<PAGE>
<PAGE> 1
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
__________________________________________________
[X] Quarterly report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the transition period from
________ to ________
________________________________________
Commission file number 0-7616
I.R.S. Employer Identification Number 23-1739078
Avatar Holdings Inc.
(a Delaware Corporation)
255 Alhambra Circle
Coral Gables, Florida 33134
(305) 442-7000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
------ ------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
9,095,102 shares of the Company's common stock ($1.00 par value)
were outstanding as of April 30, 1996.
1 of 18<PAGE>
<PAGE> 2
AVATAR HOLDINGS INC. AND SUBSIDIARIES
INDEX
-----
PAGE
----
PART I. Financial Information
---------------------------------
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets --
March 31, 1996 and December 31, 1995.............. 3
Consolidated Statements of Operations --
Three months ended March 31, 1996 and 1995........ 4
Consolidated Statements of Cash Flows --
Three months ended March 31, 1996 and 1995........ 5
Notes to Consolidated Financial Statements......... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 13
PART II. Other Information
----------------------------
Item 1. Legal Proceedings........................ 15
Item 6. Exhibits and Reports on Form 8-K......... 15
Exhibit Index....................................... 17
2<PAGE>
<PAGE> 3
PART I -- FINANCIAL INFORMATION
-----------------------------------
ITEM 1. FINANCIAL STATEMENTS
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
Unaudited
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Assets
------
Cash $6,397 $2,467
Restricted cash 2,407 4,048
Investments - trading 42,390 48,258
Contracts, mortgage notes and
other receivables, net 63,188 64,515
Land and other inventories 162,455 149,270
Property, plant and equipment, net 182,384 182,844
Other assets 15,579 15,209
Regulatory assets 4,050 4,021
-------- --------
Total Assets $478,850 $470,632
======== ========
Liabilities and Stockholders' Equity
------------------------------------
Liabilities
-----------
Notes, mortgage notes and other debt:
Real estate and corporate $108,213 $104,897
Development and construction loan 31,696 24,535
Utilities 43,367 43,164
Estimated development liability for sold land 11,706 13,033
Accounts payable 10,614 9,306
Accrued and other liabilities 32,249 32,886
Deferred customer betterment fees 18,922 18,997
Minority interest in consolidated subsidiaries 9,062 9,060
-------- ---------
Total Liabilities 265,829 255,878
Commitments and contingent liabilities
Contributions in aid of construction 55,685 56,342
Stockholders' Equity
--------------------
Common Stock, par value $1 per share
Authorized: 15,500,000 shares
Issued: 12,715,448 shares 12,715 12,715
Additional paid-in capital 207,271 207,271
(Deficit) retained earnings (677) 399
-------- --------
219,309 220,385
Treasury stock, at cost, 3,620,346 shares 61,973 61,973
-------- --------
Total Stockholders' Equity 157,336 158,412
-------- --------
Total Liabilities and Stockholders' Equity $478,850 $470,632
========= ========
</TABLE>
See notes to consolidated financial statements.
3<PAGE>
<PAGE> 4
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Three Months Ended March 31, 1996 and 1995
(Unaudited)
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
For the three months ended
March 31,
---------------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues
--------
Real estate sales $17,321 $13,367
Deferred gross profit (312) (437)
Utility revenues 8,201 7,795
Interest income 2,288 2,523
Trading account profit, net 1,001 2,884
Other 400 89
--------- ---------
Total revenues 28,899 26,221
Expenses
--------
Real estate expenses 18,150 15,410
Utility expenses 6,141 6,077
General and administrative expenses 2,553 2,170
Interest expense 2,926 2,746
Other 205 204
--------- ---------
Total expenses 29,975 26,607
--------- ---------
Loss before income taxes (1,076) (386)
Provision for income taxes - -
--------- ---------
Net loss ($1,076) ($386)
========= =========
Per share amounts:
Net loss ($.12) ($.04)
========== ==========
</TABLE>
See notes to consolidated financial statements.
