<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, 1997
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, 1997.
1 OF 20<PAGE>
<PAGE> 2
AVATAR HOLDINGS INC. AND SUBSIDIARIES
INDEX
-----
PAGE
----
PART I. Financial Information
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets --
June 30, 1997 and December 31, 1996.............. 3
Consolidated Statements of Operations --
Six months and three months ended
June 30, 1997 and 1996........................... 4
Consolidated Statements of Cash Flows --
Six months ended June 30, 1997 and 1996.......... 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........................ 14
Item 4. Submission of Matters to a Vote of
Security Holders....................... 14
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>
June 30, December 31,
1997 1996
---------- -----------
<S> <C> <C>
Assets
------
Cash $5,410 6,516
Restricted cash 2,105 1,781
Investments - trading 4,281 4,535
Contracts, mortgage notes and
other receivables, net 50,650 56,544
Land and other inventories 181,226 168,211
Property, plant and equipment, net 186,994 186,615
Other assets 16,412 15,215
Regulatory assets 3,535 3,768
---------- -----------
Total Assets $450,613 $443,185
========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Liabilities
-----------
Notes, mortgage notes and other debt:
Real estate and corporate $79,368 75,143
Development and construction loans 41,326 31,688
Utilities 40,279 42,152
Estimated development liability for
sold land 9,014 8,459
Accounts payable 6,312 7,465
Accrued and other liabilities 30,511 32,087
Deferred customer betterment fees 18,020 18,430
Minority interest in consolidated subsidiaries 7,264 9,064
---------- -----------
Total Liabilities 232,094 224,488
Commitments and contingent liabilities
Contributions in aid of construction 60,635 59,245
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 (129) 1,439
--------- -----------
219,857 221,425
Treasury stock, at cost, 3,620,346 shares 61,973 61,973
---------- -----------
Total Stockholders' Equity 157,884 159,452
---------- -----------
Total Liabilities and Stockholders' Equity $450,613 $443,185
========== ===========
</TABLE>
See notes to consolidated financial statements.
3<PAGE>
<PAGE> 4
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Six and Three Months Ended June 30, 1997 and 1996
(Unaudited)
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Six Months Three Months
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues
--------
Real estate sales $49,164 $44,143 $26,671 $26,822
Deferred gross profit 2,075 377 1,047 689
Utility revenues 17,911 16,435 8,877 8,234
Interest income 3,671 4,486 1,797 2,198
Trading account profit, net 207 1,597 115 596
Other 625 470 243 70
------- ------- ------- -------
Total revenues 73,653 67,508 38,750 38,609
Expenses
--------
Real estate expenses 51,313 44,805 26,274 26,655
Utility expenses 12,892 12,820 6,457 6,679
General and administrative
expenses 4,778 4,684 2,194 2,131
Interest expense 5,883 5,774 3,242 2,848
Other 355 408 164 203
------- ------- ------- -------
Total expenses 75,221 68,491 38,331 38,516
------- ------- ------- -------
(Loss) income before
income taxes (1,568) (983) 419 93
Provision for income taxes - - - -
------- ------- ------- -------
Net (loss) income ($1,568) ($983) $419 $93
======= ======= ======= =======
Per share amounts:
Net (loss) income ($.17) ($.11) $.05 $.01
======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
4<PAGE>
<PAGE> 5
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended June 30, 1997 and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
--------------------
Net loss ($1,568) ($983)
Adjustments to reconcile net loss to
net cash (used in) provided by operating
activities:
Depreciation and amortization 5,539 5,275
Deferred gross profit (2,075) (377)
Inventory writedown 200 -
Cost of sales not requiring cash 3,517 3,983
Trading account profit, net (207) (1,597)
Changes in operating assets and
liabilities:
Restricted cash (324) 1,685
Investments - trading 530 21,100
Principal payments on contracts
receivable 8,827 9,343
Receivables (1,775) (7,252)
Other receivables 917 87
Inventories (16,177) (20,020)
Other assets (1,197) (689)
Accounts payable and accrued and
other liabilities (2,975) (3,063)
--------- ---------
NET CASH (USED IN) PROVIDED BY
OPEATING ACTIVITIES (6,768) 7,492
INVESTING ACTIVITIES
--------------------
Investment in property, plant and equipment (4,528) (6,081)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (4,528) (6,081)
FINANCING ACTIVITIES
--------------------
Net proceeds from revolving lines of credit
and long-term borrowings 39,248 43,322
