<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 June 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the transition period from
________ to ________
________________________________________
Commission file number 0-7616
I.R.S. Employer Identification Number 23-1739078
Avatar Holdings Inc.
(a Delaware Corporation)
255 Alhambra Circle
Coral Gables, Florida 33134
(305) 442-7000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No .
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 9,095,102
shares of the Company's common stock ($1.00 par value) were
outstanding as of July 31, 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 --
June 30, 1996 and December 31, 1995.............. 3
Consolidated Statements of Operations --
Six months and three months ended
June 30, 1996 and 1995......................... 4
Consolidated Statements of Cash Flows --
Six months ended June 30, 1996 and 1995.......... 5
Notes to Consolidated Financial Statements......... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 12
PART II. Other Information
Item 1. Legal Proceedings........................ 15
Item 4. Submission of Matters to a Vote of
Security Holders......................... 15
Item 6. Exhibits and Reports on Form 8-K......... 16
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>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Assets
------
Cash $1,720 $2,467
Restricted cash 2,363 4,048
Investments - trading 28,196 48,258
Contracts, mortgage notes and other
receivables, net 62,714 64,515
Land and other inventories 162,856 149,270
Property, plant and equipment, net 183,239 182,844
Other assets 15,898 15,209
Regulatory assets 3,992 4,021
-------- --------
Total Assets $460,978 $470,632
======== ========
Liabilities and Stockholders' Equity
------------------------------------
Liabilities
-----------
Notes, mortgage notes and other debt:
Real estate and corporate $99,617 $104,897
Development and construction loan 28,390 24,535
Utilities 42,431 43,164
Estimated development liability for sold land 10,582 13,033
Accounts payable 9,393 9,306
Accrued and other liabilities 29,090 32,886
Deferred customer betterment fees 19,055 18,997
Minority interest in consolidated subsidiaries 9,060 9,060
-------- --------
Total Liabilities 247,618 255,878
Commitments and contingent liabilities
Contributions in aid of construction 55,931 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 (584) 399
-------- --------
219,402 220,385
Treasury stock, at cost, 3,620,346 shares 61,973 61,973
-------- --------
Total Stockholders' Equity 157,429 158,412
-------- --------
Total Liabilities and Stockholders' Equity $460,978 $470,632
======== ========
</TABLE>
See notes to consolidated financial statements.
3<PAGE>
<PAGE> 4
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Six Months and Three Months Ended June 30, 1996 and 1995
(Unaudited)
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Six Months Three Months
---------------- ---------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
- --------
Real estate sales $44,143 $24,448 $26,822 $11,081
Deferred gross profit 377 (544) 689 (107)
Utility revenues 16,435 15,515 8,234 7,720
Interest income 4,486 4,896 2,198 2,373
Trading account profit, net 1,597 6,221 596 3,337
Other 470 310 70 221
-------- -------- -------- --------
Total revenues 67,508 50,846 38,609 24,625
Expenses
- --------
Real estate expenses 44,805 30,248 26,655 14,838
Utility expenses 12,820 12,241 6,679 6,164
General and administrative expenses 4,684 4,434 2,131 2,264
Interest expense 5,774 5,495 2,848 2,749
Other 408 408 203 204
-------- -------- -------- --------
Total expenses 68,491 52,826 38,516 26,219
-------- -------- -------- --------
(Loss) income before income taxes (983) (1,980) 93 (1,594)
Provision for income taxes - - - -
-------- -------- -------- --------
Net (loss) income ($983) ($1,980) $93 ($1,594)
======== ======== ======== ========
Per share amounts:
Net (loss) income ($.11) ($.22) $.01 ($.18)
======== ======== ======== ========
</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 six months ended
June 30,
------------------------
1996 1995
------ ------
<S> <C> <C>
OPERATING ACTIVITIES
--------------------
Net loss ($983) ($1,980)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities
Depreciation and amortization 5,275 4,385
Deferred gross profit (377) 544
Cost of sales not requiring cash 3,983 1,621
Trading account profit, net (1,597) (6,221)
Changes in operating assets and liabilities:
Restricted cash 1,685 (1,138)
Investments - trading 21,100 -
Principal payments on contracts receivable 9,343 10,168
Receivables (7,252) (4,450)
Other receivables 87 286
Inventories (20,020) (11,694)
Other assets (689) (2,825)
Accounts payable and accrued and other
liabilities (3,063) (210)
-------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 7,492 (11,514)
INVESTING ACTIVITIES
--------------------
