-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H6JBP4qDJUOzbq1MhnnRswi/Dw4kgel+Zpkqozn/mMjsMUN4g7wE7GMBO81HIc8F F2yA87JIvCXcjh7kq3CJKQ== 0001068800-99-000352.txt : 19990816 0001068800-99-000352.hdr.sgml : 19990816 ACCESSION NUMBER: 0001068800-99-000352 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PGI INC CENTRAL INDEX KEY: 0000081157 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 590867335 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-06471 FILM NUMBER: 99687421 BUSINESS ADDRESS: STREET 1: 212 SOUTH CENTRAL STREET 2: SUITE 100 CITY: ST LOUIS STATE: MO ZIP: 63105 BUSINESS PHONE: 3145128650 MAIL ADDRESS: STREET 1: 212 SOUTH CENTRAL STREET 2: SUITE 100 CITY: ST LOUIS STATE: MO ZIP: 63105 FORMER COMPANY: FORMER CONFORMED NAME: PUNTA GORDA ISLES INC DATE OF NAME CHANGE: 19900403 10QSB 1 PGI INCORPORATED FORM 10-QSB 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 EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 ------------------------------------- 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 incorporation or organization) 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 August 13, 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 PGI INCORPORATED AND SUBSIDIARIES FORM 10 - QSB For the Quarter Ended June 30, 1999 Table of Contents -----------------
Form 10 - QSB Page No. -------------- PART I Financial Information Item 1 Financial Statements Consolidated Statements of Financial Position June 30, 1999 and December 31, 1998 3 Consolidated Statements of Operations Three and Six Months Ended June 30, 1999 and 1998 4 Condensed Consolidated Statements of Cash Flows Six Months Ended June 30, 1999 and 1998 5 Notes to Consolidated Financial Statements For Form 10 - QSB 6 - 11 Item 2 Mangement's Discussion and Analysis of Financial Condition and Results of Operations 12 - 16 PART II Other Information Item 1 Legal Proceedings 17 Item 2 Changes in Securities 17 Item 3 Defaults Upon Senior Securities 17 Item 4 Submission of Matters to a Vote of Security Holders 17 Item 5 Other Information 17 Item 6 Exhibits and Reports on Form 8 - K 17 SIGNATURES 18
2 PGI INCORPORATED AND SUBSIDIARIES Part I Financial Information Item 1 Financial Statements CONSOLIDATED STATEMENTS OF FINANCIAL POSITION ($ in thousands)
June 30, December 31, 1999 1998 ---- ---- ASSETS Cash and cash equivalents $ 12 $ 161 Restricted cash 1,828 1,903 Receivables on real estate sales - net 89 97 Other receivables 45 52 Land and improvement inventories 886 889 Property and equipment - net 1 1 Other assets 164 156 -------- -------- $ 3,025 $ 3,259 ======== ======== LIABILITES Accounts payable $ 51 $ 26 Other liabilities 1,169 1,218 Accrued interest: Primary lender 11 22 Debentures 10,501 9,715 Other 1,711 1,654 Credit agreements - Primary lender 1,000 1,000 Notes and mortgages payable 1,198 1,198 Convertible subordinated debentures payable 9,059 9,059 Convertible debentures payable 1,500 1,500 -------- -------- $ 26,200 $ 25,392 -------- -------- 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 (39,205) (38,163) -------- -------- (23,175) (22,133) -------- -------- $ 3,025 $ 3,259 ======== ======== See accompanying notes to consolidated financial statements for Form 10 - QSB.
