agent
or broker for others.
(e) To carry on any business, occupation, undertaking or
enterprise and to exercise any power of authority which may
be done by a private corporation organized and existing
under and by virtue of Chapter 608, Florida Statute, 1967,
and it being the intention that this corporation may
conduct and transact any business lawfully authorized and
not prohibited by Chapter 608, Florida Statute, 1967.
<PAGE>
<PAGE>
ARTICLE III
-----------
The maximum number of shares of capital stock which this corporation
is authorized to issue or to have outstanding at any time shall be
Thirty Million (30,000,000) shares of which Twenty Five Million
(25,000,000) shares shall be common stock of $.10 par value, and Five
Million (5,000,000) shares shall be preferred stock of $1.00 par value.
Each holder of common stock shall have one vote for each share of
stock held. At all elections of directors of the corporation each holder
of stock possessing voting power shall have the right to vote, in person
or by proxy, the number of shares owned by him for as many persons as
there are directors to be elected and for whose election he has a right
to vote, but shall not have the right to cumulate such votes.
The whole or any part of the capital stock of this corporation shall
be payable in lawful money of the United States of America, property, or
services at a valuation to be fixed by the directors of the corporation,
provided, however, that such valuation be at least equivalent to the
full par value of the stock so to be issued.
No holder of shares of any class of stock of this corporation shall
have any preemptive or preferential right to subscribe for, purchase, or
otherwise acquire or receive any shares of any class of stock hereafter
issued by this corporation, whether now or hereafter authorized, or any
shares of any class of stock of this corporation now or hereafter
acquired and held by this corporation as treasury stock and subsequently
reissued and sold or otherwise disposed of, or any bonds, certificates
of indebtedness, notes, or any other securities convertible into or
exchangeable for, or any warrants or rights to purchase or otherwise
acquire, any shares of any class of stock of this corporation, whether
now or hereafter authorized.
The preferred stock may be issued from time to time in one or more
series, upon resolution or resolutions providing for such series adopted
by the Board of Directors, with such distinctive designations as shall
be stated in such resolution or resolutions. The resolution or
resolutions providing for the issue of shares of a particular series
shall fix, subject to applicable laws and provisions of this Article
III, the designation, rights, references and limitations of the shares
of each such series. The authority of the Board of Directors with
respect to each series shall include, but not be limited to,
determination of the following:
(a) the number of the shares constituting such series,
including the authority to increase or decrease such
number, and the distinctive designation of such series;
(b) the dividend rate of the shares of such series, whether the
dividends shall be cumulative and, if so, the date from
which they shall be cumulative, and the relative rights of
priority, if any, of payment of dividends on shares of such
series;
(c) the right, if any, of the corporation to redeem shares of
such series and the terms and conditions of such redemption
including the redemption price;
-2-
<PAGE>
<PAGE>
(d) the rights of shares in case of a voluntary or involuntary
liquidation, dissolution or winding up of the corporation,
and the relative rights of priority, if any, of payment of
shares of such series;
(e) the voting rights, if any, for such series and the terms
and conditions under which such voting rights may be
exercised;
(f) the obligation, if any, of the corporation to retire shares
of such series pursuant to a retirement or sinking fund or
fund of a similar nature and the terms and conditions of
such obligation;
(g) the terms and conditions, if any, upon which shares of such
series shall be convertible into or exchangeable for shares
of stock of any other class or classes or of any other
series of preferred stock, including the price or prices or
the rate or rates of conversion or exchange and the terms
of adjustment, if any; and
(h) any other rights, preferences or limitations of the shares
of such series as may be permitted by law.
ARTICLE IV
----------
The amount of capital with which this corporation will begin business
will be not less than Five Hundred Dollars ($500.00).
ARTICLE V
---------
This Corporation is to have perpetual existence.
ARTICLE VI
----------
The principal office of the corporation shall be at 1796 West Marion
Avenue, Punta Gorda, Florida.
