1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994 -- Commission File Number 0-7616
AVATAR HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Delaware 23-1739078
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
255 Alhambra Circle, Coral Gables, Florida 33134
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (305) 442-7000
Securities registered pursuant to section 12(g) of the Act:
Common Stock, $1.00 Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliates of the
registrant was $321,974,275 as of February 28, 1995.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date.
As of February 28, 1995, there were 9,095,102 shares of common stock, $1.00
par value, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for its 1995 Annual Meeting of
Stockholders are incorporated by reference into Part III.
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AVATAR HOLDINGS INC.
1994 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I Page
Item 1. Business ....................................................... 3
Item 2. Properties...................................................... 7
Item 3. Legal Proceedings............................................... 7
Item 4. Submission of Matters to a Vote of Security-Holders............. 8
Executive Officers of the Registrant....................................... 9
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters........................................................... 11
Item 6. Selected Financial Data........................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 13
Item 8. Financial Statements and Supplementary Data....................... 18
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures............................................ 44
PART III
Item 10. Directors and Executive Officers of the Registrant................ 44
Item 11. Executive Compensation............................................ 44
Item 12. Security Ownership of Certain Beneficial Owners and Management.... 44
Item 13. Certain Relationships and Related Transactions.................... 44
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. 45
Exhibit Index............................................................... 51
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PART I
Item 1. Business
Avatar Holdings Inc. (a Delaware corporation incorporated in 1970) and its
subsidiaries (collectively, "Avatar" or the "Company") are engaged in two
principal business activities: real estate and water and wastewater utilities
operations. Avatar's real estate operations, which are located in the states of
Florida, Arizona, California, and Tennessee, include: development,
construction and sale of single family and multifamily housing communities;
development, sale and management of vacation ownership intervals; development
and sale of improved and unimproved homesites and commercial/industrial land
tracts; operations of amenities and resorts; cable television operations and
property management services. Avatar provides financing for a large portion of
its homesite sales, mainly under a deed and mortgage arrangement. Avatar's
utility operations consist of water and wastewater treatment plants which serve
communities in Florida and Arizona. During 1994, approximately 65% and 35% of
total revenues were generated through real estate and utility operations,
respectively.
Avatar's business strategy emphasizes housing sales, retail and industrial
real estate development, sales of vacation ownership intervals and resort
operations. Certain of Avatar's properties are being developed, and such
developments are at various stages of completion.
Information regarding revenues, results of operations and assets of the two
business segments noted above are included in Item 8 under the caption "Notes to
Consolidated Financial Statements".
Real Estate
Avatar's assets include real estate inventory in the states of Florida,
Arizona, California and Tennessee. In its Florida communities of Harbor Islands,
Poinciana, Barefoot Bay, Cape Coral, Golden Gate and Leisure Lakes,as well as in
its Arizona community of Rio Rico and at its newly-acquired property in
Tennessee, Avatar's activities include the construction and sale of single
family and multifamily housing, the construction, sale and management of
vacation ownership units and homesite and industrial/commercial land sales, with
the types of activities varying from community to community. Avatar owns
other sites including Banyan Bay in Martin County, Florida; Ocala Springs in
Marion County, Florida; and Woodland Hills in Los Angeles County, California.
The Harbor Islands Project encompasses 192 acres, including 30 acres
conveyed to the City of Hollywood for future parks, adjoining the Intra-coastal
Waterway in Hollywood, Florida. During 1994, the City of Hollywood and Avatar
reached a settlement agreement allowing the Company to build up to 2,400
residential units, including single family homes, townhomes, villas and mid and
high-rise condominium units in this water-oriented community. During the fourth
quarter of 1994, construction was completed on bridges, and earthwork commenced
for the project's initial phases. Preliminary construction also was completed on
the project's 196-boat slip marina. In 1994, refundable reservation deposits
were received for 30 single family homes and 10 estate homesites with a combined
sales value of approximately $12,535,000. Avatar expects to deliver these homes
during 1995.
Poinciana, located in central Florida approximately 21 miles south of
Orlando and 10 miles from Walt Disney World, encompasses 47,000 acres of land,
approximately 16,100 of which are owned by Avatar. This planned community
development includes subdivisions for single family, multifamily and
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Item 1. Business -- Continued
manufactured housing, and commercial/industrial areas. Since 1971, 21,730
homesites have been sold and approximately 4,519 housing units, primarily single
family houses and townhouses, have been constructed by Avatar and other non-
affiliated builders. As of December 31, 1994, approximately 16,600 developed and
undeveloped single family homesites remained in inventory at Poinciana.
Approximately 4,800 acres of land zoned for industrial/commercial/institutional
and multifamily use also remained in inventory. Avatar's housing programs in
Poinciana include its communities of Regency Pointe, Crescent Lakes and Cypress
Woods, as well as a scattered lot housing program. Regency Pointe, a 96 home
community, is expected to be completely sold during 1995 and the grand opening
of Crescent Lakes, a community of 904 homes, occurred in February 1995.
Platting, design and engineering was begun for Cypress Woods during 1994. At
December 31, 1994, Avatar had firm contracts at Poinciana to construct 29
single family units with a related sales value of approximately $2,427,000.
Avatar also owns and operates a 31,100 square foot shopping center at Poinciana
that was 100 % occupied at December 31, 1994. Recreational facilities owned
and operated by Avatar at the Poinciana development include an 18-hole Devlin
Von-Hagge championship golf course, tennis courts, a golf and racquet club with
a swimming pool, a community center and a series of nature walks and trails.
Avatar's real estate activities at Poinciana also include the construction,
sale and management of vacation ownership intervals. As of December 31, 1994,
1,769 unit weeks had been sold and 1,143 unit weeks remained in inventory at
Avatar's Alhambra at Poinciana. During 1994, Avatar began the design and
development of additional vacation ownership units in Poinciana. In 1994, Avatar
also acquired approximately nine acres of land and has deposits on an additional
fifteen acres in Pigeon Forge, Tennessee for the development, construction and
sale of vacation ownership intervals. Avatar expects to begin marketing the
additional Poinciana and Pigeon Forge products during mid-1995.
Barefoot Bay is located on Florida's east coast, midway between Vero Beach
and Melbourne. Avatar's operations at Barefoot Bay include the sale of
manufactured homes and homesites. Since operations commenced in 1970,
approximately 94% of the 5,020 available homesites have been sold. At December
31, 1994, Avatar had firm contracts to construct nine housing units with a
related sales value of approximately $876,000. Avatar owns and operates a 13,420
square foot shopping center in Barefoot Bay that was 90% occupied at December 31
1994, an 18-hole executive golf course, a community center, swimming pools,
tennis courts, a private beach and a fishing pier. Avatar also owns 58 acres of
land held for future development, sale or other use, adjacent to Barefoot Bay.
Cape Coral is a 60,700-acre community, of which approximately 3,800 acres
are owned by Avatar, located on Florida's west coast seven miles west of Fort
Myers. Its population has increased from 11,470 in 1970 to approximately 86,000
in 1994. Avatar owns and operates the Camelot Isles Shopping Center, a 70,000
square foot retail center that opened in February 1992, which was 100% occupied
at December 31, 1994. Remaining inventory at December 31, 1994 included
approximately 3,300 single family homesites and approximately 2,100 acres of
land zoned for commercial, industrial and multifamily use. Avatar's housing
programs in Cape Coral include: Emerald Cove, a 102 home community; The
Hermitage, an upscale gated waterfront community consisting of 19 oversized
homesites; and a scattered lot program. Avatar's Tarpon Point Marina, which is
located in Cape Coral, accommodates 175 vessels and features dockmaster
facilities, a ship's store and fueling facilities. The Camelot Marina, for which
the initial phase of construction was completed in 1991, will accommodate 76
vessels and will feature 3,500 feet of boardwalk upon completion. Other
amenities available to the residents of Cape Coral include Avatar's Cape Coral
Golf and Tennis Resort with an 18-hole championship golf course, a 9-hole
executive golf course, eight tennis courts and a 100-room motel.
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Item 1. Business -- Continued
Golden Gate City, located east of Naples in southwest Florida, had remaining
inventory at December 31, 1994 of 38 single family and duplex homesites, 51
acres of land zoned for multifamily use and 12 acres zoned for commercial use.
Golden Gate Estates includes 2,497 acres of land subdivided into 5,800
homesites. Remaining inventory as of December 31, 1994 includes 211 homesites of
varying size, the majority of which are approximately 1 and 1-1/4 acre
homesites, and 7,400 acres of land held for future use.
Avatar's land holdings in Leisure Lakes, located near the city of Lake
Placid in South Central Florida, consist of 3,239 homesites in inventory at
December 31, 1994. Amenities at Leisure Lakes include a 9-hole executive golf
course, a small lakefront motel, tennis courts, shuffleboard courts, a swimming
pool, a club house with pro shop, a coffee shop, a private beach, a boat ramp, a
card room and various lakes available for water sports.
Rio Rico, a 55,000-acre community development in southern Arizona, is
located 57 miles south of Tucson. This community, with a population of
approximately 5,400 residents,consists of single family homes and townhouses and
includes several areas zoned for commercial and industrial development. Avatar
owns and operates a 180-room hotel complex, which recently underwent a
$2,000,000 renovation, an 18-hole Robert Trent Jones designed championship golf
course and a 36,800 square foot shopping center, which was 82% occupied as of
December 31, 1994. Remaining inventory at Rio Rico at December 31, 1994 included
approximately 3,700 single family homesites, 2,536 acres of land zoned for
commercial, industrial and multifamily use, 4,762 acres of land held for future
development, sale or other use and 2,838 acres of undeveloped mountain range
reserved for open space.
Banyan Bay, located in Martin County, Florida, comprises 251 acres of land.
Future plans contemplate a medium-density residential development of two and
four story condominiums.
Ocala Springs, located five miles northeast of Ocala in Marion County,
Florida, is comprised of approximately 4,600 acres of land. The concept plan for
this project provides for 700 single family ranchettes on 1-1/4 to 1-1/2 acre
lots, 4,500 single family homesites on 1/4 to 1/2 acre lots, 400 homesites for
manufactured housing and 1,000 multifamily condominium units. Avatar also plans
on constructing an 18-hole golf course, and more than 130 acres will be used for
commercial, industrial and service facilities. These plans have been reviewed by
all appropriate state, regional and local governmental agencies and the plat for
Phase I has been filed with and accepted by Marion County.
Woodland Hills, located in northwest Los Angeles County, California,
consists of the Natoma tract that encompasses approximately 350 acres of land.
Conceptual planning for this tract has been completed for 66 luxury homesites.
An environmental impact report has been filed and is being reviewed by the City
of Los Angeles.
In addition to the real estate holdings described above, Avatar owns
approximately 2,500 acres of land in Florida that is being held for future
development or bulk sales.
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Item 1. Business -- Continued
Utilities
Avatar's water and wastewater treatment facilities include 14 water
treatment facilities and 11 wastewater treatment facilities serving 6
communities in Florida (including Poinciana, Barefoot Bay and Golden Gate) and
Rio Rico in Arizona. These facilities provide for the treatment, distribution
and sale of water for public and private use, and the treatment and disposal of
wastewater. At December 31, 1994, Avatar's utility operations had approximately
38,000 water customers and 30,000 wastewater customers.
An Avatar subsidiary provides consulting, data processing and other services
to non-affiliated utility companies as well as to various Avatar subsidiaries.
