1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
--------------------------------------------------
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1999
or
[ ] Transition Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the transition period from
_______ to ________
----------------------------------------
Commission file number 0-7616
I.R.S. Employer Identification Number 23-1739078
Avatar Holdings Inc.
(a Delaware Corporation)
201 Alhambra Circle
Coral Gables, Florida 33134
(305) 442-7000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 9,136,238 shares of the
Company's common stock ($1.00 par value) were outstanding as of October 31,
1999.
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AVATAR HOLDINGS INC. AND SUBSIDIARIES
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited):
Consolidated Balance Sheets --
September 30, 1999 and December 31, 1998............................... 3
Consolidated Statements of Operations --
Nine months and three months ended September 30, 1999 and 1998......... 4
Consolidated Statements of Cash Flows --
Nine months ended September 30, 1999 and 1998.......................... 5
Notes to Consolidated Financial Statements............................... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............... 16
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................ 23
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands)
September 30, December 31,
1999 1998
------------- ------------
Assets
Cash and cash equivalents $154,981 $32,521
Restricted cash 4,585 5,232
Investment - marketable securities 2,200 --
Contracts and mortgage notes receivable, net 8,766 13,737
Other receivables, net 4,920 4,257
Land and other inventories 156,270 170,555
Property, plant and equipment, net 26,709 26,366
Other assets 12,698 11,724
Deferred income taxes 5,765 --
Assets of discontinued operations 12,608 208,599
-------- --------
Total Assets $389,502 $472,991
======== ========
Liabilities and Stockholders' Equity
Liabilities
Notes, mortgage notes and other debt:
Corporate $112,367 $130,000
Notes, collateralized by contracts and mortgage notes receivable - 9,060
Real estate 2,983 18,493
Estimated development liability for sold land 16,120 8,671
Accounts payable 2,176 3,385
Accrued and other liabilities 35,800 35,182
Income taxes payable 1,854 --
Deferred customer betterment fees -- 18,837
Liabilities of discontinued operations 10,493 137,106
-------- --------
Total Liabilities 181,793 360,734
Stockholders' Equity
Common Stock, par value $1 per share
Authorized: 15,500,000 shares
Issued: 9,170,102 shares 9,170 9,170
Additional paid-in capital 155,619 151,422
Retained earnings (deficit) 43,557 (48,335)
-------- --------
208,346 112,257
Treasury stock, at cost, 33,864 shares (637) --
-------- --------
Total Stockholders' Equity 207,709 112,257
-------- --------
Total Liabilities and Stockholders' Equity $389,502 $472,991
======== ========
See notes to consolidated financial statements.
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4
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Nine and Three months ended September 30, 1999 and 1998
(Unaudited)
(Dollars in thousands except per share data)
Nine Months Three Months
-------------------------- --------------------------
1999 1998 1999 1998
-------- -------- ------- -------
Revenues
Real estate sales $131,952 $ 64,888 $30,982 $18,867
Deferred gross profit 2,700 3,347 685 1,067
Interest income 5,592 4,339 2,592 1,270
Other 1,430 1,435 423 489
-------- -------- ------- -------
Total revenues 141,674 74,009 34,682 21,693
Expenses
Real estate expenses 121,006 69,881 30,482 22,430
General and administrative expenses 8,974 7,540 3,544 2,398
Interest expense 7,240 9,923 1,939 3,178
Other 959 974 322 330
-------- -------- ------- -------
Total expenses 138,179 88,318 36,287 28,336
-------- -------- ------- -------
Income (loss) from continuing operations before income taxes 3,495 (14,309) (1,605) (6,643)
Income tax expense (benefit) 1,361 - (617) --
-------- -------- ------- -------
Income (loss) from continuing operations after income taxes 2,134 (14,309) (988) (6,643)
Discontinued operations:
Income from discontinued operations less income
tax expense of $572 and $1 for the nine and
three months ended 1999 and $0 for 1998 674 3,739 3 1,086
Gain (loss) on sale of discontinued operations
less income tax expense of $12,170 and $4,517 for
the nine and three months ended 1999 and $0 for 1998 90,417 -- (4,517) --
Estimated loss on disposal, less income tax
benefit of $817 for the nine months ended
1999 and $0 for 1998 (1,333) (2,000) -- --
Extraordinary item:
Loss on early extinguishment of debt,
less income tax expense of $0 -- (2,308) -- --
-------- -------- ------- -------
Net income (loss) $ 91,892 $(14,878) $(5,502) $(5,557)
======== ======== ======= =======
Basic and Diluted EPS:
Income (loss) from continuing operations after income taxes $ 0.23 $ (1.56) $ (0.11) $ (0.72)
Income from discontinued operations $ 0.07 $ 0.41 -- $ 0.12
Gain (loss) on sale of discontinued operations $ 9.87 -- $ (0.49) --
Estimated loss on disposal $ (0.15) $ (0.22) -- --
Loss from extraordinary item -- $ (0.25) -- --
Net income (loss) $ 10.02 $ (1.62) $ (0.60) $(0.60)
See notes to consolidated financial statements.