Principal payments on revolving lines of
credit and long-term borrowings (27,258) (45,480)
Redemption of 9% cumulative preferred stock (1,800) -
--------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 10,190 (2,158)
--------- ---------
DECREASE IN CASH (1,106) (747)
Cash at beginning of period 6,516 2,467
--------- ---------
CASH AT END OF PERIOD $5,410 $1,720
========= =========
</TABLE>
5<PAGE>
<PAGE> 6
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited) -- continued
For the Six Months Ended June 30, 1997 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
-------------------------------------------------
Cash paid during the period for: 1997 1996
--------- ---------
<S> <C> <C>
Interest (net of amount capitalized of
$1,569 and $1,986 in 1997
and 1996, respectively) $3,343 $4,832
========= =========
Income taxes $ - $ -
========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
------------------------------------------------------
1997 1996
--------- ---------
Contributions in aid of construction $2,374 $1,033
========= =========
</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, 1997 and
December 31, 1996, and the related consolidated statements of
operations for the six month and three month periods ended June
30, 1997 and 1996 and the consolidated statements of cash flows
for the six month periods ended June 30, 1997 and 1996 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 1996 Annual Report on
Form 10-K and the notes to Avatar's consolidated financial
statements included therein.
Reclassifications
-----------------
Certain amounts presented for 1996 have been reclassified in
the financial statements for comparative purposes.
Net (Loss) Income Per Common Share
----------------------------------
For the six and three months ended June 30, 1997 and 1996,
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, at June 30, 1997, includes utility deposits
of $54, as well as housing and vacation ownership deposits of
$1,590 and $461, respectively, which have been placed in escrow.
The housing deposits will become available to the Company when
the housing contracts close.
Stock Options
-------------
The Company has elected to follow Accounting Principles
Board Opinion No 25, "Accounting for Stock Issued to Employees"
and related interpretations in accounting for its employee stock
options. Under APB 25, because the exercise price of the
Company's stock options is higher than the market price of the
Company's common stock on June 30, 1997, no compensation expense
has been recognized.
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, 1997 and December
31, 1996 included bonds rated B- or above by Moody's and/or
Standard and Poor's, non-rated bonds of companies which are in
bankruptcy and have defaulted as to payments of principal and
interest on such bonds, and money market accounts. At December
31, 1996, the portfolio also included equity securities.
The following table sets forth the fair values of
investments:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------- -----------
<S> <C> <C>
Non-rated bonds $141 $77
Equity securities 0 81
Other rated bonds 2,608 2,172
Money market accounts 1,532 2,205
--------- -----------
Total market value $4,281 $4,535
========= ===========
Aggregate cost $4,017 $3,975
========= ===========
</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,
1997 1996
-------- ---------
<S> <C> <C>
Contracts and mortgage notes receivable $64,238 $74,029
Notes and other receivables 7,026 7,928
-------- ---------
71,264 81,957
-------- ---------
Less:
Deferred gross profit 18,565 21,878
Allowance for doubtful accounts 1,102 1,450
Market valuation reserve 11 140
Other 936 1,945
-------- ---------
20,614 25,413
-------- ---------
$50,650 $56,544
======== =========
</TABLE>
Land and Other Inventories
--------------------------
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ----------
<S> <C> <C>
Land developed and in process
of development $106,901 $103,394
Land held for future development or sale 33,544 33,544
Dwelling units completed or
under construction 39,999 30,500
Other 782 773
---------- ----------
$181,226 $168,211
========== ==========
</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,
1997 1996
----------- ----------
<S> <C> <C>
9% Cumulative preferred stock $7,200 $9,000
Other 64 64
----------- ----------
$7,264 $9,064
=========== ==========
</TABLE>
Avatar's utility subsidiary's 9% cumulative preferred stock
issue provides for manadatory redemption of a minimum of $1,800
per annum beginning in 1997. During the first quarter Avatar
redeemed $1,800 of the preferred stock. A redemption of all
outstanding shares shall occur no later than March 1, 2001.
