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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995 -- Commission File Number 0-7616
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AVATAR HOLDINGS INC.
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(Exact name of registrant as specified in its charter)
Delaware 23-1739078
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
255 Alhambra Circle, Coral Gables, Florida 33134
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (305) 442-7000
Securities registered pursuant to section 12(g) of the Act:
Common Stock, $1.00 Par Value
------------------------------
(Title of Class)
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 periods that the registrant was required to file such
reports), and (2) has been subject to such filing requirement for the
past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of the
Form 10-K or any amendment to this Form 10-K. [ X ]
Aggregate market value of the voting stock held by non-affiliates of
the registrant was $299,557,442 as of February 29, 1996.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of the latest practicable date.
As of February 29, 1996, there were 9,095,102 shares of common
stock, $1.00 par value, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the registrant's Proxy Statement for its 1996 Annual
Meeting of Stockholders are incorporated by reference into Part III.
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AVATAR HOLDINGS INC.
1995 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I Page
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Item 1. Business ............................................. 3
Item 2. Properties............................................ 7
Item 3. Legal Proceedings..................................... 7
Item 4. Submission of Matters to a Vote of Security-Holders... 9
Executive Officers of the Registrant............................ 10
PART II
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Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters................................... 12
Item 6. Selected Financial Data............................... 13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 14
Item 8. Financial Statements and Supplementary Data........... 20
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures.................. 48
PART III
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Item 10. Directors and Executive Officers of the Registrant.... 48
Item 11. Executive Compensation................................ 48
Item 12. Security Ownership of Certain Beneficial Owners
and Management........................................ 48
Item 13. Certain Relationships and Related Transactions........ 48
PART IV
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Item 14. Exhibits,Financial Statement Schedules, and Reports
on Form 8-K........................................... 49
Exhibit Index.................................................... 55
2<PAGE>
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PART I
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Item 1. Business
Avatar Holdings Inc. (a Delaware corporation incorporated in
1970) and its subsidiaries (collectively, "Avatar" or the "Company")
are engaged in two principal business activities: real estate and
water and wastewater utilities operations. Avatar's real estate
operations, which are located in the states of Florida, Arizona,
California, and Tennessee, include: development, construction and
sale of single family and multifamily housing communities;
development, sale and management of vacation ownership intervals;
development and sale of improved and unimproved homesites and
commercial/industrial land tracts; operations of amenities and
resorts; cable television operations and property management services.
Avatar provides financing for a large portion of its homesite sales,
mainly under a deed and mortgage arrangement. Avatar's utility
operations consist of water and wastewater treatment plants which
serve communities in Florida and Arizona, as well as contract
management services to various utility companies. During 1995,
approximately 71% and 29% of the total revenues were generated
through real estate and utility operations, respectively.
Avatar's business strategy emphasizes housing sales, sales of
vacation ownership intervals, retail and industrial real estate
development, and resort operations. Certain of Avatar's properties
are being developed and such developments are at various stages of
completion.
Information regarding revenues, results of operations and assets
of the business segments noted above are included in Item 8 under the
caption "Notes to Consolidated Financial Statements".
Real Estate
Avatar's assets include real estate inventory in the states of
Florida, Arizona, California and Tennessee. In its Florida
communities of Harbor Islands, Poinciana, Barefoot Bay, Cape Coral,
Golden Gate and Leisure Lakes, as well as in its Arizona community of
Rio Rico and its property in Tennessee, Avatar's activities include
the construction and sale of single family and multifamily housing,
the construction, sale and management of vacation ownership units and
the sale of homesite and industrial/commercial land , with the types
of activities varying from community to community. Avatar owns other
sites including Banyan Bay in Martin County, Florida; Ocala Springs in
Marion County, Florida; and Woodland Hills in Los Angeles County,
California.
The Harbor Islands Project encompasses 192 acres, including 30
acres conveyed to the City of Hollywood for future parks, adjoining
the Intra-coastal Waterway in Hollywood, Florida. The Company can
build up to 2,400 residential units, including single family homes,
townhomes, villas and mid and high-rise condominium units in this
water-oriented community. Additionally, this community will include
a 196-boat slip marina for which the initial phase of construction
has been completed. As of December 31, 1995, deposits on sales were
received for 50 single family homes and one estate homesite, and
refundable deposits on reservations also were received for seven
townhomes, two single family homes, and seven estate homesites. Net
sales and reservations have a combined sales value of approximately
$26,500,100. Avatar expects to deliver these single family homes and
the estate homesite during 1996.
Poinciana, located in central Florida approximately 21 miles
south of Orlando and ten miles from Walt Disney World, encompasses
47,000 acres of land, approximately 16,100 of which are owned by
Avatar. This planned community development includes subdivisions for
single family, multifamily and
3<PAGE>
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Item 1. Business -- Continued
manufactured housing, and commercial/industrial areas. Since 1971,
21,948 homesites have been sold, and approximately 4,827 housing
units, primarily single family houses and townhouses, have been
constructed by Avatar and other non-affiliated builders. As of
December 31, 1995, approximately 14,300 developed and undeveloped
single family homesites, and approximately 4,800 acres of land zoned
for industrial/commercial/institutional and multifamily use remained
in inventory at Poinciana. Avatar's housing programs in Poinciana
include its communities of Regency Pointe, Crescent Lakes and Cypress
Woods, as well as scattered lot housing programs. Regency Pointe, a 96
home community, is expected to be completely sold during 1996. At
December 31, 1995, only 14 lots at Regency Pointe remained
available for sale. The grand opening of Heatherstone, the first phase
of Crescent Lakes, a 904 home community, and The Oaks at Cypress
Woods occurred during 1995. Additionally, platting, design, and
engineering of 90 homes began for Laurel Run at Crescent Lakes. At
December 31, 1995, Avatar had contracts at Poinciana to construct 66
single family units with a related sales value of approximately
$5,926,000. Avatar also owns and operates a 31,100 square foot
shopping center at Poinciana that was 99% occupied at December 31,
1995. Recreational facilities owned and operated by Avatar at the
Poinciana development include an 18-hole Devlin Von-Hagge championship
golf course, tennis courts, a golf and racquet club with a swimming
pool, a community center and a series of nature walks and trails.
Barefoot Bay is located on Florida's east coast, midway between
Vero Beach and Melbourne. Avatar's operations at Barefoot Bay include
the sale of manufactured homes and homesites. Since operations
commenced in 1970, approximately 95% of the 5,020 available homesites
have been sold. Avatar also owns and operates a 13,420 square foot
shopping center in Barefoot Bay that was 90% occupied at December 31,
1995, an 18-hole executive golf course, a community center, swimming
pools, tennis courts, a private beach and a fishing pier. Avatar also
owns 58 acres of land adjacent to Barefoot Bay, which it is holding
for future development, sale or other use.
Cape Coral, located on Florida's west coast seven miles west of
Fort Myers, is a 60,700-acre community, of which approximately 3,900
acres are owned by Avatar. Its population has increased from 11,470
in 1970 to approximately 87,500 in 1995. Remaining inventory, at
December 31, 1995, included approximately 8,000 developed and
undeveloped single family homesites and approximately 800 acres of
land zoned for commercial, industrial and multifamily use. Avatar's
housing programs in Cape Coral include: Emerald Cove, a 101 home
community; The Hermitage, an upscale gated waterfront community
consisting of 19 oversized homesites; and scattered lot programs. At
December 31, 1995, Avatar had contracts at Cape Coral to construct 32
single family units with a related sales value of approximately
$5,096,000. Avatar owns and operates the Camelot Isles Shopping
Center, a 70,000 square foot retail center. At December 31, 1995, the
shopping center was 100% occupied. Avatar's Tarpon Point Marina,
which is located in Cape Coral, accommodates 175 vessels and features
dockmaster facilities, a ship's store and fueling facilities.
The Camelot Marina, for which the initial phase of
construction was completed in 1991, will accommodate 76 vessels and
will feature 3,500 feet of boardwalk upon completion. Other amenities
available to the residents of Cape Coral include Avatar's recently
renovated Cape Coral Golf and Tennis Resort featuring an 18-hole
championship golf course, a nine-hole executive golf course, eight
tennis courts and a 100-room motel.
Golden Gate City, located east of Naples in southwest Florida,
had remaining inventory at December 31, 1995 of 36 single family and
duplex homesites, 48 acres of land zoned for multifamily use and 12
acres zoned for commercial use.
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Item 1. Business -- Continued
Golden Gate Estates includes 2,497 acres of land subdivided into
5,800 homesites. Remaining inventory as of December 31, 1995,
included 65 homesites of varying size, the majority of which are
approximately 1 and 1-1/4 acre homesites, and 8,000 acres of land
held for future use.
Avatar's land holdings in Leisure Lakes, located near the city of
Lake Placid in South Central Florida, consist of approximately 3,400
homesites in inventory at December 31, 1995. Amenities at Leisure
Lakes include a nine-hole executive golf course, a small lakefront
motel, tennis courts, shuffleboard courts, a swimming pool, a club
house with pro shop, a coffee shop, a private beach, a boat ramp, a
card room and various lakes available for water sports.
Rio Rico, a 55,000-acre community development in southern
Arizona, is located 57 miles south of Tucson. This community, with a
population of approximately 8,000 residents, consists of single family
homes and townhouses and includes several areas zoned for commercial
and industrial development. Avatar owns and operates a 180-room hotel
complex, an 18-hole Robert Trent Jones designed championship golf
course and a 36,800 square foot shopping center, which was 95%
occupied as of December 31, 1995. Remaining inventory, at Rio Rico at
December 31, 1995, included approximately 5,600 single family
homesites, approximately 1,000 acres of land zoned for commercial,
industrial and multifamily use, 7,300 acres of land held for future
development, sale or other use and 2,838 acres of undeveloped mountain
range reserved for open space.
Avatar's real estate activities also include the construction,
sale and management of vacation ownership intervals. As of December
31, 1995, 1,945 unit weeks had been sold and 967 unit weeks remained
in inventory at Poinciana. During 1995, Avatar has continued
designing and developing additional vacation ownership units in
Poinciana.
In 1995, Avatar began the development, construction and sale of
vacation ownership intervals at its Sunrise Ridge property in Pigeon
Forge, Tennessee. As of December 31, 1995, 846 unit weeks had been
sold, 593 unit weeks remained in inventory, and 754 unit weeks
remained available for sale for the units currently under
construction.
Banyan Bay, located in Martin County, Florida, comprises 251
acres of land. Avatar plans to develop a medium-density residential
development of two and four story condominiums in Banyan Bay.
Ocala Springs, located five miles northeast of Ocala in Marion
County, Florida, is comprised of approximately 4,600 acres of land.
The concept plan for this project provides for 700 single family
ranchettes on 1-1/4 to 1-1/2 acre lots, 4,500 single family homesites
on 1/4 to 1/2 acre lots, 400 homesites for manufactured housing and
1,000 multifamily condominium units. Avatar also plans to construct
at Ocala Springs an 18-hole golf course, and develop more than 130
acres which will be used for commercial, industrial and service
facilities. Appropriate state, regional and local governmental
agencies have reviewed these plans and the plat for Phase I has been
filed with and accepted by Marion County.
Woodland Hills, located in northwest Los Angeles County,
California, consists of the Natoma tract that encompasses
approximately 350 acres of land. Conceptual planning for this tract
has been completed for 66 luxury homesites. The Company has filed an
environmental impact report which has been accepted by the City of Los
Angeles.
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Item 1. Business -- Continued
In addition to the real estate holdings described above, Avatar
owns approximately 3,500 acres of land in Florida that is being held
for future development or bulk sales.
Utilities
Avatar's water and wastewater treatment facilities include 17
water treatment facilities and eleven wastewater treatment facilities
serving six communities in Florida (including Poinciana, Barefoot Bay,
and Golden Gate) and Rio Rico, Arizona. These facilities provide for
the treatment, distribution and sale of water for public and private
use, and the treatment and disposal of wastewater. At December 31,
1995, Avatar's utility operations had approximately 39,000 water
customers and 31,000 wastewater customers.
An Avatar subsidiary provides consulting, data processing,
customer billing and other related services to all Avatar utility
operating subsidiaries. In addition, it provides these services and
others, including plant operations and maintenance, meter reading,
customer service, and payment remittance services, to 23 non-
affiliated utilities, both public and private. Notable contracts
include a five year contract for water/wastewater system operation
and maintenance for Celebration, the new project under construction
by Disney Development Company, and a meter reading contract for Fort
Pierce Utilities Authority.
Employees
As of December 31, 1995, Avatar employed approximately 1,152
individuals on a full-time or part-time basis. In addition, Avatar
employs the services of such additional personnel as may be required
to perform various land development activities. Avatar's relations
with its employees are satisfactory, and there have been no work
stoppages.
Regulation
Avatar's real estate operations, including planning, zoning,
design, construction of improvements, environmental considerations and
sales activities are regulated by various local, regional, state and
federal agencies, including the Federal Trade Commission (FTC). For
its community developments in Florida, Tennessee and Arizona, state
laws and regulations may require the filing of registration
statements, copies of promotional materials and numerous supporting
documents, and the delivery of an approved disclosure report to
purchasers, prior to the execution of a sales contract. In addition
to Florida, Tennessee and Arizona, certain states impose requirements
relating to the inspection of properties, approval of sales
literature, disclosures to purchasers of specified information,
assurances of future improvements, approval of terms of sale and
delivery to purchasers of a report describing the property. Federal
regulations adopted pursuant to the Interstate Land Sales Full
Disclosure Act provide for the filing or certification of a
registration statement with the Office of Interstate Land Sales
Regulation of the Department of Housing and Urban Development.