4<PAGE>
<PAGE> 5
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
For the three months ended
March 31,
--------------------------
1996 1995
---------- --------
<S> <C> <C>
OPERATING ACTIVITIES
--------------------
Net loss ($1,076) ($386)
Adjustments to reconcile net loss to
net cash (used in) provided by
operating activities:
Depreciation and amortization 2,455 2,508
Deferred gross profit 312 437
Cost of sales not requiring cash 1,025 871
Trading account profit, net (1,001) (2,884)
Changes in operating assets and liabilities:
Restricted cash 1,641 (181)
Investments - trading 7,100 -
Principal payments on contracts receivable 4,347 5,303
Receivables (2,200) (2,849)
Other receivables (1,132) (180)
Inventories (15,537) (4,635)
Other assets (370) (1,194)
Accounts payable and accrued and other
liabilities 336 4,347
------- --------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (4,100) 1,157
INVESTING ACTIVITIES
--------------------
Investment in property, plant and equipment (2,652) (3,125)
-------- -------
NET CASH USED IN INVESTING ACTIVITIES (2,652) (3,125)
FINANCING ACTIVITIES
--------------------
Net proceeds from revolving lines of credit and
long-term borrowings 22,569 5,968
Principal payments on revolving lines of credit and
long-term borrowings (11,887) (4,666)
-------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,682 1,302
-------- -------
INCREASE (DECREASE) IN CASH 3,930 (666)
Cash at beginning of period 2,467 4,765
-------- --------
CASH AT END OF PERIOD $6,397 $4,099
======== ========
</TABLE>
5<PAGE>
<PAGE> 6
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows -- continued
(Unaudited)
(Dollars in thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
--------------------------------------------------
<TABLE>
<CAPTION>
For the three months ended
March 31,
---------------------------
Cash paid during the period for: 1996 1995
-------- --------
<S> <C> <C>
Interest (net of amount capitalized of
$1,019 and $616 in 1996 and 1995,
respectively) $791 $1,154
======== ========
Income taxes - -
======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
------------------------------------------------------
1996 1995
-------- -------
Contributions in aid of construction $101 $472
======== =======
</TABLE>
See notes to consolidated financial statements.
6<PAGE>
<PAGE> 7
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in thousands)
Basis of Statement Presentation and Summary of Significant
----------------------------------------------------------
Accounting Policies
-------------------
The consolidated balance sheets as of March 31, 1996 and
December 31, 1995, and the related consolidated statements of
operations and cash flows for the three month period ended March
31, 1996 and 1995 have been prepared in accordance with generally
accepted accounting principles for interim financial information,
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statement presentation. In the opinion of
management, all adjustments necessary for a fair presentation of
such financial statements have been included. Such adjustments
consisted only of normal recurring items. Interim results are not
necessarily indicative of results for a full year.
For a complete description of the Company's other accounting
policies, refer to Avatar Holdings Inc.'s 1995 Annual Report on
Form 10-K and the notes to Avatar's consolidated financial
statements included therein.
Reclassifications
-----------------
Certain amounts presented for 1995 have been reclassified in
the financial statements for comparative purposes.
Net Loss Per Common Share
-------------------------
For the three months ended March 31, 1996 and 1995, net loss
per common share is computed on the basis of the weighted average
number of shares outstanding of 9,095,102.
Restricted Cash
---------------
Restricted cash includes collections of monthly payments,
totaling $851 at March 31, 1996, on pledged mortgage notes
receivable. These collections will be applied to reduce the
related mortgage trust notes. Also included in restricted cash,
at March 31, 1996, are utility deposits of $97, as well as
housing deposits of $1,459 which have been placed in escrow. The
housing deposits will become available to the Company when the
housing contracts close.
Impact of Recently Issued Accounting Standards:
-----------------------------------------------
In March 1995, the FASB issued Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," which requires impairment
losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets
are less than the assets' carrying amount. Statement No. 121 also
addresses the accounting for long-lived assets that are expected
to be disposed of. The Company adopted Statement No. 121 in the
first quarter of 1996, and there has been no material impact on
the Company's operations or financial position.
7<PAGE>
<PAGE> 8
Notes to Consolidated Financial Statements (Unaudited) --
continued
Use of Estimates:
-----------------
The preparation of the financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes.
Accordingly, actual results could differ from those reported.