9<PAGE>
<PAGE> 10
Notes to Consolidated Financial Statements (Unaudited)
-----------------------------------------------
-- continued
Minority Interest in Consolidated Subsidiaries - continued
-----------------------------------------------
Charges to operations recorded as "Other expenses" relate to
preferred stock dividends of subsidiaries for the six months
ended June 30, 1997 and 1996, which amount to $355 and $408 ,
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 June 30, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Deferred income tax assets
Net operating loss carryforward $16,000 $16,000
Tax over book basis of land inventory 24,000 24,000
Unrecoverable land development costs 3,000 3,000
Tax over book basis of depreciable assets 6,000 7,000
Alternative minimum tax and investment
tax credit carryforward 5,000 4,000
Other 3,000 3,000
-------- --------
Total deferred income taxes 57,000 57,000
Valuation allowance for deferred
income tax assets (42,000) (42,000)
-------- --------
Deferred income tax assets after valuation
allowance 15,000 15,000
Deferred income tax liabilities
Book over tax income recognized on homesite
and vacation ownership sales (6,000) (5,000)
Deferred carrying charges on utility plant (2,000) (3,000)
Other (7,000) (7,000)
-------- --------
Total deferred income tax liabilities (15,000) (15,000)
-------- --------
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, 1997 and 1996 is as follows:
10<PAGE>
<PAGE> 11
Notes to Consolidated Financial Statements (Unaudited)
-----------------------------------------------
-- continued
Income Taxes - (continued)
------------
<TABLE>
<CAPTION>
1997 1996
------- --------
<S> <C> <C>
Income tax (credit) computed at
statutory rate ($533) ($334)
Income tax effect of non-deductible
dividends on preferred stock of susidiary 121 139
State income tax (credit), net of federal effect (45) (13)
Other, net 457 208
------- --------
Provision for income taxes $0 $0
======= ========
</TABLE>
Contingencies
-------------
Avatar is involved in various pending litigation matters
primarily arising in the normal course of its business. Although
the outcome of these and the following matters cannot be
determined, management believes that the resolution of these
matters will not have a material effect on Avatar's business or
financial position.
On October 1, 1993, the United States, on behalf of the
U.S. Environmental Protection Agency, filed a civil action
against Florida Cities Water Company ("Florida Cities"), a
utility subsidiary of Avatar Holdings Inc. ("Avatar"), in the
U.S. District Court for the Middle District of Florida, United
States v. Florida Cities Water Company, Civil Action No. 93-281-
CIV-FTM-21, alleging that Florida Cities' Waterway Estates
treatment plant, located in Lee County, Florida operated in
violation of the Federal Clean Water Act ("Act"), 33 U.S.C. S1251
et seq. On May 5 and June 26, 1996, the United States amended
its complaint to include allegations against Florida Cities for
violations of the Act at two other Florida wastewater
treatment plants, Barefoot Bay, located in Brevard County,
and Carrollwood, located in Hillsborough County. In addition,
the government amended the complaint to include Avatar, the
parent corporation, as a defendant. A trial was held in March
and April 1996. On August 20, 1996, the Court issued its final
judgment, incorporating earlier rulings. The Court found Avatar
not liable on any of the government's claims and entered judgment
in Avatar's favor. The Court found Florida Cities not liable on
certain of the government's claims, but liable on other claims,
and awarded the government $310 in civil penalties against
Florida Cities. On October 18, 1996, the government filed a
notice of appeal to the U.S. Court of Appeals for the Eleventh
Circuit. Avatar and Florida Cities believe that there are strong
arguments to support the affirmance of the district court
judgment on appeal. In June of 1997, the United States, Florida
Cities and Avatar filed a joint motion to dismiss all related
appeals with prejudice. This motion is presently pending with the
appeals court.
11<PAGE>
<PAGE> 12
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, 1997, resulted in a net loss of $1,568 and a net income of
$419 or $.17 and $.05 per share, respectively, compared to a
net loss of $983 and a net income of $93 or $.11 and $.01 per
share, respectively, for the same period of 1996. The decrease
in operating results for the six months was primarily
attributable to a decrease in real estate operating results and
trading account profits, partially offset by an increase in
deferred gross profit recognition and utility operating results.
