<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, 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 August 14, 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> 2
PGI INCORPORATED AND SUBSIDIARIES
<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
FORM 10-QSB
For the Quarter Ended June 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
June 30, 1998 and December 31, 1997 3
Consolidated Statements of Operations
Three and Six Months Ended June 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 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> 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,
1998 1997
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 259 $ 2
Restricted Cash 2,023 1,173
Receivables on real estate sales - net 111 156
Other receivables 30 28
Land and improvement inventories 890 8,992
Property and equipment - net 12 18
Other assets 163 759
-------- --------
$ 3,488 $ 11,128
======== ========
LIABILITIES
Accounts payable $ 73 $ 285
Other liabilities 1,503 1,727
Accrued interest:
Primary lender 18 3,461
Debentures 8,960 8,238
Other 1,594 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
-------- --------
$ 24,905 $ 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 (37,447) (41,895)
-------- --------
(21,417) (25,865)
-------- --------
$ 3,488 $ 11,128
======== ========
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,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Real Estate Sales 13,447 - 13,447 -
Interest income 3 9 7 20
Other income 1,232 141 1,321 275
------- ----- ------- -------
14,682 150 14,775 295
------- ----- ------- -------
COSTS AND EXPENSES
Costs of Real Estate Sales 8,427 - 8,427 -
Selling expenses 10 2 15 4
General & administrative expenses 131 213 343 363
Interest 596 672 1,265 1,326
Other expenses 98 99 173 225
------- ----- ------- -------
9,262 986 10,223 1,918
------- ----- ------- -------
NET INCOME (LOSS)BEFORE INCOME TAX $ 5,420 $(836) 4,552 (1,623)
PROVISION FOR INCOME TAX 104 - 104 -
------- ----- ------- -------
NET INCOME (LOSS) $ 5,316 $(836) $ 4,448 $(1,623)
======= ===== ======= =======
NET INCOME (LOSS) PER SHARE<F*>
Primary and fully diluted $ .97 $(.23) $ .78 $ (.51)
======= ===== ======= =======
<FN>
<F*> Considers the effect of cumulative preferred dividends in arrears for
the three and six months ended June 30, 1998 and 1997.
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,
1998 1997
-------------------
<S> <C> <C>
Net cash provided by (used in) operating activities $ 7,764 $ (1)
------- -----
Cash flows from financing activities:
Proceeds from borrowings 31 117
Principal payments on debt (7,538) (103)
------- -----
Net cash provided by (used in) financial activities (7,507) 14
------- -----
Net increase in cash 257 13
Cash at beginning of period 2 12
------- -----
Cash at end of period $ 259 $ 25
======= =====
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, 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 six months
ended June 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
6
<PAGE> 7
PGI INCORPORATED AND SUBSIDIARIES
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, 1998 and 1997. The average number of
common shares outstanding for the six months ended June 30, 1998
and 1997 was 5,317,758 and 3,836,945, 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, 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 six
months ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net Income (Loss) 5,316,000 (836,000) 4,448,000 (1,623,000)
Preferred Dividends (160,000) (160,000) (320,000) (320,000)
--------- --------- --------- ----------
Income (Loss) Avail-
able to Common Shareholders 5,156,000 (996,000) 4,128,000 (1,943,000)
========= ========= ========= ==========
Weighted Amount of
Shares Outstanding 5,317,758 4,350,627 5,317,758 3,836,945
Basic and Diluted
Income (Loss) Per
Share .97 (.23) .78 (.51)
</TABLE>
7
<PAGE> 8
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 six
months ended June 30, 1998 and 1997 was $190,000 and $82,000,
respectively.
For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
(5) Restricted Cash
Restricted cash included cash pledged to agencies in various
states and local Florida governmental units related to land
development and environmental matters, real estate taxes in
litigation, collateral for primary lender debt, the servicing
of sold receivables and, as a result of sales agreements and
Company policies, customer payments and deposits related to
homesite and housing contracts.