This subsidiary is beginning to operate water and wastewater systems under
contracts with unaffiliated companies.
Employees
As of December 31, 1994, Avatar employed approximately 1,069 individuals on
a full-time or part-time basis. In addition, Avatar utilizes on a daily basis
such additional personnel as may be required to perform various land development
activities. Avatar's relations with its employees are satisfactory and there
have been no work stoppages.
Regulation
Avatar's real estate operations, including matters such as planning, zoning,
design, construction of improvements, environmental considerations and sales
activities, are regulated by various local, regional, state and federal
agencies, including the Federal Trade Commission (FTC). For its community
developments in Florida, Tennessee and Arizona, state laws and regulations may
require the filing of registration statements, copies of promotional materials
and numerous supporting documents, and the delivery of an approved disclosure
report to purchasers, prior to the execution of a land sales contract. In
addition to Florida, Tennessee and Arizona, certain states impose requirements
relating to the inspection of properties, approval of sales literature,
disclosures to purchasers of specified information, assurances of future
improvements, approval of terms of sale and delivery to purchasers of a report
describing the property. Federal regulations adopted pursuant to the Interstate
Land Sales Full Disclosure Act provide for the filing or certification of a
registration statement with the Office of Interstate Land Sales Regulation of
the Department of Housing and Urban Development. Avatar's homesite installment
sales activities are required to comply with the Federal Consumer Credit
Protection ("Truth-in-Lending") Act.
Avatar's utility operations and rate structures are regulated by various
federal, state and county agencies and must comply with federal and state
treatment standards. All sources of water and wastewater effluent are required
to be tested on a regular basis and purified in order to comply with
governmental standards.
Avatar is subject to various federal, state, and local environmental laws
and regulations. The Company does not anticipate that it will incur material
capital expenditures for environmental matters for 1995 and 1996.
The Company believes it is in compliance with applicable laws and
regulations in all material respects.
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Item 1. Business -- Continued
Competition
Avatar's real estate operations, particularly in the state of Florida, are
highly competitive. In its sales of homesites and housing units, Avatar
competes, as to price and product, with several land development companies for
the discretionary income of individuals who desire eventually to relocate or
establish a second home in Florida or Arizona. In recent years, there have been
extensive land development projects in the geographical areas in which Avatar
operates. The vacation ownership sales business is also highly competitive with
companies throughout the United States and abroad selling vacation ownership
intervals on terms similar to those offered by Avatar.
Item 2. Properties
Avatar's real estate operations are described in Item 1 above. Land
developed and in the process of being developed, or held for investment and/or
future development, has an aggregate cost of approximately $115,359,000 as of
December 31, 1994.
Avatar's utility operations include water and wastewater plants and
equipment located in Florida and Arizona. Such properties have a net book value
of $147,311,530 at December 31, 1994.
Avatar's corporate headquarters are located at 255 Alhambra Circle, Coral
Gables, Florida, in 26,595 square feet of leased office space. For additional
information concerning properties leased by Avatar, see Item 8, "Notes to
Consolidated Financial Statements."
Item 3. Legal Proceedings
Avatar is involved in various pending litigation matters primarily arising
in the normal course of its business. Although the outcome of these and the
following matters cannot be determined, management believes that the resolution
of such 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 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-C1). The complaint alleges that the subsidiary's wastewater treatment plant
in North Fort Myers, Florida, committed various violations of the Clean Water
Act, 33 U.S.C. S1251 et seq., including (1) discharge of pollutants without an
operating permit from October 1, 1988 to October 31, 1989; (2) discharging from
an unpermitted discharge location from November 1, 1989 until July 14, 1992; and
(3) discharging pollutants in excess of permit limitations at various times from
July 1991 to June of 1992. The government is seeking the statutory maximum civil
penalties of $25,000 per day, per violation based upon the allegations. Based
upon the information currently available to it, Avatar believes that there are
mitigating facts as well as legal defenses that could reduce or eliminate the
imposition of monetary sanctions.
On March 1, 1994, the Wisconsin Department of Natural Resources (the
"Department") sent Avatar notice 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
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Item 3. Legal Proceedings -- continued
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 was
previously identified as a PRP by the Department. Avatar responded in writing to
the Department. No further action has since been taken by the Department against
Avatar in connection with the ROD.
On November 1, 1994, certain private parties filed a civil action against
Avatar in Rock County Circuit Court, Wisconsin. (Alderman, et al v. Avatar
Holdings Inc., et al, Civil Action Case No. 94 CV 675). The plaintiffs allege
that Avatar and other named defendants disposed of various substances at the
Site, thereby causing contamination of the groundwater source used by the
plaintiffs. The plaintiffs are seeking compensatory damages, attorneys fees,
costs and other disbursements. A number of factual and legal defenses are
available to Avatar with respect to the Department's letter and the Alderman
litigation, which if successful, would eliminate or substantially reduce
Avatar's potential liability.
Item 4. Submission of Matters to a Vote of Security-Holders
None
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Executive Officers of the Registrant
Pursuant to General Instruction G (3) to Form 10-K, the following list is
included as an unnumbered item in Part I of this report in lieu of being
included in the Proxy Statement for the Annual Meeting of Stockholders to be
held on May 25, 1995.
The following is a list of names and ages of all of the executive officers
of Avatar, indicating all positions and offices with Avatar held by each such
person and each such person's principal occupation(s) or employment during the
past five years unless otherwise indicated. All such persons have been elected
to serve until the next annual election of officers (which is expected to occur
on May 25, 1995) when they are reappointed or their successors are elected, or
until their earlier resignation or removal.
Name Age Office and Business Experience
Leon Levy 69 Chairman of the Board since January
1981; General Partner, Odyssey
Partners, L.P., a private
partnership engaged in investment,
trading and related activities;
Chairman of the Board of
Oppenheimer Funds; former Chairman
of the Board (1974-1985) of
Oppenheimer Management Corp.;
Director of: Electra Investment
Trust PLC, and S.G. Warburg & Co.,
Ltd. (Jersey Funds).
Edwin Jacobson 65 President and Chief Executive
Officer since February 1994, and
Chairman of the Executive Committee
since June 1992; President and
Chief Executive Officer of Chicago
Milwaukee Corporation, an open-end
management investment company,
since June 1985; President and
Chief Executive Officer of CMC
Heartland Partners, an operating
general partnership of a public
limited partnership engaged in the
real estate business, since
September 1990; and President and
Chief Executive Officer since June
1985 of Milwaukee Land Company, a
non-diversified, closed-end
management investment company,
publicly-traded since July 1993.
Dennis J. Getman 50 Executive Vice President since
March 1984. Senior Vice President
from September 1981 to March 1984
and General Counsel since September
1981.
Charles L. McNairy 48 Executive Vice President since
September 1993 and Treasurer and
Chief Financial Officer since
September 1992. Senior Vice
President from September 1992 to
September 1993. Vice President -
Finance from January 1985 to
September 1992, except from April
1987 to September 1988.
Juanita I. Kerrigan 48 Vice President and Secretary since
September 1980.
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Executive Officers of the Registrant -- continued
G. Patrick Settles 46 Vice President since November 1986
and Assistant General Counsel since
September 1983.
Jeffrey A. Sopshin 32 Assistant Vice President since
April 1993 and Controller since
June 1994. Formerly Audit Manager,
Ernst & Young LLP from 1986 to
1993.
The above executive officers have held their present positions with Avatar
for more than five years, except as otherwise noted.
No director or executive officer of Avatar has any family relationship with
any other director or executive officer of Avatar.
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PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
The Common Stock of Avatar Holdings Inc. is traded through the National
Market System of the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") under the symbol AVTR. The approximate number of
record holders of Common Stock at February 28, 1995, was 5,500.
High and low quotations, as reported, for the last two years were:
Quotations
Quarter Ended 1994 1993
------ ------
High Low High Low
------ ----- ------ -----
March 31 38 1/4 33 1/4 38 3/4 33 3/4
June 30 36 1/2 34 3/4 38 33 1/2
September 30 36 3/4 35 1/4 37 27 1/2
December 31 38 33 1/2 35 1/4 30 1/2
Avatar has not declared any cash dividends on Common Stock since its
issuance and has no present intention to pay cash dividends. Avatar is subject
to certain restrictions on the payment of dividends as set forth in Item 8,
"Notes to Consolidated Financial Statements".
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Item 6. Selected Financial Data
FIVE YEAR COMPARISON OF SELECTED FINANCIAL DATA
Dollars in thousands (except per-share data)
Year ended December 31,
-----------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
Statement of Income Data
Revenues (1) $82,848 $126,048 $105,161 $104,083 $147,449
======== ======== ======== ======== ========
(Loss) income from continuing
operations before extraordinary item
and changes in methods of
accounting ($14,621) $5,474 ($4,342) ($8,635) $11,132
======== ======== ======== ======== ========
Extraordinary item - - ($2,402) - -
======== ======== ======== ======== ========
Cumulative effect of change in
method of accounting for
income taxes - ($964) - - -
======== ======== ======== ======== ========
Cumulative effect of change in
method of accounting for
investments (net of income
taxes of $238) - $388 - - -
======== ======== ======== ======== ========
Per Share Data
(Loss) income from continuing
operations before extraordinary item
and changes in methods of
accounting ($1.61) $0.56 ($0.59) ($1.17) $1.41
======== ======== ======== ======== ========
Extraordinary item - - ($0.32) - -
======== ======== ======== ======== ========
Cumulative effect of change in
method of accounting for
income taxes - ($0.10) - - -
======== ======== ======== ======== ========
Cumulative effect of change in
method of accounting for
investments - $0.04 - - -
======== ======== ======== ======== ========
December 31,
------------
Balance Sheet Data 1994 1993 1992 1991 1990
------ ------ ------ ------ ------
Total assets $446,577 $457,747 $474,448 $572,890 $557,127
======== ======== ======== ======== ========
Notes, mortgage notes and
other debt $140,962 $135,557 $235,491 $239,414 $221,347
Less notes, mortgage notes and
other debt classified as
property held for sale - - 41,075 - -
-------- -------- -------- -------- --------
$140,962 $135,557 $194,416 $239,414 $221,347
======== ======== ======== ======== ========
Stockholders' equity $168,751 $183,372 $144,639 $151,244 $159,879
======== ======== ======== ======== ========
(1) During 1993, the sale of the midwest water utilities was completed. See Item
7 under the caption Results of Operations.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (dollars in thousands)
RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors that have affected Avatar during the periods included in the
accompanying consolidated statements of operations.
A summary of the period to period changes in the items included in the
consolidated statements of income is shown below.