Avatar's homesite installment sales activities are required to comply
with the Federal Consumer Credit Protection ("Truth-in-Lending") Act.
Avatar's utility operations and rate structures are regulated by
various federal, state and county agencies and must comply with
federal and state treatment standards. All sources of water and
wastewater effluent are required to be tested on a regular
basis and purified in order to comply with
6<PAGE>
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Item 1. Business -- Continued
governmental standards. Avatar is subject to various federal, state
and local environmental laws and regulations. The Company does not
anticipate that it will incur material capital expenditures for
environmental matters for 1996 and 1997.
The Company believes it is in compliance with applicable laws and
regulations in all material respects.
Competition
Avatar's real estate operations, particularly in the state of
Florida, are highly competitive. In its sales of homesites and
housing units, Avatar competes as to price and product with several
community development companies for the discretionary income of
individuals who desire to relocate or establish a second home in
Florida or Arizona. In recent years, there have been extensive land
development projects in the geographical areas in which Avatar
operates. The vacation ownership sales business is also highly
competitive with companies throughout the United States and abroad
selling vacation ownership intervals on terms similar to those offered
by Avatar.
Item 2. Properties
Avatar's real estate operations are described in Item 1 above.
Land developed and in the process of being developed, or held for
investment and/or future development, had an aggregate cost of
approximately $130,105,000 as of December 31, 1995.
Avatar's utility operations include water and wastewater plants
and equipment located in Florida and Arizona. Such properties had a
net book value of $177,230,000 at December 31, 1995.
Avatar's corporate headquarters are located at 255 Alhambra
Circle, Coral Gables, Florida, and occupy 27,915 square feet of
leased office space. For additional information concerning properties
leased by Avatar, see Item 8, "Notes to Consolidated Financial
Statements."
Item 3. Legal Proceedings
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, a utility subsidiary of 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(D)).
The complaint alleges that the Waterway Estates wastewater treatment
plant, located in Lee County, Florida, operated in violation of the
Federal Clean Water Act, 33 U.S.C. S1251 et seq at various times
during the period from October 1, 1988 through July 14, 1992. The
Federal Clean Water Act provides for maximum civil penalties of
$25,000 per day for each violation. On May 5 and June 26, 1995, the
United States amended the complaint to include allegations against
Florida Cities Water Company for violations of the Federal Clean Water
Act at two other wastewater treatment
7<PAGE>
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Item 3. Legal Proceedings -- continued
plants, at Barefoot Bay, located in Brevard County, and
Carrolwood, located in Hillsborough County, Florida. The amended
complaint alleges that the three wastewater treatment plants were
operated for various periods of time without a federal discharge
permit and that, subsequently, certain pollutants were discharged in
excess of applicable federal permit limitations. In addition, the
government amended the complaint to include Avatar Holdings Inc., the
ultimate parent corporation,as a defendant. As a result of the Court's
disposition of two previous motions for partial summary judgment, the
Government's claims that the Brevard County and Hillsborough County
plants made discharges without operating permits have been rejected,
but the Court found that the Waterway Estates plant did discharge from
an unpermitted location and made discharges without an operating
permit. The Court also found each plant made discharges in excess of
permit limitations at various times during the period alleged. The
Court found, however, that the parent corporation had no liability
for the claims of unpermitted discharges at any of the three plants;
the Court has not ruled on the parent corporation's liability for any
remaining claims. Accordingly, the principal issues remaining in the
case relate to calculations of penalties, if any, due for discharges
from the plants which were allegedly not in accordance with the
applicable permits and administrative orders, and for the discharges
made without an operating permit at the Waterway Estates plant and
whether the parent corporation has any liability for the remaining
claims. The trial has been scheduled to commence in March 1996. Based
upon the information currently available to it, Avatar believes that
it has strong defenses to the amended complaint and intends to pursue
those defenses vigorously.
On March 1, 1994, the Wisconsin Department of Natural Resources
(the "Department") notified Avatar that the Department had recently
issued a second Record of Decision ("ROD") in connection with the
Edgerton Sand & Gravel Landfill site (the "Site"). The ROD calls for
the City of Edgerton's public water supply system to be extended to
the owners of private wells in the vicinity of the Site. The ROD also
states that other work related to soil and groundwater remedial action
would be required at the Site. The Department demanded that all
potentially responsible parties ("PRPs") associated with the Site
organize into a PRP group to undertake the implementation of the ROD.
Avatar responded in writing to the Department. No further action has
been taken since by the Department against Avatar in connection with
the ROD.
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 allege that Avatar and the other
named defendants disposed of various substances at 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 have
agreed to pay the plaintiffs an aggregate of $3,178,530 in damages (of
which Avatar's share is $548,000). Under the terms of the settlement,
the Settling Defendants receive: a release and covenant not to sue
from the plaintiffs; a release, covenant not to sue and contribution
protection from the Department in connection with operating and
maintenance costs at the Site; and releases and covenants not to sue
from those Settling Defendants who have incurred cleanup costs at the
Site. The settlement, however, will not be effective if the costs of
constructing and operating the public water supply system exceeds
$3,019,815 or the Wisconsin Department of Development fails to award
the city of Edgerton a $750,000 grant in connection with the design
and construction of the public water supply system. If the settlement
does not become effective, Avatar has available to it a number of
factual and legal defenses, which if successful, would eliminate or
substantially reduce Avatar's potential liability.
8<PAGE>
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Item 4. Submission of Matters to a Vote Security Holders
None
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Executive Officers of the Registrant
Pursuant to General Instruction G (3) to Form 10-K, the following
list is included as an unnumbered item in Part I of this report in
lieu of being included in the Proxy Statement for the Annual Meeting
of Stockholders to be held on May 23, 1996.
The following is a list of names and ages of all of the executive
officers of Avatar, indicating all positions and offices with Avatar
held by each such person and each such person's principal
occupation(s) or employment during the past five years unless
otherwise indicated. All such persons have been elected to serve
until the next annual election of officers (which is expected to occur
on May 23, 1996) when they are reappointed or their successors are
elected, or until their earlier resignation or removal.
Name Age Office and Business Experience
---- --- ------------------------------
Leon Levy 70 Chairman of the Board since
January 1981; General Partner,
Odyssey Partners, L.P., a
private partnership engaged in
investment, trading and related
activities; Chairman of the Board
of Oppenheimer Funds; former
Chairman of the Board (1974-1985)
of Oppenheimer Management Corp.;
Director of S.G. Warburg & Co.,
Ltd. (Jersey Funds).
Edwin Jacobson 66 President and Chief Executive
Officer since February 1994;
Chairman of the Executive
Committee since June 1992;
President and Chief Executive
Officer of Chicago Milwaukee
Corporation since June 1985;
President and Chief Executive
Officer of CMC Heartland Partners
since September 1990; and
President and Chief Executive
Officer, since June 1985, of
Milwaukee Land Company, a non-
diversified, closed-end management
investment company, publicly
traded since July 1993.
Dennis J. Getman 51 Executive Vice President since
March 1984. Senior Vice President
from September 1981 to March 1984
and General Counsel since
September 1981.
Charles L. McNairy 49 Executive Vice President since
September 1993 and Treasurer and
Chief Financial Officer since
September 1992. Senior Vice
President from September 1992 to
September 1993. Vice President -
Finance from January 1985 to
September 1992, except from April
1987 to September 1988.
Juanita I. Kerrigan 49 Vice President and Secretary since
September 1980.
10<PAGE>
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Executive Officers of the Registrant -- continued
G. Patrick Settles 47 Vice President since November 1986
and Assistant General Counsel since
September 1983.
Jeffrey A. Sopshin 33 Vice President since September
1995. Assistant Vice President from
April 1993 and Controller from
June 1994 to September 1995.
Formerly Audit Manager, Ernst &
Young LLP from 1986 to 1993.
Lawrence L. Colditz 31 Controller since September 1995.
Assistant Controller from
October 1992 to September 1995.
Director of Financial Accounting
from October 1991 to October 1992.
Accounting Manager from October
1990 to October 1991.
The above executive officers have held their present positions
with Avatar for more than five years, except as otherwise noted.
No director or executive officer of Avatar has any family
relationship with any other director or executive officer of Avatar.
11<PAGE>
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PART II
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Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters
The Common Stock of Avatar Holdings Inc. is traded through the
National Market System of the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") under the symbol AVTR.
There were 8,300 record holders of Common Stock at February 29,
1996.
High and low quotations, as reported, for the last two years
were:
<TABLE>
<CAPTION>
Quotations
--------------------------------------------
Quarter Ended 1995 1994
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High Low High Low
------ ------ ------ ------
<S> <C> <C> <C> <C>
March 31 37 1/2 35 1/4 38 1/4 33 1/4
June 30 37 3/4 35 1/2 36 1/2 34 3/4
September 30 38 1/4 35 36 3/4 35 1/4
December 31 38 34 1/4 38 33 1/2
</TABLE>
Avatar has not declared any cash dividends on Common Stock since
its issuance and presently does not intend to pay any cash
dividends. Avatar is subject to certain restrictions on the payment
of dividends as set forth in Item 8, "Notes to Consolidated Financial
Statements".
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Item 6. Selected Financial Data
FIVE YEAR COMPARISON OF SELECTED FINANCIAL DATA
Dollars in thousands (except per-share data)
<TABLE>
<CAPTION>
Year ended December 31
-------------------------------------------------
1995 1994 1993 1992 1991
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Statement of Income Data
- - ------------------------
Revenues (1) $102,165 $82,848 $126,048 $105,161 $104,083
========= ========= ======== ======== ========
(Loss) income from continuing
operations before extraordinary
item and changes in methods
of accounting ($10,339) ($14,621) $5,474 ($4,342) ($8,635)
========= ========= ======== ======== ========
Extraordinary item - - - ($2,402) -
========= ========= ======== ======== ========
Cumulative effect of change in
method of accounting for
income taxes - - ($964) - -
========= ========= ======== ======== ========
Cumulative effect of change in
method of accounting for
investments (net of income
taxes of $238) - - $388 - -
========= ========= ======== ======== ========
Per Share Data
- - --------------
(Loss) income from continuing
operations before extraordinary
item and changes in methods
of accounting ($1.14) ($1.61) $0.56 ($0.59) ($1.17)
========= ========= ======== ======== ========
Extraordinary item - - - ($0.32) -
========= ========= ======== ======== ========
Cumulative effect of change
in method of accounting for
income taxes - - ($0.10) - -
========= ========= ======== ======== ========
Cumulative effect of change in
method of accounting for
investments (net of income
taxes) - - $0.04 - -
========= ========= ======== ======== ========
Balance Sheet Data December 31
- - ------------------ -------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- -------- -------- --------
Total assets $470,632 $446,577 $457,747 $474,448 $572,890
========= ========= ======== ======== ========
Notes, mortgage notes and
other debt $172,596 $140,962 $135,557 $235,491 $239,414
Less notes, mortgage notes
and other debt classified as
property held for sale - - - 41,075 -
--------- --------- --------- -------- --------
$172,596 $140,962 $135,557 $194,416 $239,414
========= ========= ======== ======== ========
Stockholders' equity $158,412 $168,751 $183,372 $144,639 $151,244
========= ========= ======== ======== ========
</TABLE>
(1) During 1993, the sale of the midwest water utilities was completed
See Item 7; "Results of Operations"
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Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands)
RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors that have affected Avatar during the periods
included in the accompanying consolidated statements of operations.
A summary of the period to period changes in the items included
in the consolidated statements of income is shown below.
<TABLE>
<CAPTION>
Comparison of
Twelve months ended December 31
-----------------------------------
1995 and 1994 1994 and 1993
-----------------------------------
Increase (Decrease)
-----------------------------------
Change Change
-----------------------------------
<S> <C> <C>
Revenues
--------
Real estate sales $12,118 $3,866
Deferred gross profit on
homesite sales 997 (432)
Utility revenues 1,005 (17,293)
Interest income (1,472) (2,860)
Gain on sale of subsidiaries - (21,822)
Trading account profit, net 6,570 342
Other 99 (5,001)
--------- ---------
Total revenues 19,317 (43,200)
Expenses
--------
Real estate expenses 15,319 3,082
Utility expenses 272 (10,130)
General and administrative expenses (976) 1,604
Interest expense 420 (4,449)
Other - (450)
--------- ---------
Total expenses 15,035 (10,343)
--------- ---------
Loss before income taxes and
cumulative effect of changes
in methods of accounting (4,282) 32,857
Income taxes - (12,762)
Cumulative effect of changes
in methods of accounting - (576)
-------- ---------
Net loss ($4,282) $19,519
======== =========
</TABLE>
Operations for the years ended December 31, 1995, 1994 and 1993
resulted in a pre-tax (loss) income before the changes in accounting
methods of ($10,339), ($14,621), and $18,236, respectively. The
decrease in pre-tax loss during 1995 compared to 1994 is attributable
primarily to an increase in the pre-tax gain from net trading
account profits of $6,570 which was partially mitigated by increased
selling expenses and start up costs attributable to housing programs.
The decline in operations during 1994 compared to 1993 was primarily
attributable to a pre-tax gain of $21,822 in 1993 on the sale of the
midwest water utilities, an adjustment to the estimated
development liability for sold land of $4,532,
14<PAGE>
<PAGE> 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
RESULTS OF OPERATIONS -- continued
resulting from the purchase of Rio Rico Utilities in 1993, and an
overall decline in revenues and profit contribution from utility
operations in 1994 resulting from the sale of the midwest utilities.
