<PAGE>
PAGE>
PGI INCORPORATED AND SUBSIDIARIES
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 AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
--------------------------
/ / 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 (I.R.S. Employer
of incorporation Identification No.)
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 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 12, 1999 there were 5,317,758 shares of the Registrant's common
stock outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes No X
----- -----
1
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<PAGE>
PGI INCORPORATED AND SUBSIDIARIES
<TABLE>
Form 10 - QSB
For the Quarter Ended September 30, 1999
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, 1999 and December 31, 1998 3
Consolidated Statements of Operations
Three and Nine Months Ended September 30, 1999
and 1998 4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1999 and 1998 5
Notes to Consolidated Financial Statements for
Form 10 - QSB 6 - 12
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 13 - 18
PART II Other Information
Item 1 Legal Proceedings 19
Item 2 Changes in Securities 19
Item 3 Defaults Upon Senior Securities 19
Item 4 Submission of Matters to a Vote of Security Holders 19
Item 5 Other Information 19
Item 6 Exhibits and Reports on Form 8 - K 19
SIGNATURES 20
</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>
September 30, December 31,
1999 1998
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 3 $ 161
Restricted cash 1,516 1,903
Receivables on real estate sales - net 86 97
Other receivables 44 52
Land and improvement inventories 886 889
Property and equipment - net - 1
Other assets 163 156
-------- --------
$ 2,698 $ 3,259
======== ========
LIABILITIES
Accounts payable $ 51 $ 26
Other liabilities 1,193 1,218
Accrued interest:
Primary lender 21 22
Debentures 10,907 9,715
Other 1,741 1,654
Credit agreements -
Primary lender 700 1,000
Notes and mortgages payable 1,213 1,198
Convertible subordinated
debentures payable 9,059 9,059
Convertible debentures payable 1,500 1,500
-------- --------
Commitments and contingencies $ 26,385 $ 25,392
======== ========
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 (39,717) (38,163)
-------- --------
(23,687) (22,133)
-------- --------
$ 2,698 $ 3,259
======== ========
See accompanying notes to consolidate financial statements for Form 10 - QSB.
</TABLE>
3
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<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,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Real estate sales 27 28 27 13,475
Interest income 14 2 45 9
Other income 1 140 19 1,461
---- ---- ------ ------
42 170 91 14,945
---- ---- ------ ------
COSTS AND EXPENSES
Cost of real estate sales 3 5 3 8,432
Selling expenses 2 5 7 20
General & administrative expenses 77 52 242 395
Interest 469 438 1,376 1,703
Other expenses 3 82 17 255
---- ---- ------ ------
554 582 1,645 10,805
---- ---- ------ ------
NET INCOME (LOSS) BEFORE
INCOME TAX (512) (412) (1,554) 4,140
CREDIT FOR INCOME TAX - 104 - -
---- ---- ------ ------
NET INCOME (LOSS) (512) (308) (1,554) 4,140
==== ==== ====== ======
NET INCOME (LOSS) PER SHARE<F*>
Primary and fully diluted (.13) (.09) (.38) .69
==== ==== ====== ======
<FN>
<F*> Considers the effect of cumulative preferred dividends in arrears
for the three and nine months ended September 30, 1999 and 1998.
See accompanying notes to consolidated financial statements for Form 10 - QSB
</TABLE>
4
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<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,
1999 1998
---- ----
<S> <C> <C>
Net cash provided by (used in) operating activities $ (176) $ 7,686
----- ------
Cash flows from investing activities:
Proceeds from release of restricted cash 300 -
----- ------
Net cash provided by investing activities 300 -
----- ------
Cash flows from financing activities:
Proceeds from notes receivable 3 -
Proceeds from borrowings 15 31
Principal payments on debt (300) (7,538)
----- ------
Net cash (used in) financing activities (282) (7,507)
----- ------
Net increase (decrease) in cash (158) 179
Cash at beginning of period 161 2
----- ------
Cash at end of period $ 3 $ 181
===== ======
See accompanying notes to consolidated financial statements for Form 10 - QSB
</TABLE>
5
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<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, 1998.
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 9 and 20 to the Company's
consolidated financial statements for the year ended December 31,
1998, 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, 1999 are not necessarily
indicative of operations to be expected for the fiscal year ending
December 31, 1999 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
6
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PGI INCORPORATED AND SUBSIDIARIES
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, 1999 and
1998. The average number of common shares outstanding for the
nine months ended September 30, 1999 and 1998 was 5,317,758.
