<PAGE>
<PAGE> 1
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
__________________________________________________
[X] Quarterly report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1996
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 0-7616
I.R.S. Employer Identification Number 23-1739078
Avatar Holdings Inc.
(a Delaware Corporation)
255 Alhambra Circle
Coral Gables, Florida 33134
(305) 442-7000
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. Yes X No .
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
9,095,102 shares of the Company's common stock ($1.00 par value)
were outstanding as of October 31, 1996.
1 of 17<PAGE>
<PAGE> 2
AVATAR HOLDINGS INC. AND SUBSIDIARIES
INDEX
-----
PAGE
PART I. Financial Information ----
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets --
September 30, 1996 and December 31, 1995............... 3
Consolidated Statements of Operations --
Nine months and three months ended
September 30, 1996 and 1995........................... 4
Consolidated Statements of Cash Flows --
Nine months ended September 30, 1996 and 1995........... 5
Notes to Consolidated Financial Statements............... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations....................................... 12
PART II. Other Information
Item 1. Legal Proceedings.............................. 15
Item 6. Exhibits and Reports on Form 8-K............... 15
Exhibit Index............................................. 16
2<PAGE>
<PAGE> 3
PART I -- FINANCIAL INFORMATION
-----------------------------------
ITEM 1. FINANCIAL STATEMENTS
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- -------------
<S>
Assets <C> <C>
------
Cash $6,954 $2,467
Restricted cash 893 4,048
Investments - trading 4,365 48,258
Contracts, mortgage notes and other receivables, net 60,142 64,515
Land and other inventories 164,062 149,270
Property, plant and equipment, net 186,609 182,844
Other assets 15,770 15,209
Regulatory assets 3,763 4,021
---------- ----------
Total Assets $442,558 $470,632
========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Liabilities
-----------
Notes, mortgage notes and other debt:
Real estate and corporate $82,510 $104,897
Development and construction loans 28,864 24,535
Utilities 41,782 43,164
Estimated development liability for sold land 7,880 13,033
Accounts payable 7,777 9,306
Accrued and other liabilities 31,578 32,886
Deferred customer betterment fees 18,676 18,997
Minority interest in consolidated subsidiaries 9,060 9,060
---------- ----------
Total Liabilities 228,127 255,878
Commitments and contingent liabilities
Contributions in aid of construction 57,359 56,342
Stockholders' Equity
--------------------
Common Stock, par value $1 per share
Authorized: 15,500,000 shares
Issued: 12,715,448 shares 12,715 12,715
Additional paid-in capital 207,271 207,271
(Deficit) retained earnings (941) 399
---------- ----------
219,045 220,385
Treasury stock, at cost, 3,620,346 shares 61,973 61,973
---------- ----------
Total Stockholders' Equity 157,072 158,412
---------- ----------
Total Liabilities and Stockholders' Equity $442,558 $470,632
========== ==========
</TABLE>
See notes to consolidated financial statements.
3<PAGE>
<PAGE> 4
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Nine Months and Three months Ended September 30, 1996 and 1995
(Unaudited)
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Nine Months Three Months
------------------ ------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues
- --------
Real estate sales $68,197 $38,388 $24,054 $13,940
Deferred gross profit 1,587 (901) 1,210 (357)
Utility revenues 24,245 22,630 7,810 7,115
Interest income 6,667 7,181 2,181 2,285
Trading account profit, net 2,047 8,073 450 1,852
Other 763 471 293 161
---------- --------- --------- ---------
Total revenues 103,506 75,842 35,998 24,996
Expenses
- --------
Real estate expenses 69,725 46,907 24,920 16,659
Utility expenses 19,022 18,187 6,202 5,946
General and administrative
expenses 6,660 7,021 1,976 2,587
Interest expense 8,828 8,561 3,054 3,066
Other 611 610 203 202
---------- --------- --------- ---------
Total expenses 104,846 81,286 36,355 28,460
---------- --------- --------- ---------
Loss before income taxes (1,340) (5,444) (357) (3,464)
Provision for income taxes - - - -
---------- --------- ---------- ----------
Net loss ($1,340) ($5,444) ($357) ($3,464)
========== ========= ========== ==========
Per share amounts:
Net loss ($.15) ($.60) ($.04) ($.38)
========== ========= ========== ==========
</TABLE>
See notes to consolidated financial statements.