Comparison of
Twelve months ended December 31
-------------------------------
1994 and 1993 1993 and 1992
------------- -------------
Increase (Decrease)
-------------------
$ Change $ Change
-------------------------------
Revenues
--------
Real estate sales $3,866 $5,203
Deferred gross profit on homesite sales (432) (1,044)
Utility revenues (17,293) (7,252)
Interest income (2,860) (2,411)
Gain on sale of subsidiaries (21,822) 21,822
Trading account profit, net 342 -
Other (5,001) 4,569
--------- --------
Total revenues (43,200) 20,887
Expenses
--------
Real estate expenses 3,082 2,594
Utility expenses (10,130) (1,991)
General and administrative expenses 1,604 811
Interest expense (4,449) (2,822)
Other (450) (283)
--------- --------
Total expenses (10,343) (1,691)
--------- --------
(Loss) income before income taxes,
extraordinary item and cumulative effect
of changes in methods of accounting (32,857) 22,578
Income taxes (12,762) 12,762
Extraordinary item - 2,402
Changes in methods of accounting 576 (576)
---------- ---------
Net (loss) income ($19,519) $11,642
========== =========
Operations for the years ended December 31, 1994, 1993 and 1992 resulted in
a pre-tax (loss) gain before the changes in accounting methods and extraordinary
item of ($14,621), $18,236 and ($4,342), respectively. The decline in pre-tax
income during 1994 compared to 1993 is primarily attributable to a pre-tax gain
of $21,822 in 1993 on the sale of the midwest water utilities, a reduction in
the estimated development liability for sold land of $4,532 resulting from the
purchase of Rio Rico Utilities in 1993, and an overall decline in revenues and
profit contribution from utility operations in 1994 resulting from the sale of
the midwest utilities. The improvement in pre-tax results of operations in 1993
compared to 1992 was primarily attributable to a pre-tax gain of $21,822 on the
sale of the midwest water
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (dollars in thousands) -- continued
RESULTS OF OPERATIONS -- continued
utilities and an adjustment of $4,532 to the estimated development liability for
sold land as a result of the purchase of Rio Rico Utilities.
The financial statements for the year ended December 31, 1994 include the
following amounts recorded in the fourth quarter: a loss of $1,402 due to the
decline in market value of investments, a loss of $1,500 due to the write down
to net realizable value of a certain inventory tract adjacent to Avatar's
Barefoot Bay community and a provision of $1,000 due to an increase in the
accrual related to pending litigation.
Avatar uses the installment method of profit recognition for homesite sales.
Under the installment method the gross profit on recorded homesite sales is
deferred and recognized in income of future periods, as principal payments on
contracts are received. Fluctuations in deferred gross profit result from
deferred gross profit on current homesite sales less recognized deferred gross
profit on prior years' homesite sales.
In accordance with the Company's business plan, the Company continued its
shift from selling predominantly Avatar-owned homesites to providing a
diversified mix of products and services, including introducing additional
housing products, expanding vacation ownership operations, developing amenities
and support facilities, expanding property management services and converting
land holdings into income producing operations. Avatar's business plan also
includes the goal of maintaining or slightly increasing its current homesite
sales volume. The 1994 average selling prices of housing and homesites were
consistent with 1993 levels.
Gross real estate revenues increased 9.7% during 1994 when compared to 1993
and 15% during 1993 when compared to 1992. The increase in real estate revenues
for 1994 when compared to 1993 is primarily a result of a bulk land sale and
increased homesite and vacation ownership sales volume. Real estate expenses
increased $3,082 or 6.5% in 1994 when compared to 1993 and $2,594 or 5.8% in
1993 when compared to 1992. The increase in real estate expenses for 1994
when compared to 1993 is primarily a result of a write-down of a parcel of
land adjacent to Avatar's Barefoot Bay community and an overall increase in cost
of products sold due to the increased volume in real estate sales. Margins
have improved based on a reduction in related costs as a percentage of real
estate sales and a more profitable sales mix of increased bulk, homesite and
vacation ownership sales for 1994 when compared to 1993. The increase in real
estate revenues and expenses for 1993 when compared to 1992 is primarily a
result of increased housing and homesite sales.
Utility revenues decreased $17,293 or 37.6% during 1994 when compared to
1993 and $7,252 or 13.6% during 1993 when compared to 1992. Utility expenses
decreased $10,130 or 29.1% during 1994 when compared to 1993 and decreased
$1,991 or 5.4% during 1993 when compared to 1992. Utility revenues and expenses
decreased in 1994 and 1993 as a result of the sale of the midwest water
utilities which closed on August 31, 1993. A comparison of the remaining utility
operations held at December 31, 1994 to the prior period indicates that revenues
increased $2,257 or 8.5% in 1994 when compared to 1993 and expenses increased
$4,169 or 20.5% in 1994 when compared to 1993. The increase in expenses is
primarily a result of a full year of utility operations in Arizona, amounts
accrued for pending litigation, and the amortization of rate case costs.
14
15
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (dollars in thousands) -- continued
RESULTS OF OPERATIONS -- continued
Interest income decreased $2,860 or 20.5% during 1994 when compared to 1993
and $2,411 or 14.7% during 1993 when compared to 1992. The declines in interest
income are primarily attributable to lower average aggregate balances of the
Company's contract and mortgage notes receivable portfolio. The average balance
of Avatar's receivable portfolio was $109,265, $127,909 and $153,053 for
1994, 1993 and 1992, respectively. Additionally, during 1993 interest
income of $409 was earned on proceeds from the sale of the midwest water
utilities. These earnings have now been classified as trading account profit,
net.
A pre-tax gain on sale of subsidiaries of $21,822 in 1993 was the result of
the sale of the midwest water utilities, which generated net proceeds of
approximately $59,400.
Trading account profit, net for 1994 of $342 represents interest income and
realized and unrealized gains and losses related to the trading investment
portfolio, net of commissions payable to investment advisors. These investments
were acquired during the fourth quarter of 1993.
Other revenues for 1993 includes a reduction of the estimated development
liability for sold land of $4,532 as a result of the purchase of Rio Rico
Utilities.
General and administrative expenses increased $1,604 or 18.6% in 1994
when compared to 1993 and $811 or 10.4% in 1993 when compared to 1992. The
increase for 1994 when compared to 1993 is primarily attributable to an increase
in professional fees and the cost of a legal settlement. The increase in 1993
when compared to 1992 was primarily a result of incentive compensation recorded
for executive officers and an increase in professional fees.
Interest expense decreased $4,449 or 28.4% in 1994 when compared to 1993 and
$2,822 or 15.3% in 1993 when compared to 1992. The decrease for 1994 when
compared to 1993 is primarily attributable to the capitalization of interest
associated with development and construction costs of approximately $1,625
and an overall decrease in the outstanding balance of notes, mortgage notes and
other debt as a result of the sale of the midwest water utilities. The decrease
for 1993 was attributable to an overall decrease in notes, mortgage notes
and other debt outstanding during 1993.
LIQUIDITY AND CAPITAL RESOURCES
Avatar's primary business activities, which include housing, vacation
ownership, retail land sales, land development, resort operations and utility
services, are capital intensive in nature. Avatar expects to fund its operations
and capital requirements through a combination of cash and investment securities
on hand, operating cash flows and external borrowings.
In 1994, net cash provided by operating activities amounted to $7,711 and
resulted primarily from operations including principal payments on contracts
receivable of $20,043. Net cash used in investing activities of $15,530 in 1994
resulted from investments in property, plant and equipment. Net cash provided by
financing activities of $5,406 resulted from net proceeds from revolving lines
of credit and long-term borrowings of $26,584 less principal payments on
revolving lines of credit and long-term borrowings of $21,178.
15
16
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (dollars in thousands) -- continued
LIQUIDITY AND CAPITAL RESOURCES -- continued
In 1993, net cash used in operating activities was $40,075 which resulted
primarily from purchases of investments-trading of $50,000 offset by principal
payments on contracts receivable of $21,249. Net cash provided by investing
activities of $64,823 resulted primarily from the proceeds of the sale of
subsidiaries of $59,371 and proceeds from the sale of securities of $17,444
offset by investment in property, plant and equipment of $11,567. Net cash used
in financing activities of $20,214 resulted primarily from the principal payment
on revolving lines of credit and long-term borrowings of $48,538, the purchase
of treasury stock of $27,000, less net proceeds from revolving lines of credit,
long-term borrowings of $26,121 and proceeds of $30,340 from the issuance of
common stock in conjunction with the redemption/conversion of Avatar's 5 1/4%
convertible-purchase subordinated debentures due May 1, 2007.
Avatar renegotiated certain of its existing bank credit lines and
established a new credit line, thereby increasing its secured lines of credit
from $45,534 at December 31 1993, to $59,819 at December 31, 1994. Avatar's
unsecured credit lines were unchanged at $15,000 for December 31, 1994 and 1993.
The unused portions of these credit lines were $15,100, and $8,275 for the
secured and unsecured lines, respectively, at December 31, 1994. Included in
these lines of credit is a line of credit secured by investments, which had an
outstanding balance at December 31, 1994 of $31,900 and will mature May 31,
1996. Also included is a line of credit with a balance outstanding at December
31, 1994 of $11,684, collateralized by certain contracts receivable and due May
31, 1996. During the fourth quarter of 1994, Avatar negotiated a line of credit
of $14,000 due May 31, 1996, collateralized by certain contracts receivable,
which had no outstanding balance at December 31, 1994.
Avatar has planned utility construction for 1995 totaling approximately
$16,850. The Company also has planned land development expenditures of $10,900
during 1995, which will result in additional homesite inventory and preservation
of development permits. Avatar anticipates that land development and utility
construction expenditures for 1995 will be funded by operating cash flow and
borrowings from external sources.
As of December 31, 1994, Avatar had approximately $51,582 in investments
which are all 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 Avatar's cash requirements necessitate the use or
partial use of the portfolio proceeds. As of December 31, 1994, $44,999 of the
investments served as collateral for a secured line of credit with an
outstanding balance of $31,900. See Note C to the Consolidated Financial
Statements.
Avatar's Board of Directors has authorized expenditures for the purchase of
Avatar's common stock and 8% and 9% senior debentures. As of December 31, 1994,
the remaining authorization for such expenditures was $4,301.
Management does not anticipate a significant change in interest rates for
1995 and, accordingly, does not expect Avatar's primary business activities to
be adversely affected by interest rates. Avatar's homesite sales are not
dependent upon the customer obtaining third party financing. A high interest
rate environment would be likely to adversely affect Avatar's real estate
results of operations and liquidity because certain of Avatar's debt obligations
are tied to prevailing interest rates. Increases in interest rates
16
17
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (dollars in thousands) -- continued
LIQUIDITY AND CAPITAL RESOURCES -- continued
affecting the Company's utility operations generally are passed on to the
consumer through the regulatory process.
EFFECTS OF INFLATION AND ECONOMIC CONDITIONS
Inflation has had a minimal impact on Avatar's operations over the past
several years, and management believes its effect has been neither significant
nor greater than its effect to the industry as a whole. It is anticipated that
the impact of inflation on Avatar's operations for 1995 will be insignificant.
IMPACT OF TAX INSTALLMENT METHOD
In years 1988 through 1993, the Company elected the installment method for
recording a substantial amount of its homesite sales in its federal income tax
return, which deferred taxable income into future fiscal periods. As a result
of this election, the Company may be required to pay compound interest on
certain federal income taxes in future fiscal periods attributable to the
taxable income deferred under the installment method. The Company believes that
the potential interest amount, if any, will not be material to its financial
position and results of operations of the affected future periods.
17
18
Item 8. Financial Statements and Supplementary Data
Report of Independent Certified Public Accountants.. 19
Consolidated Balance Sheets -- December 31, 1994 and
1993................................................ 20
Consolidated Statements of Operations -- For the
years ended December 31, 1994, 1993
and 1992............................................ 21
Consolidated Statements of Stockholders' Equity --
For the years ended December 31, 1994, 1993 and
1992................................................ 22
Consolidated Statements of Cash Flows -- For the
years ended December 31, 1994, 1993
and 1992............................................ 23
Notes to Consolidated Financial Statements.......... 25
18
19
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholders and Board of Directors
Avatar Holdings Inc.