The financial statements for the year ended December 31, 1995
include the following amounts recorded in the fourth quarter: a
decline due to an adjustment to the market value of investments of
$790 and a provision of $1,250 due to an increase in the accrual
relating to pending litigation.
The financial statements for the year ended December 31, 1994
include the following amounts recorded in the fourth quarter: a loss
of $1,402 due to the decline in market value of investments, a loss of
$1,500 due to the write down of a certain inventory tract to net
realizable value and a provision of $1,000 due to an increase in the
accrual related to pending litigation.
Avatar uses the installment method of profit recognition for
homesite sales. Under the installment method the gross profit on
recorded homesite sales is deferred and recognized in income of future
periods, as principal payments on contracts are received.
Fluctuations in deferred gross profit result from deferred gross
profit on current homesite sales minus recognized deferred gross
profit on prior years' homesite sales.
In accordance with the Company's business plan, in 1995, the
Company continued to develop a diversified mix of products and
services by introducing additional homebuilding products, expanding
vacation ownership operations, developing amenities and support
facilities, expanding property contract management services and
converting land holdings into income producing operations. Homesite
sales for 1995 were comparable to 1994 levels.
Gross real estate revenues increased $12,118 or 27.6% during 1995
when compared to 1994 and $3,866 or 9.7% during 1994 when compared to
1993. The increase in real estate revenues for 1995 when compared to
1994 is primarily a result of increased homebuilding and vacation
ownership sales volume. Homebuilding revenues increased $5,860 or
79% in 1995 when compared to 1994, while vacation ownership revenues
increased $6,069 or 401% in 1995 when compared to 1994. The increase
in homebuilding revenues is a result of the Company's increased focus
developing this product line. The increase in vacation ownership
revenues is attributable to sales at the new Sunrise Ridge Resort.
Real estate expenses increased $15,319 or 30.3% in 1995 when
compared to 1994 and $3,082 or 6.5% in 1994 when compared to 1993. The
increase in real estate expenses for 1995 when compared to 1994 is
primarily a result of increased selling expenses and start up costs
attributable to housing programs. Margins for 1995 have declined
slightly from those of 1994 for homebuilding, vacation ownership, and
homesite operations. The increase in real estate revenues for 1994
when compared to 1993 is primarily a result of a bulk land sale and
increased homesite and vacation ownership sales volume. The increase
in real estate expenses for 1994 when compared to 1993 is primarily
a result of a write-down of a parcel of land adjacent to Avatar's
Barefoot Bay community and an overall increase in the cost of products
sold due to the increased volume in real estate sales.
The 1995 average selling prices of homesites were consistent
with 1994 levels. The 1995 average selling prices of housing units
closed were also consistent with 1994 levels. The average selling
price of
15<PAGE>
<PAGE> 16
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
RESULTS OF OPERATIONS -- continued
housing units in backlog of $210 at December 31, 1995 increased by
144% over 1994 prices due to sales at Avatar's Harbor Islands, which
has an average sales price of $412.
Data from home-building operations for the years ended 1995 and
1994 is summarized as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Units closed
------------
Number of units 150 86
Aggregate dollar volume $12,989 $7,354
Average price per unit $87 $86
Units sold, net
---------------
Number of units 243 101
Aggregate dollar volume $39,917 $7,919
Average price per unit $164 $78
Backlog December 31
-------
1995 1994
-------- --------
Number of units 152 59
Aggregate dollar volume $31,978 $5,050
Average price per unit $210 $86
</TABLE>
Utility revenues increased $1,005 or 3.5% during 1995 when
compared to 1994 and decreased $17,293 or 37.6% during 1994 when
compared to 1993. Utility expenses increased $272 or 1.1% during
1995 when compared to 1994 and decreased $10,130 or 29.1% during 1994
when compared to 1993. Utility revenues increased in 1995 as a result
of rate increases and customer growth. Utility expenses increased
accordingly with the customer growth. Utility revenues and expenses
decreased in 1994 as a result of the sale of the midwest water
utilities which closed on August 31, 1993. A comparison of utility
operations held at December 31, 1994 to the prior period indicates
revenues increased $2,257 or 8.5% in 1994 when compared to 1993 and
expenses increased $4,169 or 20.5% in 1994 when compared to 1993. The
increase in expenses for 1994 is primarily a result of a year of
utility operations in Arizona, amounts accrued for pending litigation,
and the amortization of rate case costs.
Interest income decreased $1,472 or 13.2% during 1995 when
compared to 1994 and $2,860 or 20.5% during 1994 when compared to
1993. The declines in interest income are primarily attributable to
lower average aggregate balances of the Company's contract and
mortgage notes receivable portfolio. The average balance of Avatar's
receivable portfolio was $95,299, $109,265 and $127,909 for 1995, 1994
and 1993, respectively.
A pre-tax gain on the sale of subsidiaries of $21,822 in 1993 was
the result of the sale of the midwest water utilities, which generated
net proceeds of approximately $59,400.
16<PAGE>
<PAGE> 17
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
RESULTS OF OPERATIONS -- continued
Trading account profit, net, increased $6,570 for 1995 when
compared to 1994 and increased $342 in 1994 when compared to 1993.
Trading account profit, net, represents interest income and realized
and unrealized gains and losses related to the trading investment
portfolio, net of commissions payable to investment advisors.
Other revenues for 1993 include a reduction of the estimated
development liability for sold land of $4,532 as a result of the
purchase of Rio Rico Utilities.
General and administrative expenses decreased $976 or 9.5% in
1995 compared to 1994 and increased $1,604 or 18.6% in 1994 compared
to 1993. The decrease for 1995 compared to 1994 resulted from
reductions in the accrual for incentive compensation recorded for
executive officers and expenses related to a legal settlement. The
increase in 1994 compared to 1993 was primarily attributable to an
increase in professional fees and the estimated cost of a legal
settlement.
Interest expense increased $420 or 3.7% in 1995 when compared to
1994 and decreased $4,449 or 28.4% in 1994 when compared to 1993. The
increase in 1995 is primarily due to the increase in the outstanding
balance of notes, mortgage notes and other debt, which was partially
offset by capitalization of interest associated with the development
and construction costs of approximately $3,234 for 1995 and $1,625
for 1994. The decrease for 1994 was primarily attributable to the
capitalization of interest, as well as an overall decrease in notes,
mortgage notes and other debt outstanding during 1994.
LIQUIDITY AND CAPITAL RESOURCES
Avatar's primary business activities, which include housing,
vacation ownership, retail land sales, land development, resort
operations and utility services, are capital intensive in nature.
Avatar expects to fund its operations and capital requirements through
a combination of cash and investment securities on hand, operating
cash flows and external borrowings. Avatar has extended certain lines
of credit to May 31, 1997 and is in the process of renegotiating one
additional line of credit which expires May 31, 1996 and which is
expected to be extended.
In 1995, net cash used in operating activities amounted to
$20,180 as a result of an increase in inventories, which included
expenditures from land development, housing, and vacation ownership
operations of $37,843, partially offset by principal payments on
contracts receivable of $19,475 and $11,000 in withdrawals from the
investment portfolio. Net cash used in investing activities of $13,753
in 1995 resulted primarily from investments in property, plant and
equipment. Net cash provided by financing activities of $31,635
resulted primarily from net proceeds from revolving lines of credit
and long-term borrowings of $76,035 less principal payments on
revolving lines of credit and long-term borrowings of $44,013.
In 1994, net cash provided by operating activities was $7,711
and resulted primarily from operations, including principal payments
on contracts receivable of $20,043. Net cash used in investing
activities of $15,530 in 1994 resulted primarily from
investments in property, plant and equipment. Net cash provided
by financing activities of $5,406 resulted primarily from net
proceeds
17<PAGE>
<PAGE> 18
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
LIQUIDITY AND CAPITAL RESOURCES -- continued
from revolving lines of credit and long-term borrowings of $26,584
less principal payments on revolving lines of credit and long-term
borrowings of $21,178.
Avatar's secured lines of credit were $57,513 and $59,819 at
December 31, 1995 and 1994, respectively. Avatar's unsecured credit
lines were $15,000 at December 31, 1995 and 1994, respectively. The
unused portions of the secured and unsecured credit lines were $0 and
$12,025, respectively, at December 31, 1995. Included in these lines
of credit is a line of credit secured by investments, which had an
outstanding balance at December 31, 1995 of $36,000 and will mature
May 31, 1997, with a mandatory paydown of $10,000 by December 31,
1996. Also included are two lines of credit with balances
outstanding at December 31, 1995 of $8,774 and $11,250; due May 31,
1996 and May 31, 1997, respectively. These lines are collateralized
by certain contracts receivable.
In the first quarter of 1996, Avatar received approval for an
additional line of credit for up to $10,000, with a maturity date five
years from the closing date which is expected to occur during the
second quarter of 1996 and which will be collateralized by certain
contracts receivable. Avatar also obtained a line of credit in the
initial amount of $10,000, collateralized by the stock of Avatar
Mortgage Funding Inc. This line will increase to $16,000 upon
extinguishment of the Avatar Homesite Mortgage Trust Notes and
substitution of contracts receivable as collateral, which is
anticipated to occur during the third quarter of 1996, and will mature
May 31, 1997.
Avatar has planned utility construction for 1996 totaling
approximately $16,742 and planned land development expenditures of
$43,812 during 1996, of which $38,014 is related to housing. The
Company's planned land development expenditures will result in
additional inventory and the preservation of development permits. It
is anticipated that land development and utility construction
expenditures for 1996 will be funded by operating cash flow and
borrowings from external sources.
As of December 31, 1995, Avatar had approximately $48,258 in
investments which are all classified as trading (See Note C to the
Consolidated Financial Statements). 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 1995, the Company's cash requirements necessitated
the use of $11,000 from its portfolio proceeds. As of December 31,
1995, $46,729 of the investments serve as collateral for a secured
line of credit with an outstanding balance of $36,000.
Avatar's Board of Directors has authorized expenditures for the
purchase of Avatar's common stock and 8% and 9% senior debentures. As
of December 31, 1995, the remaining authorized expenditures for this
purpose were $2,942.
Management does not anticipate a significant change in interest
rates for 1996, and, accordingly, does not expect Avatar's primary
business activities to be adversely affected by interest rates.
Avatar's homesite and vacation ownership sales are not dependent upon
the customer obtaining third party financing. Vacation ownership
sales are substantially funded under a credit facility agreement. A
high interest rate environment would be likely to adversely affect
Avatar's real estate results of operations and
18<PAGE>
<PAGE> 19
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
LIQUIDITY AND CAPITAL RESOURCES -- continued
liquidity because certain of Avatar's debt obligations are tied
to prevailing interest rates. Increases in interest rates affecting
the Company's utility operations generally are passed on to the
consumer through the regulatory process.
EFFECTS OF INFLATION AND ECONOMIC CONDITIONS
Inflation has had a minimal impact on Avatar's operations over
the past several years, and management believes its effect has been
neither significant nor greater than its effect on the industry as a
whole. It is anticipated that the impact of inflation on Avatar's
operations for 1996 will not be significant.
IMPACT OF TAX INSTALLMENT METHOD
In years 1988 through 1994, the Company elected the installment
method for recording a substantial amount of its homesite and vacation
ownership sales on its federal income tax return, which deferred
taxable income into future fiscal periods. As a result of this
election, the Company may be required to pay compound interest on
certain federal income taxes in future fiscal periods as a result of
the taxable income deferred under the installment method. The Company
believes that the potential interest amount, if any, will not have a
material effect on its financial position and results of operations
for the affected future periods.
19<PAGE>
<PAGE> 20
Item 8. Financial Statements and Supplementary Data
Report of Independent Certified Public Accountants............. 21
Consolidated Balance Sheets -- December 31, 1995 and 1994...... 22
Consolidated Statements of Operations -- For the years ended
December 31, 1995, 1994 and 1993............................ 23
Consolidated Statements of Stockholders' Equity -- For the
years ended December 31, 1995, 1994 and 1993.............. 24
Consolidated Statements of Cash Flows -- For the years ended
December 31, 1995, 1994 and 1993............................. 25
Notes to Consolidated Financial Statements..................... 27
20<PAGE>
<PAGE> 21
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors
Avatar Holdings Inc.
We have audited the accompanying consolidated balance sheets of Avatar
Holdings Inc. and subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1995. Our audits also included the financial statement
schedule listed in the index at Item 14. These financial statements
and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and related schedule are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Avatar Holdings Inc. and subsidiaries at
December 31, 1995 and 1994, and the consolidated results of their
operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
As discussed in Note A to the consolidated financial statements, in
1993 the Company changed its methods of accounting for income taxes,
investments and postretirement benefits other than pensions.
/s/ERNST & YOUNG LLP
Miami, Florida
February 26, 1996 except for Note H,
as to which the date is March 28, 1996
21<PAGE>
<PAGE> 22
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31 December 31
1995 1994
---------- -----------
<S> <C> <C>
Assets
------
Cash $2,467 $4,765
Restricted cash 4,048 1,272
Investments - trading 48,258 51,582
Contracts, mortgage notes and other
receivables, net 64,515 71,424
Land and other inventories 149,270 121,149
Property, plant and equipment, net 182,844 177,385
Other assets 15,209 15,835
Regulatory assets 4,021 3,165
---------- ----------
Total Assets $470,632 $446,577
========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Liabilities
-----------
Notes, mortgage notes and other debt:
Real estate and corporate $104,897 $99,754
Development and construction loans 24,535 3,014
Utilities 43,164 38,194
Estimated development liability for sold land 13,033 19,165
Accounts payable 9,306 5,610
Accrued and other liabilities 32,886 29,114
Deferred customer betterment fees 18,997 19,214
Minority interest in consolidated subsidiaries 9,060 9,059
---------- ----------
Total Liabilities 255,878 223,124
Commitments and contingent liabilities
Contributions in aid of construction 56,342 54,702
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
Retained earnings 399 10,738
---------- ----------
220,385 230,724
Treasury stock, at cost, 3,620,346 shares 61,973 61,973
---------- ----------
Total Stockholders' Equity 158,412 168,751
---------- ----------
Total Liabilities and Stockholders' Equity $470,632 $446,577
========== ==========
</TABLE>
See notes to consolidated financial statements.