The improvement for the three months ended June 30, 1997 was
primarily attributed to a commercial land sale along with
increased utility margins and deferred gross profit recognition,
partly mitigated by reduced trading account profits and an
increase in interest expense.
Avatar's real estate revenues for the six and three months
ended June 30, 1997, increased $5,021 or 11.4% and decreased $151
or 0.6% , respectively, while real estate expenses increased
$6,508 or 14.5% and decreased $381 or 1.4%, respectively, when
compared to the same period of 1996. The increase in real estate
revenues for the six month period ended June 30, 1997 is
generally a result of increased housing and vacation ownership
sales partially mitigated by a decrease in homesite sales. The
decrease in real estate revenues for the three months ended June
30, 1997 is a result of a reduction in the average price per
house closing, due to reduced closings at the Company's Harbor
Islands project, and reduced homesite sales; mitigated by
increased vacation ownership sales and a commercial land sale.
The increase in real estate expenses for the six month period
ended June 30, 1997, when compared to the same period of 1996, is
essentially a result of related costs associated with the
increased sales volume as well as expenditures associated with a
new product at the Company's Poinciana project. The decrease in
real estate expenses for the three months ended June 30, 1997 is
due to a reduction in costs related to the reduced sales volume.
Data from home-building operations for the six and three
months ended June 30, 1997 and 1996 is summarized as follows :
<TABLE>
<CAPTION>
Six Months Three Months
1997 1996 1997 1996
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Units closed
------------
Number of units 214 110 106 66
Aggregate dollar volume $27,868 $18,993 $13,885 $15,168
Average price per unit $130 $173 $131 $230
Units sold, net
---------------
Number of units 339 215 146 73
Aggregate dollar volume $43,904 $28,550 $20,831 $10,731
Average price per unit $130 $133 $143 $147
Backlog June 30,
-------
1997 1996
-------- -------
Number of units 428 257
Aggregate dollar volume $57,385 $41,535
Average price per unit $134 $162
</TABLE>
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
---------------------
During the second quarter of 1997 Avatar entered into a
joint venture with Brookman- Fels, a prominent high-end home
builder in the South Florida area. The joint venture provides
Brookman-Fels with the exclusive right to build on two parcels of
Avatar's Harbor Islands property, which has a density of
approximately 114 single family custom and semi-custom homes,
Avatar is also working with Brookman-Fels to market its other
planned communities in Harbor Islands.
Utility revenues for the six and three months ended June 30,
1997, increased $1,476 or 9.0% and $643 or 7.8%, respectively,
when compared to the same period of 1996. The increase in utility
revenues for the six and three months is primarily attributable
to customer growth, the implementation of rate increases that
were not effective during the first six months of 1996, and
increased contract services. Utility expenses for the six and
three months ended June 30, 1997, increased $72 or 0.6% and
decreased $222 or 3.3%, respectively, when compared to the same
period of 1996. The increase in utility expenses for the six
months is primarily attributable to increases in general and
administrative expenses, purchased power and other operational
expenses, mitigated by a decrease in legal fees. The decrease in
utility expenses for the three months ended June 30, 1997 as
compared to the same period in 1996 is primarily due to a charge
for legal expenses in 1996 mitigated by an increase in operating
expenses for the three months ended June 30, 1997.
Interest income for the six and three months ended June 30,
1997, decreased $815 or 18.2% and $401 or 18.2%, respectively,
when compared to the same period for 1996. The decline in
interest income is due in part 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 $64,238 at June 30, 1997,
compared to $84,753 at June 30, 1996.
Trading account profit, net for the six and three months
ended June 30, 1997, decreased $1,390 or 87.0% and $481 or 80.7%,
respectively, compared to the same period for 1996. 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. The decrease in
trading account profits is primarily due to the lower average
balance of investment securities .
Interest expense for the six and three months ended June 30,
1997, increased $109 or 1.9% and $394 or 13.8%, respectively,
compared to the same period of 1996. The increase for the six and
three month periods is primarily attributed to a reduction in
capitalized interest, as well as additional borrowings.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Avatar's primary business activities, which include housing,
vacation ownership, 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
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
--------------------------------
LIQUIDITY AND CAPITAL RESOURCES - continued
-------------------------------
securities on hand, operating cash flows, proceeds from the sale
of certain non-core assets and external borrowings.