We have audited the accompanying consolidated balance sheets of Avatar Holdings
Inc. and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1994. Our audits also
included the financial statement schedule listed in the Index at Item 14. These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and related schedule
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Avatar
Holdings Inc. and subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Note A to the consolidated financial statements, in 1993 the
Company changed its methods of accounting for income taxes, investments and
postretirement benefits other than pensions.
/s/ ERNST & YOUNG LLP
Miami, Florida
February 24, 1995
19
20
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
December 31, December 31,
1994 1993
------------ ------------
Assets
Cash $4,765 $7,178
Restricted cash 1,272 1,442
Investments - trading 51,582 51,184
Contracts, mortgage notes and other
receivables, net 71,424 82,996
Land and other inventories 121,149 117,557
Property, plant and equipment, net 177,385 178,940
Other assets 15,835 15,460
Regulatory assets 3,165 2,990
----------- ----------
Total Assets $446,577 $457,747
=========== ==========
Liabilities and Stockholders' Equity
Liabilities
Notes, mortgage notes and other debt:
Real estate and corporate $102,768 $96,768
Utilities 38,194 38,789
Estimated development liability for sold land 19,165 19,331
Accounts payable 5,610 4,501
Accrued and other liabilities 29,114 23,057
Deferred customer betterment fees 19,214 19,537
Minority interest in consolidated subsidiaries 9,059 9,058
----------- ---------
Total Liabilities 223,124 211,041
Commitments and contingent liabilities
Contributions in aid of construction 54,702 63,334
Stockholders' Equity
Common Stock, par value $1 per share
Authorized: 15,500,000 shares
Issued: 12,715,448 shares 12,715 12,715
Additional paid-in capital 207,271 207,271
Retained earnings 10,738 25,359
----------- ----------
230,724 245,345
Treasury stock, at cost, 3,620,346 shares 61,973 61,973
----------- ----------
Total Stockholders' Equity 168,751 183,372
----------- ----------
Total Liabilities and Stockholders' Equity $446,577 $457,747
=========== ==========
See notes to consolidated financial statements.
20
21
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars in thousands except per share data)
For the year ended December 31,
---------------------------------
1994 1993 1992
-------- --------- --------
Revenues
--------
Real estate sales $43,863 $39,997 $34,794
Deferred gross profit on homesite sales (1,710) (1,278) (234)
Utility revenues 28,664 45,957 53,209
Interest income 11,125 13,985 16,396
Gain on sale of subsidiaries - 21,822 -
Trading account profit, net 342 - -
Other 564 5,565 996
-------- -------- -------
Total revenues 82,848 126,048 105,161
Expenses
Real estate expenses 50,576 47,494 44,900
Utility expenses 24,651 34,781 36,772
General and administrative expenses 10,224 8,620 7,809
Interest expense 11,207 15,656 18,478
Other 811 1,261 1,544
-------- -------- -------
Total expenses 97,469 107,812 109,503
-------- -------- -------
(Loss) income before income taxes,
extraordinary item and cumulative effect
of changes in methods of accounting (14,621) 18,236 (4,342)
Provision for income taxes - 12,762 -
-------- -------- --------
(Loss) income before extraordinary item
and cumulative effect of changes in
in methods of accounting (14,621) 5,474 (4,342)
Extraordinary item:
Loss on extinguishment of 8% debentures - - (2,402)
Cumulative effect of change in method of
accounting for income taxes - (964) -
Cumulative effect of change in method of
accounting for investments (net of
income taxes of $238) - 388 -
-------- -------- -------
Net (loss) income ($14,621) $4,898 ($6,744)
======== ======== =======
Per share amounts:
(Loss) income before extraordinary item and
cumulative effect of changes in methods
of accounting ($1.61) $0.56 ($0.59)
Extraordinary item - - (0.32)
Cumulative effect of change in method of
accounting for income taxes - (0.10) -
Cumulative effect of change in method of
accounting for investments - 0.04 -
-------- -------- -------
Net (loss) income ($1.61) $0.50 ($0.91)
======== ======== =======
See notes to consolidated financial statements.
21
22
AVATAR HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
Additional
Common Paid-in Retained Treasury
Stock Capital Earnings Stock
------- --------- -------- --------
Balance January 1, 1992 $10,021 $148,991 $27,205 $34,973
Net (loss) - - (6,744) -
Conversion of 5-1/4% debentures 6 133 - -
------- -------- -------- -------
Balance December 31, 1992 10,027 149,124 20,461 34,973
Net income - - 4,898 -
Conversion of 5-1/4% debentures 2,688 58,147 - -
Purchase of treasury stock - - - 27,000
------- -------- -------- -------
Balance at December 31, 1993 12,715 207,271 25,359 61,973
Net (loss) - - (14,621) -
------- -------- -------- -------
Balance at December 31, 1994 $12,715 $207,271 $10,738 $61,973
======= ======== ======== =======
There are 5,000,000 authorized shares of preferred stock, none of which are
issued.
See notes to consolidated financial statements.
22
23
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in Thousands)
For the year ended December 31,
-------------------------------
1994 1993 1992
------ ------ -----
OPERATING ACTIVITIES
--------------------
Net (loss) income ($14,621) $4,898 ($6,744)
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Gain on sale of subsidiaries - (21,822) -
Depreciation and amortization 8,453 9,441 10,239
Deferred gross profit 1,710 1,278 234
Deferred income taxes - 11,897 -
Loss on extinguishment of 8% debentures for
9% debentures - - 2,402
Cost of sales not requiring cash 3,010 1,962 2,246
Cumulative effect of change in method of
accounting for income taxes - 964 -
Cumulative effect of change in method of
accounting for investments (net of income
taxes of $238) - (388) -
Changes in operating assets and liabilities:
Restricted cash 170 189 (1,820)
Investments - trading (398) (50,000) -
Principal payments on contracts receivable 20,043 21,249 18,589
Receivables (9,655) (9,934) (600)
Other receivables (526) 4,386 592
Inventories (6,768) (13,033) (4,764)
Prepaid expenses and other assets (375) (4,636) (3,977)
Accounts payable and accrued and other
liabilities 6,668 3,474 (626)
-------- -------- --------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 7,711 (40,075) 15,771
INVESTING ACTIVITIES
--------------------
Investment in property, plant, and equipment (15,530) (11,567) (13,785)
Net proceeds from sale of subsidiaries - 59,371 -
Investments in marketable securities - (425) (5,614)
Proceeds from sale of securities - 17,444 9,302
-------- -------- --------
NET CASH (USED IN) PROVIDED BY INVESTING
ACTIVITIES (15,530) 64,823 (10,097)
FINANCING ACTIVITIES
--------------------
Net proceeds from revolving lines of credit
and long-term borrowings 26,584 26,121 70,592
Principal payments on revolving lines of
credit and long-term borrowings (21,178) (48,538) (76,023)
Purchase of 8% debentures - (31) (380)
Purchase of 9% debentures - (1,106) -
Net proceeds from issuance of common stock
in conjunction with the redemption/conversion
of 5 1/4% debentures - 30,340 69
Purchase of treasury stock - (27,000) -
Reduction in bond discount on the extinguishment
of 8% debentures - - (313)
Costs of exchanging 8% debentures for 9%
debentures - - (1,222)
-------- -------- --------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES $5,406 ($20,214) ($7,277)
-------- -------- --------
23
24
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows -- continued
(Dollars in Thousands)
For the year ended December 31,
-------------------------------
1994 1993 1992
------ ------ ------
INCREASE (DECREASE) IN CASH ($2,413) $4,534 ($1,603)
Cash at beginning of year 7,178 2,644 4,247
-------- ------- --------
CASH AT END OF YEAR $4,765 $7,178 $2,644
======== ======= =======
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES
Transfers of assets and liabilities to property
held for sale (midwest water utilities):
1994 1993 1992
------ ------ ------
Cash - - ($211)
Other receivables - - (3,457)
Inventory - - (456)
Property, plant and equipment, net - - (128,455)
Other assets - - (4,756)
Mortgages and notes payable - - 41,075
Intercompany debt - - 6,149
Accounts payable and other accrued liabilities - - 9,390
Deferred income taxes - - 3,166
Contributions in aid of construction - - 35,153
Minority interest in consolidated subsidiaries - - 1,082
------- ------- ---------
Total midwest water utilities - - ($41,320)
======= ======= =========
Redemption/conversion of 5-1/4% debentures - $30,917 -
======= ======= =========
Contributions in aid of construction $1,344 $5,046 $7,145
======= ======= =========
Retirement of 8% debentures, net - - $21,976
======= ======= =========
Issuance of 9% debentures, net - - $22,843
======= ======= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
For the year ended December 31,
-------------------------------
Cash paid during the period for: 1994 1993 1992
------ ------ ------
Interest $10,921 $15,327 $18,253
======= ======= =======
Income taxes $255 $2,038 $1,752
======= ======= =======
See notes to consolidated financial statements.
24
25
AVATAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994
(Dollars in thousands except per-share data)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include Avatar Holdings Inc.
and its subsidiaries ("Avatar"). All significant intercompany accounts
and transactions have been eliminated in consolidation.
General:
Avatar is principally engaged in the business of developing and
selling improved and unimproved real estate, single and multifamily
residential housing, vacation ownership intervals and providing water
and wastewater utility services.
Restricted Cash:
Restricted cash represents collections of monthly payments on
pledged mortgage notes receivable. These collections will be applied
to reduce the related mortgage trust notes (See Note H).
Land Inventories:
Land inventories are stated at the lower of cost or estimated net
realizable value. Cost includes expenditures for acquisition,
construction, development and carrying charges. Interest costs
incurred during the period of land development, when applicable, are
capitalized as part of the cost of such projects. Land acquisition
costs are allocated to individual land parcels based upon the
relationship that the estimated sales prices of specific parcels bear
to the total sales price of the entire community. Construction and
development costs are added to the value of the specific parcels for
which the costs are incurred.
Revenues:
The Company uses the installment method of profit recognition for
sales of homesites and vacation ownership intervals. Under the
installment method, the gross profit on recorded sales is deferred and
recognized in income of future periods as principal payments on related
contracts are received. Under the installment method, deferred profit
is included in the balance sheet, as a reduction of contracts
receivable, until recognized.
Sales of housing units are recognized in full upon the transfer of
title to a purchaser. Revenues from commercial land and bulk land
sales are recognized in full at closing, provided the purchaser's
initial investment is adequate, all financing is considered collectible
and Avatar is not obligated to perform significant future activities.
Utility revenues are recorded as the service is provided.
25
26
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- continued
Property, Plant and Equipment:
Property, plant and equipment are stated at cost and depreciation
is computed principally by the straight line method over the estimated
useful lives of the assets. Depreciation, maintenance and operating
expenses of equipment utilized in the development of land are
capitalized as land inventory cost.
Income Taxes:
Effective January 1, 1993, the Company adopted Financial
Accounting Standards Board Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes." Under Statement No. 109,
the liability method is used in accounting for income taxes. Under
this method, deferred income tax assets and liabilities are determined
based on differences between financial reporting and tax basis of
assets and liabilities and are measured using the enacted tax rates and
laws that are expected to be in effect when the differences reverse.
Prior to the adoption of Statement No. 109, income tax expense was
based on items of income and expense that were reported in different
years in the financial statements and tax returns and were measured at
the tax rates in effect in the year the difference originated (deferred
method).
