SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------- FORM 10-Q/A AMENDMENT NO. 4 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 Commission File Number: 1-8967 ATLANTIC GULF COMMUNITIES CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 59-0720444 - --------- ---------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 2601 South Bayshore Drive MIAMI, FLORIDA 33133-5461 - --------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number: (305) 859-4000 -------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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. [X] Yes [ ] No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. [X] Yes [ ] No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date. There are 11,509,077 shares of the Registrant's Common Stock outstanding as of August 12, 1997. TABLE OF CONTENTS ----------------- PAGE NO. ---- PART I. - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of June 30, 1997 and December 31, 1996 ................................... 1 Consolidated Statements of Operations for the Three and Six Months Ended June 30, 1997 and 1996 ......... 2 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1997 and 1996 ................. 3 Notes to Consolidated Financial Statements .......... 4 PART II. - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K .................... 7 PART I. - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS -------------------- ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets June 30, 1997 and December 31, 1996 (in thousands of dollars) June 30, December 31, 1997 1996 --------- ----------- ASSETS (unaudited) ------ Cash and cash equivalents $ 4,461 $ 7,050 Restricted cash and cash equivalents 3,971 6,034 Contracts receivable, net 7,979 9,649 Mortgages, notes and other receivables, net 48,018 63,800 Land and residential inventory 140,066 153,417 Property, plant and equipment, net 2,730 2,911 Other assets, net 25,704 20,532 --------- --------- Total assets $ 232,929 $ 263,393 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Accounts payable and accrued liabilities $ 11,408 $ 16,914 Customers' and other deposits 4,369 5,483 Other liabilities 12,378 15,393 Notes, mortgages and capital leases 137,140 169,215 --------- --------- 165,295 207,005 --------- --------- Cumulative Redeemable Convertible Preferred Stock Series A preferred stock 7,796 -- Series B preferred stock 9,055 -- --------- --------- 16,851 -- --------- --------- Stockholders' equity Common stock, $.10 par value; 70,000,000 and 15,665,000 shares authorized; 11,595,354 and 9,795,642 shares issued 1,160 980 Contributed capital 132,284 122,123 Accumulated deficit (76,652) (60,706) Minimum pension liability adjustment (6,000) (6,000) Treasury stock, 86,277 shares, at cost (9) (9) --------- --------- Total stockholders' equity 50,783 56,388 --------- --------- Total liabilities and stockholders' equity $ 232,929 $ 263,393 ========= ========= See accompanying notes to consolidated financial statements. 1 ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations Three and Six Months Ended June 30, 1997 and 1996 (in thousands, except per share data) (unaudited) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, --------------------- ------------------- Revenues: 1997 1996 1997 1996 -------- ------- -------- ------- Real estate sales: Homesite $ 9,532 $ 9,627 $ 12,082 $24,225 Tract 6,042 30,204 12,706 35,949 Residential 2,201 6,451 9,271 9,321 -------- ------- -------- ------- Total real estate sales 17,775 46,282 34,059 69,495 Other operating revenue 852 1,149 1,445 2,282 Interest income 1,745 1,789 3,117 3,130 -------- ------- -------- ------- Total revenues 20,372 49,220 38,621 74,907 -------- ------- -------- ------- Costs and expenses: Cost of real estate sales: Homesite 9,268 7,494 11,256 18,413 Tract 5,538 24,906 11,693 29,609 Residential 3,082 4,896 8,398 7,071 -------- ------- -------- ------- Total cost of real estate sales 17,888 37,296 31,347 55,093 Selling expense 1,889 3,272 4,018 5,824 Other operating expense 298 558 628 1,257 Other real estate costs 2,896 4,435 5,802 8,692 General and administrative expense 2,456 2,256 4,656 5,386 Depreciation 169 223 353 472 Cost of borrowing, net of amounts capitalized 4,699 3,098 8,734 6,386 Other expense 287 95 462 302 -------- ------- -------- ------- Total costs and expenses 30,582 51,233 56,000 83,412 -------- ------- -------- ------- Loss before non-recurring and extraordinary items (10,210) (2,013) (17,379) (8,505) -------- ------- -------- ------- Other income (expense) (non-recurring items): Reorganization reserves 1,365 -- 1,794 1,267 Utility condemnation -- -- -- 4,151 Miscellaneous 175 2,509 (361) 3,178 -------- ------- -------- ------- Total non-recurring items 1,540 2,509 1,433 8,596 -------- ------- -------- ------- Income (loss) before extraordinary item (8,670) 496 (15,946) 91 Extraordinary gain on extinguishment of debt -- -- -- 3,770 -------- ------- -------- ------- Net income (loss) $ (8,670) $ 496 $(15,946) $ 3,861 ======== ======= ======== ======= Net income (loss) before extraordinary item per common share $ (.88) $ .05 $ (1.63) $ .01 ======== ======= ======== ======= Net income (loss) per common share $ (.88) $ .05 $ (1.63) $ .40 ======== ======= ======== ======= Weighted average common shares outstanding 9,863 9,699 9,793 9,716 ======== ======= ======== ======= See accompanying notes to consolidated financial statements. 