Investment in property, plant and equipment (6,081) (7,890)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (6,081) (7,890)
FINANCING ACTIVITIES
--------------------
Net proceeds from revolving lines of credit and
long-term borrowings 43,322 27,754
Principal payments on revolving lines of credit and
long-term borrowings (45,480) (11,039)
-------- --------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (2,158) 16,715
-------- --------
DECREASE IN CASH (747) (2,689)
Cash at beginning of period 2,467 4,560
-------- --------
CASH AT END OF PERIOD $1,720 $1,871
======== ========
</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 six months ended
June 30,
------------------------
Cash paid during the period for: 1996 1995
------ ------
<S> <C> <C>
Interest (net of amount capitalized of
$1,986 and $1,238 in 1996 and 1995,
respectively) $4,832 $4,696
======== ========
Income taxes $ - $ -
======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
------------------------------------------------------
1996 1995
------ ------
Contributions in aid of construction $1,033 $1,555
======== ========
</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 June 30, 1996 and December
31, 1995, and the related consolidated statements of operations for
the six month and three month periods ended June 30, 1996 and 1995 and
the consolidated statements of cash flows for the six month periods
ended June 30, 1996 and 1995 have been prepared in accordance with
generally accepted accounting principles for interim financial
information, the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statement presentation. In the
opinion of management, all adjustments necessary for a fair
presentation of such financial statements have been included. Such
adjustments consisted only of normal recurring items. Interim results
are not necessarily indicative of results for a full year.
For a complete description of the Company's other accounting
policies, refer to Avatar Holdings Inc.'s 1995 Annual Report on Form
10-K and the notes to Avatar's consolidated financial statements
included therein.
Reclassifications
-----------------
Certain amounts presented for 1995 have been reclassified in the
financial statements for comparative purposes.
Net (Loss) Income Per Common Share
----------------------------------
For the six months and three months ended June 30, 1996 and
1995, net (loss) income 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 $869 at June 30, 1996, on pledged mortgage notes receivable.
These collections will be applied to reduce the related mortgage trust
notes. Also included in restricted cash, at June 30, 1996, are utility
deposits of $48, as well as housing deposits of $1,446 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 June 30, 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. At December 31, 1995, the
portfolio also included 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>
June 30, December 31,
1996 1995
--------- -----------
<S> <C> <C>
Corporate bonds $7,721 $21,985
Non-rated bonds 73 8,472
Equity securities 63 2,045
Other rated bonds 9,917 4,753
Money market accounts 10,422 11,519
Less:
Securities sold short - (516)
-------- --------
Total market value $28,196 $48,258
======== ========
Aggregate cost $27,055 $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>
June 30, December 31,
1996 1995
---------- ------------
<S> <C> <C>
Contracts and mortgage notes receivable $84,753 $89,317
Notes and other receivables 7,243 7,268
-------- --------
91,996 96,585
Less:
Deferred gross profit 25,830 27,589
Allowance for doubtful accounts 1,283 1,003
Market valuation reserve 334 704
Other 1,835 2,774
-------- --------
29,282 32,070
-------- --------
$62,714 $64,515
======== ========
</TABLE>
Land and Other Inventories
--------------------------
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Land developed and in process of development $101,237 $95,315
Land held for future development or sale 34,883 34,790
Dwelling units completed or under construction 25,928 18,044
Other 808 1,121
-------- --------
$162,856 $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>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
9% Cumulative preferred stock $9,000 $9,000
Other 60 60
-------- --------
$9,060 $9,060
======== ========
</TABLE>
Avatar's utility subsidiary's 9% cumulative preferred stock issue
provides for redemption no earlier than March 1, 1997, in whole or
in part; however, a minimum of $1,800 per annum of the preferred
stock must be redeemed beginning in 1997. A redemption of all
outstanding shares shall occur no later than March 1, 2001.
Charges to operations recorded as "Other expenses" relate to
preferred stock dividends of subsidiaries for the six months ended
June 30, 1996 and 1995, which amounted to $408 and $408, respectively,
and for the three months ended June 30, 1996 and 1995 which amounted
to $203 and $204 , respectively.