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5
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
For the Nine months ended September 30, 1999 and 1998
(Dollars in Thousands)
1999 1998
------- --------
OPERATING ACTIVITIES
Net income (loss) $ 91,892 $(14,878)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 2,563 2,584
Gain on sale of Florida Utilities assets (90,417) --
Gain on sale of Cape Coral assets (7,043) --
Loss on early extinguishment of debt -- 2,308
Estimated loss on disposal of discontinued operations 1,333 2,000
Deferred gross profit (2,700) (3,347)
Investments - trading 12 --
Cost of homesite sales not requiring cash 1,908 1,492
Changes in operating assets and liabilities:
Restricted cash 647 (961)
Principal payments on contracts receivable 7,017 10,980
Receivables 654 (331)
Other receivables (705) (570)
Inventories (4,512) (14,911)
Deferred income taxes (5,765) --
Other assets 1,993 (3,485)
Income taxes payable 1,854 --
Accounts payable and accrued and other liabilities (17,929) 3,181
Assets/liabilities from discontinued operations, net (5,609) (6,859)
--------- --------
NET CASH USED IN OPERATING ACTIVITIES (24,807) (22,797)
INVESTING ACTIVITIES
Investment in property, plant and equipment (13,752) (1,484)
Net proceeds from sale of Florida Utilities assets 164,071 --
Net proceeds from sale of Cape Coral assets 37,588 --
Investment in marketable securities (2,212) --
--------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 185,695 (1,484)
FINANCING ACTIVITIES
Proceeds from issuance of 7% Convertible Subordinated Notes -- 115,000
Payment of financing fees -- (3,450)
Proceeds from revolving lines of credit and long-term borrowings 109 10,167
Principal payments on revolving lines of credit and long-term borrowings (35,267) (70,170)
Repurchase of 7% Convertible Subordinated Notes (2,633) --
Purchase of treasury stock (637) --
--------- --------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (38,428) 51,547
--------- --------
INCREASE IN CASH 122,460 27,266
Cash and cash equivalents at beginning of period 32,521 3,860
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $154,981 $ 31,126
======== ========
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AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited) -- continued
For the Nine months ended September 30, 1999 and 1998
(Dollars in thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
1999 1998
------- ------
Cash paid during the period for:
Interest - Continuing operations (net of amount
capitalized of $523 and $418
in 1999 and 1998, respectively) $ 8,209 $9,228
======= ======
Interest - Discontinued operations (net of amount
capitalized of $33 and $167 in 1999
and 1998, respectively $ 2,547 $1,997
======= ======
Income taxes paid $13,000 $ --
======= ======
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
1999 1998
------- ------
Contributions in aid of construction $ -- $1,617
====== ======
See notes to consolidated financial statements.
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AVATAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS IN THOUSANDS)
BASIS OF STATEMENT PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated balance sheets as of September 30, 1999 and December
31, 1998, and the related consolidated statements of operations for the nine
month and three month periods ended September 30, 1999 and 1998 and the
consolidated statements of cash flows for the nine months ended September 30,
1999 and 1998 have been prepared in accordance with generally accepted
accounting principles for interim financial information, the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statement presentation. In the opinion of
management, all adjustments necessary for a fair presentation of such financial
statements have been included. Such adjustments consisted only of normal
recurring items. Interim results are not necessarily indicative of results for
a full year.