As permitted by Statement No. 109, the Company elected not to
restate the financial statements of any prior years. The cumulative
effect of adopting Statement No. 109 resulted in a charge to net income
during the first quarter of 1993 of $964 or $.13 per share. The
cumulative effect of adopting Statement No. 109 for Avatar's utility
subsidiaries was not credited or charged to net income, but was
recorded as a regulatory liability or regulatory asset in accordance
with accounting procedures applicable to regulated enterprises. The
regulatory liabilities and regulatory assets will generally be
amortized to income or expense over the useful life of the utility
system and reflect probable future revenue reductions or increases from
ratepayers. The effect of the change on income from continuing
operations for the year ended December 31, 1993 was not material.
Deferred Customer Betterment Fees:
Amounts collected from customers for utility improvements are
classified as "Deferred Customer Betterment Fees". These fees will be
reclassified to "Contributions in Aid of Construction" when service to
the customer begins.
Contributions in Aid of Construction:
Advances from real estate developers and other direct
contributions to utility subsidiaries for plant construction are
recorded as "Contributions in Aid of Construction". To the extent
required by regulatory agencies, the account balance is amortized over
the depreciable life of the utility plant as an offset to depreciation
expense.
26
27
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- continued
Investments -- trading:
In 1993, the Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" , which among other things requires that companies
classify certain debt and equity securities as "held to maturity",
"available for sale" or "trading". The Company classifies all of
its investment portfolio as trading. This category is defined as
including debt and marketable equity securities held for resale in
anticipation of earning profits from short-term movements in market
prices. Trading account securities are carried at fair value, which
was $51,582 at December 31, 1994, and $51,184 at December 31, 1993.
Subsequent to the adoption of Statement No. 115, gains and losses,
both realized and unrealized are included in net trading account
profit. The cumulative effect for the year ended December 31, 1993 of
adopting Statement No. 115 was an increase in net income of $388 (net
of deferred income taxes of $238) or $.04 per share.
Postretirement Benefits:
In 1993, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions". This statement requires the accrual of
postretirement benefits (such as health care benefits) during the years
an employee provides services. These benefits for retirees currently
are provided only to the employees of the Company's utility
subsidiaries. The costs of these benefits were previously expensed on
a pay-as-you-go basis.
Net Income/Loss Per Common Share:
For 1994, net loss per common share is computed on the basis of
the weighted average number of shares outstanding of 9,095,102.
For 1993 and 1992, net income per common share is computed on the
basis of the weighted average number of shares outstanding plus common
stock equivalents, if any, that would result from the dilutive effect
of the assumed conversion (and associated purchase) of the 5 1/4%
convertible-purchase subordinated debentures. In 1993, the Company
redeemed and converted all of the 5 1/4% convertible-purchase
subordinated debentures into 2,688,276 shares of common stock.
Reclassifications:
Certain 1993 and 1992 financial statement items have been
reclassified to conform with 1994 presentations.
27
28
NOTE B - REAL ESTATE SALES
The components of real estate sales are as follows:
For the year ended December 31,
-------------------------------
1994 1993 1992
------ ------ ------
Gross homesite sales $12,271 $10,913 $8,913
Housing sales 7,400 7,268 6,077
Vacation ownership sales 1,338 530 1,148
Resort revenues 13,222 13,540 12,349
Commercial/Industrial land sales 4,001 2,149 1,075
Rental, leasing, cable and other
real estate operations 5,631 5,597 5,232
------- ------- -------
Total real estate sales $43,863 $39,997 $34,794
======= ======= =======
NOTE C - 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 December 31, 1994 and 1993
included corporate 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, 1993, the portfolio also included an
unsecured claim on a company in bankruptcy which was sold during 1994.
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 obligation has been
recorded at the fair market value of the securities. There is 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
fair market value price.
The following table sets forth the fair values of investments
(including securities sold short which are valued at the cost to
purchase):
December 31,
------------
1994 1993
------ ------
Corporate bonds $21,352 $20,045
Non-rated bonds 13,069 13,695
Equity securities 8,472 7,020
U.S. Government and Agency securities 1,930 3,994
Unsecured claim - 5,689
Money market accounts 11,065 1,661
Less:
Securities sold short (1,856) (920)
Forward foreign exchange contracts (2,450) -
------- -------
Total market value $51,582 $51,184
======= =======
Aggregate cost $52,717 $50,000
======= =======
28
29
NOTE C - INVESTMENTS -- TRADING -- continued
The portfolio also includes certain forward foreign exchange
contracts used by portfolio managers to hedge the foreign currency risk
associated with certain bonds denominated in foreign currency. As of
December 31, 1994, the fair value (carrying amount) of these forward
foreign exchange contracts was $2,450. The average fair value during
1994 of forward foreign exchange contracts was $3,025.
NOTE D - CONTRACTS, MORTGAGE NOTES AND OTHER RECEIVABLES
Contracts, mortgage notes and other receivables are summarized as
follows:
December 31,
------------
1994 1993
------ ------
Contracts and mortgage notes receivable $101,280 $117,249
Notes and other receivables 5,948 5,639
-------- --------
107,228 122,888
-------- --------
Less:
Allowance for doubtful accounts 1,387 2,631
Market valuation reserve 1,184 2,082
Deferred gross profit 30,221 31,969
Other 3,012 3,210
-------- --------
35,804 39,892
-------- --------
$71,424 $82,996
======== ========
Contracts and mortgage notes receivable are generated through the
sale of homesites at various sales offices located throughout the
northeast, midwest and west coast of the United States. A significant
portion of the contracts and mortgage notes receivable at December 31,
1994, resulted from sales made to customers in the northeast.
Contracts receivable are collectible primarily over a ten year period
and bear interest at rates primarily ranging from 7 1/2% to 12% per
annum (weighted average rate 9.9%). The Company generally requires
that customers pledge their homesites as collateral for contracts and
mortgages receivable and such collateral can be repossessed by the
Company in the event of a default. A contract receivable is considered
delinquent if the scheduled installment payment remains unpaid 30 days
after its due date. Delinquent principal amounts of contracts and
mortgage notes receivable at December 31, 1994 and 1993 were $11,207 or
11.1% and $13,442 or 11.5%, respectively. Estimated maturities for the
five years subsequent to 1994 are: 1995 - $16,656; 1996 - $19,145; 1997
- $18,574; 1998 - $15,634 and 1999 - $10,788.
NOTE E - LAND AND OTHER INVENTORIES
Inventories consist of the following:
December 31,
------------
1994 1993
------ ------
Land developed and in process of development $80,629 $76,145
Land held for future development or sale 34,730 37,478
Dwelling units completed or under construction 4,232 2,407
Other 1,558 1,527
-------- --------
$121,149 $117,557
======== ========
29
30
NOTE F - ESTIMATED DEVELOPMENT LIABILITY FOR SOLD LAND
The estimated development liability for sold land consists of
required land and utility improvements in all areas designated for
homesite sales and is summarized as follows:
December 31,
------------
1994 1993
------ ------
Gross unexpended costs (net of recoveries
of $12,002 in 1994 and $12,688 in 1993) $25,554 $29,933
Less costs relating to unsold homesites 6,389 10,602
------- -------
Estimated development liability for sold land $19,165 $19,331
======= =======
These estimates are based on engineering studies of quantities of
work to be performed based on current estimated costs. These estimates
are reevaluated annually and adjusted accordingly.
A major portion of the estimated development liability for sold
land relates to utility extensions for homesites at Avatar's Arizona
community (Rio Rico) which were sold prior to 1980. At Rio Rico,
Avatar entered into various service and construction agreements with
Citizens Utilities Company "Citizens" , a non-related company,
generally providing for Avatar to construct certain utility facilities
and deed them to Citizens. Avatar's expenditures, related to the
construction of some of these facilities, are expected to be reimbursed
from Citizens' present and future customers. Some of these
reimbursable amounts are determined by specific formulas. The recovery
of these expenditures is dependent upon the community attaining an
occupancy and/or usage level sufficient to allow reimbursement prior to
the expiration of the agreements. During 1993, Avatar purchased
Citizens' water and wastewater treatment division, therefore making the
portions of the existing agreements relating to water and wastewater
extensions irrelevant, and leaving only the electrical portion.
Avatar may be obligated to expend approximately $8,620 (current
costs) to complete water and wastewater utility facilities at its
Poinciana subdivision. These potential future obligations are based on
internal engineering studies and are not included in the estimated
development liability discussed above. As such, past and future
expenditures are expected to be recovered from customers' fees and
future revenues.
Expenditures, net of recoveries, for homesite improvement costs
totaling $25,554 are estimated to be $10,732 in 1995, $5,366 in 1996,
and $9,456 thereafter. Because the timing of the expenditures after
1996 is dependent upon certain future occurrences beyond Avatar's
control, projection by year after 1996 is not presently practicable.
30
31
NOTE G - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment and accumulated depreciation consist
of the following:
December 31,
------------
1994 1993
------ ------
Utility land, plant and equipment $201,934 $193,745
Land and improvements 12,757 12,126
Buildings and improvements 24,197 20,296
Machinery, equipment and fixtures 14,392 13,661
Other 366 396
-------- --------
253,646 240,224
Less accumulated depreciation 76,261 61,284
-------- --------
$177,385 $178,940
======== ========
Depreciation charged to operations during 1994, 1993 and 1992
was $5,655, $6,524 and $7,607, respectively, net of amortization of
contributions in aid of construction of $2,798, $2,917 and $2,632
during 1994, 1993 and 1992, respectively.
NOTE H - NOTES, MORTGAGE NOTES AND OTHER DEBT
Notes, mortgage notes and other debt are summarized as follows:
December 31,
------------
1994 1993
------ ------
Real estate and corporate
Bank credit lines $44,719 $28,534
8% senior debentures, due 2000, net of
unamortized discount of $1,241 and $1,384,
respectively 6,386 6,243
9% senior debentures, due 2000, net of
unamortized discount of $3,139 and $3,502,
respectively 22,592 22,229
Mortgage note obligations, interest rates from
8.875% to 10%, due from 1995 - 2002 5,808 7,323
Short term development and construction loans,
interest rates from 8.75% to 9% 3,014 -
Avatar Homesite Mortgage Trust 1992 - 1, 7% Notes 20,249 32,439
-------- -------
$102,768 $96,768
======== =======
Utilities
Bank credit lines $6,725 $4,675
Utility first mortgage bonds due serially from
1996 - 2007, interest rates from 7 3/4% to 11 1/2% 24,921 26,433
Utility promissory notes, due 1995 - 2002 6,548 7,681
-------- -------
$38,194 $38,789
======== =======
31
32
NOTE H - NOTES, MORTGAGE NOTES AND OTHER DEBT - continued
At December 31, 1994, Avatar had unsecured bank credit lines of
$15,000 and secured bank credit lines of $59,819. The unused portions
of the unsecured and secured lines were $8,275 and $15,100,
respectively. Interest rates for borrowings under these lines range
from 7.46% to 8.5% on the unsecured bank credit lines and from 7.6% to
12.25% on the secured bank credit lines at December 31, 1994. Certain
credit lines also provide for fixed rate borrowing pursuant to
Eurodollar interest rates. Under the terms of these agreements, Avatar
is restricted from paying dividends and is required to maintain a
minimum net worth as defined. The secured lines are collateralized by
certain contracts and mortgage notes receivable of $16,914 and
investments of $44,999 at December 31, 1994.