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, 1999 and
1998, 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, 1999 and 1998.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income (Loss) (512,000) (308,000) (1,554,000) 4,140,000
Preferred Dividends (160,000) (160,000) (480,000) (480,000)
--------- --------- ---------- ---------
Income (Loss) Available to
Common Shareholders (672,000) (468,000) (2,034,000) 3,660,000
========= ========= ========== =========
Weighted Amount of Shares
Outstanding 5,317,758 5,317,758 5,317,758 5,317,758
Basic and Diluted Loss Per
Share (.13) (.09) (.38) .69
</TABLE>
7
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<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, 1999 and 1998 was $97,000 and $231,000
respectively.
For purposes of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of
three months or less to be cash equivalents.
(5) Restricted Cash
Restricted cash included cash pledged to agencies in various
states and local Florida governmental units related to land
development and environmental matters, real estate taxes in
litigation, collateral for primary lender debt, the servicing of
sold receivables and, as a result of sales agreements and Company
policies, customer payments and deposits related to homesite and
housing contracts.
(6) Receivables on Real Estate Sales
Net receivables on real estate sales consisted of:
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1999 1998
---- ----
($ in thousands)
<S> <C> <C>
Contracts receivable on homesite sales $ 619 $ 644
Other 82 84
----- -----
701 728
Less: Allowance for cancellations (615) (631)
----- -----
$ 86 $ 97
===== =====
</TABLE>
8
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PGI INCORPORATED AND SUBSIDIARIES
(7) Land and Improvements
Land and improvement inventories consisted of:
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1999 1998
---- ----
($ in thousands)
<S> <C> <C>
Unimproved land $ 613 $ 613
Fully improved land 273 276
----- -----
$ 886 $ 889
===== =====
</TABLE>
(8) Property and Equipment
Property and equipment consisted of:
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1999 1998
---- ----
($ in thousands)
<S> <C> <C>
Furniture, fixtures and other equipment $ 93 $ 93
Less: Accumulated depreciation (93) (92)
---- ----
$ - $ 1
==== ====
</TABLE>
(9) Other Assets
Other assets consisted of:
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1999 1998
---- ----
($ in thousands)
<S> <C> <C>
Deposit with Trustee of 6-1/2% debentures $ 142 $ 138
Other 21 18
----- -----
$ 163 $ 156
===== =====
</TABLE>
9
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PGI INCORPORATED AND SUBSIDIARIES
(10) Other Liabilities
Other liabilities consisted of:
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1999 1998
---- ----
($ in thousands)
<S> <C> <C>
Accrued property taxes
- current $ 23 $ 32
- delinquent 663 675
Other accrued expenses 326 328
Deposits, advances and escrows 171 174
Estimated recourse liability for
receivables sold 10 9
------- -------
$ 1,193 $ 1,218
======= =======
</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,
1999 1998
---- ----
($ in thousands)
<S> <C> <C>
Credit agreements - primary lender:
(maturing July 8, 1997, bearing interest
at prime plus 5%) $ 700 $ 1,000
Notes and mortgages payable - $1,176,000
bearing interest at prime plus 2% 1,213 1,198
-------- --------
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
-------- --------
$ 12,472 $ 12,757
======== ========
</TABLE>
10
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PGI INCORPORATED AND SUBSIDIARIES
(12) Real Estate Sales and Other Income
Real Estate Sales and Costs of Sales consisted of:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 1998 1999 1998
---- ---- ---- ----
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Sales - Acreage in Bulk - - - $13,447
Homesite Sales 27 28 27 28
------ ------ ------ -------
27 28 27 $13,475
====== ====== ====== =======
Cost of Sales - Acreage in Bulk - - - $ 8,427
Homesite Sales 3 5 3 5
------ ------ ------ -------
3 5 3 $ 8,432
====== ====== ====== =======
</TABLE>
Other income consisted of:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 1998 1999 1998
---- ---- ---- ----
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Commission income $ - $ 80 $ - $ 247
Reduction of previously
accrued property taxes - - - 248
Debt release settlement - - - 870
Other income 1 60 19 96
------ ------ ------ ------
$ 1 $ 140 $ 19 $1,461
====== ====== ====== ======
</TABLE>
(13) Commitments and Contingencies
The aggregate outstanding balances of all receivables sold and
exchanged with recourse totaled $33,000 and $48,000 at September
30, 1999 and December 31, 1998, respectively. Based on its
collection experience and such receivables, the Company maintained
allowances at September 30, 1999 and December 31, 1998, classified
in other liabilities, of $10,000 and $9,000 respectively for the
recourse provisions related to all receivables sold.