4<PAGE>
<PAGE> 5
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
For the nine months ended
September 30,
---------------------------
1996 1995
--------- --------
<S> <C> <C>
OPERATING ACTIVITIES
- --------------------
Net loss ($1,340) ($5,444)
Adjustments to reconcile net loss to
net cash provided by (used in) operating
activities:
Depreciation and amortization 7,491 7,737
Deferred gross profit (1,587) 901
Cost of sales not requiring cash 5,480 2,506
Trading account profit, net (2,047) (8,073)
Changes in operating assets and liabilities:
Restricted cash 3,155 (2,084)
Investments - trading 45,554 9,000
Principal payments on contracts receivable 13,834 14,859
Receivables (7,832) (9,258)
Other receivables (42) 217
Inventories (25,425) (20,373)
Other assets (561) (732)
Accounts payable and accrued and other
liabilities (2,514) 3,227
---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 34,166 (7,517)
INVESTING ACTIVITIES
- --------------------
Investment in property, plant and equipment (10,239) (13,109)
--------- ----------
NET CASH USED IN INVESTING ACTIVITIES (10,239) (13,109)
FINANCING ACTIVITIES
- --------------------
Net proceeds from revolving lines of credit and
long-term borrowings 63,537 38,103
Principal payments on revolving lines of credit and
long-term borrowings (82,977) (17,147)
---------- ----------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (19,440) 20,956
--------- ----------
INCREASE IN CASH 4,487 330
Cash at beginning of period 2,467 4,560
-------- ---------
CASH AT END OF PERIOD $6,954 $4,890
======== =========
</TABLE>
5<PAGE>
<PAGE> 6
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows -- continued
(Unaudited)
(Dollars in thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
--------------------------------------------------
<TABLE>
<CAPTION>
For the nine months ended
September 30,
---------------------------
Cash paid during the period for: 1996 1995
--------- ----------
<S> <C> <C>
Interest (net of amount capitalized of
$2,850 and $1,825 in 1996 and 1995,
respectively) $5,056 $6,320
========== ==========
Income taxes $ - $ -
========== ==========
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
------------------------------------------------------
1996 1995
---------- ----------
Contributions in aid of construction $3,085 $1,688
========== ==========
</TABLE>
See notes to consolidated financial statements.
6<PAGE>
<PAGE> 7
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands)
Basis of Statement Presentation and Summary of Significant
----------------------------------------------------------
Accounting Policies
-------------------
The consolidated balance sheets as of September 30, 1996 and
December 31, 1995, and the related consolidated statements of
operations for the nine month and three month periods ended
September 30, 1996 and 1995 and the consolidated statements of
cash flows for the nine month periods ended September 30, 1996
and 1995 have been prepared in accordance with generally accepted
accounting principles for interim financial information, the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statement presentation. In the opinion of
management, all adjustments necessary for a fair presentation of
such financial statements have been included. Such adjustments
consisted only of normal recurring items. Interim results are not
necessarily indicative of results for a full year.
For a complete description of the Company's other accounting
policies, refer to Avatar Holdings Inc.'s 1995 Annual Report on
Form 10-K and the notes to Avatar's consolidated financial
statements included therein.
Reclassifications
-----------------
Certain amounts presented for 1995 have been reclassified in
the financial statements for comparative purposes.
Net Loss Per Common Share
-------------------------
For the nine and three months ended September 30, 1996 and
1995, net loss per common share is computed on the basis of
the weighted average number of shares outstanding of
9,095,102.
Restricted Cash
---------------
Restricted cash, at September 30, 1996, includes utility
deposits of $70, as well as housing deposits of $813 which have
been placed in escrow. The housing deposits will become
available to the Company when the housing contracts close.
Impact of Recently Issued Accounting Standards
-----------------------------------------------
In March 1995, the FASB issued Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," which requires impairment
losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets
are less than the assets' carrying amount. Statement No. 121 also
addresses the accounting for long-lived assets that are expected
to be disposed of. The Company adopted Statement No. 121 in the
first quarter of 1996, and there has been no material impact on
the Company's operations or financial position.
7<PAGE>
<PAGE> 8
Notes to Consolidated Financial Statements (Unaudited) -- continued
Use of Estimates
-----------------
The preparation of the financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes.
Accordingly, actual results could differ from those reported.
Investments - trading
---------------------
The Company classifies all of its investment portfolio as
trading. This category is defined as including debt and
marketable equity securities held for resale in anticipation of
earning profits from short-term movements in market prices.