In 1992, Avatar issued $51,160 of 7% Mortgage Trust Notes, rated
"A" by Standard & Poor's Corporation, pursuant to the securitization of
a portion of its homesite receivables. The notes mature on December
15, 2002; however, the Company expects the notes to be repaid during
the third quarter of 1996 through the collection of principal payments,
including principal prepayments and late collections and all interest
payments, net of servicing fee and other adjustments on the mortgage
loans. Additionally, all liquidation proceeds with respect to the
mortgage loans, proceeds from the sale of property acquired through
foreclosure or deed-in-lieu of foreclosure proceedings and proceeds
from the purchase of mortgage loans by the issuer are required to be
applied to these notes. The balance of these notes at December 31,
1994 was $20,249.
Maturities of notes, mortgage notes and other debt at December 31,
1994, are as follows:
Real estate Utilities Total
----------- --------- -----
1995 $3,959 $11,156 $15,115
1996 46,383 4,415 50,798
1997 1,980 3,780 5,760
1998 2,099 3,075 5,174
1999 2,812 3,075 5,887
thereafter 45,535 12,693 58,228
-------- -------- --------
$102,768 $38,194 $140,962
======== ======== ========
Maturities for 1995 include approximately $803 related to the
Company's bank credit lines. There is no assurance that Avatar will be
able to obtain satisfactory extensions or refinancing of these or other
credit lines.
Interest capitalized during 1994, 1993 and 1992 amounted to
$1,625, $381 and $772, respectively.
Property, plant and equipment and inventory pledged as collateral
for notes, mortgage notes and other indebtedness had a net book value
of approximately $146,000 at December 31, 1994.
NOTE I - MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES
As of December 31, 1994 and 1993, preferred stock outstanding is
as follows:
December 31,
------------
1994 1993
------ ------
9% cumulative preferred stock $9,000 $9,000
Other 59 58
------ ------
$9,059 $9,058
====== ======
32
33
NOTE I - MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES -- continued
Avatar's utility subsidiary's 9% cumulative preferred stock issue
provides for redemption to occur no earlier than March 1, 1997, in
whole or in part; however, a minimum of $1,800 of the preferred stock
must be redeemed per annum beginning in 1997. A redemption of all
outstanding shares shall occur no later than March 1, 2001.
Charges to operations recorded as "Other Expenses" relating to
preferred stock dividends of subsidiaries amounted to $811 in 1994,
$1,261 in 1993 and $1,544 in 1992.
NOTE J - RETIREMENT PLANS
Avatar has two defined contribution savings plans that cover
substantially all employees. Under one of the savings plans, Avatar
contributes to the plan based upon specified percentages of employees'
voluntary contributions. The other savings plan does not provide for
contributions by Avatar.
Avatar's non-contributory defined benefit pension plan covers
substantially all employees of its subsidiary, Avatar Utilities Inc.
The benefits are based on years of service and the employees'
compensation during the highest 5 out of the last 10 years of
employment. Avatar's funding policy is to contribute amounts to the
plan sufficient to meet the minimum funding requirements set forth in
the Employee Retirement Income Security Act of 1974.
33
34
NOTE J - RETIREMENT PLANS - continued
The following table sets forth the defined benefit plan's funded
status as of December 31, 1994, 1993 and 1992 and the retirement
expense recognized in the consolidated statements of income for the
years then ended.
1994 1993 1992
------ ------ ------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $2,382, $3,316 and $4,969
respectively $2,526 $3,382 $5,060
====== ====== ======
Projected benefit obligation for services
rendered to date ($3,159) ($4,201) ($7,520)
Plan assets at fair value 3,036 4,800 7,132
------ ------ ------
Projected benefit obligation (in excess
of) less than plan assets (123) 599 (388)
Unrecognized net gain (413) (788) (733)
Prior service cost not yet recognized in net periodic
pension cost 456 192 571
Unrecognized net assets at January 1, 1986,
net of amortization (87) (102) (73)
------ ------ ------
Accrued pension cost included in accrued and other
liabilities ($167) ($99) ($623)
====== ====== ======
Net retirement cost included the following components:
Defined Benefit Plan:
Service cost -- benefits earned during the period $209 $220 $434
Interest cost on projected benefit obligation 229 190 537
Actual return on plan assets (362) (241) (489)
Net amortization and deferral 169 51 (1)
------ ------ ------
Net pension cost 245 220 481
Defined contribution plan 102 89 90
------ ------ ------
Total retirement expense $347 $309 $571
====== ====== =====
The actuarial assumptions used in determining the present value of
the projected benefit obligation were: weighted average discount rate
of 7 1/2% in 1994 and 8% in 1993 and 1992, rate of increase in future
compensation levels of 5% in 1994 and 6% in 1993 and 1992 and expected
long-term rate of return on plan assets of 8% in 1994, 1993 and 1992.
At December 31, 1994 and 1993, the plan assets are invested in a
group annuity contract with a major insurance company. Plan assets are
invested in the general asset fund of the insurance company, which is
composed primarily of fixed income securities, equity securities,
public bonds and cash equivalents in the insurance company's separate
accounts.
34
35
NOTE K - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Avatar's utility subsidiary sponsors a defined benefit
postretirement plan that provides medical and life insurance benefits
to both salaried and nonsalaried employees after retirement. The
postretirement medical and life insurance plan is non-contributory.
Avatar's utility subsidiary's funding policy for its
postretirement plan is to fund on a pay-as-you-go basis. Prior to
1993, the expense was also measured on this basis. In 1993, the
Company adopted FASB Statement No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", which requires
accounting for postretirement benefits on an accrual basis.
The following table sets forth the plan's status as of December
31, 1994 and 1993:
Accumulated postretirement benefit obligation: 1994 1993
------ ------
Retirees ($767) ($594)
Fully eligible active plan participants (865) (778)
Other active plan participants (2,250) (2,264)
------- -------
(3,882) (3,636)
Plan assets at fair value 0 0
------- -------
Accumulated postretirement benefit obligation in excess of
plan assets (3,882) (3,636)
Unrecognized net gain from past experience different from that
assumed and from changes in assumptions (195) (24)
Unrecognized transition obligation 2,793 2,948
------- -------
Accrued postretirement benefit cost ($1,284) ($712)
======= =======
Net periodic postretirement benefit cost
included the following components:
Service cost $314 $342
Interest cost on accumulated postretirement
benefit obligation 271 246
Amortization of transition obligation over 20 years 155 155
Other (20) -
------- -------
Net periodic postretirement benefit cost $720 $743
======= =======
For measurement purposes, the annual rate of increase in the per
capita cost of covered health care benefits assumed for 1994 and 1993
was 12% and 13%, respectively; the rate of increase was assumed to
decrease gradually to 6% by the year 2000 and remain at that level
thereafter. The health care cost trend rate assumption has a
significant effect on the amounts reported. To illustrate, increasing
the assumed health care cost trend rates by 1 percentage point each
year would increase the accumulated postretirement benefit obligation
as of December 31, 1994 by $752 and the aggregate of the service and
interest cost components of net periodic postretirement benefit for the
year then ended by $133.
The weighted average discount rate used in determining the
accumulated postretirement benefit obligation is 8%.
35
36
NOTE L - LEASE COMMITMENTS
Avatar leases the majority of its administration and sales offices
under operating leases that expire at varying times through 1999.
Rental expenses for the years 1994, 1993 and 1992 were $1,235, $1,186
and $1,513, respectively. Minimum rental commitments under
noncancelable operating leases as of December 31, 1994 were as follows:
1995 - $1,073; 1996 - $1,024; 1997-$760; 1998 - $579; 1999 -$556 and
thereafter - $84.
NOTE M - ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities are summarized as follows:
December 31,
------------
1994 1993
------ ------
Customer deposits and advances $3,090 $2,380
Property taxes 5,787 1,427
Interest 1,759 1,576
Other 18,478 17,674
------- -------
$29,114 $23,057
======= =======
As of December 31, 1994, the Company had incentive compensation
agreements with certain individuals providing for a cash payment (to
the extent vested), within ten days following the respective fifth
anniversary date of the respective agreement (or the termination date,
if earlier), in an amount equal to the excess of a formula amount
based upon the closing prices of Avatar common stock during a specified
period prior to the respective fifth anniversary date (or termination
date, if earlier) over the closing price of Avatar common stock on the
date of the respective agreement. Each individual will vest in the
rights to this incentive compensation with respect to one-fifth thereof
as of the first through fifth anniversaries, subject to certain terms
and conditions of the contracts. For the years ended December 31, 1994
and 1993, the Company recorded incentive compensation of $763 and
$469, respectively, associated with these agreements. The liability
for incentive compensation included in other liabilities at December
31, 1994 and 1993 is $996 and $754, respectively.
NOTE N - INCOME TAXES
Under the installment method of tax reporting for homesite sales,
Avatar anticipates that its 1994 consolidated federal income tax return
will reflect a net operating loss carryforward of approximately
$27,000, which expires in years 2003 through 2009. The net operating
loss carryforward was generated primarily as a result of electing the
installment method of reporting homesite sales for tax purposes. In
addition, investment tax credits and alternative minimum tax credit
carryforwards of approximately $5,000 are available, a portion of
which expires in years 1995 to 2001. These carryforwards have not been
examined by the Internal Revenue Service.
The Company has recorded a valuation allowance of $38,000 with
respect to the deferred income tax assets which remain after offset by
the deferred income tax liabilities. Included in the valuation
allowance for deferred income tax assets is approximately $9,000 which,
if utilized, will be credited to additional paid-in capital.
36
37
NOTE N - INCOME TAXES - continued
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred income tax
assets and liabilities as of December 31, 1994 and 1993 are as follows:
1994 1993
------ ------
Deferred income tax assets
Net operating loss carryover $10,000 $7,000
Tax over book basis of land inventory 22,000 20,000
Unrecoverable land development costs 5,000 5,000
Tax over book basis of depreciable assets 6,000 6,000
Alternative minimum tax and investment tax credit
carryforward 5,000 5,000
Other 3,000 2,000
-------- -------
Total deferred income taxes 51,000 45,000
Valuation allowance for deferred income tax assets (38,000) (33,000)
-------- -------
Deferred income tax assets after valuation allowance 13,000 12,000
Deferred income tax liabilities
Book over tax income recognized on land sales (4,000) (3,000)
Deferred carrying charges on utility plant (3,000) (3,000)
Other (6,000) (6,000)
-------- -------
Total deferred income tax liabilities (13,000) (12,000)
-------- -------
Net deferred income taxes $0 $0
======== =======
The provision for income taxes consists of the following:
1994 1993 1992
------ ------ ------
Federal:
Current $ - $321 $ -
Deferred - 10,884 -
State:
Current - 544 -
Deferred - 1,013 -
------- ------- -------
Total $ - $12,762 $ -
======= ======= =======
37
38
NOTE N - INCOME TAXES - continued
A reconciliation of income tax expense (credit) to the expected
income tax expense (credit) at the federal statutory rate of 34% (35%
for 1993) for the twelve months ended December 31 is as follows:
Liability Deferred
Method Method
------------------ ---------
1994 1993 1992
------ ------ ------
Income tax (credit) expense computed
at statutory rate ($4,971) $6,382 ($2,293)
Income tax effect of non-deductible dividends
on preferred stock of subsidiary 275 441 525
Depreciation on assets contributed to
utility companies - - (665)
State income tax (credit), net of federal effect (535) 1,012 -
Loss not available for carryback - - 2,433
Difference between book and tax basis
of midwest water utilities - 2,051 -
Other 231 206 -
Change in valuation allowance on deferred tax
assets 5,000 2,670 -
-------- ------- --------
Provision for income taxes $ - $12,762 $ -
======== ======= ========
In years 1988 through 1993, the Company elected the installment
method for recording a substantial amount of its homesite sales in its
federal income tax return, which deferred taxable income into future
fiscal periods. As a result of such election, the Company may be
required to pay compound interest on certain federal income taxes in
future fiscal periods attributable to the taxable income deferred under
the installment method. The Company believes that the potential
interest amount, if any, will not be material to its financial position
and results of operations of the affected future periods.