22<PAGE>
<PAGE> 23
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
For the year ended December 31
------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Revenues
--------
Real estate sales $55,981 $43,863 $39,997
Deferred gross profit on homesite sales (713) (1,710) (1,278)
Utility revenues 29,669 28,664 45,957
Interest income 9,653 11,125 13,985
Gain on sale of subsidiaries - - 21,822
Trading account profit, net 6,912 342 -
Other 663 564 5,565
--------- -------- ---------
Total revenues 102,165 82,848 126,048
Expenses
--------
Real estate expenses 65,895 50,576 47,494
Utility expenses 24,923 24,651 34,781
General and administrative expenses 9,248 10,224 8,620
Interest expense 11,627 11,207 15,656
Other 811 811 1,261
-------- -------- ---------
Total expenses 112,504 97,469 107,812
-------- -------- ---------
(Loss) income before income taxes and
cumulative effect of changes
in methods of accounting (10,339) (14,621) 18,236
Provision for income taxes - - 12,762
-------- -------- --------
(Loss) income before cumulative effect
of changes in methods of accounting (10,339) (14,621) 5,474
Cumulative effect of change in method
of accounting for income taxes - - (964)
Cumulative effect of change in method of
accounting for investments (net of
income taxes of $238) - - 388
--------- --------- --------
Net (loss) income ($10,339) ($14,621) $4,898
========= ========= ========
Per share amounts:
(Loss) income before cumulative effect
of changes in methods of accounting ($1.14) ($1.61) $0.56
Cumulative effect of change in method
of accounting for income taxes - - (0.10)
Cumulative effect of change in method
of accounting for investments - - 0.04
-------- -------- --------
Net (loss) income ($1.14) ($1.61) $0.50
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
23<PAGE>
<PAGE> 24
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(Dollars in thousands)
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained Treasury
Stock Capital Earnings Stock
--------- ----------- ---------- --------
<S> <C> <C> <C> <C>
Balance at January 1, 1993 $10,027 $149,124 $20,461 $34,973
Net income - - 4,898 -
Conversion of 5-1/4% debentures 2,688 58,147 - -
Purchase of treasury stock - - - 27,000
------- -------- -------- -------
Balance at December 31, 1993 12,715 207,271 25,359 61,973
Net (loss) - - (14,621) -
------- -------- -------- -------
Balance at December 31, 1994 12,715 207,271 10,738 61,973
Net (loss) - - (10,339) -
------- -------- -------- -------
Balance at December 31, 1995 $12,715 $207,271 $399 $61,973
======= ======== ======== =======
</TABLE>
There are 5,000,000 authorized shares of preferred stock, none of
which are issued.
See notes to consolidated financial statements.
24<PAGE>
<PAGE> 25
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
For the year ended December 31
--------------------------------
1995 1994 1993
--------- -------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
- - --------------------
Net (loss) income ($10,339) ($14,621) $4,898
Adjustments to reconcile net (loss) income to
net cash (used in) provided by operating
activities:
Gain on sale of subsidiaries - - (21,822)
Depreciation and amortization 9,934 8,453 9,441
Deferred gross profit 713 1,710 1,278
Deferred income taxes - - 11,897
Cost of sales not requiring cash 3,590 3,010 1,962
Cumulative effect of change in method of
accounting for income taxes - - 964
Cumulative effect of change in method of
accounting for investments (net of income
taxes of $238) - - (388)
Trading account profit, net (6,912) (342) -
Changes in operating assets and liabilities:
Restricted cash (2,776) 170 189
Investments - trading 11,000 - (50,000)
Principal payments on contracts receivable 19,475 20,043 21,249
Receivables (12,017) (9,655) (9,934)
Other receivables (1,262) (526) 4,386
Inventories (37,843) (6,768) (13,033)
Prepaid expenses and other assets 626 (375) (4,636)
Accounts payable and accrued and other
liabilities 5,631 6,612 3,474
-------- -------- --------
NET CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES (20,180) 7,711 (40,075)
INVESTING ACTIVITIES
- - --------------------
Investment in property, plant and equipment (13,753) (15,530) (11,567)
Net proceeds from sale of subsidiaries - - 59,371
Investments in marketable securities - - (425)
Proceeds from the sale of securities - - 17,444
-------- -------- --------
NET CASH (USED IN) PROVIDED BY INVESTING
ACTIVITIES (13,753) (15,530) 64,823
FINANCING ACTIVITIES
- - --------------------
Net proceeds from revolving lines of credit and
long-term borrowings 76,035 26,584 26,121
Principal payments on revolving lines of credit
and long-term borrowings (44,013) (21,178) (48,538)
Purchase of 8% debentures - - (31)
Purchase of 9% debentures (387) - (1,106)
Net proceeds from issuance of common stock in
conjunction with the redemption/conversion of
5 1/4% debentures - - 30,340
Purchase of treasury stock - - (27,000)
-------- ------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES $31,635 $5,406 ($20,214)
-------- -------- ---------
</TABLE>
See notes to consolidated financial statements.
25<PAGE>
<PAGE> 26
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows -- continued
(Dollars in thousands)
<TABLE>
<CAPTION>
For the year ended December 31
--------------------------------
1995 1994 1993
--------- --------- --------
<S> <C> <C> <C>
(DECREASE) INCREASE IN CASH ($2,298) ($2,413) $4,534
Cash at beginning of year 4,765 7,178 2,644
--------- --------- --------
CASH AT END OF YEAR $2,467 $4,765 $7,178
========= ========= =========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES
---------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Redemption/conversion of 5-1/4% debentures - - $30,917
======== ======== =========
Contributions in aid of construction $5,000 $1,344 $5,046
======== ======== =========
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
-------------------------------------------------
<TABLE>
<CAPTION>
For the year ended December 31
---------------------------------
Cash paid during the period for: 1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Interest (net of amount capitalized of
$3,234, $1,625, and $381 in 1995, 1994,
and 1993, respectively) $9,557 $10,921 $15,327
========= ========= =========
Income taxes $0 $255 $2,038
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
26<PAGE>
<PAGE> 27
AVATAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
(Dollars in thousands except per-share data)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
----------------------------
The consolidated financial statements include Avatar
Holdings Inc. and its subsidiaries (collectively, "Avatar" or
the "Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation.
General:
--------
Avatar is principally engaged in the business of
developing and selling single family and multifamily
residential housing, vacation ownership intervals, improved
and unimproved real estate, and providing water and wastewater
utility services.
Restricted Cash:
----------------
Restricted cash represents collections of monthly
payments, totaling $931 at December 31, 1995, on pledged
mortgage notes receivable. These collections will be applied
to reduce the related mortgage trust notes (See Note H). Also
included in restricted cash, at December 31, 1995, are utility
deposits of $28, housing deposits of $1,044 and vacation
ownership deposits of $2,045. The housing deposits will
become available to the Company when the housing contracts
close and the vacation ownership deposits became available to
the Company upon approval from the state of Tennessee in
January 1996.
Land Inventories:
-----------------
Land inventories are stated at the lower of cost or
estimated net realizable value. Cost includes expenditures
for acquisition, construction, development and carrying
charges. Interest costs incurred during the period of land
development, when applicable, are capitalized as part of the
cost of such projects. Land acquisition costs are allocated
to individual land parcels based upon the relationship that
the estimated sales prices of specific parcels bear to the
total sales price of the entire community. Construction and
development costs are added to the value of the specific
parcels for which the costs are incurred.
Revenues:
---------
The Company uses the installment method of profit
recognition for sales of homesites, the accrual method of
profit recognition for sales of completed vacation ownership
intervals, and the percentage of completion method for sales
of those vacation ownership intervals which are under
construction. Under the installment method, the gross profit
on recorded sales is deferred and recognized in income of
future periods as principal payments on related contracts are
received, and deferred profit is included in the
balance sheet, as a reduction of contracts receivable,
until
27<PAGE>
<PAGE> 28
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
continued
recognized. Under the percentage of completion method, the
gross profit on recorded sales is recognized based upon the
percentage of construction completed.
Sales of housing units are recognized in full upon the
transfer of title to a purchaser. Revenues from commercial
land and bulk land sales are recognized in full at closing,
provided the purchaser's initial investment is adequate, all
financing is considered collectible and Avatar is not
obligated to perform significant future activities.
Utility revenues are recorded as the service is provided.
Property, Plant and Equipment:
------------------------------
Property, plant and equipment are stated at cost and
depreciation is computed principally by the straight line
method over the estimated useful lives of the assets.
Depreciation, maintenance and operating expenses of equipment
utilized in the development of land are capitalized as land
inventory cost.
Income Taxes:
-------------
Effective January 1, 1993, the Company adopted Financial
Accounting Standards Board Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." Under
Statement No. 109, the liability method is used in accounting
for income taxes where deferred income tax assets and
liabilities are determined based on differences between
financial reporting and tax basis of assets and liabilities
and are measured using the enacted tax rates and laws that are
expected to be in effect when the differences reverse.
As permitted by Statement No. 109, the Company elected
not to restate its financial statements for any prior years.
The cumulative effect of adopting Statement No. 109 resulted
in a charge to net income during 1993 of $964. The
cumulative effect of adopting Statement No. 109 for Avatar's
utility subsidiaries was not credited or charged to net
income, but was recorded as a regulatory liability or
regulatory asset in accordance with accounting procedures
applicable to regulated enterprises. The regulatory
liabilities and regulatory assets will generally be amortized
to income or expense over the useful life of the utility
system and reflect probable future revenue reductions or
increases from ratepayers. The effect of the adoption of
Statement No. 109 on income from continuing operations for
the year ended December 31, 1993 was not material.
Deferred Customer Betterment Fees:
----------------------------------
Amounts collected from customers for utility improvements
are classified as "Deferred Customer Betterment Fees". These
fees will be reclassified to "Contributions in Aid of
Construction" when service to the customer begins.
28<PAGE>
<PAGE> 29
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
continued
Contributions in Aid of Construction:
-------------------------------------
Advances from real estate developers and other direct
contributions to utility subsidiaries for plant construction
are recorded as "Contributions in Aid of Construction". To
the extent required by regulatory agencies, the account
balance is amortized over the depreciable life of the utility
plant as an offset against depreciation expense.
Investments:
------------
In 1993, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," which among other
things, requires that companies classify certain debt and
equity securities as "held to maturity", "available for sale"
or "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
value, which was $48,258 at December 31, 1995 and $51,582 at
December 31, 1994. Subsequent to the initial adoption of
Statement No. 115, gains and losses, both realized and
unrealized are included in net trading account profit. The
cumulative effect for the year ended December 31, 1993 of
adopting Statement No. 115 increased net income by $388 (net
of deferred income taxes of $238) or $.04 per share.
Postretirement Benefits:
------------------------
In 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." This statement
requires the accrual of postretirement benefits (such as
health care benefits) during the years an employee provides
services. These benefits for retirees currently are provided
only to the employees of the Company's utility subsidiaries.
The costs of these benefits were previously expensed on a pay-
as-you-go basis.
Advertising Costs:
------------------
Advertising costs are expensed as incurred . For the years
ended December 31, 1995, 1994 and 1993, advertising costs
totaled $3,265, $1,304 and $826, respectively.
Net Income/Loss Per Common Share:
---------------------------------
For 1995 and 1994, net loss per share of Common Stock was
computed on the basis of the weighted average number of shares
outstanding of 9,095,102.
For 1993, net income per share of Common Stock was
computed on the basis of the weighted average number of shares
outstanding plus common stock equivalents, if any, that
would result from the dilutive effect of the assumed
conversion (and associated purchase) of the 5 1/4%
convertible-purchase subordinated debentures. In 1993, the
Company redeemed or converted all of the 5 1/4% convertible-
purchase subordinated debentures into 2,688,276 shares of
Common Stock.
29<PAGE>
<PAGE> 30
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
continued
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 will adopt
Statement No. 121 in the first quarter of 1996 and currently
does not believe that such adoption will have a material
effect on the Company's operations or financial position.
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.
Reclassifications:
------------------
Certain 1994 and 1993 financial statement items have been
reclassified to conform with 1995 presentations.
30<PAGE>
<PAGE> 31
NOTE B - REAL ESTATE SALES
The components of real estate sales are as follows:
<TABLE>
<CAPTION>
For the year ended December 31
----------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Gross homesite sales $12,561 $12,271 $10,913
Housing sales 13,260 7,400 7,268
Vacation ownership sales 7,407 1,338 530
Resort revenues 14,320 13,222 13,540
Commercial/Industrial land sales 2,624 4,001 2,149
Rental, leasing, cable and other
real estate operations 5,809 5,631 5,597
--------- --------- ---------
Total real estate sales $55,981 $43,863 $39,997
========= ========= =========
</TABLE>
NOTE C - INVESTMENTS
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 based generally on prices
quoted by investment brokerage companies.