Trading account securities are carried at fair market value, and
both realized and unrealized gains and losses are included in net
trading account profit. Fair values for actively traded debt
securities and equity securities are based on quoted market
prices on national markets. Fair values for thinly traded
investment securities are generally based on prices quoted by
investment brokerage companies.
Avatar's investment portfolio at September 30, 1996 and
December 31, 1995 included bonds rated B- or above by Moody's
and/or Standard and Poor's, non-rated bonds of companies which
are in bankruptcy and have defaulted as to payments of principal
and interest on such bonds, equity securities, and money market
accounts.
At December 31, 1995, the portfolio also included corporate
bonds, as well as, obligations for securities which have been
sold that the Company does not own and will, therefore, be
obligated to purchase at a future date. Such obligations have
been recorded at the fair market value of the securities and
contain an element of market risk in that, if the securities
increase in value, it will be necessary to purchase the
securities at a cost in excess of the price at which they were
sold previously.
The following table sets forth the fair values of
investments (including securities sold short which are valued at
the cost to purchase):
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
-------------- --------------
<S> <C> <C>
Corporate bonds $0 $21,985
Non-rated bonds 74 8,472
Equity securities 64 2,045
Other rated bonds 2,505 4,753
Money market accounts 1,722 11,519
Less:
Securities sold short 0 (516)
--------- ---------
Total market value $4,365 $48,258
========= =========
Aggregate cost $2,674 $44,116
========= =========
</TABLE>
8<PAGE>
<PAGE> 9
Notes to Consolidated Financial Statements (Unaudited) -- continued
Contracts, Mortgage Notes and Other Receivables
-----------------------------------------------
Contracts, mortgage notes, and other receivables are summarized
as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
-------------- ------------
<S> <C> <C>
Contracts and mortgage notes receivable $78,680 $89,317
Notes and other receivables 7,507 7,268
---------- ----------
86,187 96,585
Less:
Deferred gross profit 23,463 27,589
Allowance for doubtful accounts 1,416 1,003
Market valuation reserve 226 704
Other 940 2,774
---------- ----------
26,045 32,070
---------- ----------
$60,142 $64,515
========== ==========
</TABLE>
Land and Other Inventories
--------------------------
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
-------------- -------------
<S> <C> <C>
Land developed and in process of development $102,082 $95,315
Land held for future development or sale 34,883 34,790
Dwelling units completed or under construction 26,324 18,044
Other 773 1,121
----------- ----------
$164,062 $149,270
=========== ==========
</TABLE>
Notes, Mortgage Notes and Other Debt
------------------------------------
The Company obtained various credit lines during 1996
in the amount of $16,000, $10,000 and $20,000; the amount
used during 1996 totaled $23,895 (refer to item 2.
Management Discussion and Analysis - Liquidity and Capital
Resources section).
During the nine months ended September 30, 1996 ,
the Company repaid $32,650 on a credit line secured by
substantially all of its investment portfolio. Additionally,
the Avatar Homesite Mortgage Trust Notes were repaid,
totaling $8,606.
9<PAGE>
<PAGE> 10
Notes to Consolidated Financial Statements (Unaudited) -- continued
Minority Interest in Consolidated Subsidiaries
----------------------------------------------
Minority interest in consolidated subsidiaries is
represented by preferred stock of Avatar Utilities' subsidiaries.
Total preferred stock outstanding is as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
--------------- --------------
<S> <C> <C>
9% Cumulative preferred stock $9,000 $9,000
Other 60 60
--------- ---------
$9,060 $9,060
========= =========
</TABLE>
Avatar's utility subsidiary's 9% cumulative preferred stock
issue provides for redemption no earlier than March 1, 1997, in
whole or in part; however, a minimum of $1,800 per annum of the
preferred stock must be redeemed beginning in 1997. A redemption
of all outstanding shares must occur no later than March 1, 2001.
Charges to operations recorded as "Other expenses" relate to
preferred stock dividends of subsidiaries for the nine months
ended September 30, 1996 and 1995, which amounted to $611 and
$610 respectively, and for the three months ended September 30,
1996 and 1995 which amounted to $203 and $202 , respectively.