For a complete description of the Company's other accounting policies,
refer to Avatar Holdings Inc.'s 1998 Annual Report on Form 10-K and the notes
to Avatar's consolidated financial statements included therein.
RECLASSIFICATIONS
Certain 1998 financial statement items have been reclassified to
conform to the 1999 presentation.
EARNINGS PER SHARE
Earnings per share is computed based on the weighted average number of
shares outstanding of 9,157,818 and 9,139,075 for the nine and three months
ended September 30, 1999, respectively and 9,170,102 for the nine and three
months ended September 30, 1998. For computing earnings per share for the nine
and three months ended September 30, 1999 and 1998, the conversion of the Notes
and employee stock options were not assumed, as the effect of both would be
antidilutive. There is no difference between basic and diluted earnings per
share for 1999 and 1998.
REPURCHASE OF COMMON STOCK AND NOTES
On April 26, 1999, Avatar's Board of Directors authorized the
expenditure of up to $15,000 to purchase, from time to time, shares of its
common stock and/or its 7% Convertible Subordinated Notes (the "Notes") in the
open market, through privately negotiated transactions or otherwise, depending
on market and business conditions and other factors. As of September 30, 1999,
the Company repurchased $2,633 principal amount of the Notes and $637 of its
common stock.
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. Due to the short
maturity period of the cash equivalents, the carrying amount of these
instruments approximates their fair values. Restricted cash includes deposits
of $4,585 and $5,232 as of September 30, 1999 and December 31, 1998,
respectively.
7
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - continued
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH - continued
These balances are comprised primarily of housing deposits that will become
available to the Company when the housing contracts close.
Restricted cash from discontinued operations includes deposits of $0
and $198 for vacation ownership and $0 and $35 for Florida utilities operations
as of September 30, 1999 and December 31, 1998, respectively. Vacation
ownership deposits are deposits received from purchasers that are held in
escrow until a certificate of occupancy is obtained or the legal rescission
period has expired. The Florida Utilities and vacation ownership operations
were sold during the second and third quarters of 1999, respectively. (See
Discontinued Operations).
STOCK OPTIONS
In October 1995, the Financial Accounting Standards Board (FASB)
issued Statement No. 123, "Accounting for Stock-Based Compensation." Statement
No. 123 allows companies to measure compensation cost in connection with
employee stock compensation plans using a fair value based method or to use an
intrinsic value based method in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25). The
Company has elected to follow APB 25 and related interpretations in accounting
for its employee stock options.
USE OF ESTIMATES
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Accordingly, actual results could differ from those
reported.
INVESTMENTS - MARKETABLE SECURITIES
The Company classified its entire 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 other revenues in
the accompanying consolidated statements of operations. The Company has
recorded a trading account loss of $12 for the nine and three months ended
September 30, 1999. Fair values for actively traded debt securities and equity
securities are based on quoted market prices on national markets. The fair
value of the Company's investment portfolio at September 30, 1999 is $2,200
with an aggregate cost of $2,212. As of September 30, 1999, the portfolio did
not include any forward foreign exchange contracts.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued
CONTRACTS AND MORTGAGE NOTES RECEIVABLES
Contracts and mortgage notes receivables are summarized as follows:
September 30, December 31,
1999 1998
------------- ------------
Contracts and mortgage notes receivable $17,598 $24,992
------- -------
Less:
Deferred gross profit 7,560 10,532
Other 1,272 723
------- -------
8,832 11,255
------- -------
$ 8,766 $13,737
======= =======
LAND AND OTHER INVENTORIES
Inventories consist of the following:
September 30, December 31,
1999 1998
------------- ------------
Land developed and in process of development $ 91,636 $100,414
Land held for future development or sale 29,058 31,027
Dwelling units completed or under construction 35,142 38,590
Other 434 524
-------- --------
$156,270 $170,555
======== ========
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES
As of September 30, 1999 and December 31, 1998, preferred stock
outstanding of the Florida utilities (classified as Discontinued Operations)
owned by minority interests is as follows:
September 30, December 31,
1999 1998
------------- ------------
9% Cumulative preferred stock $ -- $5,400
Other 25 72
---- ------
$ 25 $5,472
==== ======
The Florida utilities subsidiary's 9% cumulative preferred stock
provides for redemption of a minimum of $1,800 of the preferred stock each year
beginning in 1997. During each of the first quarters of 1999 and 1998, Avatar
redeemed $1,800 of the preferred stock. In addition during the second quarter
of 1999, after the sale of Florida Utilities, the remaining $3,600 of preferred
stock was redeemed.