Avatar's investment portfolio at December 31, 1995 and
1994 included corporate bonds and other 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, money market accounts and U.S. Government and
Agency securities. The non-rated bonds are thinly traded and
may require 60 to 90 days to liquidate. The portfolio also
includes 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 as of December 31):
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Corporate bonds $21,985 $21,352
Non-rated bonds 8,472 13,069
Equity securities 2,045 8,472
U.S. Government
and Agency securities - 1,930
Other rated bonds 4,753 -
Money market accounts 11,519 11,065
Less: Securities sold short (516) (1,856)
Forward foreign exchange contracts - (2,450)
--------- ---------
Total fair value $48,258 $51,582
========= =========
Aggregate cost $44,116 $52,717
========= =========
</TABLE>
31<PAGE>
<PAGE> 32
NOTE C - INVESTMENTS -- continued
As of December 31, 1995, the portfolio did not include any
forward foreign exchange contracts. At December 31, 1994, the
portfolio included certain forward foreign exchange contracts,
with a fair value (carrying amount) of $2,450, used by
portfolio managers to hedge the foreign currency risk
associated with certain bonds denominated in foreign currency.
The average fair value during 1995 and 1994 of forward foreign
exchange contracts was $1,140 and $3,025, respectively.
NOTE D - CONTRACTS, MORTGAGE NOTES AND OTHER RECEIVABLES
Contracts, mortgage notes and other receivables are
summarized as follows:
<TABLE>
<CAPTION>
December 31
------------------------
1995 1994
---------- ----------
<S> <C> <C>
Contracts and mortgage notes receivable $89,317 $101,280
Notes and other receivables 7,268 5,948
--------- ----------
96,585 107,228
--------- ----------
Less:
Allowance for doubtful accounts 1,003 1,387
Market valuation reserve 704 1,184
Deferred gross profit 27,589 30,221
Other 2,774 3,012
--------- ---------
32,070 35,804
--------- ---------
$64,515 $71,424
========= =========
</TABLE>
Contracts and mortgage notes receivable are generated
through the sale of homesites at various sales offices located
throughout the northeast, midwest and west coast of the United
States. A significant portion of the contracts and mortgage
notes receivable at December 31, 1995 resulted from sales made
to customers in the northeast. Contracts receivable are
collectible primarily over a ten year period and bear interest
at rates primarily ranging from 7 1/2% to 12% per annum
(weighted average rate 9.9%). The Company generally requires
that customers pledge the homesites as collateral for
contracts and mortgages receivable, and such collateral can be
repossessed by the Company in the event of a default. A
contract receivable is considered delinquent if the scheduled
installment payment remains unpaid 30 days after its due date.
Delinquent principal amounts of contracts and mortgage notes
receivable at December 31, 1995 and 1994 were $11,619 or 13.0%
and $11,207 or 11.1%, respectively. Estimated maturities for
the five years subsequent to 1995 are: 1996 - $18,535; 1997 -
$18,142; 1998 - $15,424; 1999 - $10,959 and 2000 - $7,530.
32<PAGE>
<PAGE> 33
NOTE E - LAND AND OTHER INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
Land developed and in process of development $95,315 $80,629
Land held for future development or sale 34,790 34,730
Dwelling units completed or under construction 18,044 4,232
Other 1,121 1,558
---------- ----------
$149,270 $121,149
========== ==========
</TABLE>
NOTE F - ESTIMATED DEVELOPMENT LIABILITY FOR SOLD LAND
The estimated development cost for sold land consists of
required land and utility improvements in all areas designated
for homesite sales and is summarized as follows:
<TABLE>
<CAPTION>
December 31
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Gross unexpended costs(net of recoveries
of $11,495 in 1995 and $12,002 in 1994) $19,022 $25,554
Less costs relating to unsold homesites 5,989 6,389
--------- ---------
Estimated development liability for sold land $13,033 $19,165
========= =========
</TABLE>
These estimates are based on engineering studies of
quantities of work to be performed based on current estimated
costs and are reevaluated annually and adjusted accordingly.
A major portion of the estimated development liability for
sold land relates to utility extensions for homesites at
Avatar's Arizona community (Rio Rico) which were sold prior to
1980. At Rio Rico, Avatar entered into various service and
construction agreements with Citizens Utilities Company
("Citizens"), a non-related company, generally providing for
Avatar to construct certain utility facilities and deed them
to Citizens. Avatar's expenditures, related to the
construction of some of these facilities, are expected to be
reimbursed from Citizens' present and future customers. Some
of these reimbursable amounts are determined by specific
formulas. The recovery of these expenditures is dependent
upon the community attaining an occupancy and/or usage level
sufficient to allow reimbursement prior to the expiration of
the agreements. During 1993, Avatar purchased Citizens'
water and wastewater treatment division thereby voiding the
portion of the existing agreement relating to water and
wastewater extensions, leaving only the electrical portion.
Avatar may be obligated to expend approximately $6,911
(current costs) to complete water and wastewater utility
facilities at Poinciana. These possible future obligations
are based on internal engineering studies and are not included
in the estimated development liability discussed above. As
such, past and future expenditures are expected to be
recovered from customers' fees and future revenues.
Expenditures, net of recoveries, for homesite improvement
costs totaling $19,022 are estimated as follows: 1996-
$5,798, 1997-$3,252 and thereafter-$9,972. Because the
timing of the expenditures after 1997 is dependent upon
certain future occurrences beyond Avatar's control,
33<PAGE>
<PAGE> 34
NOTE F - ESTIMATED DEVELOPMENT LIABILITY FOR SOLD LAND --
continued
projections yearly after 1997 are not practicable.
NOTE G - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment and accumulated depreciation
consist of the following:
<TABLE>
<CAPTION>
December 31
--------------------------
1995 1994
---------- ----------
<S> <C> <C>
Utility land, plant and equipment $219,271 $201,934
Land and improvements 12,844 12,757
Buildings and improvements 19,361 24,197
Machinery, equipment and fixtures 14,887 14,392
Other 418 366
---------- ----------
266,781 253,646
Less accumulated depreciation 83,937 76,261
---------- ----------
$182,844 $177,385
========== ==========
</TABLE>
Depreciation charged to operations during 1995, 1994 and
1993 was $5,883, $5,655 and $6,524, respectively, net of
amortization of contributions and advances in aid of
construction of $4,051, $2,798 and $2,917 during 1995, 1994
and 1993, respectively.
NOTE H - NOTES, MORTGAGE NOTES AND OTHER DEBT
Notes, mortgage notes and other debt are summarized as follows:
<TABLE>
<CAPTION>
December 31
---------------------
1995 1994
--------- ---------
<S> <C> <C>
Real estate and corporate
Bank credit lines $57,513 $44,719
8% senior debentures, due 2000, net of
unamortized discount of $1,080 and $1,241,
respectively 6,547 6,386
9% senior debentures, due 2000, net of
unamortized discount of $2,725 and $3,139,
respectively 22,619 22,592
Mortgage note obligations, interest rates from
8.75% to 10%, due from 1996 - 2002 9,612 5,808
Avatar Homesite Mortgage Trust 1992 - 2002, 7% Notes 8,606 20,249
--------- ---------
$104,897 $99,754
========= =========
Development and construction loans,
interest rates from 8% to 10.75% $24,535 $3,014
========= =========
Utilities
Bank credit lines $2,975 $6,725
Utility first mortgage bonds due serially from
1996 - 2007, interest rates from 7.79% to 9.19% 16,820 24,921
Utility senior notes, 7.27%, due 2000 - 2010 18,000 -
Utility promissory notes, due 1996 - 2002 5,369 6,548
--------- --------
$43,164 $38,194
========= ========
</TABLE>
34<PAGE>
<PAGE> 35
NOTE H - NOTES, MORTGAGE NOTES AND OTHER DEBT -- continued
At December 31, 1995, Avatar had secured bank credit
lines of $57,513 and unsecured bank credit lines of $15,000.
The unused portions of the secured and unsecured credit lines
were $0 and $12,025 at December 31, 1995. Interest rates for
borrowings under these lines range from 8% to 10.5% on the
secured bank credit lines and from 6.57% to 8.5% on the
unsecured bank credit lines at December 31, 1995. The weighted
average interest rate on short term borrowings at December 31,
1995 was 8.2%. Additionally, certain credit lines provide for
fixed rate borrowing pursuant to Eurodollar interest rates.
Under the terms of these agreements, Avatar is restricted from
paying dividends and is required to maintain a minimum net
worth as defined therein. The secured lines are
collateralized by certain real property, and contracts and
mortgage notes receivable of $25,494 and investments of
$46,729 at December 31, 1995.
In 1992, Avatar issued $51,160 of 7% Mortgage Trust
Notes pursuant to the securitization of a portion of its
homesite receivables. The notes mature on December 15, 2002;
however, the Company expects the notes to be repaid during the
third quarter of 1996. Any liquidation proceeds with respect
to the mortgage loans, proceeds from the sale of property
acquired through foreclosure or deed-in-lieu of foreclosure
proceedings and proceeds from the purchase of mortgage loans
by the issuer are required to be applied to these notes. The
balance of these notes at December 31, 1995 was $8,606.
Maturities of notes, mortgage notes and other debt at
December 31, 1995, are as follows:
<TABLE>
<CAPTION>
Development
Real estate and Construction Utilities Total
------------- ---------------- --------- ----------
<S> <C> <C> <C> <C>
1996 $19,806 $2,916 $5,147 $27,869
1997 38,286 5,441 3,573 47,300
1998 4,752 11,967 2,275 18,994
1999 794 2,442 2,275 5,511
2000 34,048 1,769 3,911 39,728
thereafter 7,211 - 25,983 33,194
------------- --------- --------- ----------
$104,897 $24,535 $43,164 $172,596
============= ========= ========= ==========
</TABLE>
Maturities for 1996 include approximately $8,932 related
to one of the Company's bank credit lines, which Avatar will
seek to extend or refinance. There is no assurance, however,
that Avatar will be able to obtain a satisfactory extension
or refinancing of this credit line.
In the first quarter of 1996, Avatar received approval
for an additional line of credit for up to $10,000, with a
maturity date five years from the closing date which is
expected to occur during the second quarter of 1996 and
which is collateralized by certain contracts receivable.
Avatar also obtained a line of credit in the initial amount
of $10,000, collateralized by the stock of Avatar Mortgage
Funding Inc. This line will increase to $16,000 upon
extinguishment of the Avatar Homesite Mortgage Trust Notes
and substitution of contracts receivable as collateral,
which is anticipated to occur during the third quarter of
1996, and will mature May 31, 1997.
Interest capitalized during 1995, 1994 and 1993 amounted to
$3,234, $1,625 and $381, respectively.
Property, plant and equipment, and inventory pledged as
collateral for notes, mortgage notes and other indebtedness,
had a net book value of approximately $156,000 at December 31,
1995.
35<PAGE>
<PAGE> 36
NOTE I - MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES
As of December 31, 1995 and 1994, outstanding preferred
stock of a subsidiary is as follows:
<TABLE>
<CAPTION>
December 31
-----------------------
1995 1994
-------- --------
<S> <C> <C>
9% cumulative preferred stock $9,000 $9,000
Other 60 59
-------- --------
$9,060 $9,059
======== ========
</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"
relating to preferred stock dividends of subsidiaries amounted
to $811 in 1995, $811 in 1994 and $1,261 in 1993.
NOTE J - RETIREMENT PLANS
Avatar has two defined contribution savings plans that
cover substantially all employees. Under one of the savings
plans, Avatar contributes to the plan based upon specified
percentages of employees' voluntary contributions. The other
savings plan does not provide for contributions by Avatar.
Avatar's non-contributory defined benefit pension plan
covers substantially all employees of its subsidiary, Avatar
Utilities Inc. The benefits are based on years of service and
the employees' compensation during the highest five out of the
last ten years of employment. Avatar's funding policy is to
contribute amounts to the plan sufficient to meet the minimum
funding requirements set forth in the Employee Retirement
Income Security Act of 1974.
36<PAGE>
<PAGE> 37
NOTE J - RETIREMENT PLANS -- continued
The following table sets forth the defined benefit plan's
funded status as of December 31, 1995, 1994 and 1993 and the
retirement expense recognized in the consolidated statements
of income for the years then ended.
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $2,924, $2,382, and $3,316,
respectively $3,025 $2,526 $3,382
======== ======== ========
Projected benefit obligation for services
rendered to date ($3,646) ($3,159) ($4,201)
Plan assets at fair value 3,642 3,036 4,800
-------- -------- --------
Projected benefit obligation less than
(in excess of) plan assets (4) (123) 599
Unrecognized net gain (413) (413) (788)
Prior service cost not yet recognized in net
periodic pension cost 409 456 192
Unrecognized net assets at January 1, 1986,
net of amortization (73) (87) (102)
-------- -------- -------
Accrued pension cost included in accrued and
other liabilities ($81) ($167) ($99)
======== ======== =======
Net retirement cost included the following
components:
Defined Benefit Plan:
Service cost -- benefits earned during the period $190 $209 $220
Interest cost on projected benefit obligation 250 229 190
Actual return on plan assets (495) (362) (241)
Net amortization and deferral 245 169 51
-------- ------- -------
Net pension cost 190 245 220
Defined contribution plan 117 102 89
-------- ------- -------
Total retirement expense $307 $347 $309
======== ======= =======
</TABLE>
The actuarial assumptions used in determining the present
value of the projected benefit obligation were: weighted
average discount rate of 7 1/2% in 1995 and 1994 and 8% in
1993, rate of increase in future compensation levels of 5% in
1995 and 1994 and 6% in 1993, and expected long-term rate of
return on plan assets of 8% in 1995, 1994 and 1993.