9<PAGE>
<PAGE> 10
Notes to Consolidated Financial Statements (Unaudited) -- continued
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 June 30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred income tax assets
Net operating loss carryforward $16,000 $13,000
Tax over book basis of land inventory 24,000 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 4,000 5,000
Other 3,000 1,000
-------- --------
Total deferred income taxes 57,000 52,000
Valuation allowance for deferred income tax assets (42,000) (39,000)
-------- --------
Deferred income tax assets after valuation allowance 15,000 13,000
Deferred income tax liabilities
Book over tax income recognized on homesites
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>
A reconciliation of income tax expense to the expected income tax
expense (credit) at the federal statutory rate of 34% for the six
months ended June 30, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
Six Months
1996 1995
------ ------
<S> <C> <C>
Income tax (credit) computed at statutory rate ($334) ($673)
Income tax effect of non-deductible dividends
on preferred stock of subsidiary 139 138
State income tax (credit), net of federal effect (13) (54)
Other, net 208 74
Change in valuation allowance on deferred tax assets - 515
-------- --------
Provision for income taxes $0 $0
======== ========
</TABLE>
10<PAGE>
<PAGE> 11
Notes to Consolidated Financial Statements (Unaudited) -- continued
Contingencies
-------------
Avatar is involved in various pending litigation matters
primarily arising in the normal course of its business. Although the
outcome of these and the following matters cannot be determined,
management believes that the resolution of these matters will not have
a material effect on Avatar's business or financial position.
On October 1, 1993, the United States, on behalf of the U.S.
Environmental Protection Agency, filed a civil action against Florida
Cities Water Company ("Florida Cities") , a utility subsidiary of
Avatar Holdings Inc. ("Avatar"), in the U.S. District Court for the
Middle District of Florida. (United States v. Florida Cities Water
Company, Civil Action No. 93-281-CIV-FTM-21(d)), alleging that the
Waterway Estates treatment plant, located in Lee County, Florida,
operated in violation of the Clean Water Act ("Act"), 33 U.S.C. S1251
et seq. at various times during the period from October 1, 1988
through July 14, 1992. The 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 for violations of the 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, the parent
corporation, as a defendant. On November 22, 1995, the Court ruled
that certain claims against Florida Cities for unpermitted discharges
at the Barefoot Bay and Carrollwood plants, and alledged violations
of an administrative order, were barred by the doctrine of res
judicata. On November 22, 1995 and December 21, 1995, the Court held
that allegations against the parent corporation for events occuring
prior to May 5, 1990 were barred by the statue of limitations.
Moreover, the Court held that certain claims against the parent
corporation relating to unpermitted discharges at the Barefoot Bay and
Carrollwood plants and Florida Cities' alleged violations of an
administrative order, were precluded by the res judicata doctrine. As
a result, the issues remaining for trial involved calculations of
penalties for alleged unpermitted discharges and permit violations,
and whether the parent corporation had any liability for these claims.
A trial was held in March and April 1996, and post-trial briefs were
submitted to the Court on June 6, 1996. On July 23, 1996, the Court
requested additional briefing on two cases that could arguably bear
on the Court's prior November 1995 ruling precluding certain claims
based on the doctrine of res judicata. Upon consideration of these
cases, the Court could reinstate certain claims perviously rejected
by the Court. All parties submitted opening briefs in response to the
recent request by the Court, and will submit reply briefs by August 9,
1996. Based upon the information currently available to it, Avatar
and Florida Cities believe that they have strong defenses to the
claims that were at issue at trial, and a strong position that the
claims previously barred by the Court based on the doctrine of res
judicata should not be reinstated. Avatar and Florida Cities intend
to continue their vigorous defense in this matter.
11<PAGE>
<PAGE> 12
Notes to Consolidated Financial Statements (Unaudited) -- continued
Contingencies -- continued
-------------
On November 1, 1994, certain private parties filed a civil action
against Avatar and twenty other defendants, in Rock County Circuit
Court Wisconsin. (Alderman, et al v. DT Inc., et al, Civil Action
Case No. 94 CV 675). The plaintiffs allege that Avatar and the other
named defendants disposed of various substances at the Edgerton Sand
& Gravel Landfill site (the "Site"), thereby causing contamination
of the groundwater source used by the plaintiffs. On March 8, 1996,
the plaintiffs entered into a settlement agreement with seventeen
of the named defendants, including Avatar (the "Settling Defendants").