11
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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, 1998, 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
2012.
The following summarizes the temporary differences of the Company
at December 31, 1998 at the current statutory rate:
<TABLE>
<S> <C>
Deferred tax
Net operating loss carryforward $ 12,580,000
Adjustments to reduce land to net realizable value 12,000
Expenses capitalized under IRC 263(a) 56,000
ITC carryforward 215,000
Valuation allowance (12,691,000)
------------
172,000
Deferred tax liability
Basis difference of land and improvement inventories 172,000
------------
Net deferred tax asset $ 0
============
</TABLE>
12
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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 that
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 its continuing financial difficulties due to the
principal and interest owed on its debt and management's 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 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 1999 decreased by
$14,854,000 to $91,000 from $14,945,000 for the comparable 1998 period
primarily due to the sale of approximately 4,890 acres in May of 1998.
A net loss of $1,554,000 was incurred for the first nine months of 1999
compared to net income of $4,140,000 for the first nine months of 1998.
Expenses for the nine months decreased by $9,160,000 as a result of
substantially less outstanding debt in 1999 than in 1998 because of the
bulk acreage sale and pay down of debts. After consideration of
cumulative preferred dividends in arrears, totaling $480,000 for each of
the
13
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PGI INCORPORATED AND SUBSIDIARIES
nine months ended September 30, 1999 and 1998 ($.15 per share of common
stock), net income (loss) per shared of $(.38) and $.69 respectively,
were reported for the nine month periods ended September 30, 1999 and
1998.
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 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.
On September 22, 1999, $300,000 of the restricted cash escrow was
released and used to repay First Mortgage Indebtedness.
Real Estate Sales and Cost of Sales consisted of:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 1998 1999 1998
---- ---- ---- ----
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Sales - Acreage in Bulk - - - $13,447
Homesite Sales 27 28 27 28
-- -- -- -------
27 28 27 $13,475
== == == =======
Cost of Sales - Acreage in Bulk - - - $ 8,427
Homesite Sales 3 5 3 5
-- -- -- -------
3 5 3 $ 8,432
== == == =======
</TABLE>
14
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PGI INCORPORATED AND SUBSIDIARIES
Other income consisted of:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 1998 1999 1998
---- ---- ---- ----
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Commission income $ - $ 80 $ - $ 247
Reduction of previously
accrued property taxes - - - 248
Debt release settlement - - - 870
Other income 1 60 19 96
--- ---- --- ------
$ 1 $140 $19 $1,461
=== ==== === ======
</TABLE>
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 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 remaining acreage of the Company mainly consists of 370 acres
located in Hernando County, Florida. The Company believes that the
Retained Acreage may in the future prove to be of greater value than the
property sold because the Retained Acreage's ratio of acreage to
frontage on the proposed Suncoast Expressway is greater than the sold
property's ratio and because of the proximity of the Retained Acreage to
the proposed Suncoast Expressway and the planned interchange between the
Suncoast Expressway and Highway 98. The Company acknowledges that the
completion of the highway improvements could reasonably be expected to
increase materially the value of the Property. The Company fully
recognizes, however, that completion of the Suncoast Highway, if it ever
occurs, is still more than five years away, and that any information or
projections of enhanced values are purely speculative.
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 1 - Note 2 - Recognition of Real Estate
15
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<PAGE>
PGI INCORPORATED AND SUBSIDIARIES
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 used in operating activities for the nine months ended
September 30, 1999 was $176,000 compared to cash provided of $7,686,000
for the comparable 1998 period. During the first nine months of
1999, investing activities provided $300,000 in proceeds from release of
restricted cash. Financing activities used $282,000 in cash flow with
$3,000 in cash flow from notes receivable proceeds and $15,000 in
proceeds from borrowings. Cash used in financing activities in the
amount of $300,000 was for primary lender debt repayment.