3 PGI INCORPORATED AND SUBSIDIARIES PART I Financial Information (Continued) CONSOLIDATED STATEMENTS OF OPERATIONS ($ in thousands) (Unaudited)
Three Months Ended Six Months Ended ------------------ ---------------- June 30, June 30, June 30, June 30, 1999 1998 1999 1998 ---- ------ ------ ------ REVENUES Real estate sales - 13,447 - 13,447 Interest income 11 3 31 7 Other income 15 1,232 18 1,321 ---- ------ ------ ------ 26 14,682 49 14,775 ---- ------ ------ ------ COSTS AND EXPENSES Costs of real estate sales - 8,427 - 8,427 Selling expenses 4 10 5 15 General & administrative expenses 92 131 165 343 Interest 458 596 907 1,265 Other expenses 2 98 14 173 ---- ------ ------ ------ 556 9,262 1,091 10,223 ---- ------ ------ ------ NET INCOME (LOSS) BEFORE (530) 5,420 (1,042) 4,552 INCOME TAX PROVISION FOR INCOME TAX - 104 - 104 ---- ------ ------ ------ NET INCOME (LOSS) (530) 5,316 (1,042) 4,448 ==== ====== ====== ====== NET INCOME (LOSS) PER SHARE (.13) .97 (.26) .78 ==== ====== ====== ====== Primary and fully diluted Considers the effect of cumulative preferred dividends in arrears for the three and six months ended June 30, 1999 and 1998. See accompanying notes to consolidated financial statements for Form 10 - QSB.
4 PGI INCORPORATED AND SUBSIDIARIES PART I Financial Information (Continued) CONSOLIDATED STATEMENTS OF CASH FLOWS ($ in thousands) (Unaudited)
Six Months Ended ---------------- June 30, June 30, 1999 1998 ---- ---- Net cash provided by (used in) operating activities $(151) $ 7,764 ----- ------- Cash flows from financing activities: Proceeds from notes receivable 2 - Proceeds from borrowings - 31 Principal payments on debt - (7,538) ----- ------- Net cash provided by (used in) financing activities 2 (7,507) ----- ------- Net increase (decrease) in cash (149) 257 Cash at beginning of period 161 2 ----- ------- Cash at end of period $ 12 $ 259 ===== ======= See accompanying notes to consolidated financial statements for Form 10 - QSB.
5 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 10 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 six months ended June 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 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 6 PGI INCORPORATED AND SUBSIDIARIES share amounts for the six months ended June 30, 1999 and 1998. The average number of common shares outstanding for the six months ended June 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 six months ended June 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 six months ended June 30, 1999 and 1998:
Three Months Ended Six Months Ended ------------------ ---------------- June 30, June 30, June 30, June 30, 1999 1998 1999 1998 ---- ---- ---- ---- Net Income (Loss) (530,000) 5,316,000 (1,042,000) 4,448,000 Preferred Dividends (160,000) (160,000) (320,000) (320,000) -------- --------- ---------- --------- Income (Loss) Available to Common Shareholders (690,000) 5,156,000 (1,362,000) 4,128,000 ======== ========= ========== ========= Weighted Amount of Shares Outstanding 5,317,758 5,317,758 5,317,758 5,317,758 Basic and Diluted Loss Per Share (.13) .97 (.26) .78
7 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, 1999 and 1998 was $75,000 and $190,000 respectively. For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. (5) Restricted Cash Restricted cash included cash pledged to agencies in various states and local Florida governmental units related to land development and environmental matters, real estate taxes in litigation, collateral for primary lender debt, the servicing of sold receivables and, as a result of sales agreements and Company policies, customer payments and deposits related to homesite and housing contracts. (6) Receivables on Real Estate Sales Net receivables on real estate sales consisted of:
June 30, December 31, 1999 1998 ---- ---- ($ in thousands) Contracts receivable on homesite sales $ 624 $ 644 Other 84 84 ----- ----- 708 728 Less: Allowance for cancellations (619) (631) ----- ----- $ 89 $ 97 ===== =====
(7) Land and Improvements Land and improvement inventories consisted of:
June 30, December 31, 1999 1998 ---- ---- ($ in thousands) Unimproved land $ 613 $ 613 Fully improved land 273 276 ----- ----- $ 886 $ 889 ===== =====
8 PAGE> PGI INCORPORATED AND SUBSIDIARIES (8) Property and Equipment Property and equipment consisted of:
June 30, December 31, 1999 1998 ---- ---- ($ in thousands) Furniture, fixtures and other equipment $ 93 $ 93 Less: Accumulated depreciation (92) (92) ------- ------- $ 1 $ 1 ======= =======
(9) Other Assets Other assets consisted of:
June 30, December 31, 1999 1998 ---- ---- ($ in thousands) Deposit with Trustee of 6-1/2% debentures $ 141 $ 138 Other 23 18 ------- ------- $ 164 $ 156 ======= =======
(10) Other Liabilities Other liabilities consisted of:
June 30, December 31, 1999 1998 ---- ---- ($ in thousands) Accrued property taxes - current $ 15 $ 32 - delinquent 661 675 Other accrued expenses 316 328 Deposits, advances and escrows 171 174 Estimated recourse liability for receivables sold 6 9 ------- ------- $ 1,169 $ 1,218 ======= =======
9 PGI INCORPORATED AND SUBSIDIARIES (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:
June 30, December 31, 1999 1998 ---- ---- ($ in thousands) Credit agreements - primary lender: (maturing July 8, 1997, bearing interest at prime plus 5%): $ 1,000 $ 1,000 Notes and mortgages payable - $1,176,000 bearing interest at prime plus 2% 1,198 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 ------- ------- $12,757 $12,757 ======= =======
(12) Real Estate Sales and Other Income Real Estate Sales and Costs of Sales consisted of:
Three Months Ended Six Months Ended ------------------ ---------------- June 30, June 30, June 30, June 30, 1999 1998 1999 1998 ---- ---- ---- ---- ($ in thousands) ($ in thousands) Sales - Acreage in Bulk - $13,447 - $13,447 ====== ======= ====== ======= Cost of Sales-Acreage in Bulk - $ 8,427 - $ 8,427 ====== ======= ====== =======
10 PGI INCORPORATED AND SUBSIDIARIES (12) con't Other income consisted of:
Three Months Ended Six Months Ended ------------------ ---------------- June 30, June 30, June 30, June 30, 1999 1998 1999 1998 ---- ---- ---- ---- ($ in thousands) ($ in thousands) Commission income $ - $ 88 $ - $ 167 Reduction of previously accrued property taxes - 248 - 248 Debt release settlement - 870 - 870 Other income 15 26 18 36 ---- ------ ---- ------ $ 15 $1,232 $ 18 $1,321 ==== ====== ==== ======
(13) Commitments and Contingencies The aggregate outstanding balances of all receivables sold and exchanged with recourse totaled $37,000 and $48,000 at June 30, 1999 and December 31, 1998, respectively. Based on its collection experience with such receivables, the Company maintained allowances at June 30, 1999 and December 31, 1998, classified in other liabilities, of $6,000 and $9,000 respectively for the recourse provisions related to all receivables sold. (14) Income Taxes Effective January 1, 1993 the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes", which requires a change from the deferred method to the asset and liability method of accounting for income taxes. 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: Deferred tax asset: 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 ===========
11 PGI INCORPORATED AND SUBSIDIARIES Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Preliminary Note Readers should understand as they read this report that the Company is not presently pursuing its core business. 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., and 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 six months of 1999 decreased by $14,726,000 to $49,000 from $14,775,000 for the comparable 1998 period primarily due to the sale of approximately 4,890 acres in May of 1998. A net loss of $1,042,000 was incurred for the first six months of 1999 compared to net income of $4,448,000 for the first six months of 1998. Expenses for the six months decreased by $9,132,000 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 $320,000 for each of the six months ended June 30, 1999 and 1998 ($.10 per share of common stock), net income (loss) per share of $(.26) and $.78, respectively, were reported for the six month periods ended June 30, 1999 and 1998. 12 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 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 $1,000,000 was placed in escrow with PGIP as the escrow agent. Pursuant to the Escrow Agreement, the escrowed funds are to be paid out (i) as requested by PGI and agreed to by PGIP, or (ii) as deemed necessary and appropriate by PGIP, in either case, to protect PGIP's interest in the Retained Acreage (as hereinafter defined), including PGIP's right to receive principal and interest under the First Mortgage securing the Remaining indebtedness, or (iii) to PGIP to pay any other obligations owed to PGIP by the Company. The real estate owned by the Company which was not sold to the Purchaser (approximately 370 acres) (the "Retained Acreage") remains subject to the First Mortgage. Real Estate Sales and Cost of Sales consisted of:
Three Months Ended Six Months Ended ------------------ ---------------- June 30, June 30, June 30, June 30, 1999 1998 1999 1998 ---- ---- ---- ---- ($ in thousands) ($ in thousands) Sales - Acreage in Bulk - $13,447 - $13,447 ===== ======= ===== ======= Cost of Sales - Acreage in Bulk - $ 8,427 - $ 8,427 ===== ======= ===== =======
Other income consisted of:
Three Months Ended Six Months Ended ------------------ ---------------- June 30, June 30, June 30, June 30, 1999 1998 1999 1998 ---- ---- ---- ---- ($ in thousands) ($ in thousands) Commission income $ - $ 88 $ - $ 167 Reduction of previously accrued property taxes - 248 - 248 Debt release settlement - 870 - 870 Other income 15 26 18 36 ------ ------ ------ ------ $ 15 $1,232 $ 18 $1,321 ====== ====== ====== ======
13 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 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 Expressway, 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 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 used in operating activities for the six months ended June 30, 1999 was $151,000 compared to cash provided of $7,764,000 for the comparable 1998 period. During the first six months of 1999, financing activities provided $2,000 in cash flow from notes receivable proceeds. 14 PGI INCOPORATED AND SUBSIDIARIES Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Analysis of Financial Condition Assets totaled $3.0 million at June 30, 1999 compared to $3.3 million at December 31, 1998, reflecting the following changes:
June 30, December 31, Increase 1999 1998 (Decrease) ---- ---- ---------- ($ in thousands) Cash and cash equivalents $ 12 $ 161 $ (149) Restricted cash 1,828 1,903 (75) Receivables 134 149 (15) Land and improvement inventories 886 889 (3) Net property and equipment 1 1 - Other assets 164 156 8 ------ ------ ------ $3,025 $3,259 $ (234) ====== ====== ======
Liabilities were $26.2 million at June 30, 1999 compared to $25.4 million at December 31, 1998 reflecting the following changes among categories:
June 30, December 31, Increase 1999 1998 (Decrease) ---- ---- ---------- ($ in thousands) Accounts payable $ 51 $ 26 $ 25 Other liabilities 1,169 1,218 (49) Accrued interest 12,223 11,391 832 Credit agreements - primary lender 1,000 1,000 - Notes and mortgages payable 1,198 1,198 - Convertible subordinated debentures payable 9,059 9,059 - Convertible debentures payable 1,500 1,500 - ------- ------- ------ $26,200 $25,392 $ 808 ======= ======= ======
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. 15 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:
June 30, 1999 ------------- Principal Unpaid Amount Due Interest ---------- -------- ($ in thousands) Convertible subordinated debentures due June 1, 1991 $1,034 $ 647 Convertible subordinated debentures due May 1, 1992 8,025 5,566 ------ ------ $9,059 $6,213 ====== ======
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 and expects this exercise to be complete by August 31, 1999. The related party is not expected to charge PGI, Incorporated for the cost of the 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. 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. 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. A hearing will be held to settle recoverable costs and application of the decision to subsequent years taxes. There remains 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 19 herein for a list of exhibits filed under this Item. (c) No report on Form 8-K was filed during the quarter ended June 30, 1999. 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 13, 1999 /s/Laurence A. Schiffer ------------------ -------------------------------- Laurence A. Schiffer President 18 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 19 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1998 APR-01-1999 JUN-30-1999 1,840,000 0 753,000 (619,000) 886,000 0 93,000 (92,000) 3,025,000 0 12,757,000 532,000 0 2,000,000 (25,707,000) 3,025,000 0 26,000 0 4,000 94,000 0 458,000 (530,000) 0 0 0 0 0 (530,000) (.13) (.13) CURRENT ASSETS AND CURRENT LIABILITIES VALUES ARE ZERO BECAUSE OF AN UNCLASSIFIED BALANCE SHEET.
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