Investments - trading
---------------------
The Company classifies all of its investment portfolio as
trading. This category is defined as including debt and
marketable equity securities held for resale in anticipation of
earning profits from short-term movements in market prices.
Trading account securities are carried at fair market value, and
both realized and unrealized gains and losses are included in net
trading account profit. Fair values for actively traded debt
securities and equity securities are based on quoted market
prices on national markets. Fair values for thinly traded
investment securities are generally based on prices quoted by
investment brokerage companies .
Avatar's investment portfolio at March 31, 1996 and December
31, 1995 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):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Corporate bonds $21,237 $21,985
Non-rated bonds 50 8,472
Equity securities 94 2,045
Other rated bonds 9,373 4,753
Money market accounts 11,842 11,519
Less:
Securities sold short (206) (516)
--------- ---------
Total market value $42,390 $48,258
========= =========
Aggregate cost $40,984 $44,116
========= =========
</TABLE>
8<PAGE>
<PAGE> 9
Notes to Consolidated Financial Statements (Unaudited) --
continued
Contracts, Mortgage Notes and Other Receivables
-----------------------------------------------
Contracts, mortgage notes, and other receivables are summarized
as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------- ------------
<S> <C> <C>
Contracts and mortgage notes receivable $86,052 $89,317
Notes and other receivables 8,419 7,268
----------- ------------
94,471 96,585
----------- ------------
Less:
Deferred gross profit 26,942 27,589
Allowance for doubtful accounts 1,092 1,003
Market valuation reserve 437 704
Other 2,812 2,774
---------- ------------
31,283 32,070
---------- ------------
$63,188 $64,515
========== ============
</TABLE>
Land and Other Inventories
--------------------------
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- -----------
<S> <C> <C>
Land developed and in process of development $99,998 $95,315
Land held for future development or sale 34,843 34,790
Dwelling units completed or under construction 26,733 18,044
Other 881 1,121
---------- ----------
$162,455 $149,270
========== ==========
</TABLE>
Minority Interest in Consolidated Subsidiaries
----------------------------------------------
Minority interest in consolidated subsidiaries is
represented by preferred stock of Avatar Utilities' subsidiaries.
Total preferred stock outstanding is as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- ------------
<S> <C> <C>
9% Cumulative preferred stock $9,000 $9,000
Other 62 60
---------- ------------
$9,062 $9,060
========== ============
</TABLE>
9<PAGE>
<PAGE> 10
Notes to Consolidated Financial Statements (Unaudited) --
continued
Minority Interest in Consolidated Subsidiaries - continued
----------------------------------------------
Avatar's utility subsidiary's 9% cumulative preferred stock
issue provides for redemption no earlier than March 1, 1997, in
whole or in part; however, a minimum of $1,800 per annum of the
preferred stock must be redeemed beginning in 1997. A redemption
of all outstanding shares must occur no later than March 1, 2001.
Charges to operations recorded as "Other Expenses" relate to
preferred stock dividends of subsidiaries for the three months
ended March 31, 1996 and 1995, which amount to $205 and $204 ,
respectively.
Income Taxes
------------
Deferred income taxes reflect the net tax effect of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes. Significant components of the Company's
deferred income tax assets and liabilities as of March 31, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Deferred income tax assets
Net operating loss carryforward $17,000 $10,000
Tax over book basis of land inventory 23,000 22,000
Unrecoverable land development costs 3,000 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>
10<PAGE>
<PAGE> 11
Notes to Consolidated Financial Statements (Unaudited) --
continued
Income Taxes -- continued
------------
A reconciliation of income tax expense to the expected
income tax expense (credit) at the federal statutory rate of 34%
for the three months ended March 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
For the Three Months
ended March 31,
--------------------
1996 1995
-------- --------
<S> <C> <C>
Income tax (credit) computed at statutory rate ($366) ($131)
Income tax effect of non-deductible dividends
on preferred stock of subsidiary 70 69
State income tax (credit), net of federal effect (30) 0
Other, net 326 62
-------- --------
Provision for income taxes $0 $0
======== ========
</TABLE>
Contingencies
-------------
Avatar is involved in various pending litigation matters
primarily arising in the normal course of its business. Although
the outcome of these and the following matters cannot be
determined, management believes that the resolution of these
matters will not have a material effect on Avatar's business or
financial position.