NOTE O - SALE OF SUBSIDIARIES
The Company closed on the sale of its midwest water utilities,
located in Indiana, Missouri, Ohio and Michigan, on August 31, 1993,
with an aggregate selling price of $62,000, resulting in a pre-tax
gain of $21,822.
NOTE P - REDEMPTION/CONVERSION OF 5 1/4% CONVERTIBLE-PURCHASE
SUBORDINATED DEBENTURES
During 1993, the Company redeemed all its outstanding 5 1/4%
convertible-purchase subordinated debentures due May 1, 2007 (the
"5 1/4% debentures") at a redemption price of 100% of the principal
amount plus accrued and unpaid interest through the redemption date.
Holders were entitled to convert their 5 1/4% debentures into shares of
the Company's common stock at a conversion price of $23.00 per share
provided they paid in cash an amount equal to the principal amount of
the 5 1/4% debentures being converted, for which they received
additional shares of common stock equal to the number issued on
conversion. The net result of this transaction, after expenses, was
an increase in cash of $30,340, a decrease in debt of $30,973 and an
increase in stockholders' equity of $60,835.
38
39
NOTE Q - TREASURY STOCK PURCHASE
On September 30, 1993, the Company purchased 1,000,000 shares of
the Company's common stock from the estate of Peter J. Sharp at a
purchase price of $27.00 per share. These shares are being held in the
Company's treasury for future corporate purposes.
NOTE R - CONTINGENCIES
Avatar is involved in various pending litigation matters primarily
arising in the normal course of its business. Although the outcome of
these and the following matters cannot be determined, management
believes that the resolution of these matters will not have a material
effect on Avatar's business or financial position.
On October 1, 1993, the United States, on behalf of the U.S.
Environmental Protection Agency, filed a civil action against 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-C1). The complaint alleges that the
subsidiary's wastewater treatment plant in North Fort Myers, Florida,
committed various violations of the Clean Water Act, 33 U.S.C. S1251 et
seq., including: (1) discharge of pollutants without an operating
permit from October 1, 1988 to October 31, 1989; (2) discharging from
an unpermitted discharge location from November 1, 1989 until July 14,
1992; and (3) discharging pollutants in excess of permit limitations
at various times from July 1991 to June 1992. The government is
seeking the statutory maximum civil penalties of $25 per day, per
violation based upon the allegations. Based upon the information
currently available to it, Avatar believes that there are mitigating
facts as well as legal defenses that could reduce or eliminate the
imposition of monetary sanctions.
On March 1, 1994, the Wisconsin Department of Natural Resources
(the "Department") sent Avatar notice 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 was previously identified as a PRP by the Department.
Avatar responded in writing to the Department. No further action has
since been taken by the Department against Avatar in connection with
the ROD.
On November 1, 1994, certain private parties filed a civil action
against Avatar in Rock County Circuit Court, Wisconsin. (Alderman, et
al v. Avatar Holdings Inc., et al, Civil Action Case No. 94 CV 675).
The plaintiffs allege that Avatar and other named defendants disposed
of various substances at the Site, thereby causing contamination of the
groundwater source used by the plaintiffs. The plaintiffs are seeking
compensatory damages, attorneys fees, costs and other disbursements.
A number of factual and legal defenses are available to Avatar with
respect to the Department's letter and the Alderman litigation, which
if successful, would eliminate or substantially reduce Avatar's
potential liability.
39
40
NOTE S - FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS
For the year ended December 31,
-------------------------------
1994 1993 1992
------ ------ ------
Revenues:
Real estate
Unaffiliated customers $54,184 $58,206 $51,561
Intersegment 100 343 324
--------- --------- ---------
54,284 58,549 51,885
Utility
Unaffiliated customers 28,664 67,842 53,600
Intersegment - - -
--------- --------- ---------
28,664 67,842 53,600
Elimination of intersegment revenues (100) (343) (324)
--------- --------- ---------
Total Revenues $82,848 $126,048 $105,161
========= ========= =========
Operating profit:
Real estate ($6,516) $2,435 ($824)
Utility 3,102 31,457 14,960
--------- --------- ---------
Total operating profit (3,414) 33,892 14,136
Interest expense (11,207) (15,656) (18,478)
--------- --------- ---------
(Loss) income before income taxes,
extraordinary item and cumulative effect
of changes in methods of accounting ($14,621) $18,236 ($4,342)
========= ========= =========
Depreciation and amortization:
Real estate $1,957 $2,030 $2,747
Utility 3,698 4,494 4,860
--------- --------- ---------
Total $5,655 $6,524 $7,607
========= ========= =========
Capital expenditures:
Real estate $5,599 $1,857 $2,834
Utility 10,745 15,226 18,788
--------- --------- ---------
$16,344 $17,083 $21,622
========= ========= =========
December 31,
------------
1994 1993 1992
------ ------ ------
Identifiable assets:
Real estate $221,384 $224,261 $232,016
Utility 173,357 181,884 233,486
--------- --------- ---------
Total Identifiable Assets 394,741 406,145 465,502
General corporate assets 51,836 51,602 8,946
--------- --------- ---------
Total Assets $446,577 $457,747 $474,448
========= ========= =========
40
41
NOTE S - FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS --
continued
(a) Avatar's businesses are primarily conducted in the United
States.
(b) In computing operating profit, interest has been reflected
separately.
(c) Intersegment revenues contain primarily intercompany interest
and management fees charged to affiliates.
(d) Identifiable assets by segment are those assets that are used in
the operations of each segment. General corporate assets are
principally cash, receivables and investments.
(e) No significant part of the business is dependent upon a single
customer or group of customers.
(f) Cable TV, mortgage and hotel and recreational operations which
primarily serve Avatar communities do not qualify individually
as separate reportable segments and are included in the real
estate segment.
(g) General corporate expenses are included in the real estate
segment.
NOTE T- FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and fair values of the Company's financial
instruments, all of which are held for purposes other than trading
except for investments, are as follows at December 31:
1994 1993
------------------- ----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- --------- ------
Cash and restricted cash $6,037 $6,037 $8,620 $8,620
Investments - trading 51,582 51,582 51,184 51,184
Contracts, mortgage notes and other
receivables 71,424 73,185 82,996 85,048
Notes, mortgage notes and other debt:
Short term bank credit lines 51,444 51,444 33,209 33,209
Short term development and construction
loans 3,014 3,014 - -
Mortgage obligations, first mortgage bonds,
and promissory notes 37,277 37,263 41,437 45,079
Senior debentures 28,978 30,976 28,472 31,643
Mortgage trust notes 20,249 18,820 32,439 32,439
The following methods and assumptions were used by the Company in
estimating the fair value of financial instruments:
Cash and restricted cash: The carrying amount reported in the
balance sheet for cash approximates its fair value.
Investments - trading: The carrying amount in the balance sheet for
investments is at fair market value. (See Notes A and C)
Contracts, mortgage notes and other receivables: The fair value
amount of the Company's contracts, mortgage notes and other
receivables are estimated based on a discounted cash flow analysis.
Notes, mortgage notes and other debt: The carrying amounts of the
Company's borrowings under its short term bank credit lines and
short term development and construction loans approximate their fair
value. The fair values of the Company's mortgage obligations,
mortgage bonds and promissory notes
41
42
NOTE T- FAIR VALUE OF FINANCIAL INSTRUMENTS - continued
are estimated using discounted cash flow analysis, based on the
Company's current incremental borrowing rates for similar types of
borrowing arrangements.
Senior and subordinated debentures: The fair values of the
Company's senior and subordinated debentures are estimated based on
quoted market prices.
Mortgage trust notes: The fair value amount of the Company's
mortgage trust notes are estimated using discounted cash flow
analysis based on the Company's current incremental borrowing rate.
42
43
NOTE U - QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1994 and 1993 is as
follows:
1994 Quarter
------------------------------------
First Second Third Fourth
-------- ------- ------- -------
Net revenues $21,447 $21,708 $19,316 $20,377
Expenses 23,039 23,698 21,811 28,921
------- ------- ------- -------
(Loss) before income taxes (1,592) (1,990) (2,495) (8,544)
Provision for income taxes (255) - 255 -
------- ------- ------- -------
Net (loss) ($1,847) ($1,990) ($2,240) ($8,544)
======= ======= ======= =======
Per share amounts:
Net (loss) ($0.20) ($0.22) ($0.25) ($0.94)
======= ======= ======= =======
1993 Quarter
-----------------------------------
First Second Third Fourth
------- ------- ------ -------
Net revenues $27,993 $27,153 $46,335 $24,567
Expenses 27,673 27,330 25,872 26,937
Income (loss) before income taxes and ------- ------- ------- -------
changes in methods of accounting 320 (177) 20,463 (2,370)
Provision for income taxes (396) (278) (10,118) (1,970)
Changes in methods of accounting (964) - - 388
------- ------- ------- -------
Net (loss) income ($1,040) ($455) $10,345 ($3,952)
======= ======= ======= =======
Per share amounts:
(Loss) income before cumulative effect
of changes in methods of accounting ($0.01) ($0.06) $1.03 ($0.48)
Cumulative effect of change in method
of accounting for income taxes (0.13) - - -
Cumulative effect of change in method
of accounting for investments - - - 0.04
------- ------- ------- -------
Net (loss) income ($0.14) ($0.06) $1.03 ($0.44)
======= ======= ======= =======
The financial statements for the year ended December 31, 1994 include
the following amounts recorded in the fourth quarter:
(a) a loss of $1,402 (or $.15 per share) due to the decline in
market value of investments
(b) a loss of $1,500 (or $.16 per share) due to the write down of
a certain inventory tract to net realizable value
(c) an expense of $1,000 (or $.11 per share) due to an increase
in the accrual related to pending litigation
43
44
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
A. Identification of Directors
The information called for by this item is incorporated by
reference from Avatar's 1995 definitive proxy statement
(under the caption "Election of Directors"), to be filed with
the Securities and Exchange Commission on or before April 30,
1995.
B. Identification of Executive Officers
For information with respect to the executive officers of
Avatar, see "Executive Officers of the Registrant" at the end
of Part I of this report.
C. Compliance with Section 16(a) of the Exchange Act
The information called for by this item is incorporated by
reference from Avatar's 1995 definitive proxy statement
(under the caption "Compliance with Section 16(a) of the
Securities Exchange Act of 1934"), to be filed with the
Securities and Exchange Commission on or before April 30,
1995.
Item 11. Executive Compensation
The information called for by this item is incorporated by
reference from Avatar's 1995 definitive proxy statement (under the
caption "Executive Compensation and Other Information"), to be filed
with the Securities and Exchange Commission on or before April 30,
1995.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information called for by this item is incorporated by
reference from Avatar's 1995 definitive proxy statement (under the
captions "Principal Stockholders" and "Security Ownership of
Management"), to be filed with the Securities and Exchange Commission
on or before April 30, 1995.