Charges to operations recorded as "Other Expenses" (See Discontinued
Operations) relating to preferred stock dividends of subsidiaries amounted to
$438 in 1999 and $397 in 1998.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued
NOTES, MORTGAGE NOTES AND OTHER DEBT
On February 2, 1998 the Company issued $115,000 principal amount of 7%
Convertible Subordinated Notes due 2005 (the "Notes"). The Notes are
convertible into common stock of Avatar at the option of the holder at any time
at or before maturity, unless previously redeemed, at a conversion price of
$31.80 per share. The Notes are subordinated to all present and future senior
indebtedness of Avatar and are effectively subordinated to all indebtedness and
other liabilities of subsidiaries of Avatar. The net proceeds of $111,550 after
deducting expenses were, in part, used to repay $33,000 aggregate amount of 8%
Senior Debentures due 2000 and 9% Senior Debentures due 2000. The early
extinguishment of the 8% and 9% Senior Debentures resulted in an extraordinary
loss of $2,308 pertaining to the unamortized portion of discounts associated
with these debentures. During the first three quarters of 1999, the Company
repurchased $2,633 principal amount of the Notes.
INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred income tax assets and
liabilities as of September 30, 1999 and December 31, 1998 are as follows:
1999 1998
-------- --------
Deferred income tax assets
Net operating loss carry-forward $ -- $ 27,000
Tax over book basis of land inventory 29,000 31,000
Unrecoverable land development costs 3,000 3,000
Tax over book basis of depreciable assets 5,000 5,000
Alternative minimum tax and investment tax credit carry-forward -- 4,000
Attributable to Discontinued Operations -- 4,000
Other 3,765 1,000
-------- --------
Total deferred income taxes 40,765 75,000
Valuation allowance for deferred income tax assets (34,000) (59,000)
-------- --------
Deferred income tax assets after valuation allowance 6,765 16,000
Deferred income tax liabilities
Book over tax income recognized on home-site sales (1,000) (2,000)
Attributable to Discontinued Operations -- (14,000)
-------- --------
Total deferred income tax liabilities (1,000) (16,000)
-------- --------
Net deferred income taxes $ 5,765 $ --
======== ========
A reconciliation of income tax expense before discontinued operations
to the expected income tax expense (credit) at the federal statutory rate of
35% and 34% for the nine months ended September 30, 1999 and 1998 is as
follows:
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - continued
INCOME TAXES - continued
1999 1998
------ -------
Income tax expense (credit) computed at statutory rate $1,223 $(3,567)
State income tax (credit), net of federal effect 126 (396)
Other, net 12 (37)
Change in valuation allowance on deferred tax assets -- 4,000
------ -------
Provision for income taxes $1,361 $ 0
====== =======
In 1999, $4,197 was credited to additional paid-in capital
representing the benefit of utilizing deferred income tax assets which were
generated in prior years.
CONTINGENCIES
Avatar is involved in various pending litigation matters primarily
arising in the normal course of its business. Although the outcome of these
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.
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS
The Company is primarily engaged in real estate operations. The
Company owns and develops land, primarily in various locations in Florida and
Arizona. The Company's current and planned real estate operations include the
following segments: the development, sale and management of active adult
communities; the development and sale of residential communities (including
construction of upscale custom and semi-custom homes, mid-priced single- and
multi-family homes and the sale of homesites); the development, leasing and
management of improved commercial and industrial properties; operations of
amenities and resorts; cable television operations; and property management
services.