On October 1, 1993, the United States, on behalf of the
U.S. Environmental Protection Agency, filed a civil action
against Florida Cities Water Company, 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,
11<PAGE>
<PAGE> 12
Notes to Consolidated Financial Statements (Unaudited) --
continued
Contingencies -- continued
-------------
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 was held in March
and April, 1996 and the filing of trial briefs is expected to be
in June 1996. Based upon the information currently available to
it, Avatar believes that it has strong defenses to the amended
complaint and intends to continuue to pursue these 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 $3,179 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. The grant was awarded to the city of Edgerton. The
Settling Defendants are negotiating the terms of the Consent
Decree with the Department and the State Department of Justice.
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.
12<PAGE>
<PAGE> 13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (dollars in thousands
except per share data)
RESULTS OF OPERATIONS
---------------------
Operations for the three month period ended March 31, 1996,
resulted in a net loss of $1,076 or $.12 per share, compared
to a net loss of $386 or $.04 per share for the same period of
1995. The decrease in operating results for the three months was
primarily attributable to a decrease in trading account profits
partially offset by an increase in real estate operating results
and utility operating results.
Avatar's real estate revenues for the three months ended
March 31, 1996, increased $3,954 or 29.6%, while real estate
expenses increased $2,740 or 17.8%, when compared to the same
period of 1995. The increase in real estate revenues for the
three month period ended March 31, 1996 is generally a result of
increased housing, vacation ownership, and resort revenues, as
well as, a bulk land sale. The increase in real estate expenses
for the three month period ended March 31, 1996, when compared to
the same period of 1995, is essentially a result of increased
real estate sales volume and increased selling expenses related
to new projects within home-building operations.
Data from home-building operations for the three months
ended March 31, 1996 and 1995 is summarized as follows :
<TABLE>
<CAPTION>
Three Months
1996 1995
----------- -----------
<S> <C> <C>
Units closed
------------
Number of units 44 25
Aggregate dollar volume $3,825 $2,008
Average price per unit $87 $80
Units sold, net
---------------
Number of units 142 79
Aggregate dollar volume $17,819 $19,521
Average price per unit $125 $247
Backlog March 31,
------- 1996 1995
--------- ----------
Number of units 250 113
Aggregate dollar volume $45,972 $22,563
Average price per unit $184 $200
</TABLE>
The decrease in the average price per unit sold is a result
of sales reservations written during the fourth quarter of 1994
at the Company's Harbor Island project converting to contracts
during the three months ended March 31, 1995.
Utility revenues for the three months ended March 31, 1996,
increased $406 or 5.2% when compared to the same period of 1995.
The increase in utility revenues is primarily attributable to
the implementation of rate increases as well as
customer growth. Utility
13<PAGE>
<PAGE> 14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (dollars in thousands
except per share data) -- continued
RESULTS OF OPERATIONS -- continued
---------------------
expenses for the three months ended March 31, 1996, increased $64
or 1.1%, when compared to the same period of 1995. The increase
in utility expenses is due to higher utility operating costs.
Interest income for the three months ended March 31, 1996,
decreased $235 or 9.3% when compared to the same period for
1995. The decline in interest income is due to lower average
aggregate amounts outstanding in the Company's contract and
mortgage notes receivable portfolio. Avatar's contracts and
mortgage notes receivable portfolio amounted to $86,052 at March
31, 1996, compared to $97,390 at March 31, 1995.
Trading account profit, net for the three months ended March
31, 1996, decreased $1,883 or 65.3% compared to the same period
for 1995. The lower average amount invested in the Company's
investment portfolio contributed to the decline in trading
account profit. Trading account profit represents interest income
and realized and unrealized gains and losses related to the
trading investment portfolio, net of commissions payable to
brokers.
General and administrative expenses for the three months
ended March 31, 1996, increased $383 or 17.6% compared to the
same period of 1995. The increase for the three months ended
March 31, 1996 is mainly attributable to an increase in the
accrual for incentive compensation.