Item 13. Certain Relationships and Related Transactions
None
44
45
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K
(a) The following documents are filed or incorporated by reference as
part of this report:
(1) Financial Statements:
See Item 8,"Financial Statements and Supplementary Data," on Page
18 of this report.
(2) Schedules:
II - Valuation and Qualifying Accounts
Schedules other than those listed above are omitted, since the
information required is not applicable or is included in the
financial statements or notes thereto.
(3) Exhibits:
3(a) * Certificate of Incorporation, as amended (previously filed as an
exhibit to the Form 10-K for the year ended December 31, 1986).
3(b) * By-laws, as amended through March 24, 1994 (previously filed as
an exhibit to Form 10-K for the year ended December 31, 1993).
4(a) * Instruments defining the rights of security holders, including
indenture for 8% senior debentures (previously filed as an
exhibit to the Form 8-K dated as of September 12, 1980).
4(b) * Supplemental Indenture for 8% senior debentures dated as of
December 19, 1992 (previously filed as an exhibit to Form 10-K
for the year ended December 31, 1992).
4(c) * Indenture for 9% senior debentures dated as of December 19, 1992
(previously filed as an exhibit to Form 10-K for the year ended
December 31, 1992).
10(a) * Consulting Agreement, dated as of December 31, 1990, by and
between Avatar Properties Inc and John Sladkus (previously filed
as an exhibit to Form 10-K for the year ended December 31,
1990).
Consulting Agreement, dated as of December 31, 1990, by and
between Avatar Utilities Inc. and John Sladkus (previously filed
as an exhibit to Form 10-K for the year ended December 31,
1990).
10(b) * 1 Employment Agreement, dated as of June 15, 1992, by and between
Avatar Holdings Inc. and Lawrence Wilkov (previously filed as an
exhibit to Form 10-K for the year ended December 31, 1992).
45
46
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K -- continued
10(c) *1 Employment Agreement, dated as of June 15, 1992, by and
between Avatar Holdings Inc. and Edwin Jacobson (previously
filed as an exhibit to Form 10-K for the year ended December
31, 1992).
10(d) *1 Amendment to Employment Agreement, dated as of March 1, 1994,
by and between Avatar Holdings Inc. and Edwin Jacobson
(previously filed as an exhibit to Form 10-K for the year ended
December 31, 1993)
10(e) * Four separate Stock Purchase Agreements dated January 30, 1993,
with respect to the sale of the Registrant's utilities located
in Indiana, Missouri, Ohio and Michigan, respectively
(previously filed as an exhibit to Form 8-K dated as of
February 3, 1993).
10(f) * Agreement dated January 30, 1993, with respect to the
transactions contemplated by the Stock Purchase Agreements
(previously filed as an exhibit to Form 8-K dated as of
February 3, 1993).
10(g) * Guarantee by the Registrant. (previously filed as an exhibit to
Form 8-K dated as of February 3, 1993).
10(h) * Guarantee by American Water Works Company, Inc. (previously
filed as an exhibit to Form 8-K dated as of February 3, 1993).
10(i) *1 Incentive Compensation Agreement, dated as of January 18, 1993
by and between Avatar Holdings Inc. and Dennis Getman
(previously filed as an exhibit to Form 10-K for the year ended
December 31, 1993).
10(j) *1 Incentive Compensation Agreement, dated as of September 9, 1993
by and between Avatar Holdings Inc. and Charles McNairy
(previously filed as an exhibit to Form 10-K for the year ended
December 31, 1993).
10(k) * Revolving Credit Agreement between Avatar Properties Inc. and
BHF Bank dated November 30, 1993(previously filed as an exhibit
to Form 10-K for the year ended December 31, 1993).
10(l) *1 Settlement Agreement dated July 22, 1994, between Lawrence
Wilkov and Avatar Holdings Inc., et al (previously filed as an
exhibit to Form 10-Q for the quarter ended June 30, 1994).
11 Statement Re: Computation of earnings per share (filed
herewith).
21 Subsidiaries of the Registrant (filed herewith).
27 Financial Data Schedule (filed herewith).
* These exhibits are incorporated by reference and are on file
with the Securities and Exchange Commission.
1 Employment and Compensation agreements.
46
47
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K -- continued
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended
December 31, 1994.
47
48
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
AVATAR HOLDINGS INC. AND SUBSIDIARIES
(Dollars in thousands)
Balance Charged to Balance
at Beginning Costs and End of
of Period Expenses Deduction Period
------------ ---------- --------- --------
Year ended December 31, 1994:
Deducted from asset accounts:
Deferred gross profit on
homesite sales $31,969 $1,710 (1) $3,458 (2) $30,221
Allowance for doubtful
accounts 2,631 502 1,746 (2) 1,387
Market valuation account 2,082 - 898 (3) 1,184
Valuation allowance for
deferred tax assets 33,000 5,000 - 38,000
------- ------- ------- -------
Total $69,682 $7,212 $6,102 $70,792
======= ======= ======= =======
Year ended December 31, 1993:
Deducted from asset accounts:
Deferred gross profit on
homesite sales $34,950 $1,278 (1) $4,259 (2) $31,969
Allowance for doubtful
accounts 3,051 2,342 2,762 (2) 2,631
Market valuation account 3,297 - 1,215 (3) 2,082
Valuation allowance for
deferred tax assets 30,330 (4) 2,670 - 33,000
------- ------- ------- -------
Total $71,628 $6,290 $8,236 $69,682
======= ======= ======= =======
Year ended December 31, 1992:
Deducted from asset accounts:
Deferred gross profit on
homesite sales $40,507 $234 (1) $5,791 $34,950
Allowance for doubtful
accounts 5,457 2,068 4,474 (2) 3,051
Market valuation account 4,899 - 1,602 (3) 3,297
------- ------- ------- -------
Total $50,863 $2,302 $11,867 $41,298
======= ======= ======= =======
(1) Charged to operations as a reduction of revenues.
(2) Uncollectible accounts written off.
(3) Credited principally to interest income or allowance for doubtful
accounts upon write-off of uncollectible accounts.
(4) Valuation allowance for deferred tax assets recorded in conjunction
with the adoption of FASB Statement No. 109.
48
49
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
AVATAR HOLDINGS INC.
Dated: March 28, 1995 By: /s/Charles L. McNairy
--------------------------------
Charles L. McNairy, Executive
Vice President, Treasurer and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
Dated: March 28, 1995 By:
-------------------------------------
J. Edward Houston, Director,
Chairman of the Audit Committee
and Executive Committee Member
Dated: March 28, 1995 By: /s/Edwin Jacobson
--------------------------------------
Edwin Jacobson, Director,
Chairman of the Executive Committee,
President and Chief Executive Officer
Dated: March 28, 1995 By: /s/Leon T. Kendall
--------------------------------------
Leon T. Kendall, Director and
Audit Committee Member
Dated: March 28, 1995 By: /s/Leon Levy
--------------------------------------
Leon Levy, Chairman of the Board of
Directors and Executive Committee
Member
49
50
Dated: March 28, 1995 By: /s/Martin Meyerson
--------------------------------------
Martin Meyerson, Director and
Audit Committee Member
Dated: March 28, 1995 By: /s/William Porter
--------------------------------------
William Porter, Director and
Audit Committee Member
Dated: March 28, 1995 By: /s/Kenneth T. Rosen
--------------------------------------
Kenneth T. Rosen, Director
Dated: March 28, 1995 By: /s/Fred Stanton Smith
--------------------------------------
Fred Stanton Smith, Director and
Executive Committee Member
Dated: March 28, 1995 By: /s/Jeffrey A. Sopshin
--------------------------------------
Jeffrey A. Sopshin, Assistant Vice
President and Controller
Dated: March 28, 1995 By: /s/Henry King Stanford
--------------------------------------
Henry King Stanford, Director
50
51
Exhibit Index
3(a) * Certificate of Incorporation, as amended (previously
filed as an exhibit to the Form 10-K for the year ended
December 31, 1986).
3(b) * By-laws, as amended through March 24, 1994 (previously
filed as an exhibit to the Form 10-K for the year ended
December 31, 1993)
4(a) * Instruments defining the rights of security holders,
including indenture for 8% senior debentures (previously
filed as an exhibit to the Form 8-K dated as of September
12, 1980).
4(b) * Supplemental Indenture for 8% senior debentures dated as
of December 19, 1992 (previously filed as an exhibit to
Form 10-K for the year ended December 31, 1992).
4(c) * Indenture for 9% senior debentures dated as of December
19, 1992 (previously filed as an exhibit to Form 10-K for
the year ended December 31, 1992).
10(a) * Consulting Agreement, dated as of December 31, 1990, by
and between Avatar Properties Inc. and John Sladkus
(previously filed as an exhibit to Form 10-K for the year
ended December 31, 1990).
Consulting Agreement, dated as of December 31, 1990, by
and between Avatar Utilities Inc. and John Sladkus
(previously filed as an exhibit to Form 10-K for the year
ended December 31, 1990).
10(b) *1 Employment Agreement, dated as of June 15, 1992, by and
between Avatar Holdings Inc. and Lawrence Wilkov
(previously filed as an exhibit to Form 10-K for the year
ended December 31, 1992).
10(c) *1 Employment Agreement, dated as of June 15, 1992, by and
between Avatar Holdings Inc. and Edwin Jacobson
(previously filed as an exhibit to Form 10-K for the year
ended December 31, 1992).
10(d) *1 Amendment to Employment Agreement, dated as of March 1,
1994, by and between Avatar Holdings Inc. and Edwin
Jacobson (previously filed as an exhibit to Form 10-K for
the year ended December 31, 1993)
10(e) * Four separate Stock Purchase Agreements dated January 30,
1993, with respect to the sale of the Registrant's
utilities located in Indiana, Missouri, Ohio and
Michigan, respectively (previously filed as an exhibit
to Form 8-K dated as of February 3, 1993).
10(f) * Agreement dated January 30, 1993, with respect to the
transactions contemplated by the Stock Purchase
Agreements (previously filed as an exhibit to Form 8-K
dated as of February 3, 1993).
51
52
Exhibit Index -- continued
10(g) * Guarantee by the Registrant (previously filed as an
exhibit to Form 8-K dated as of February 3, 1993).
10(h) * Guarantee by American Water Works Company, Inc.
(previously filed as an exhibit to Form 8-K dated as of
February 3, 1993).
10(i) *1 Incentive Compensation Agreement, dated as of January
18, 1993 by and between Avatar Holdings Inc. and
Dennis Getman (previously filed as an exhibit to Form
10-K for the year ended December 31, 1993).
10(j) *1 Incentive Compensation Agreement, dated as of
September 9, 1993 by and between Avatar Holdings Inc.
and Charles McNairy (previously filed as an exhibit to
Form 10-K for the year ended December 31, 1993).
10(k) * Revolving Credit Agreement between Avatar Properties
Inc. and BHF Bank dated November 30, 1993 (previously
filed as an exhibit to the Form 10-K for the year ended
December 31, 1993)
10(l) *1 Settlement Agreement dated July 22, 1994, between
Lawrence Wilkov and Avatar Holdings Inc., et al
(previously filed as an exhibit to Form 10-Q for the
quarter ended June 30, 1994).
11 Statement Re: Computation of earnings per share (filed
herewith)............................................. 53
21 Subsidiaries of the Registrant (filed herewith)....... 54
27 Financial Data Schedule (filed herewith).............. 56
* These exhibits are incorporated by reference and are on file with
the Securities and Exchange Commission.
1 Employment and Compensation agreements.
52