Prior to April 15, 1999, the Company's utilities operations included
the purification and distribution of water and the treatment and disposal of
wastewater through plants in Florida and Arizona. On April 15, 1999, two
operating subsidiaries of the Company closed on the sale of the assets used in
their Florida utilities operations (See Discontinued Operations), subsequent to
which the Company expanded its contract management operations to include the
purification and distribution of water and the treatment and disposal of
wastewater for unaffiliated public and private utilities.
The following table summarizes the Company's information for
reportable segments for the nine and three months ended September 30, 1999 and
1998:
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS - continued
Nine Months Three Months
-------------------------- --------------------------
1999 1998 1999 1998
-------- -------- ------- -------
Revenues:
Segment revenues
Residential development $ 71,276 $ 47,649 $28,156 $13,921
Active adult -- -- -- --
Resorts 9,072 10,376 1,526 2,432
Commercial and industrial 2,477 2,881 -- 1,219
Rental, leasing, cable and
other real estate operations 4,040 3,929 1,130 1,278
All other 46,165 1,022 550 353
-------- -------- ------- -------
133,030 65,857 31,362 19,203
Unallocated revenues
Deferred gross profit 2,700 3,347 685 1,067
Interest income 5,592 4,339 2,592 1,270
Other 352 466 43 153
-------- -------- ------- -------
Total revenues $141,674 $ 74,009 $34,682 $21,693
======== ======== ======= =======
Operating income (loss):
Segment operating income (loss)
Residential development $ 7,811 $ 58 $ 3,235 $ (831)
Active adult (1,561) (740) (728) (372)
Resorts 138 (801) (459) (932)
Commercial and industrial 2,022 1,709 (56) 511
Rental, leasing, cable and
other real estate operations 1,157 1,051 231 388
All other 7,237 (34) 168 3
-------- -------- ------- -------
16,804 1,243 2,391 (1,233)
Unallocated income (expenses)
Deferred gross profit 2,700 3,347 685 1,067
Interest income 5,592 4,339 2,592 1,270
General and administrative expenses (8,974) (7,540) (3,544) (2,398)
Interest expense (6,628) (8,590) (1,915) (2,848)
Other (5,999) (7,108) (1,814) (2,501)
-------- -------- ------- -------
Income (loss) from continuing operations $ 3,495 $(14,309) $(1,605) $(6,643)
======== ======== ======= =======
Assets:
September 30, December 31,
1999 1998
------------- ------------
Segment assets
Residential development $ 82,542 $87,795
Active adult 37,500 19,710
Resorts 4,923 9,318
Commercial and industrial 10,007 14,081
Rental, leasing, cable and
other real estate operations 4,279 10,685
Discontinued assets 12,608 208,599
Unallocated assets 237,643 122,803
-------- --------
Total assets $389,502 $472,991
======== ========
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS - CONTINUED
(a) Avatar's businesses are primarily conducted in the United States.
(b) Identifiable assets by segment are those assets that are used in the
operations of each segment.
(c) No significant part of the business is dependent upon a single
customer or group of customers.
(d) Bulk land sales, Arizona utilities, the cost to carry land and the
sale of Cape Coral assets do not qualify individually as separate
reportable segments and are included in "All Other".
(e) Included in segment profit/(loss) for the nine months ended in 1999 is
interest expense of $268, $59 and $285 from residential development,
resorts and rental/leasing, respectively. Included in segment
profit/(loss) for the nine months ended in 1998 is interest expense of
$803, $120 and $410 from residential development, resorts and
rental/leasing, respectively. Included in segment profit/(loss) for
the three months ended in 1999 is interest expense of $24, $0 and $0
from residential development, resorts and rental/leasing,
respectively. Included in segment profit/(loss) for the three months
ended in 1998 is interest expense of $156, $40 and $134 from
residential development, resorts and rental/leasing, respectively.
(f) Included in operating profit/(loss) for the nine months ended in 1999
is depreciation expense of $143, $901, $347 and $115 from residential
development, resorts, rental/leasing and unallocated corporate,
respectively. Included in operating profit/(loss) for the nine months
ended in 1998 is depreciation expense of $203, $926, $367 and $238
from residential development, resorts, rental/leasing and unallocated
corporate, respectively. Included in operating profit/(loss) for the
three months ended in 1999 is depreciation expense of $31, $151, $80
and $35 from residential development, resorts, rental/leasing and
unallocated corporate, respectively. Included in operating
profit/(loss) for the three months ended in 1998 is depreciation
expense of $68, $306, $161 and $70 from residential development,
resorts, rental/leasing and unallocated corporate, respectively.