ARTICLE VII
-----------
The Board of Directors of the corporation shall be comprised of eight
(8) members, all of whom shall be elected annually. The number of
directors may be increased or decreased from time to time in the manner
provided in the By-Laws. Whenever any vacancy on the Board of Directors
shall occur due to death, resignation, retirement, removal, increase in
the number of directors or otherwise, a majority of directors in office,
although less than a majority of the entire Board, may fill the vacancy
or vacancies for the balance of the unexpired term or terms, at which
time a successor or successors shall be duly elected by the shareholders
and shall qualify.
-3-
<PAGE>
<PAGE>
ARTICLE VIII
------------
The names and post office addresses of the first Board of Directors,
who, subject to the provisions of the Certificate of Incorporation, the
by-laws and the corporation laws of the State of Florida, shall hold
office for the first year of the corporation's existence, or until their
successors are elected and have qualified, are as follows:
NAME ADDRESS
Wilber H. Cole 6021 Maynada Street
Coral Gables, Florida
Mark Marks 1905 N. E. 124th Street
North Miami, Florida
Beatrice M. Marks 1905 N. E. 124th Street
North Miami, Florida
ARTICLE IX
----------
The names and post office addresses of each subscriber to the
Certificate of Incorporation and the number of shares that each agree to
take are as follows, to-wit:
NAME ADDRESS SHARES
Wilber H. Cole 6021 Maynada Street 667 Common -
Coral Gables, Florida No par $167.00
Mark Marks 1905 N. E. 124th Street 667 Common -
North Miami, Florida No par $167.00
Beatrice M. Marks 1905 N. E. 124th Street 666 Common -
North Miami, Florida No par $167.00
The proceeds of the stock subscribed for will be at least as much as
the amount necessary to begin business.
-4-
<PAGE>
<PAGE>
ARTICLE X
---------
No shareholder shall have a pre-emptive right to purchase any new or
additional shares of the corporation, whenever issued by the
corporation, whether sold for cash or issued for other consideration,
and whether of the same kind, class or series which the shareholder
already holds.
ARTICLE XI
----------
The corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation in the manner
now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, PGI Incorporated has caused these Restated
Articles of Incorporation (excluding the Certificate of Designation
setting forth the rights, preferences, privileges, and designations
creating and establishing the Class A Cumulative Preferred Stock of PGI
Incorporated which remain in effect but are filed separately with the
Secretary of State of the State of Florida) to be executed by Laurence
A. Schiffer, its Vice Chairman of the Board and Chief Executive Officer
as of this 4th day of September, 1998.
/s/ Laurence A. Schiffer
PGI Incorporated
-5-
<PAGE>
<PAGE>
CERTIFICATE OF THE VICE CHAIRMAN
OF THE BOARD OF DIRECTORS
AND THE PRESIDENT OF
PGI INCORPORATED
The undersigned, Laurence A. Schiffer, the Vice Chairman of the Board
of Directors and the President of PGI Incorporated, a Florida
corporation ("PGI"), makes this certificate pursuant to the requirements
of Section 607.1007 of the Florida Business Corporation Act (the
"Florida Act") in connection with the restatement of the Articles of
Incorporation of PGI as amended to date (the "Articles of Incorporation
as Amended") and the filing thereof with the Secretary of State of the
State of Florida:
1. Attached hereto as Attachment A is a true, correct, accurate and
complete copy of the Articles of Incorporation as Amended, restated as
so amended (the "Restated Articles") (excluding the Certificate of
Designation setting forth the rights, preferences, privileges, and
designations creating and establishing the Class A Cumulative Preferred
Stock of PGI Incorporated which remain in effect but are filed
separately with the Secretary of State of the State of Florida).
2. The Restated Articles do not contain an amendment to the Articles
of Incorporation as Amended requiring shareholder approval which has not
previously been obtained and filed with the Secretary of State of the
State of Florida.
3. The Board of Directors of PGI adopted the Restated Articles by
those certain Resolutions of the Board of Directors by Unanimous Written
Consent and dated as of September 4, 1998.
IN WITNESS WHEREOF, the undersigned have executed this Certificate as
of the 4th day of September, 1998.