(6) Receivables on Real Estate Sales
Net receivables on real estate sales consisted of:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
($ in thousands)
<S> <C> <C>
Contracts receivable on homesite sales $ 773 $ 816
Other 84 89
----- -----
857 905
Less: Allowance for cancellations (706) (706)
Unamortized valuation discount (40) (43)
----- -----
$ 111 $ 156
===== =====
</TABLE>
(7) Land and Improvements
Land and improvement inventories consisted of:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
($ in thousands)
<S> <C> <C>
Unimproved land $629 $8,724
Fully improved land 261 268
---- ------
$890 $8,992
==== ======
</TABLE>
8
<PAGE> 9
PGI INCORPORATED AND SUBSIDIARIES
(8) Property and Equipment
Property and equipment consisted of:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
($ in thousands)
<S> <C> <C>
Furniture, fixtures and other equipment $ 212 $ 212
Less: Accumulated depreciation (200) (194)
----- -----
$ 12 $ 18
===== =====
</TABLE>
(9) Other Assets
<TABLE>
<CAPTION>
Other assets consisted of: June 30, December 31,
1998 1997
-------- ------------
($ in thousands)
<S> <C> <C>
Guaranteed future connections, net $ - $621
Deposit with Trustee of 6-1/2% debentures 135 131
Other 28 7
---- ----
$163 $759
==== ====
</TABLE>
(10) Other Liabilities
Other Liabilities consisted of:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
($ in thousands)
<S> <C> <C>
Accrued property taxes
- current $ 23 $ 230
- delinquent 679 745
Other accrued expenses 341 342
Income Taxes Payable 104 -
Deposits, advances and escrows 282 336
Estimated recourse liability for
receivables sold 58 58
Other 16 16
------ ------
$1,503 $1,727
====== ======
</TABLE>
(11) Primary Lender Credit Agreements, Notes and Mortgages Payable and
Convertible Subordinated Debentures Payable
Credit agreements with the Company's primary lender and notes and
mortgages payable consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
($ 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 June 30, 1998
primarily consists of $1,176,000 bearing
interest at prime plus 2% 1,198 3,750
------ ------
</TABLE>
9
<PAGE> 10
PGI INCORPORATED AND SUBSIDIARIES
Convertible subordinated debentures payable:
<TABLE>
<S> <C> <C>
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 $21,653
======= =======
</TABLE>
(12) Real Estate Sales and Other Income
Real Estate Sales and Cost of Sales consisted of:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- -----------------------
June 30, June 30, June 30, June30,
1998 1997 1998 1997
-------- -------- -------- -------
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Sales - Acreage in Bulk $13,447 $ - $13,447 $ -
======= ===== ======= =====
Cost of Sales-Acreage in Bulk $ 8,427 $ - $ 8,427 $ -
======= ===== ======= =====
</TABLE>
Other Income consisted of:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------ ----------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
-------- -------- -------- --------
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Commission income $ 88 $ 99 $ 167 $201
Reduction of previously accrued
property taxes 248 - 248 -
Debt release settlement 870 - 870 -
Other income 26 42 36 74
------ ---- ------ ----
$1,232 $141 $1,321 $275
====== ==== ====== ====
</TABLE>
(13) Commitments and Contingencies
The aggregate outstanding balances of all receivables sold and
exchanged with recourse totaled $101,000 and $145,000 at June
30, 1998 and December 31, 1997, respectively. Based on its
collection experience with such receivables, the Company
maintained allowances at both June 30, 1998 and December 31,
1997, classified in other liabilities, of $58,000 for the
recourse provisions related to all receivables sold.
10
<PAGE> 11
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>
The provision for income taxes at June 30, 1998 consists of non-refundable
alternative minimum tax.
11
<PAGE> 12
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 six months of 1998 increased by $14.5 million to
$14.8 million from $295,000 for the comparable 1997 period due to the sale of
approximately 4,890 acres on May 13, 1998. A net gain of $4.4 million was
realized for the first six months of 1998 compared to a net loss of
$1,623,000 for the first six months of 1997. After consideration of
cumulative preferred dividends in arrears, totaling $320,000 for each of the
six months ended June 30, 1998 and 1997 ($.10 per share of common stock), net
income (loss) per share of $.78 and $(.51), respectively, were reported for
the six month periods ended June 30, 1998 and 1997.
12
<PAGE> 13
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 $1,000,000 was placed in escrow
with PGIP as the escrow agent. Pursuant to the Escrow Agreement, the
escrowed funds are to be paid out (i) as requested by PGI and agreed
to by PGIP, or (ii) as deamed necessary and appropriate by PGIP, in
either case, to protect PGIP's interest in the Retained Acreage (as
hereinafter defined), including PGIP's right to receive principal
and interest under the First Mortgage securing the Remaining Indebtedness,
or (iii) to PGIP to pay any other obligations owed to PGIP by the
Company. The real estate owned by the Company which was not sold to
the Purchaser (approximately 370 acres) (the "Retained Acreage")
remains subject to the First Mortgage.
Real Estate Sales and Cost of Sales consisted of:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------ ------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
-------- -------- -------- --------
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Sales - Acreage in Bulk $13,447 $ - $13,447 $ -
======= ===== ======= =====
Cost of Sales-Acreage in Bulk $ 8,427 $ - $ 8,427 $ -
======= ===== ======= =====
</TABLE>
Other income consisted of:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- ------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
-------- -------- -------- --------
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Commission income $ 88 $ 99 $ 167 $201
Reduction of previously accrued
property taxes 248 - 248 -
Debt release settlement 870 - 870 -
Other income 26 42 36 74
------ ---- ------ ----
$1,232 $141 $1,321 $275
====== ==== ====== ====
</TABLE>
13
<PAGE> 14
PGI INCORPORATED AND SUBSIDIARIES
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
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 six months ended June 30,
1998 was $7.8 million compared to cash used of $1,000 for the comparable 1997
period due to the bulk acreage sale in the second quarter of 1998. During
the first six 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 $3.5 million at June 30, 1998 compared to $11.13 million
at December 31, 1997, reflecting the following changes:
<TABLE>
<CAPTION>
June 30, December 31, Increase
1998 1997 (Decrease)
-------- ------------ ----------
($ in thousands)
<S> <C> <C> <C>
Cash and Cash Equivalents $ 259 $ 2 $ 257
Restricted Cash 2,023 1,173 850
Receivables 141 184 (43)
Land and improvement inventories 890 8,992 (8,102)
Net property and equipment 12 18 (6)
Other assets 163 759 (596)
------ ------- -------
$3,488 $11,128 $(7,640)
====== ======= =======
</TABLE>
Liabilities were $24.9 million at June 30, 1998 compared to $37.0
million at December 31, 1997, reflecting the following changes among
categories.