Income Taxes
------------
Deferred income taxes reflect the net tax effect of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes. Significant components of the Company's
deferred income tax assets and liabilities as of September 30,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Deferred income tax assets
Net operating loss carryforward $16,000 $14,000
Tax over book basis of land inventory 24,000 21,000
Unrecoverable land development costs 3,000 4,000
Tax over book basis of depreciable assets 7,000 5,000
Alternative minimum tax and investment tax credit
carryforward 4,000 5,000
Other 3,000 2,000
--------- ----------
Total deferred income taxes 57,000 51,000
Valuation allowance for deferred income tax assets (42,000) (40,000)
---------- ----------
Deferred income tax assets after valuation allowance 15,000 11,000
Deferred income tax liabilities
Book over tax income recognized on homesite
and vacation ownership sales (6,000) (3,000)
Deferred carrying charges on utility plant (2,000) (3,000)
Other (7,000) (5,000)
---------- ----------
Total deferred income tax liabilities (15,000) (11,000)
---------- ----------
Net deferred income taxes $0 $0
========== ==========
</TABLE>
10<PAGE>
<PAGE> 11
Notes to Consoldiated Financial Statements (Unaudited) -- continued
Income Taxes -- continued
------------
A reconciliation of income tax expense to the expected
income tax expense (credit) at the federal statutory rate of 34%
for the nine months ended September 30, 1996 and 1995 is as
follows:
<TABLE>
<CAPTION>
Nine Months
1996 1995
-------- ---------
<S> <C> <C>
Income tax (credit) computed at statutory rate ($456) ($1,851)
Income tax effect of non-deductible dividends
on preferred stock of subsidiary 207 207
State income tax (credit), net of federal effect (18) (180)
Other, net 267 (176)
Change in valuation allowance on deferred tax assets - 2,000
------- --------
Provision for income taxes $0 $0
======= ========
</TABLE>
Contingencies
-------------
Avatar is involved in various pending litigation matters
primarily arising in the normal course of its business. Although
the outcome of these and the following matters cannot be
determined, management believes that the resolution of these
matters will not have a material effect on Avatar's business or
financial position.
On October 1, 1993, the United States, on behalf of the
U.S. Environmental Protection Agency, filed a civil action
against Florida Cities Water Company ("Florida Cities"), a
utility subsidiary of Avatar Holdings Inc. ("Avatar"), in the
U.S. District Court for the Middle District of Florida, United
States v. Florida Cities Water Company, Civil Action No. 93-281-
CIV-FTM-21, alleging that Florida Cities' Waterway Estates
treatment plant, located in Lee County, Florida operated in
violation of the Federal Clean Water Act ("Act"), 33 U.S.C. S1251
et seq. On May 5 and June 26, 1996, the United States amended
its complaint to include allegations against Florida Cities for
violations of the Act at two other Florida wastewater
treatment plants, Barefoot Bay, located in Brevard
County, and Carrollwood, located in Hillsborough County. In
addition, the government amended the complaint to include
Avatar, the parent corporation, as a defendant. A trial was held
in March and April 1996. On August 20, 1996, the Court issued
its final judgment, incorporating earlier rulings. The Court
found Avatar not liable on any of the government's claims and
entered judgment in Avatar's favor. The Court found Florida
Cities not liable on certain of the government's claims, but
liable on other claims, and awarded the government $310 in civil
penalties against Florida Cities. On October 18, 1996, the
government filed a notice of appeal to the U.S. Court of Appeals
for the Eleventh Circuit. Avatar and Florida Cities believe that
there are strong arguments to support the affirmance of the
district court judgment on appeal.
11<PAGE>
<PAGE> 12
Notes to Consolidated Financial Statements (Unaudited) -- continued
Contingencies -- continued
-------------
On November 1, 1994, certain private parties filed a civil
action against Avatar and twenty other defendants, in Rock County
Circuit Court Wisconsin. (Alderman, et al v. DT Inc., et al,
Civil Action Case No. 94 CV 675). The plaintiffs alleged that
Avatar and the other named defendants disposed of various
substances at the Edgerton Sand and Gravel Landfill site (the
"Site"), thereby causing contamination of the groundwater source
used by the plaintiffs. On March 8, 1996, the plaintiffs entered
into a settlement agreement with seventeen of the named
defendants, including Avatar (the "Settling Defendants"). The
Settling Defendants paid the plaintiffs an aggregate of $3,179
in damages (of which Avatar's share is $548). An Order Dismissing
Avatar and the other Settling Defendants from this litigation was
entered by the Circuit Court of Rock County in the State of
Wisconsin, on August 26, 1996. On August 14, 1996, the Federal
District Court for the Western District of Wisconsin, approved
a consent decree between the State of Wisconsin, on behalf of
the Wisconsin Department of Natural Resources, and the Settling
Defendants. The consent decree provides the Settling Defendants
with a covenant not to sue, a release, and contribution
protection for past and future response costs in connection with
the Site.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (dollars in thousands
except per share data)
RESULTS OF OPERATIONS
---------------------
Operations for the nine and three month periods ended
September 30, 1996, resulted in a net loss of $1,340 and $357 or
$.15 and $.04 per share, respectively, compared to a net loss of
$5,444 and $3,464 or $.60 and $.38 per share, respectively, for
the same periods of 1995. The improvement in operations for the
nine months and three months is primarily a result of improved
margins from real estate operations, an increase in deferred
gross profit recognition, and improved contributions from utility
operations, partially offset by lower net trading account
profits.