2 ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows Six Months Ended June 30, 1997 and 1996 (in thousands of dollars) (unaudited) SIX MONTHS ENDED JUNE 30, -------------------- 1997 1996 -------- -------- Cash flows from operating activities: Net income (loss) $(15,946) $ 3,861 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 2,998 2,605 Gain from utility condemnations or sales -- (5,684) Extraordinary gain from extinguishment of debt -- (3,770) Other income (1,337) (1,881) Reorganization items 179 (882) Land acquisitions (5,572) (7,903) Other net changes in assets and liabilities: Restricted cash 2,063 2,738 Receivables 4,798 10,002 Land and residential inventory 19,197 37,295 Other assets (8,668) (6,462) Accounts payable and accrued liabilities (5,252) (4,867) Customer deposits (1,114) (1,638) Other liabilities (483) (1,060) Other, net -- (261) -------- -------- Net cash provided by (used in) operating activities (9,137) 22,093 -------- -------- Cash flows from investing activities: Additions to property, plant and equipment, net (172) (167) Proceeds from sale of property, plant and equipment, net -- 773 Proceeds from utility condemnations or sales -- 25,690 Funds withdrawn from utility trust accounts 12,109 -- -------- -------- Net cash provided by investing activities 11,937 26,296 -------- -------- Cash flows from financing activities: Borrowings under credit agreements 66,699 25,448 Repayments under credit agreements (99,745) (66,081) Principal payments on other liabilities (1,218) (2,380) Proceeds from issuance of common stock 10,000 -- Proceeds from issuance of preferred stock 18,875 -- -------- -------- Net cash used in financing activities (5,389) (43,013) -------- -------- Increase (decrease) in cash and cash equivalents (2,589) 5,376 Cash and cash equivalents at beginning of period 7,050 3,560 -------- -------- Cash and cash equivalents at end of period $ 4,461 $ 8,936 ======== ======== Supplemental cash flow information: Interest payments, net of amounts capitalized $ 4,951 $ 3,827 ======== ======== Reorganization item payments $ 900 $ 2,861 ======== ======== See accompanying notes to consolidated financial statements. 3 ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 1997 (unaudited) (1) The June 30, 1997 financial statements are unaudited and subject to year-end adjustments. In management's opinion, the interim financial statements reflect all adjustments, principally consisting of normal recurring accruals, necessary for a fair presentation of the financial position and results of operations. Results for interim periods are not necessarily indicative of results for the full year. For a complete description of the Company's accounting policies, see "Notes to Consolidated Financial Statements" included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996 ("1996 Annual Report"). Certain prior year amounts have been reclassified to conform with the 1997 presentation. (2) The net income (loss) per common share is based on the weighted average number of shares of common stock outstanding during the periods. The effect of any outstanding warrants and options to purchase common stock on the per share computation was anti-dilutive or not material during the periods. (3) The Company capitalizes interest primarily on land inventory being developed for sale which is subsequently charged to income when the related asset is sold. Capitalized interest was $1,447,000 and $2,722,000 for the three and six-month periods ended June 30, 1997, respectively, and $1,369,000 and $3,261,000 for the three and six-month periods ended June 30, 1996, respectively. (4) Revenue from the sale of residential units other than Regency Island Dunes ("Regency") condominium units is recognized when the earnings process is complete. Revenue from the sale of Regency condominium units is recognized using the percentage-of-completion method. Earned revenue is based on the percentage of costs incurred to date to total estimated costs to be incurred. This percentage is then applied to the expected revenue associated with units that have been sold to date. Revenue from the sale of land is recognized when the cash received, as a percentage of the sales price, is at least 20% for land sales other than retail land sales and 10% for retail land sales, the earnings process is complete and the collection of any remaining receivable is reasonably assured. (5) Due to the necessity to establish reserves against future mandatory debt, and capital and operating expenditures, the Company did not have Available Cash, as defined in the Company's loan agreements, at June 30, 1997, to enable it to make any interest payments on the Cash Flow Notes for the six-month period commencing January 1, 1997 and ending June 30, 1997. In addition, the Company did not have any Available Cash enabling it to make any interest payments for the year ended December 31, 1996. Interest on the Cash Flow Notes is noncumulative. Therefore, the Company has not recorded interest expense associated with the Cash Flow Notes during the six months ended June 30, 1997 and 1996. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." (6) Pursuant to the Company's 1996 Non-Employee Directors' Stock Plan, the Company issued 12,355 shares of Atlantic Gulf's common stock to the Non-Employee Directors at a price of $4.3125 per share for the first quarter of 1997 and 11,158 shares at a price of $5.50 per share for the second quarter of 1997. 4 ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 1997 (unaudited) (7) The Company and AP-AGC, LLC a Delaware limited liability company ("Apollo"), entered into an Amended and Restated Investment Agreement dated as of February 7, 1997, amended as of March 20, 1997, and amended and restated as of May 15, 1997 (the "Investment Agreement"). In addition, the Company, certain of its subsidiaries and Apollo entered into a Secured Agreement dated as of February 7, 1997, and amended and restated as of May 15, 1997 (the "Secured Agreement" and, together with the Investment Agreement, the "Agreements"). Apollo is an affiliate of Apollo Real Estate Investment Fund II, L.P. ("Apollo Fund II"), a private real estate investment fund, the general partner of which is Apollo Real Estate Advisors II, L.P., a New York-based investment fund. Pursuant to the Agreements, Apollo agreed to purchase from the Company up to 2,500,000 shares of 20% Series A Cumulative Redeemable Convertible Preferred Stock (the "Series A Preferred Stock") at a per share price of $9.88, and 5,000,000 warrants to purchase up to 5,000,000 shares of Common Stock (the "Investor Warrants"), at a per warrant price of $.06, for an aggregate purchase price of up to $25 million (the "Apollo Transaction"). See Part II. Item 2. CHANGES IN SECURITIES. On June 24, 1997, pursuant to the Agreements, Apollo purchased 553,475 shares of Series A Preferred Stock and Investor Warrants to purchase an additional 1,106,950 shares of Common Stock, for an aggregate purchase price of $5,534,752. Also on June 24, 1997, the Company and certain purchasers (the "Private Purchasers") consummated a private placement pursuant to which the Private Purchasers purchased for an aggregate price of $20 million; (a) 1,776,199 shares of Common Stock for $10 million, and (b) 1,000,000 shares of 20% Series B Cumulative Redeemable Convertible Preferred Stock (the "Series B Preferred Stock"), at a per share price of $9.88, and 2,000,000 Series B Warrants to purchase 2,000,000 shares of Common Stock at a per warrant price of $.06 for an aggregate purchase price of $10 million. The Series B Preferred Stock balance at June 30, 1997 is the total aggregate purchase price of $10 million net of corresponding Series B Warrants purchased - $0.120 million and net of Series B issuance costs - $0.825 million for a net Series B Preferred Stock balance of $9.055 million. The Series A Preferred Stock, Investor Warrants, Series B Preferred Stock and Series B Warrants are convertible or exercisable into Common Stock, at $5.75 per share, subject to certain adjustments. Of the total proceeds of approximately $25.5 million from the above-mentioned transactions, $13.3 million were used to reduce the amount outstanding under the Term Loan and $7.9 million were used to reduce the amount outstanding under the Reducing Revolving Loan. On June 30, 1997, pursuant to the Agreements, Apollo purchased, for an aggregate purchase price of $3,340,000, an additional 334,000 shares of Series A Preferred Stock and Investor Warrants to purchase an additional 668,000 shares of Common Stock. The Company used approximately $3.0 million of these proceeds plus an acquisition loan of $2.6 million to acquire a 2.9-acre parcel in the 5 ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 1997 (unaudited) downtown business district of Fort Lauderdale, Florida upon which the Company plans to construct a high-rise luxury apartment complex to be called Las Olas Tower. The Series A Preferred Stock balance at June 30, 1997 is the total aggregate purchase price of Series A Preferred Stock issued to Apollo as of that date - $8.875 million, net of corresponding Investor Warrants purchased - $.106 million and net of Series A issuance costs - $.973 million for a net Series A Preferred Stock balance of $7.796 million. On July 31, 1997, pursuant to the