Plan assets are invested in the general asset fund of a
major insurance company, which is composed primarily of fixed
income securities, and a separate account, which is composed
of equity securities, public bonds or cash equivalents.
37<PAGE>
<PAGE> 38
NOTE K - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
A utility subsidiary of Avatar sponsors a defined non-
contributory benefit postretirement plan that provides medical
and life insurance benefits to salaried and nonsalaried
employees after retirement.
The utility's funding policy for its postretirement plan
was to fund on a pay-as-you-go basis. Prior to 1993, the
expense also was measured on this basis. In 1993, the
Company adopted FASB Statement No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions,"
which requires accounting for postretirement benefits on an
accrual basis.
The following table sets forth the plan's status as of
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
Accumulated postretirement benefit obligation: -------- --------
<S> <C> <C>
Retirees ($948) ($766)
Fully eligible active plan participants (768) (865)
Other active plan participants (2,299) (2,307)
-------- --------
(4,015) (3,938)
Plan assets at fair value 0 0
-------- --------
Accumulated postretirement benefit obligation
in excess of plan assets (4,015) (3,938)
Unrecognized net gain from past experience
different from that assumed and
from changes in assumptions (715) (195)
Unrecognized transition obligation 2,798 2,793
-------- --------
Accrued postretirement benefit cost ($1,932) ($1,340)
======== ========
Net periodic postretirement benefit cost
included the following components:
Service cost $273 $315
Interest cost on accumulated postretirement
benefit obligation 283 271
Amortization of transition obligation over 20 years 155 155
Other (35) (23)
-------- --------
Net periodic postretirement benefit cost $676 $718
======== ========
</TABLE>
For measurement purposes, the annual rate of increase in
the per capita cost of covered health care benefits assumed
for 1995 and 1994 was 11% and 12%, respectively and the rate
of increase was assumed to decrease gradually to 6% by the
year 2000 and remain at that level thereafter. The health
care cost trend rate assumption has a significant effect on
the amounts reported. To illustrate, increasing the assumed
health care cost trend rates by 1 percentage point each year
would increase the accumulated postretirement benefit
obligation as of December 31, 1995 by $777 and the aggregate
of the service and interest cost components of net periodic
postretirement benefits for the year then ended by $130.
The weighted average discount rate used in determining the
accumulated postretirement benefit obligation for 1995 and
1994 was 7.5% and 8%, respectively.
38<PAGE>
<PAGE> 39
NOTE L - LEASE COMMITMENTS
Avatar leases the majority of its administration and sales
offices under operating leases that expire at varying times
through 1999. Rental expenses for the years 1995, 1994 and
1993 were $1,562, $1,235, and $1,186, respectively. Minimum
rental commitments under noncancelable operating leases as of
December 31, 1995 were as follows: 1996 - $1,700; 1997 -
$1,336; 1998 - $1,131; 1999 - $987 and 2000 - $410.
NOTE M - ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities are summarized as follows:
<TABLE>
<CAPTION>
December 31
---------------------
1995 1994
--------- --------
<S> <C> <C>
Customer deposits and advances $5,696 $3,090
Property taxes 5,886 5,787
Interest 1,573 1,759
Other 19,731 18,478
--------- ---------
$32,886 $29,114
========= =========
</TABLE>
As of December 31, 1995, the Company had incentive
compensation agreements with certain key employees providing
for a cash payment (to the extent vested), within ten days
following the respective fifth anniversary date of the
respective agreement (or respective termination date, if
earlier), in an amount equal to the excess of a formula
amount based upon the closing prices of Avatar common stock
during a specified period prior to the respective fifth
anniversary date (or respective termination date, if earlier)
over the closing price of Avatar common stock on the date of
the respective agreement. Generally, each such employee will
vest in the rights to the incentive compensation with respect
to one-fifth thereof in each of the first through fifth
anniversaries, subject to certain terms and conditions of the
respective agreements. For the years ended December 31, 1995
and 1994, the Company recorded incentive compensation of $39
and $763, respectively, associated with these agreements. The
liability for incentive compensation included in other
liabilities at December 31, 1995 and 1994 is $1,035 and $996,
respectively.
NOTE N - INCOME TAXES
Under the installment method of tax reporting for homesite
and vacation ownership sales, Avatar anticipates that its 1995
consolidated federal income tax return will reflect a net
operating loss carryforward of approximately $41,000, which
expires in years 2003 through 2010. In addition, investment
tax credits and alternative minimum tax credit carryforwards
of approximately $5,000 are available, a portion of which
expires in years 1996 to 2001. These carryforwards have not
been examined by the Internal Revenue Service.
The Company has recorded a valuation allowance of $42,000
with respect to the deferred income tax assets which remain
after offset by the deferred income tax liabilities. Included
in the valuation allowance for deferred income tax assets is
approximately $9,000 which, if utilized, will be credited to
additional paid-in capital.
39<PAGE>
<PAGE> 40
NOTE N - INCOME TAXES -- continued
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 December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Deferred income tax assets
Net operating loss carryforward $16,000 $10,000
Tax over book basis of land inventory 23,000 22,000
Unrecoverable land development costs 4,000 5,000
Tax over book basis of depreciable assets 7,000 6,000
Alternative minimum tax and investment tax
credit carryforward 5,000 5,000
Other 2,000 3,000
--------- ---------
Total deferred income taxes 57,000 51,000
Valuation allowance for deferred income tax assets (42,000) (38,000)
--------- ---------
Deferred income tax assets after valuation allowance 15,000 13,000
Deferred income tax liabilities
Book over tax income recognized on homesite
and vacation ownership sales (5,000) (4,000)
Deferred carrying charges on utility plant (3,000) (3,000)
Other (7,000) (6,000)
-------- ---------
Total deferred income tax liabilities (15,000) (13,000)
-------- ---------
Net deferred income taxes $0 $0
======== =========
</TABLE>
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- ---------
<S> <C> <C> <C>
Federal:
Current $ - $ - $321
Deferred - - 10,884
State:
Current - - 544
Deferred - - 1,013
-------- --------- ---------
Total $ - $ - $12,762
======== ========= =========
</TABLE>
40<PAGE>
<PAGE> 41
NOTE N - INCOME TAXES -- continued
A reconciliation of income tax expense (credit) to the
expected income tax expense (credit) at the federal statutory
rate of 34% (35% for 1993) for the year ended December 31 is
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Income tax expense ( credit) computed
at statutory rate ($3,515) ($4,971) $6,382
Incometaxeffect of non-deductible dividends
on preferred stock of subsidiary 276 275 441
State income tax (credit),net of federal effect (358) (535) 1,012
Difference between book and tax basis
of midwest water utilities - - 2,051
Other (403) 231 206
Change in valuation allowance on deferred
tax assets 4,000 5,000 2,670
------- ------- --------
Provision for income taxes $ - $ - $12,762
======= ======= ========
</TABLE>
In years 1988 through 1994, the Company elected the
installment method for recording a substantial amount of its
homesite and vacation ownership sales on its federal income
tax return, which deferred taxable income into future fiscal
periods. As a result of such election, the Company may be
required to pay compound interest on certain federal income
taxes in future fiscal periods as a result of the taxable
income deferred under the installment method. The Company
believes that the potential interest amount, if any, will not
have a material effect on its financial position and results
of operations during the affected future periods.
NOTE O - SALE OF SUBSIDIARIES
The Company closed on the sale of its midwest water
utilities, located in Indiana, Missouri, Ohio and Michigan,
on August 31, 1993, with an aggregate selling price of
$62,000, resulting in a pre-tax gain of $21,822.
NOTE P - REDEMPTION/CONVERSION OF 5 1/4% CONVERTIBLE-
PURCHASE SUBORDINATED DEBENTURES
During 1993, the Company redeemed all its outstanding 5
1/4% convertible-purchase subordinated debentures due May 1,
2007 (the "5 1/4% debentures") at a redemption price of 100%
of the principal amount plus accrued and unpaid interest
through the redemption date. Holders were entitled to convert
their 5 1/4% debentures into shares of the Company's common
stock at a conversion price of $23.00 per share provided they
paid in cash an amount equal to the principal amount of the 5
1/4% debentures being converted, for which they received
additional shares of common stock equal to the number issued
on conversion. The net result of this transaction, after
expenses, was an increase in cash of $30,340, a decrease in
debt of $30,973 and an increase in stockholders' equity of
$60,835.
41<PAGE>
<PAGE> 42
NOTE Q - TREASURY STOCK PURCHASE
On September 30, 1993, the Company purchased 1,000,000
shares of the Company's common stock from the estate of Peter
J. Sharp at a purchase price of $27.00 per share. These shares
are being held in the Company's treasury for future corporate
purposes.
NOTE R - 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, a utility subsidiary of
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(D)). The complaint alleges
that the Waterway Estates wastewater treatment plant, located
in Lee County, Florida, operated in violation of the Federal
Clean Water Act, 33 U.S.C. S1251 et seq at various times
during the period from October 1, 1988 through July 14, 1992.
The Federal Clean Water Act provides for maximum civil
penalties of $25 per day for each violation. On May 5 and
June 26, 1995, the United States amended the complaint to
include allegations against Florida Cities Water Company for
violations of the Federal Clean Water Act at two other
wastewater treatment plants, Barefoot Bay, located in
Brevard County, and Carrolwood, located in Hillsborough
County, Florida. The amended complaint alleges that the three
wastewater treatment plants were operated for various periods
of time without a federal discharge permit and that,
subsequently, certain pollutants were discharged in excess of
applicable federal permit limitations. In addition, the
government amended the complaint to include Avatar Holdings
Inc., the ultimate parent corporation, as a defendant. As a
result of the Court's disposition of two previous motions for
partial summary judgment, the Government's claims that the
Brevard County and Hillsborough County plants made discharges
without operating permits have been rejected, but the Court
found that the Waterway Estates plant did discharge from an
unpermitted location and made discharges without an operating
permit. The Court also found each plant made discharges in
excess of permit limitations at various times during the
period alleged. The Court found, however, that the parent
corporation had no liability for the claims of unpermitted
discharges at any of the three plants; the Court has not ruled
on the parent corporation's liability for any remaining
claims. Accordingly, the principal issues remaining in the
case relate to calculations of penalties, if any, due for
discharges from the plants which were allegedly not in
accordance with the applicable permits and administrative
orders, and for the discharges made without an operating
permit at the Waterway Estates plant and whether the parent
corporation has any liability for the remaining claims. The
trial has been scheduled to commence in March 1996. Based upon
the information currently available to it, Avatar believes
that it has strong defenses to the amended complaint and
intends to pursue those defenses vigorously.
On March 1, 1994, the Wisconsin Department of Natural
Resources (the "Department") notified Avatar that the
Department had recently issued a second Record of Decision
("ROD") in connection with the Edgerton Sand & Gravel Landfill
site (the "Site"). The ROD calls for the City of Edgerton's
public water supply system to be extended to the owners of
private wells in the vicinity of the Site. The ROD also
states that other work related to soil and groundwater
remedial action would
42<PAGE>
<PAGE> 43
NOTE R - CONTINGENCIES -- continued
be required at the Site. The Department demanded that all
potentially responsible parties ("PRPs") associated with the
Site organize into a PRP group to undertake the
implementation of the ROD. Avatar responded in writing to
the Department. No further action has been taken since by
the Department against Avatar in connection with the ROD.
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
allege that Avatar and the other named defendants disposed of
various substances at 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 have agreed
to pay the plaintiffs an aggregate of $3,179 in damages (of
which Avatar's share is $548). Under the terms of the
settlement, the Settling Defendants receive: a release and
covenant not to sue from the plaintiffs; a release, covenant
not to sue and contribution protection from the Department in
connection with operating and maintenance costs at the Site;
and releases and covenants not to sue from those Settling
Defendants who have incurred cleanup costs at the Site. The
settlement, however, will not be effective if the costs of
constructing and operating the public water supply system
exceeds $3,020 or the Wisconsin Department of Development
fails to award the city of Edgerton a $750 grant in connection
with the design and construction of the public water supply
system. If the settlement does not become effective, Avatar
has available to it a number of factual and legal defenses,
which if successful, would eliminate or substantially reduce
Avatar's potential liability.
43<PAGE>
<PAGE> 44
NOTE S - FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS
<TABLE>
<CAPTION>
For the year ended December 31
--------------------------------
1995 1994 1993
-------- --------- --------
<S> <C> <C> <C>
Revenues:
Real estate
Unaffiliated customers $72,496 $54,184 $58,206
Interegment 100 100 343
--------- -------- --------
72,596 54,284 58,549
Utility
Unaffiliated customers 29,669 28,664 67,842
Intersegment - - -
--------- -------- ---------
29,669 28,664 67,842
Elimination of intersegment revenues (100) (100) (343)
--------- -------- ---------
Total Revenues $102,165 $82,848 $126,048
========= ======== =========
Operating profit:
Real estate ($2,547) ($6,516) $2,435
Utility 3,835 3,102 31,457
-------- --------- ---------
Total operating profit 1,288 (3,414) 33,892
Interest expense (11,627) (11,207) (15,656)
-------- --------- ---------
(Loss) income before income
taxes,and effect of changes
in methods of accounting ($10,339) ($14,621) $18,236
========= ========= =========
Depreciation and amortization:
Real estate $2,397 $1,957 $2,030
Utility 3,486 3,698 4,494
--------- -------- ---------
Total $5,883 $5,655 $6,524
========= ======== =========
Capital expenditures:
Real estate $2,138 $5,599 $1,857
Utility 17,382 10,745 15,226
--------- -------- ---------
$19,520 $16,344 $17,083
========= ======== =========
December 31
--------------------------------
1995 1994 1993
-------- -------- ---------
Identifiable assets:
Real estate $239,459 $221,384 $224,261
Utility 182,661 173,357 181,884
-------- -------- ---------
Total Identifiable Assets 422,120 394,741 406,145
General corporate assets 48,512 51,836 51,602
-------- --------- ---------
Total Assets $470,632 $446,577 $457,747
======== ========= =========
</TABLE>
44<PAGE>
<PAGE> 45
NOTE S - FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS -
- continued
(a) Avatar's businesses are primarily conducted in the
United States.