Avatar's real estate revenues for the nine and three months
ended September 30, 1996, increased $29,809 or 77.7% and $10,114
or 72.6%, respectively, while real estate expenses increased
$22,818 or 48.6% and $8,261 or 49.6%, respectively, when compared
to the same periods of 1995. The increase in real estate revenues
for the nine month and three month periods ended September 30,
1996 is generally a result of increased housing and vacation
ownership sales and increased resort revenues. The increase in
real estate expenses for the nine and three month periods ended
September 30, 1996, when compared to the same periods of 1995, is
essentially a result of the related costs associated with the
increase in real estate sales volume. For the nine and three
month period ended September 30, 1996, Avatar's real estate
margins increased $6,991 or 82.1% and $1,853 or 68.2%,
respectively, when compared to the same periods in 1995.
12<PAGE>
<PAGE> 13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (dollars in thousands
except per share data) -- continued
RESULTS OF OPERATIONS -- continued
---------------------
Data from home-building operations for the nine months and
three months ended September 30, 1996 and 1995 (including backlog
data as of September 30, 1996 and 1995) is summarized as follows:
<TABLE>
<CAPTION>
Nine Months Three Months
1996 1995 1996 1995
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Units closed
------------
Number of units 192 87 82 32
Aggregate dollar volume $34,414 $7,403 $15,421 $2,723
Average price per unit $179 $85 $188 $85
Units sold, net
---------------
Number of units 362 189 147 58
Aggregate dollar volume $47,755 $32,972 $19,205 $5,891
Average price per unit $132 $174 $131 $102
Backlog September 30,
-------
1996 1995
--------- -----------
Number of units 322 161
Aggregate dollar volume $45,319 $30,619
Average price per unit $141 $190
</TABLE>
The average price per unit closed increased for the nine and
three months ended September 30, 1996 when compared to the same
period in 1995, due to closings at the Company's Harbor Island
project in 1996. The decrease in the average price per unit sold
for the nine months ended September 30, 1996 when compared to the
same period in 1995, is a result of sales reservations written
during the fourth quarter of 1994 at the Company's Harbor Island
project converting to contracts during the nine months ended
September 30, 1995.
Utility revenues for the nine and three months ended
September 30, 1996, increased $1,615 or 7.1% and $695 or 9.8%,
respectively, when compared to the same periods of 1995. The
increase in utility revenues is primarily attributable to
increases due to rate cases settled in the latter part of 1995
and customer growth. Utility expenses for the nine and three
months ended September 30, 1996, increased $835 or 4.6% and $256
or 4.3%, respectively, when compared to the same periods of 1995.
The increase in utility expenses is due to higher utility
operating costs.
Interest income for the nine and three months ended
September 30, 1996, decreased $514 or 7.2% and $104 or 4.6%,
respectively, when compared to the same periods for 1995. The
decline in interest income is due to lower average aggregate
amounts outstanding in the Company's contract and mortgage notes
receivable portfolio. Avatar's contracts and mortgage notes
receivable portfolio amounted to $78,680 at September 30, 1996,
compared to $92,549 at September 30, 1995.
13<PAGE>
<PAGE> 14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (dollars in thousands
except per share data) -- continued
RESULTS OF OPERATIONS -- continued
---------------------
Trading account profit, net for the nine and three months
ended September 30, 1996, decreased $6,026 and $1,402,
respectively, compared to the same periods for 1995. Trading
account profit represents interest income and realized and
unrealized gains and losses related to the trading investment
portfolio, net of commissions payable to brokers.