14
<PAGE> 15
PGI INCORPORATED AND SUBSIDIARIES
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
<TABLE>
<CAPTION>
June 30, December 31, Increase
1998 1997 (Decrease)
-------- ------------ ----------
($ in thousands)
<S> <C> <C> <C>
Accounts payable $ 73 $ 285 $ (212)
Other liabilities 1,503 1,727 (224)
Accrued interest 10,572 13,328 (2,756)
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 -
------- ------- --------
$24,905 $36,993 $(12,088)
======= ======= ========
</TABLE>
The Company has aggressively taken steps to curtail and simplify
operations as well as concentrate on major bulk sales of its undeveloped
acreage. The Company remains totally dependent upon the sale of property to
fund its operations and debt service requirements.
The Company remains in default of the entire principal plus interest on
its convertible subordinated debentures. The amounts due are as indicated in
the following table:
<TABLE>
<CAPTION>
June 30, 1998
------------------------
Principal Unpaid
Amount Due Interest
---------- --------
($ in thousands)
<S> <C> <C>
Convertible subordinated debentures due June 1, 1991 $1,034 $ 575
Convertible subordinated debentures due May 1, 1992 8,025 4,841
------ ------
$9,059 $5,416
====== ======
</TABLE>
The Company does not have funds available to make any payments of
either principal or interest on the above debentures.
15
<PAGE> 16
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) Form 8-K, with exhibits, related to the Company's sale of
substantial acreage, was filed May 28, 1998.
16
<PAGE> 17
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, 1998 /s/Laurence A. Schiffer
------------------------------ --------------------------------
Laurence A. Schiffer
President
17
<PAGE> 18
PGI INCORPORATED AND SUBSIDIARIES
<TABLE>
<CAPTION>
EXHIBIT INDEX
- -------------
<C> <S>
2. Inapplicable.
3.1 Articles of Incorporation of PGI, Inc. as amended
through December 22, 1997.
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
</TABLE>
18
<PAGE> 1
The undersigned, Laurence A. Schiffer, hereby certifies that
set forth below is a true, accurate, correct and complete copy of the Articles
of Incorporation of PGI Incorporated, as amended through December 22, 1997
(except for the Certificate of the Designation, Powers, Preferences and
Relative Rights and the Qualifications, Limitations or Restrictions thereof
which have not been set forth in the Articles of Incorporation as amended, of
the Class A Cumulative Preferred Stock, effective as of March 24, 1987 (filed
as Exhibit 3.2 to the Registrant's Form 10-K Annual Report for the year ended
December 31, 1986)), and that there have been no other amendments thereto
through the date hereof and that such Articles of Incorporation as amended
remain in full force and effect on and as of the date hereof.
/s/ Laurence A. Schiffer
------------------------------------------
Laurence A. Schiffer, Secretary,
PGI Incorporated
August 14, 1998
ARTICLES OF INCORPORATION
OF
PGI INCORPORATED
AS AMENDED THROUGH
DECEMBER 22, 1997
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> 2
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,
preferences 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;
-2-
<PAGE> 3
(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;
(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
(g) 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
-3-
<PAGE> 4
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.
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> 5
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.
-5-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,282,000
<SECURITIES> 0
<RECEIVABLES> 847,000
<ALLOWANCES> (706,000)
<INVENTORY> 890,000
<CURRENT-ASSETS> 0<F1>
<PP&E> 212,000
<DEPRECIATION> (200,000)
<TOTAL-ASSETS> 3,488,000
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 12,757,000
<COMMON> 532,000
0
2,000,000
<OTHER-SE> (23,417,000)
<TOTAL-LIABILITY-AND-EQUITY> 3,488,000
<SALES> 13,447,000
<TOTAL-REVENUES> 14,682,000
<CGS> 8,427,000
<TOTAL-COSTS> 8,437,000
<OTHER-EXPENSES> 229,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 596,000
<INCOME-PRETAX> 5,420,000
<INCOME-TAX> 104,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,316,000
<EPS-PRIMARY> .97
<EPS-DILUTED> .97
<FN>
<F1>
CURRENT ASSETS AND CURRENT LIABILITIES VALUES ARE ZERO
BECAUSE OF AN UNCLASSIFIED BALANCE SHEET.
</TABLE>