16
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<PAGE>
PGI INCORPORATED AND SUBSIDIARIES
Analysis of Financial Condition
Assets totaled $2.7 million at September 30, 1999 compared to $3.3
million at December 31, 1998, reflecting the following changes:
<TABLE>
<CAPTION>
Sept. 30, Dec. 31, Increase
1999 1998 (Decrease)
---- ---- ----------
($ in thousands)
<S> <C> <C> <C>
Cash and cash equivalents $ 3 $ 161 $(158)
Restricted cash 1,516 1,903 (387)
Receivables 130 149 (19)
Land and improvement inventories 886 889 (3)
Net property and equipment - 1 (1)
Other assets 163 156 7
------ ------ -----
$2,698 $3,259 $(561)
====== ====== =====
</TABLE>
Liabilities were $26.4 million at September 30, 1999 compared to
$25.4 million at December 31, 1998 reflecting the following changes
among categories:
<TABLE>
<CAPTION>
Sept. 30, Dec. 31, Increase
1999 1998 (Decrease)
---- ---- ----------
($ in thousands)
<S> <C> <C> <C>
Accounts payable $ 51 $ 26 $ 25
Other liabilities 1,193 1,218 (25)
Accrued Interest 12,669 11,391 1,278
Credit agreements - primary lender 700 1,000 (300)
Notes and mortgages payable 1,213 1,198 15
Convertible subordinated
debentures payable 9,059 9,059 -
Convertible debentures payable 1,500 1,500 -
------- ------- ------
$26,385 $25,392 $ 993
======= ======= ======
</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.
17
<PAGE>
<PAGE>
PGI INCORPORATED AND SUBSIDIARIES
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
The Company remains in default of the entire principal plus
interest on its convertible subordinated debentures. The amounts due
are as indicated in the following table:
<TABLE>
<CAPTION>
September 30, 1999
------------------
Principal Unpaid
Amount Due Interest
---------- --------
($ in thousands)
<S> <C> <C>
Convertible subordinated debentures due
June 1, 1991 $1,034 $ 665
Convertible subordinated debentures due
May 1, 1992 8,025 5,751
------ ------
$9,059 $6,416
====== ======
</TABLE>
The Company does not have funds available to make any payments of
either principal or interest on the above debentures.
Year 2000 Issues
- ----------------
The year 2000 issue is determined to have an immaterial effect on
the Company. As of January 1, 1999, the Company has begun maintaining
the financial records on different software, which is also used by a
related party. The related party is responsible for testing and
modifying the software for the year 2000 processing. This exercise was
98% complete as of September 30, 1999. The related party is not
expected to charge PGI, Incorporated for the cost of conversion or
modifications. As a result, any changes required, as part of any year
2000 conversions made to the financial records will have a minimal
effect on the business, results of operations and financial condition.
The Company has no material third party relationships with vendors
which would require year 2000 modifications, does not own or operate any
building, and had no other major information technology system with
imbedded technology.
18
<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. On April 1, 1999, the Supreme Court of Florida issued their
opinion in favor of Sugarmill Woods, Inc. A motion has been filed to
recover permissible expenses incurred in litigating the case. On
November 9, 1999 the Circuit Court of Citrus County adjudged the
agricultural classification applicable to tax years 1994, 1995, and
1996. Tax year 1997 remains in dispute on a matter of timely filing of
petition for exemption. There is a restricted escrow of $557,000 for
payment of the taxes.
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 21 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, 1999.
19
<PAGE>
<PAGE>
PGI INCORPORATED AND SUBSIDIARIES
In accordance with the requirements 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 15, 1999 /s/ Laurence A Schiffer
------------------- --------------------------
Laurence A. Schiffer
President
20
<PAGE>
<PAGE>
PGI INCORPORATED AND SUBSIDIARIES
EXHIBIT INDEX
- -------------
2. Inapplicable.
3. 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.
21
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,519,000
<SECURITIES> 0
<RECEIVABLES> 745,000
<ALLOWANCES> (615,000)
<INVENTORY> 886,000
<CURRENT-ASSETS> 0<F1>
<PP&E> 93,000
<DEPRECIATION> (93,000)
<TOTAL-ASSETS> 2,698,000
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 12,472,000
<COMMON> 532,000
0
2,000,000
<OTHER-SE> (26,219,000)
<TOTAL-LIABILITY-AND-EQUITY> 2,698,000
<SALES> 27,000
<TOTAL-REVENUES> 42,000
<CGS> 3,000
<TOTAL-COSTS> 2,000
<OTHER-EXPENSES> 80,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 469,000
<INCOME-PRETAX> (512,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (512,000)
<EPS-BASIC> (.13)
<EPS-DILUTED> (.13)
<FN>
<F1> CURRENT ASSETS AND CURRENT LIABILITIES VALUES
ARE ZERO BECAUSE OF AN UNCLASSIFIED BALANCE SHEET.
</TABLE>