General and administrative expenses for the nine and three
months ended September 30, 1996, decreased $361 or 5.1% and
decreased $611 or 23.6%, respectively, compared to the same
periods of 1995. The decrease for the nine months and three
months ended September 30, 1996 is mainly attributable to a
decrease in the accrual for incentive compensation.
Interest expense for the nine and three months ended
September 30, 1996, increased $267 or 3.1% and decreased $12 or
0.4%, respectively, compared to the same periods of 1995. The
increase for the nine months is principally attributable to the
increase in construction loans for homebuilding and vacation
ownership operations.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Avatar's primary business activities, which include
homebuilding, vacation ownership, resort operations, utility
services, land sales, and land development are capital intensive
in nature. Avatar expects to have available a combination of cash
and investment securities on hand, operating cash flows and
external borrowings, which management believes is adequate to
fund its operations and capital requirements.
Avatar had approximately $4,365 in investments, at
September 30, 1996, which were classified as trading. The
Company intends to continue to actively trade such securities in
an effort to generate profits and will reinvest such profits
until such time as the Company's cash requirements necessitate
the use or partial use of the portfolio proceeds. During the
nine months ended September 30, 1996, the Company's cash
requirements necessitated the sale of $45,554 from its portfolio
proceeds, of which, $32,650 was used to reduce related
debt. Substantially all of the investment portfolio
collateralizes a $10,000 line of credit which had an outstanding
balance at September 30, 1996, of $3,350 and will mature during
the second quarter of 1997.
In March 1996, the Company obtained a credit line in the
initial amount of $10,000, which matures May 31, 1997 and is
collateralized by the stock of Avatar Mortgage Funding Inc.
This line was increased to $16,000 during the third quarter of
1996. At September 30, 1996, this line had an outstanding
balance of $10,000. In September, the Avatar Homesite Mortgage
Trust Notes were repaid and the contracts receivable, which had
secured the Mortgage Trust Notes, were substituted as collateral
for the Company's obligations under this credit line.
14<PAGE>
<PAGE> 15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (dollars in thousands
except per data share) -- continued
Liquidity and Capital Resources -- continued
-------------------------------
On April 17, 1996, the Company obtained an additional line
of credit for $10,000. This credit facility matures in April
2001 and is collateralized by certain contracts receivable. At
September 30, 1996, the outstanding balance on this line totaled
$6,895.
In August 1996, Avatar obtained a credit line in the amount
of $20,000. This line of credit matures in August 1997 and is
collateralized by the stock of Avatar Utilities Inc. At
September 30, 1996, $7,000 on this line was outstanding, and is
classified as corporate debt on the balance sheet.
PART II -- OTHER INFORMATION
----------------------------
Item 1. Legal Proceedings
The information, which is set forth in the under the
caption "Contingencies" in the Notes to Consolidated Financial
Statements (Unaudited) in Item 1 of Part I of this Report, is
incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
27 Financial Data Schedule (filed herewith)
Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended September 30, 1996.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
AVATAR HOLDINGS INC.
Date: November 13, 1996 By: /s/ Lawrence L. Colditz
----------------- -------------------------
Lawrence L. Colditz
Controller
Date: November 13, 1996 By: /s/ Charles L. McNairy
----------------- ----------------------
Charles L. McNairy
Executive Vice President,
Treasurer and Chief Financial Officer
15<PAGE>
<PAGE> 16
Exhibit Index
27 Financial Data Schedule (filed herewith)................. 17
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 7,847
<SECURITIES> 4,365
<RECEIVABLES> 86,187
<ALLOWANCES> (26,045)
<INVENTORY> 164,062
<CURRENT-ASSETS> 0
<PP&E> 186,609
<DEPRECIATION> 0
<TOTAL-ASSETS> 442,558
<CURRENT-LIABILITIES> 0
<BONDS> 153,156
<COMMON> 12,715
0
0
<OTHER-SE> 144,357
<TOTAL-LIABILITY-AND-EQUITY> 442,558
<SALES> 68,197
<TOTAL-REVENUES> 103,506
<CGS> 39,914
<TOTAL-COSTS> 58,936
<OTHER-EXPENSES> 14,798
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,828
<INCOME-PRETAX> (1,340)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,340)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,340)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.15)
<FN>
NOTE: Total Current Assets and Total Current Liabilities are not applicaple
because Registrant does not present a classified balance sheet.
17
</TABLE >
</TABLE>