Avatar had approximately $4,281 in investments, at June 30,
1997, 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.
Substantially all of the investment portfolio collateralizes
a $3,350 line of credit which had an outstanding balance at June
30, 1997, of $3,350 and will mature during the second quarter of
1998.
The Harbor Islands land development and construction loan
requires a mandated principal reduction of $13,000 by October
1997, less any amounts repaid pursuant to periodic release prices
on sales ($7,080 at June 30,1997). The lender has indicated
a willingness to extend the date of this principal reduction
requirement. Avatar expects to complete re-negotiating the
details of this requirement and various other terms of the credit
facility during the third quarter of 1997.
PART II -- OTHER INFORMATION
----------------------------
Item 1. Legal Proceedings
------- -----------------
The information, which is set forth in the 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 31, 1993 civil action against
Avatar, 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
29, 1997, in Coral Gables, Florida, for the purpose of electing
nine directors; approving the Incentive and Capital Accumualtion
plan; and approving the appointment of Ernst & Young, LLP
independent accountants, as auditors for the year ending December
31, 1997. Proxies were solicited from holders of 9,095,102
outstanding shares of Common Stock as of the close of
business on March 31, 1997, as described in Registrant's
Proxy Statement dated April 29, 1997. All of management's
nominees for directors were re-elected, the Incentive Plan was
approved, and the appointment of Ernst & Young LLP was approved
by the following votes:
14<PAGE>
<PAGE> 15
PART II -- OTHER INFORMATION - continued
----------------------------
Item 4. Submission of Matters to a Vote of Security Holders
------- ----------------------------------------------------
-- continued
<TABLE>
<CAPTION>
ELECTION OF DIRECTORS
Name Votes FOR WITHHELD
---- --------- --------
<S> <C> <C>
Leon Levy 7,166,526 22,306
Milton H. Dresner 7,165,959 22,873
Edwin Jacobson 7,162,184 26,648
Gerald Kelfer 7,162,658 26,174
Leon T. Kendall 7,166,205 22,627
Martin Meyerson 7,166,119 22,713
Kenneth T. Rosen 7,166,719 22,113
Fred Stanton Smith 7,162,786 26,046
Henry King Stanford 7,163,541 25,291
</TABLE>
<TABLE>
<CAPTION>
APPROVAL OF INCENTIVE AND CAPITAL ACCUMULATION PLAN
Votes Votes
Votes FOR AGAINST ABSTAINED
--------- ------- ---------
<S> <C> <C>
6,448,027 544,005 73,953
</TABLE>
<TABLE>
<CAPTION>
APPOINTMENT OF AUDITORS
Shares Voted Shares
Shares Voted FOR AGAINST ABSTAINED
---------------- ------- ---------
<S> <C> <C>
7,167,882 2,908 18,042
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
------- --------------------------------
Exhibits
--------
10 (i) Amendment to Employment Agreement, dated as of
June 13, 1997, to Employment Agreement, dated
as of July 27, 1995, by and between Avatar
Holdings Inc. and Edwin Jacobson (filed herewith)
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, 1997.
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: August 14, 1997 By: /s/ Lawrence L. Colditz
--------------- ------------------------
Lawrence L. Colditz
Controller
Date: August 14, 1997 By: /s/ Charles L. McNairy
--------------- -----------------------------
Charles L. McNairy
Executive Vice President,
Treasurer and Chief Financial
Officer
16<PAGE>
<PAGE> 17
Exhibit Index
10 (i) Amendment to Employment Agreement, dated as of
June 13, 1997, to Employment Agreement, dated as of
July 27, 1995, by and between Avatar Holdings Inc.
and Edwin Jacobson (filed herewith)................ 18
27 Financial Data Schedule (filed herewith)........... 20
17
<PAGE>
<PAGE> 18
Exhibit 10(i) Ammendment to Employment Agreement between Avatar
Holdings Inc. and Edwin Jacobson
AVATAR HOLDINGS INC.