/s/ Laurence A. Schiffer
Laurence A. Schiffer
Vice Chairman of the Board and President
September 4, 1998
<PAGE>
<PAGE>
EXHIBIT A -- RESTATED CERTIFICATE OF INCORPORATION AS AMENDED
-------------------------------------------------------------
September 4, 1998
<PAGE>
<PAGE>
PGI INCORPORATED
ACTIONS BY THE BOARD OF DIRECTORS
BY UNANIMOUS WRITTEN CONSENT
The undersigned, being all the directors of PGI Incorporated, (the
"Corporation"), a Florida corporation, pursuant to Section 607.0821 of
the Florida Business Corporation Act (the "Florida Act"), hereby
unanimously consent and subscribe in writing, without a meeting, to the
following recitals and actions:
WHEREAS, the shareholders of the Corporation have approved numerous
amendments to the Corporation's Articles of Incorporation (the
"Articles") since the Company's incorporation in 1959 and the Board
believes it would be in the best interest of the Company that the
Articles as so amended, be restated into one document and filed with the
Secretary of State of the State of Florida (the "Secretary").
WHEREAS, attached hereto as Attachment A is the restated articles of
incorporation of the Corporation in its entirety in the form attached
hereto as the current articles of incorporation of the Corporation (the
"Restated Articles") (excluding the Certificate of Designation setting
forth the rights, preferences, privileges and designations creating and
establishing the Corporation's Class A Cumulative Preferred Stock which
remain in effect (the "Certificate of Designation")) and which Restated
Articles compile in one document the original Articles as amended to
date, except for the Certificate of Designation.
RESOLVED, that pursuant to Sections 607.1007 of the Florida Act, the
Restated Articles is hereby adopted and approved in all respects and for
all purposes as the current articles of incorporation of the
Corporation; and
FURTHER RESOLVED, that pursuant to Section 607.0120 of the Florida
Act, the Board of Directors authorizes, empowers and directs the proper
officers of the Corporation enumerated therein, in the name and on
behalf of the Corporation, to take such other and further actions and to
execute, deliver to and file with the Secretary, in addition to the
Restated Articles, such other and further documents and certificates
(the "Documents"), as any of them may deem necessary or advisable to
implement or to otherwise carry out the intent of the foregoing
resolutions; and
FURTHER RESOLVED, that if and to the extent required by the
Secretary, the Board of Directors authorizes the proper officers of the
Corporation to make such additions, deletions and alterations to the
Documents and the Restated Articles (but in the case of the Restated
Articles, only if the nature of the revisions are solely to correct
clerical, typographical or procedural errors or omissions) necessary to
effect the acceptance of the filing of the Restated Articles and the
Documents by the Secretary, as the officers in their judgment deem
necessary or proper.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Written
Consent as of Sept. 4, 1998.
/s/ Andrew S. Love, Jr.
Andrew S. Love, Jr.
/s/ Laurence A. Schiffer
Laurence A. Schiffer
BEING ALL OF THE DIRECTORS
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,117,000
<SECURITIES> 0
<RECEIVABLES> 859,000
<ALLOWANCES> (706,000)
<INVENTORY> 889,000
<CURRENT-ASSETS> 0<F1>
<PP&E> 93,000
<DEPRECIATION> (92,000)
<TOTAL-ASSETS> 3,318,000
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 12,757,000
<COMMON> 532,000
0
2,000,000
<OTHER-SE> (24,257,000)
<TOTAL-LIABILITY-AND-EQUITY> 3,318,000
<SALES> 28,000
<TOTAL-REVENUES> 170,000
<CGS> 5,000
<TOTAL-COSTS> 10,000
<OTHER-EXPENSES> 134,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 438,000
<INCOME-PRETAX> (412,000)
<INCOME-TAX> (104,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (308,000)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
<FN>
<F1> CURRENT ASSETS AND CURRENT LIABILITIES VALUES
ARE ZERO BECAUSE OF AN UNCLASSIFIED BALANCE SHEET.
</TABLE>