The Settling Defendants 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 Wisconsin Department of
Natural Resources (the "Department") in connection with operating and
maintenance costs at the Site pursuant to a consent decree with the
State of Wisconsin, which must receive judicial approval to become
effective (the "Consent Decree"); and releases and covenants not to
sue from those Settling Defendants who have incurred cleanup costs at
the Site. Once the Consent Decree is lodged and approved by the court,
this matter sould be fully resolved. In the event, however, the
Consent Decree is not approved, the litigation would most likely
resume, in which case Avatar has available to it a number of factual
and legal defenses, which if successful, would eliminate or
substantially reduce Avatar's potential liability.
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 six and three month periods ended June 30,
1996, resulted in a net loss of $983 and net income of $93 or $.11 and
$.01 per share, respectively, compared to a net loss of $1,980 and
$1,594 or $.22 and $.18 per share, respectively, for the same periods
of 1995. The improvement in operations for the six months and three
months is primarily a result of improved margins from real estate
operations, while net trading account profits were lower.
Avatar's real estate revenues for the six and three months ended
June 30, 1996, increased $19,695 or 80.6% and $15,741 or 142.1%,
respectively, while real estate expenses increased $14,557 or 48.1%
and $11,817 or 79.6%, respectively, when compared to the same periods
of 1995. The increase in real estate revenues for the six month and
three month periods ended June 30, 1996 is generally a result of
increased housing and vacation ownership sales, increased resort
revenues and increased bulk land sales. The increase in real estate
expenses for the six and three month periods ended June 30, 1996, when
compared to the same periods of 1995, is essentially a result of the
related costs associated with the increase in real estate sales
volume.
12<PAGE>
<PAGE 13>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands except per
share data) -- continued
RESULTS OF OPERATIONS -- continued
---------------------
Data from home-building operations for the six months ended June
30, 1996 and 1995 is summarized as follows :
<TABLE>
<CAPTION>
Six Months Three Months
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Units closed
------------
Number of units 110 55 66 30
Aggregate dollar volume $18,993 $4,680 $15,168 $2,672
Average price per unit $173 $85 $230 $89
Units sold, net
---------------
Number of units 215 131 73 52
Aggregate dollar volume $28,550 $27,081 $10,731 $7,560
Average price per unit $133 $207 $147 $145
Backlog June 30,
-------
1996 1995
------ ------
Number of units 257 135
Aggregate dollar volume $41,535 $27,451
Average price per unit $162 $203
</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
six months ended June 30, 1995.
Utility revenues for the six and three months ended June 30,
1996, increased $920 or 5.9% and $514 or 6.7%, respectively, when
compared to the same periods of 1995. The increase in utility revenues
is primarily attributable to increases due to rate cases settled in
the latter part of 1995 and customer growth. Utility expenses for the
six and three months ended June 30, 1996, increased $579 or 4.7% and
$515 or 8.4%, respectively, when compared to the same periods of 1995.
The increase in utility expenses is due to higher utility operating
costs.
Interest income for the six and three months ended June 30, 1996,
decreased $410 or 8.4% and $175 or 7.4%, respectively, when compared
to the same periods for 1995. The decline in interest income is due
to lower average aggregate amounts outstanding in the Company's
contract and mortgage notes receivable portfolio. Avatar's contracts
and mortgage notes receivable portfolio amounted to $84,753 at June
30, 1996, compared to $94,239 at June 30, 1995.
Trading account profit, net for the six and three months ended
June 30, 1996, decreased $4,624 and $2,741, respectively, compared to
the same periods for 1995. Trading account profit represents interest
income and realized and unrealized gains and losses related to the
trading investment portfolio, net of commissions payable to brokers.
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
---------------------
General and administrative expenses for the six and three months
ended June 30, 1996, increased $250 or 5.6% and decreased $133 or
5.9%, respectively, compared to the same periods of 1995. The increase
for the six months ended June 30, 1996 is mainly attributable to an
increase in the accrual for incentive compensation and an increase in
professional fees.