(b) In computing operating profit, interest has been
reflected separately.
(c) Intersegment revenues contain primarily intercompany
interest and management fees charged to affiliates.
(d) Identifiable assets by segment are those assets that are
used in the operations of each segment. General
corporate assets are principally cash, receivables and
investments.
(e) No significant part of the business is dependent upon a
single customer or group of customers.
(f) Cable TV, mortgage and hotel and recreational operations
which primarily serve Avatar communities do not qualify
individually as separate reportable segments and are
included in the real estate segment.
(g) General corporate expenses are included in the real estate
segment.
NOTE T- FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and fair values of the Company's
financial instruments, all of which are held for purposes
other than trading (except for investments - trading) are as
follows at December 31:
<TABLE>
<CAPTION>
1995 1994
------------------ -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Cash and restricted cash $6,515 $6,515 $6,037 $6,037
Investments - trading 48,258 48,258 51,582 51,582
Contracts, mortgage notes and
other receivables 64,515 65,493 71,424 73,185
Notes, mortgage notes and other debt:
Short term bank credit lines 19,774 19,774 51,444 51,444
Long term bank credit lines 40,714 40,394 - -
Short term development and
construction loans 2,916 2,916 3,014 3,014
Long term development and
construction loans 21,619 22,123 - -
Mortgage obligations, first mortgage
bonds and promissory notes 49,801 47,739 37,277 37,263
Senior debentures 29,166 30,936 28,978 30,976
Mortgage trust notes 8,606 7,107 20,249 18,820
</TABLE>
The following methods and assumptions were used by the
Company in estimating the fair value of financial instruments:
Cash and restricted cash: The carrying amount reported in
the balance sheet for cash approximates its fair value.
Investments - trading: The carrying amount in the balance
sheet for investments is at fair market value. (See Note A)
Contracts, mortgage notes and other receivables: The fair
value amount of the Company's contracts, mortgage notes and
other receivables are estimated based on a discounted cash
flow analysis.
45<PAGE>
<PAGE> 46
NOTE T- FAIR VALUE OF FINANCIAL INSTRUMENTS -- continued
Notes, mortgage notes and other debt: The carrying amounts
of the Company's borrowings under its short term bank credit
lines and short term development and construction loans
approximate their fair value. The fair values of the
Company's mortgage obligations, mortgage bonds and
promissory notes are estimated using discounted cash flow
analysis, based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements.
Senior and subordinated debentures: The fair values of the
Company's senior and subordinated debentures are estimated
based on quoted market prices.
Mortgage trust notes: The fair value amount of the
Company's mortgage trust notes are estimated using
discounted cash flow analysis based on the Company's current
incremental borrowing rate.
46<PAGE>
<PAGE> 47
NOTE U - QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1995 and 1994 is
as follows:
<TABLE>
<CAPTION>
1995 Quarter
---------------------------------------------
First Second Third Fourth
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net revenues $26,221 $24,625 $24,996 $26,323
Expenses 26,607 26,219 28,460 31,218
-------- -------- -------- ---------
(Loss) before income taxes (386) (1,594) (3,464) (4,895)
Provision for income taxes - - - -
--------- -------- -------- --------
Net (loss) ($386) ($1,594) ($3,464) ($4,895)
========= ========= ========= ========
Per share amounts:
Net (loss) ($0.04) ($0.18) ($0.38) ($0.54)
========= ========= ========= =========
1994 Quarter
----------------------------------------------
First Second Third Fourth
--------- --------- -------- ---------
Net revenues $21,447 $21,708 $19,316 $20,377
Expenses 23,039 23,698 21,811 28,921
--------- --------- --------- ---------
(Loss) before income taxes (1,592) (1,990) (2,495) (8,544)
Provision for income taxes (255) - 255 -
--------- --------- --------- ---------
Net (loss) ($1,847) ($1,990) ($2,240) ($8,544)
========= ========= ========= =========
Per share amounts:
Net (loss) income ($0.20) ($0.22) ($0.25) ($0.94)
========= ========= ========= =========
</TABLE>
The financial statements for the year ended December 31, 1995
include the following amounts recorded in the fourth quarter:
(a) a decline due to an adjustment to the market value
of investments of $790 ( or $.09 per share)
(b) a provision of $1,250 (or $.14 per share) due to an
increase in the accrual related to pending
litigation
The financial statements for the year ended December 31, 1994
include the following amounts recorded in the fourth quarter:
(a) a loss of $1,402 (or $.15 per share) due to the
decline in market value of investments
(b) a loss of $1,500 (or $.16 per share) due to the
write down of a certain inventory tract to estimated
net realizable value
(c) an expense of $1,000 (or $.11 per share) due to an
increase in the accrual related to pending
litigation
47<PAGE>
<PAGE> 48
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures.
Not applicable.
PART III
--------
Item 10. Directors and Executive Officers of the Registrant
A. Identification of Directors
The information required by this item is
incorporated by reference from Avatar's 1996
definitive proxy statement (under the caption
"Election of Directors") to be filed with the
Securities and Exchange Commission on or before
April 29, 1996.
B. Identification of Executive Officers
For information with respect to the executive
officers of Avatar, see "Executive Officers of the
Registrant" at the end of Part I of this report.
C. Compliance with Section 16(a) of the Exchange Act
The information required by this item is
incorporated by reference from Avatar's 1996
definitive proxy statement (under the caption
"Compliance with Section 16(a) of the Securities
Exchange Act of 1934"), to be filed with the
Securities and Exchange Commission on or before
April 29, 1996.
Item 11. Executive Compensation
The information required by this item is incorporated by
reference from Avatar's 1996 definitive proxy statement (under
the caption "Executive Compensation and Other Information") to
be filed with the Securities and Exchange Commission on or
before April 29, 1996.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information required by this item is incorporated by
reference from Avatar's 1996 definitive proxy statement (under
the captions "Principal Stockholders" and "Security Ownership
of Management") to be filed with the Securities and Exchange
Commission on or before April 29, 1996.
Item 13. Certain Relationships and Related Transactions
None
48<PAGE>
<PAGE> 49
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) The following documents are filed or incorporated
by reference as part of this report:
(1) Financial Statements:
-------------------------
See Item 8, "Financial Statements and Supplementary Data"
on Page 19 of this report.
(2) Schedules:
--------------
II - Valuation and Qualifying Accounts
Schedules other than those listed above are omitted, since
the information required is not applicable or is included
in the financial statements or notes thereto.
(3) Exhibits:
-------------
3(a) * Certificate of Incorporation, as amended (previously
filed as an exhibit to the Form 10-K for the year
ended December 31, 1986).
3(b) * By-laws, as amended through March 24, 1994
(previously filed as an exhibit to the Form 10-K for
the year ended December 31, 1993)
4(a) * Instruments defining the rights of security holders,
including indenture for 8% senior debentures
(previously filed as an exhibit to the Form 8-K dated
as of September 12, 1980).
4(b) * Supplemental Indenture for 8% senior debentures dated
as of December 19, 1992 (previously filed as an
exhibit to Form 10-K for the year ended December 31,
1992).
4(c) * Indenture for 9% senior debentures dated as of
December 19, 1992 (previously filed as an exhibit to
Form 10-K for the year ended December 31, 1992).
10(a) * Consulting Agreement, dated as of December 31, 1990,
by and between Avatar Properties Inc. and John Sladkus
(previously filed as an exhibit to Form 10-K for the
year ended December 31, 1990).
Consulting Agreement, dated as of December 31, 1990,
by and between Avatar Utilities Inc. and John Sladkus
(previously filed as an exhibit to Form 10-K for the
year ended December 31, 1990).
10(b) * 1 Employment Agreement, dated as of June 15, 1992, by
and between Avatar Holdings Inc. and Lawrence Wilkov
(previously filed as an exhibit to Form 10-K for the
year ended December 31, 1992).
49<PAGE>
<PAGE> 50
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K -- continued
10(c) * 1 Employment Agreement, dated as of June 15, 1992,
by and between Avatar Holdings Inc. and Edwin
Jacobson (previously filed as an exhibit to Form
10-K for the year ended December 31, 1992).
10(d) * 1 Amendment to Employment Agreement, dated as of
March 1, 1994, by and between Avatar Holdings
Inc. and Edwin Jacobson (previously filed as an
exhibit to Form 10-K for the year ended December
31, 1993)
10(e) * Four separate Stock Purchase Agreements dated
January 30, 1993, with respect to the sale of the
Registrant's utilities located in Indiana,
Missouri, Ohio and Michigan, respectively
(previously filed as an exhibit to Form 8-K dated
as of February 3, 1993).
10(f) * Agreement dated January 30, 1993, with respect to
the transactions contemplated by the Stock
Purchase Agreements (previously filed as an
exhibit to Form 8-K dated as of February 3, 1993).
10(g) * Guarantee by the Registrant (previously filed as
an exhibit to Form 8-K dated as of February 3,
1993).
10(h) * Guarantee by American Water Works Company, Inc.
(previously filed as an exhibit to Form 8-K dated
as of February 3, 1993).
10(i) * 1 Incentive Compensation Agreement, dated as of
January 18, 1993 by and between Avatar Holdings
Inc. and Dennis Getman (previously filed as an
exhibit to Form 10-K for the year ended December
31, 1993).
10(j) * 1 Incentive Compensation Agreement, dated as of
September 9, 1993 by and between Avatar Holdings
Inc. and Charles McNairy (previously filed as an
exhibit to Form 10-K for the year ended December
31, 1993).
10(k) * Revolving Credit Agreement between Avatar
Properties Inc. and BHF Bank dated November 30,
1993 (previously filed as an exhibit to the Form
10-K for the year ended December 31, 1993)
10(l) * 1 Settlement Agreement dated July 22, 1994, between
Lawrence Wilkov and Avatar Holdings Inc., et al
(previously filed as an exhibit to Form 10-Q for
the quarter ended June 30, 1994).
10(m) * 1 Employment Agreement, dated as of July 27, 1995,
by and between Avatar Holdings Inc. and Edwin
Jacobson (previously filed as an exhibit to Form
10-Q for the quarter ended September 30, 1995).
50<PAGE>
<PAGE> 51
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K -- continued
11 Statement Re: Computation of earnings per share
(filed herewith)
21 Subsidiaries of the Registrant (filed herewith)
27 Financial Data Schedule (filed herewith)
* These exhibits are incorporated by reference and are on
file with the Securities and Exchange Commission
1 Employment and Compensation agreements
(b) Reports on Form 8-K:
------------------------
No reports on Form 8-K were filed during the quarter
ended December 31, 1995.
51<PAGE>
<PAGE> 52
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
AVATAR HOLDINGS INC. AND SUBSIDIARIES
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Balance
Beginning Costs and at end of
of Period Expenses Deduction Period
----------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1995:
Deducted from asset accounts:
Deferred gross profit on
homesite sales $30,221 $713(1) $3,345(2) $27,589
Allowance for doubtful accounts 1,387 271 655(2) 1,003
Market valuation account 1,184 - 480(3) 704
Valuation allowance for
deferred tax assets 38,000 4,000 - 42,000
--------- ------- ------- --------
Total $70,792 $4,984 $4,480 $71,296
========= ======= ======= ========
Year ended December 31,1994:
Deducted from asset accounts:
Deferred gross profit on
homesite sales $31,969 $1,710(1) $3,458(2) $30,221
Allowance for doubtful accounts 2,631 502 1,746(2) 1,387
Market valuation account 2,082 - 898(3) 1,184
Valuation allowance for deferred
tax assets 33,000 5,000 - 38,000
-------- ------- ------- --------
Total $69,682 $7,212 $6,102 $70,792
======== ======= ======= ========
Year ended December 31,1993:
Deducted from asset accounts:
Deferred gross profit on
homesite sales $34,950 $1,278(1) $4,259(2) $31,969
Allowance for doubtful accounts 3,051 2,342 2,762(2) 2,631
Market valuation account 3,297 - 1,215(3) 2,082
Valuation allowance for deferred
tax assets 30,330(4) 2,670 - 33,000
-------- ------- ------- --------
Total $71,628 $6,290 $8,236 $69,682
======== ======= ======= ========
</TABLE>
(1) Charged to operations as a reduction of revenues.
(2) Uncollectible accounts written off.
(3) Credited principally to interest income or allowance for
doubtful accounts upon write-off of uncollectible accounts.
(4) Valuation allowance for deferred tax assets recorded in
conjunction with the adoption of FASB Statement No. 109.
52<PAGE>
<PAGE> 53
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AVATAR HOLDINGS INC.
Dated: March 29, 1996 By: /s/Charles L. McNairy
--------------------- ---------------------------------------
Charles L. McNairy, Executive
Vice President, Treasurer and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant in the capacities and on the dates indicated.
Dated: March 29, 1996 By: /s/Lawrence L. Colditz
--------------------- ----------------------------------------
Lawrence L. Colditz, Controller
Dated: March 29, 1996 By: /s/Milton Dresner
--------------------- -----------------------------------------
Milton Dresner, Director and Audit
Committee Member
Dated: March 29, 1996 By: /s/Leon T. Kendall
--------------------- -----------------------------------------
Leon T. Kendall, Director and
Chairman of the Audit Committee.