255 Alhambra Circle
Coral Gables, Florida 33134
June 13, 1997
Mr. Edwin Jacobson
2575 South Bayshore Drive
Penthouse A
Coconut Grove, Florida 33133
Re: Amendment to Employment Agreement
Dear Mr. Jacobson:
Reference is hereby made to that certain employment
agreement between Avatar Holdings Inc. (the "Company") and you
dated July 27, 1995, as amended on February 13, 1997 (as so
amended, the "1995 Employment Agreement").
The Company acknowledges your decision and
notification pursuant to the 1995 Employment Agreement to
resign as Chief Executive Officer of the Company effective July
31, 1997 but to continue as Chairman of the Executive Committee
in accordance with the 1995 Employment Agreement. Accordingly,
we agree as follows:
1. The 1995 Employment Agreement is hereby amended
effective June 16, 1997, as follows:
(a) Duties. The third sentence of Paragraph 2(d) of
the 1995 Employment Agreement is hereby amended and restated in
its entirety as follows: "In such event, you shall have the
right, but shall not be obligated, to change the amount of time
devoted to your duties and responsibilities hereunder provided
that you are reasonably available to perform such functions and
duties as are incident to the office of Chairman of the
Executive Committee (but not the Chief Executive Officer) or
such other duties (consistent with such change in the amount of
time devoted and such change in office) as reasonably may be
requested of you by the Board of Directors."
(b) Base Salary. The first sentence of Paragraph
3(a)(i) of the 1995 Employment Agreement is hereby amended by
deleting the amount "$400,000" and substituting therefor
"$325,000".
18<PAGE>
<PAGE> 19
Exhibit 10(i) Ammendment to Employment Agreement between Avatar
Holdings Inc. and Edwin Jacobson -- continued
(c) Final Payment. Paragraph 3(a)(ii) of the 1995
Employment Agreement is hereby deleted so that no Final Payment
is to be made to you under any provision of the 1995 Employment
Agreement.
(d) Cause. Paragraph 7(c) of the 1995 Employment
Agreement is hereby amended by adding the following
parenthetical clause immediately following the phrase "the
willful, repeated and demonstrable failure by you substantially
to perform your duties over a period of not less than 30 days,
other than any such failure resulting from your incapacity due
to physical or mental illness":
(it being understood that the Company shall recognize your
right to reduce your duties pursuant to Paragraph 2(d)
hereof)
(e) Mitigation. Paragraph 8(e) of the 1995
Employment Agreement is hereby deleted.
Except as expressly amended by this letter agreement, your
1995 Employment Agreement remains in full force and effect in
accordance with its terms. This letter agreement, together
with the 1995 Employment Agreement, constitutes the complete
understanding between the parties with respect to your
employment and no agreements or representations, oral or
otherwise, express or implied, with respect to the subject
matter hereof have been made by either party which are not set
forth expressly in this letter agreement and the 1995
Employment Agreement. This letter agreement may be executed in
one or more counterparts, each of which shall be deemed to be
an original but all of which together will constitute one and
the same instrument.
If the foregoing is satisfactory, would you please so
indicate by signing and returning to the Company the enclosed
copy of this letter whereupon this will constitute our
agreement on the subject.
AVATAR HOLDINGS INC.
By: /s/ Leon Levy
-----------------------
Leon Levy
Chairman of the Board
ACCEPTED AND AGREED TO:
/s/ Edwin Jacobson
------------------------
Edwin Jacobson
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 7,515
<SECURITIES> 4,281
<RECEIVABLES> 71,264
<ALLOWANCES> (20,614)
<INVENTORY> 181,226
<CURRENT-ASSETS> 0
<PP&E> 186,994
<DEPRECIATION> 0
<TOTAL-ASSETS> 450,613
<CURRENT-LIABILITIES> 0
<BONDS> 160,973
<COMMON> 12,715
0
0
<OTHER-SE> 145,169
<TOTAL-LIABILITY-AND-EQUITY> 450,613
<SALES> 49,164
<TOTAL-REVENUES> 73,653
<CGS> 31,746
<TOTAL-COSTS> 44,638
<OTHER-EXPENSES> 9,882
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,883
<INCOME-PRETAX> (1,568)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,568)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,568)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> (0.17)
<FN>
NOTE: Total Current Assets and Total Current Liabilities are not
applicable because Registrant does not present a classified
balance sheet.
20
</TABLE >
</TABLE>