Interest expense for the six and three months ended June 30,
1996, increased $279 or 5.1% and $99 or 3.6%, respectively, compared
to the same periods of 1995. The increase for the six months is
principally attributable to the increase in construction loans for
homebuilding and vacation ownership operations.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Avatar's primary business activities, which include homebuilding,
vacation ownership, 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 $28,196 in investments, at June 30,
1996, which were classified as trading. The Company intends to
continue to actively trade such securities in an effort to generate
profits and will reinvest such profits until such time as the
Company's cash requirements necessitate the use or partial use of the
portfolio proceeds. During the six months ended June 30, 1996, the
Company's cash requirements necessitated the sale of $21,100 from its
portfolio proceeds, of which, $12,250 was used to reduce related
debt. Substantially all of the investment portfolio collateralizes
a $34,000 line of credit which had an outstanding balance at June 30,
1996, of $23,750 and will mature during the second quarter of 1997.
In March 1996, the Company obtained a credit line in the initial
amount of $10,000, which matures May 31, 1997 and is collateralized by
the stock of Avatar Mortgage Funding Inc. This line 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 June 30, 1996, this line had an outstanding balance of
$10,000. 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. At June 30, 1996,
the outstanding balance on this line totaled $5,925.
Avatar received approval for an additional line of credit for up
to $20,000, this line is expected to close during the third quarter
of 1996.
14<PAGE>
<PAGE> 15
PART II -- OTHER INFORMATION
----------------------------
Item 1. Legal Proceedings
The information, which is set forth under the caption
"Contingencies" in the Notes to Consolidated Financial Statements
(Unaudited) in Item 1 of Part I of this Report, is incorporated
herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on May 23,
1996, in Coral Gables, Florida, for the purpose of electing eight
directors; approving an employment agreement between Avatar and
Edwin Jacobson, President and Chief Executive Officer, to be
effective June 16, 1997; and approving the appointment of Ernst &
Young, LLP, independent accountants, as auditors for the year ending
December 31, 1996. Proxies were solicited from holders of 9,095,102
outstanding shares of Common Stock as of the close of business on
March 29, 1996, as described in Registrant's Proxy Statement
dated April 23, 1996. All of management's nominees for directors
were re-elected, the employment agreement with Edwin Jacobson was
approved, and the appointment of Ernst & Young, LLP was approved by
the following votes:
ELECTION OF DIRECTORS
<TABLE>
<CAPTION>
Name Votes FOR WITHHELD
---- --------- --------
<S> <C> <C>
Leon Levy 7,387,653 18,526
Milton H. Dresner 7,386,849 19,330
Edwin Jacobson 7,384,891 21,288
Leon T. Kendall 7,387,740 18,439
Martin Meyerson 7,386,055 20,124
Kenneth T. Rosen 7,387,631 18,548
Fred Stanton Smith 7,385,434 20,745
Henry King Stanford 7,384,783 21,396
</TABLE>
APPROVAL OF EMPLOYMENT AGREEMENT WITH EDWIN JACOBSON
<TABLE>
<CAPTION>
Votes Votes
Votes FOR AGAINST ABSTAINED
--------- ------- ---------
<S> <C> <C>
7,231,316 24,275 31,418
</TABLE>
APPOINTMENT OF AUDITORS
<TABLE>
<CAPTION>
Shares Voted Shares
Shares Voted FOR AGAINST ABSTAINED
---------------- ------------ ---------
<S> <C> <C>
7,385,757 4,346 16,076
</TABLE>
15<PAGE>
<PAGE> 16
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 June
30, 1996.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
AVATAR HOLDINGS INC.
Date: August 12, 1996 By: /s/ Lawrence L. Colditz
--------------- ------------------------
Lawrence L. Colditz
Controller
Date: August 12, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,083
<SECURITIES> 28,196
<RECEIVABLES> 91,996
<ALLOWANCES> (29,282)
<INVENTORY> 162,856
<CURRENT-ASSETS> 0
<PP&E> 183,239
<DEPRECIATION> 0
<TOTAL-ASSETS> 460,978
<CURRENT-LIABILITIES> 0
<BONDS> 170,438
<COMMON> 12,715
0
0
<OTHER-SE> 144,714
<TOTAL-LIABILITY-AND-EQUITY> 460,978
<SALES> 44,143
<TOTAL-REVENUES> 67,508
<CGS> 25,121
<TOTAL-COSTS> 37,941
<OTHER-EXPENSES> 9,392
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,774
<INCOME-PRETAX> (983)
<INCOME-TAX> 0
<INCOME-CONTINUING> (983)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (983)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
<FN>
NOTE: Total Current Assets and Total Current Liabilities are not
applicaple because Registrant does not present a classified
balance sheet.
18
</TABLE>