Interest expense for the three months ended March 31, 1996,
increased $180 or 6.6% compared to the same period of 1995. The
increase for the three months is primarily due to the increase in
the outstanding balance of notes, mortgage notes and other debt
which was partially offset by the capitalization of interest,
which was greater for the first three months of 1996 compared to
the same period in 1995.
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 have available a combination of cash and
investment securities on hand, operating cash flows and external
borrowings, which management believes is adequate to fund its
operations and capital requirements.
Avatar had approximately $42,390 in investments, at March
31, 1996, which were classified as trading. The Company intends
to continue to actively trade such securities in an effort to
generate profits and will reinvest such profits until such time
as the Company's cash requirements necessitate the use or partial
use of the portfolio proceeds. During the three months ended
March 31, 1996, the Company's cash requirements necessitated the
sale of $7,100 of its portfolio investments. A portion of the
investment portfolio collateralizes a $36,000 line of credit
which had an outstanding balance at March 31, 1996, of $36,000
and will mature during the second quarter of 1997.
14<PAGE>
<PAGE> 15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (dollars in thousands
except per share data) -- continued
LIQUIDITY AND CAPITAL RESOURCES - continued
-------------------------------
In March 1996, the Company obtained a credit line in the
initial amount of $10,000, which matures May 31, 1997 and is
collateralized by the stock of Avatar Mortgage Funding Inc.
This line will be increased to $16,000 upon repayment of the
Avatar Homesite Mortgage Trust Notes, which Avatar expects to
occur during the third quarter of 1996. At March 31, 1996, this
line had an outstanding balance of $8,000. Upon repayment of the
Avatar Homesite Mortgage Trust Notes, the contracts receivable,
which had secured the Mortgage Trust Notes, will be substituted
as collateral for the Company's obligations under the credit
line.
On April 17, 1996, the Company obtained an additional line
of credit for $10,000. This credit facility matures in April
2001 and is collateralized by certain contracts receivable.
Maturities of debt for 1996 include approximately $7,894,
related to one of the Company's bank credit lines, which matures
in May 1996. Avatar is currently negotiating to extend or
refinance this credit line; however, there is no assurance that
Avatar will be able to obtain a satisfactory extension or
refinancing of this credit line.
PART II -- OTHER INFORMATION
----------------------------
Item 1. Legal Proceedings
The information, which is set forth in the second and final
paragraph under the caption "Contingencies" in the Notes to
Consolidated Financial Statements (Unaudited) in Item 1 of Part
I of this Report, relating to the October 1, 1993 and the
November 1, 1994 civil actions against Avatar, respectively, is
incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
27 Financial Data Schedule (filed herewith)
Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
March 31, 1996.
15<PAGE>
<PAGE> 16
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
AVATAR HOLDINGS INC.
Date: May 15, 1996 By: /s/ Lawrence L. Colditz
------------ ------------------------
Lawrence L. Colditz
Controller
Date: May 15, 1996 By: /s/ Charles L. McNairy
------------ ------------------------
Charles L. McNairy
Executive Vice President,
Treasurer and Chief Financial
Officer
16<PAGE>
<PAGE> 17
Exhibit Index
27 Financial Data Schedule (filed herewith).............. 18
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 8,804
<SECURITIES> 42,390
<RECEIVABLES> 94,471
<ALLOWANCES> (31,283)
<INVENTORY> 162,455
<CURRENT-ASSETS> 0
<PP&E> 182,384
<DEPRECIATION> 0
<TOTAL-ASSETS> 478,850
<CURRENT-LIABILITIES> 0
<BONDS> 183,276
<COMMON> 12,715
0
0
<OTHER-SE> 144,621
<TOTAL-LIABILITY-AND-EQUITY> 478,850
<SALES> 17,321
<TOTAL-REVENUES> 28,899
<CGS> 7,674
<TOTAL-COSTS> 13,815
<OTHER-EXPENSES> 5,388
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,926
<INCOME-PRETAX> (1,076)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,076)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,076)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
<FN>
NOTE: Total Current Assets and Total Current Liabilities
are not applicable because Registrant does not present
a classified balance sheet.
</TABLE >
18
</TABLE>