Dated: March 29, 1996 By: /s/Edwin Jacobson
--------------------- ------------------------------------------
Edwin Jacobson, Director,
Chairman of the Executive Committee,
President and Chief Executive Officer
Dated: March 29, 1996 By: /s/Leon Levy
--------------------- -----------------------------------------
Leon Levy, Chairman of the Board of
Directors and Executive Committee
Member
53<PAGE>
<PAGE> 54
Dated: March 29, 1996 By: /s/Martin Meyerson
--------------------- -----------------------------------------
Martin Meyerson, Director and
Audit Committee Member
Dated: March 29, 1996 By: /s/William Porter
--------------------- ----------------------------------------
William Porter, Director and
Audit Committee Member
Dated: March 29, 1996 By:
--------------------- ----------------------------------------
Kenneth T. Rosen, Director
Dated: March 29, 1996 By: /s/Fred Stanton Smith
--------------------- -----------------------------------------
Fred Stanton Smith, Director and
Executive Committee Member
Dated: March 29, 1996 By: /s/Henry King Stanford
--------------------- -----------------------------------------
Henry King Stanford, Director
54<PAGE>
<PAGE> 55
Exhibit Index
3(a) * Certificate of Incorporation, as amended (previously filed as
an exhibit to the Form 10-K for the year ended December 31,
1986).
3(b) * By-laws, as amended through March 24, 1994 (previously filed
as an exhibit to the Form 10-K for the year ended December 31,
1993).
4(a) * Instruments defining the rights of security holders, including
indenture for 8% senior debentures (previously filed as an
exhibit to the Form 8-K dated as of September 12, 1980).
4(b) * Supplemental Indenture for 8% senior debentures dated as of
December 19, 1992 (previously filed as an exhibit to Form 10-K
for the year ended December 31, 1992).
4(c) * Indenture for 9% senior debentures dated as of December 19,
1992 (previously filed as an exhibit to Form 10-K for the year
ended December 31, 1992).
10(a) * Consulting Agreement, dated as of December 31, 1990, by and
between Avatar Properties Inc. and John Sladkus (previously
filed as an exhibit to Form 10-K for the year ended December
31, 1990).
Consulting Agreement, dated as of December 31, 1990, by and
between Avatar Utilities Inc. and John Sladkus (previously
filed as an exhibit to Form 10-K for the year ended December
31, 1990).
10(b) * 1 Employment Agreement, dated as of June 15, 1992, by and
between Avatar Holdings Inc. and Lawrence Wilkov (previously
filed as an exhibit to Form 10-K for the year ended December
31, 1992).
10(c) * 1 Employment Agreement, dated as of June 15, 1992, by and
between Avatar Holdings Inc. and Edwin Jacobson (previously
filed as an exhibit to Form 10-K for the year ended December
31, 1992).
10(d) * 1 Amendment to Employment Agreement, dated as of March 1, 1994,
by and between Avatar Holdings Inc. and Edwin Jacobson
(previously filed as an exhibit to Form 10-K for the year ended
December 31, 1993).
10(e) * Four separate Stock Purchase Agreements dated January 30,
1993, with respect to the sale of the Registrant's utilities
located in Indiana, Missouri, Ohio and Michigan,
respectively (previously filed as an exhibit to Form 8-K dated
as of February 3, 1993).
10(f) * Agreement dated January 30, 1993, with respect to the
transactions contemplated by the Stock Purchase Agreements
(previously filed as an exhibit to Form 8-K dated as of
February 3, 1993).
55<PAGE>
<PAGE> 56
Exhibit Index -- continued
10(g) * Guarantee by the Registrant (previously filed as an exhibit to
Form 8-K dated as of February 3, 1993).
10(h) * Guarantee by American Water Works Company, Inc. (previously
filed as an exhibit to Form 8-K dated as of February 3,
1993).
10(i) * 1 Incentive Compensation Agreement, dated as of January 18,
1993 by and between Avatar Holdings Inc. and Dennis Getman
(previously filed as an exhibit to Form 10-K for the year
ended December 31, 1993).
10(j) * 1 Incentive Compensation Agreement, dated as of September 9,
1993 by and between Avatar Holdings Inc. and Charles McNairy
(previously filed as an exhibit to Form 10-K for the year
ended December 31, 1993).
10(k) * Revolving Credit Agreement between Avatar Properties Inc. and
BHF Bank dated November 30, 1993 (previously filed as an
exhibit to the Form 10-K for the year ended December 31,
1993).
10(l) * 1 Settlement Agreement dated July 22, 1994, between Lawrence
Wilkov and Avatar Holdings Inc., et al (previously filed as an
exhibit to Form 10-Q for the quarter ended June 30, 1994).
10(m) * 1 Employment Agreement, dated as of July 27, 1995, by and
between Avatar Holdings Inc. and Edwin Jacobson (previously
filed as an exhibit to Form 10-Q for the quarter ended
September 30, 1995).
11 Statement Re:Computation of earnings per share (filed herewith).. 57
21 Subsidiaries of the Registrant (filed herewith).................. 58
27 Financial Data Schedule (filed herewith)......................... 60
* These exhibits are incorporated by reference and are on file with
the Securities and Exchange Commission.
1 Employment and Compensation agreements.
56
<PAGE>
<PAGE> 1
Exhibit 11 - Computation of earnings per share
<TABLE>
<CAPTION>
Year ended December 31
--------------------------------
PRIMARY 1995 1994 1993
- - ------- --------- --------- ---------
<S> <C> <C> <C>
Average common shares outstanding assuming
conversion of 5-1/4% convertible-purchase
subordinated debentures at the beginning of
the period the conversion occurred 9,095,102 9,095,102 9,840,251
(Loss) income before cumulative effect of
changes in methods of accounting ($10,339) ($14,621) $5,474
Add 5-1/4% convertible-purchase subordinated
debenture interest, net of federal income tax - - 32
--------- --------- --------
Total (10,339) (14,621) 5,506
Cumulative effect of change in method
of accounting for income taxes - - (964)
Cumulative effect of change in method
of accounting for investments
(net of income taxes of $238) - - 388
--------- ---------- ---------
Net (loss) income ($10,339) ($14,621) $4,930
========= ========== =========
Per share amounts:
(Loss) income before cumulative effect of
accounting changes ($1.14) ($1.61) $0.56
Cumulative effect of change in method
of accounting for income taxes - - (0.10)
Cumulative effect of change in method
of accounting for investments - - 0.04
---------- ---------- ---------
Net (loss) income ($1.14) ($1.61) $0.50
========== ========== =========
FULLY DILUTED
- - -------------
Average common shares outstanding assuming
conversion of 5-1/4% convertible-purchase
subordinated debentures at the beginning of
the period the conversion occurred 9,095,102 9,095,102 9,840,251
(Loss) income before cumulative effect of
changes in methods of accounting ($10,339) ($14,621) $5,474
Add 5-1/4% convertible-purchase subordinated
debenture interest, net of federal income tax - - 32
--------- ---------- ----------
Total ($10,339) ($14,621) $5,506
Cumulative effect of change in method
of accounting for income taxes - - (964)
Cumulative effect of change in method
of accounting for investments
(net of income taxes of $238) - - 388
---------- --------- ----------
Net (loss) income ($10,339) ($14,621) $4,930
========== ========= ==========
Per share amounts:
(Loss) income before cumulative effect of
accounting changes ($1.14) ($1.61) $0.56
Cumulative effect of change in method
of accounting for income taxes - - (0.10)
Cumulative effect of change in method
of accounting for investments - - 0.04
--------- --------- ---------
Net (loss) income ($1.14) ($1.61) $0.50
========= ========= ==========
</TABLE>
57
<PAGE>
<PAGE> 1
Exhibit 21 - Subsidiaries of Registrant
Unless otherwise indicated, Avatar owns, directly or through a
subsidiary, all of the outstanding capital stock of each of the below
listed active subsidiaries.
<TABLE>
<CAPTION>
Name State of Incorporation
---- ----------------------
<S> <C>
American Cablevision Services, Inc. Florida
Avatar Communities, Inc. Florida
Avatar Communities of Arizona, Inc. Arizona
Avatar Communities of California, Inc. California
Avatar Communities of Connecticut, Inc. Connecticut
Avatar Communities of District of Columbia, Inc. District of Colombia
Avatar Communities of Georgia, Inc. Georgia
Avatar Communities of Illinois, Inc. Illinois
Avatar Communities of Indiana, Inc. Indiana
Avatar Communities of Massachusetts, Inc. Massachusetts
Avatar Communities of Michigan, Inc. Michigan
Avatar Communities of Nevada, Inc. Nevada
Avatar Communities of New Jersey, Inc. New Jersey
Avatar Communities of New York, Inc. New York
Avatar Communities of Ohio, Inc. Ohio
Avatar Communities of Pennsylvania, Inc. Pennsylvania
Avatar Communities of Wisconsin, Inc. Wisconsin
Avatar Finance, Inc. Delaware
Avatar Mortgage Funding, Inc. Delaware
Avatar Homesite Mortgage Trust New York (1)
Avatar International Sales of U.S.A., Inc. Delaware
Avatar Properties Inc. Florida
Avatar Camelot Isles, Inc. Florida
Avatar Leisure Lakes, Inc. Florida
Avatar Realty Inc. Delaware
Avatar Condominium Management Inc. Florida
Avatar Asset Management, Inc. Florida
Avatar Development Corporation Florida
Harbor Islands Clubs, Inc. Florida
Harbor Islands Community Management, Inc. Florida
Harbor Islands Community Services, Inc.. Florida
Harbor Islands Realty, Inc. Florida
Avatar Georgetown Inc. Delaware
Avatar Realty of Arizona, Inc. Arizona
Dorten, Inc. Florida
GACL, Inc. of California California
Mulholland Hills Associates California (2)
Optimum Environments Inc. California
Avatar Resort Management, Inc. Florida
Avatar Vacation Realty, Inc. Florida
Avatar Vacation Realty of Tennessee, Inc. Tennessee
Avatar Vacation Resorts, Inc. Florida
Avatar Beach Resort, Inc. Florida
Poinciana Vacation Resort, Inc. Florida
Sunrise Ridge Resorts, Inc. Tennessee
Avatar Vacation Resorts Club, Inc. Florida
Banyan Bay Development Corporation Florida
Barefoot Bay Corporation Florida
Barefoot Bay Development Corporation Florida
Cape Coral Development Corporation Florida
Cape Coral Realty, Inc. Florida
</TABLE>
58<PAGE>
<PAGE> 2
<TABLE>
<CAPTION>
Exhibit 21- Subsidiaries of Registrant (continued)
<S> <C>
Country Club Inn, Inc. Florida
Fort Myers Construction Co., Inc. Florida
Golden Gate Realty, Inc. Florida
Kissimmee Construction Corporation Florida
Lee Investment Company, Inc. Florida
Poinciana Golf and Racquet Club, Inc. Florida
Poinciana New Township, Inc. Florida
Rio Rico Properties Inc. Arizona
Avatar Homes of Arizona, Inc. Arizona
Rio Rico Golf and Country Club Arizona
Rio Rico Resort Hotel, Inc. Arizona
Rio Rico Realty, Inc. Arizona
Tarpon Point, Inc. Florida
Parkway Mortgage Company, Inc. Florida
Rio Rico Utilities Inc. Arizona
Avatar Utilities Inc. Delaware (3)
Avatar Utility Services, Inc. Florida
Poinciana Utilities Inc. Florida
Barefoot Bay Propane Gas Company Florida
Consolidated Water Company Delaware (4)
FCWC Holdings, Inc. Delaware (5)
Florida Cities Water Company Florida
</TABLE>
Notes to Exhibit 21 - Subsidiaries of Registrant:
-------------------------------------------------
(1) Partnership owned 95% by Avatar Mortgage Funding Inc. and 5%
by Avatar Properties Inc.
(2) Partnership owned 99% by GACL, Inc. of California and 1% by
Lee Investment Company, Inc.
(3) Avatar Utilities Inc. owns over 99% of the outstanding shares
of common stock of Consolidated Water Company. All of the
outstanding shares of preferred stock of Consolidated Water
Company are owned by other interests.
(4) Consolidated Water Company owns all of the outstanding common
stock of FCWC Holdings, Inc.
(5) FCWC Holdings, Inc. owns all of the common and preferred
stock of Florida Cities Water Company. FCWC Holdings, Inc.
has one class of preferred stock owned by outside interests.
59
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 6,515
<SECURITIES> 48,258
<RECEIVABLES> 96,585
<ALLOWANCES> (32,070)
<INVENTORY> 149,270
<CURRENT-ASSETS> 0
<PP&E> 266,781
<DEPRECIATION> (83,937)
<TOTAL-ASSETS> 470,632
<CURRENT-LIABILITIES> 0
<BONDS> 172,596
<COMMON> 12,715
0
0
<OTHER-SE> 145,697
<TOTAL-LIABILITY-AND-EQUITY> 470,632
<SALES> 55,981
<TOTAL-REVENUES> 102,165
<CGS> 30,036
<TOTAL-COSTS> 54,959
<OTHER-EXPENSES> 18,795
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,627
<INCOME-PRETAX> (10,339)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,339)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,339)
<EPS-PRIMARY> (1.14)
<EPS-DILUTED> (1.14)
<FN>
NOTE: Total Current Assets and Total Current Liabilities are not
applicable because Registrant does not present a classified
balance sheet.
60
</TABLE>