Agreements, Apollo purchased, for an aggregate purchase price of $8.5 million, an additional 850,000 shares of Series A Preferred Stock and Investor Warrants to purchase an additional 1,700,000 shares of Common Stock. On July 31, 1997, approximately $7.5 million of these proceeds were used to acquire approximately 600 acres in Frisco, Texas which is near Dallas, Texas. This property is anticipated to yield approximately 1,725 single family units. On August 7, 1997, pursuant to the Agreements, Apollo purchased, for an aggregate purchase price of $2,590,000, an additional 259,000 shares of Series A Preferred Stock and Investor Warrants to purchase an additional 518,000 shares of Common Stock. On August 7, 1997, the Company utilized approximately $2.5 million of these proceeds plus a purchase money mortgage of $8.0 million to acquire approximately 515 acres of residential property in the Fort Myers, Florida area in a project known as West Bay Club. Subsequent to this acquisition, the Company owns a total of approximately 841 acres in West Bay Club and is planning to assemble a total of 879 acres in this project which is anticipated to yield approximately 545 single family homes and 520 high-rise condominium units. The holders of the Series A Preferred Stock and the Series B Preferred Stock are entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available therefore, cash dividends on each share of preferred stock at an annual rate equal to 20% of the Liquidation Preference in effect from time to time. All dividends are cumulative, whether or not declared, on a daily basis from the date on which the preferred stock is originally issued by the Company, and will be payable quarterly in arrears on March 31, June 30, September 30, and December 31 of each year commencing on September 30, 1997. As of June 30, 1997, the Series A Preferred Stock Liquidation Preference was $8.875 million and the corresponding undeclared but accumulated and unpaid dividends were $0.023 million. As of June 30, 1997, the Series B Preferred Stock Liquidation Preference was $10 million and the corresponding undeclared but accumulated and unpaid dividends were $0.038 million. The total undeclared but accumulated dividends as of June 30, 1997 did not materially affect the net income (loss) per common share. Following an Event of Default (as defined in the respective Statement of Designation with respect to the Series A Preferred Stock or the Series B Preferred Stock, dividends accumulate at an annual rate equal to 23% of the Liquidation Preference. 6 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------ -------------------------------- (a) Exhibits required by Item 601 of Regulation S-K 10 *(a) Form of Mortgage and Security Agreement, as of June 23, 1997, to the Bank of New York. *(b) Form of Personal Property Security Agreement, as of June 23, 1997, in favor of The Bank of New York. *(c) Form of Stock Pledge Agreement, as of June 23, 1997, in favor of The Bank of New York. *(d) Form of Junior Mortgage and Security Agreement, as of June 23, 1997, to Foothill Capital Corporation. *(e) Form of Junior Personal Property Security Agreement, as of June 23, 1997, in favor of Foothill Capital Corporation. *f) Form of Junior Stock Pledge Agreement, as of June 23, 1997, in favor of Foothill Capital Corporation. 27 Financial Data Schedule. - ---------------- * previously filed (b) Reports on Form 8-K The Company filed a report on Form 8-K on June 5, 1997, pursuant to Item 5, Other Events, reporting that the Company and Apollo entered into an Amended and Restated Investment Agreement dated as of February 7, 1997, amended as of March 20, 1997, and amended and restated as of May 15, 1997. 7 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to be signed on its behalf by the undersigned thereunto duly authorized. ATLANTIC GULF COMMUNITIES CORPORATION Date: October 16, 1997 /s/ J. LARRY RUTHERFORD ---------------------------------- J. Larry Rutherford Chairman of the Board, President, and Chief Executive Officer Date: October 16, 1997 /s/ CALLIS N. CARLETON ---------------------------------- Callis N. Carleton Vice President and Controller (Principal Accounting Officer) 8 EXHIBIT INDEX EXHIBIT DESCRIPTION ------- ----------- 10 *(a) Form of Mortgage and Security Agreement, as of June 23, 1997, to the Bank of New York. *(b) Form of Personal Property Security Agreement, as of June 23, 1997, in favor of The Bank of New York. *(c) Form of Stock Pledge Agreement, as of June 23, 1997, in favor of The Bank of New York. *(d) Form of Junior Mortgage and Security Agreement, as of June 23, 1997, to Foothill Capital Corporation. *(e) Form of Junior Personal Property Security Agreement, as of June 23, 1997, in favor of Foothill Capital Corporation. *(f) Form of Junior Stock Pledge Agreement, as of June 23, 1997, in favor of Foothill Capital Corporation. 27 Financial Data Schedule. - -------------- * previously filed