DISCONTINUED OPERATIONS
During 1997, the Company developed a formal plan for the disposition
of its timeshare business. On July 30, 1999, the Company closed on the sale of
its timeshare subsidiary under a contract executed during the second quarter of
1999. The net cash sales price was $3,497, subject to certain adjustments. The
Company revised the estimate of the net realizable value of the discontinued
operations based on the July 30, 1999 closing and current business conditions.
As a result, the Company recorded an estimated loss on the disposal of the
timeshare operations of $2,150 and $2,000 for the nine months ended September
30, 1999 and 1998, respectively, less income tax benefit of $817 and $0 for the
nine months ended September 30, 1999 and 1998, respectively. Net assets and
liabilities of the timeshare business have been segregated from the continuing
operations in the accompanying balance sheets, and operating results are
segregated and reported as discontinued operations in the accompanying
consolidated statements of operations and cash flows.
On April 15, 1999, two operating subsidiaries of the Company closed on
the sale of substantially all of the assets used in their Florida Utilities
operations for a cash sales price of $208,619 subject to certain adjustments.
The sale transaction resulted in a gain of $90,417, net of income tax expense
of $12,170 that is classified in the accompanying consolidated statement of
operations as a gain from the sale of discontinued operations. Net assets and
liabilities of the Florida Utilities operations have been segregated from the
continuing operations in the accompanying balance sheets, and operating results
are segregated and reported as discontinued operations in the accompanying
consolidated statements of operations and cash flows.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued
DISCONTINUED OPERATIONS -- continued
Consolidated operating results relating to the discontinued operations
for the nine and three months ended September 30, 1999 and 1998 are as follows:
1999
------------------------------------------------------------------------
Nine Months Three Months
----------------------------------- --------------------------------
Vacation Florida Vacation Florida
Ownership Utilities Total Ownership Utilities Total
--------- --------- ------- --------- --------- ------
Revenues
Real estate sales $ 8,076 $ -- $ 8,076 $ 1,684 $ -- $1,684
Utilities revenues -- 17,950 17,950 -- 3,086 3,086
Interest income 1,955 -- 1,955 296 -- 296
Other 613 (529) 84 110 149 259
------- -------- ------- ------- ------ ------
Total revenues 10,644 17,421 28,065 2,090 3,235 5,325
Expenses
Real estate expenses $ 8,935 $ -- $ 8,935 $ 2,009 $ -- $2,009
Utilities expenses -- 14,830 14,830 -- 3,084 3,084
Interest expense 1,527 1,089 2,616 211 17 228
Minority interest -- 438 438 -- -- --
------- -------- ------- ------- ------ ------
Total expenses 10,462 16,357 26,819 2,220 3,101 5,321
Income (loss) from
discontinued operations
before income taxes 182 1,064 1,246 (130) 134 4
Income tax expense (benefit) 84 488 572 (59) 60 1
------- -------- ------- ------- ------ ------
Income (loss) from
discontinued operations $ 98 $ 576 $ 674 $ (71) $ 74 $ 3
======= ======== ======= ======= ====== ======
1998
------------------------------------------------------------------------
Nine Months Three Months
----------------------------------- --------------------------------
Vacation Florida Vacation Florida
Ownership Utilities Total Ownership Utilities Total
--------- --------- ------- --------- --------- ------
Revenues
Real estate sales $ 12,624 $ -- $12,624 $7,214 $ -- $ 7,214
Utilities revenues -- 26,172 26,172 -- 8,442 8,442
Interest income 1,831 -- 1,831 657 -- 657
Other 1,039 (127) 912 548 (38) 510
-------- -------- ------- ------ ------- -------
Total revenues 15,494 26,045 41,539 8,419 8,404 16,823
Expenses
Real estate expenses $ 13,764 $ -- $13,764 $7,590 $ -- $ 7,590
Utilities expenses -- 19,479 19,479 -- 6,476 6,476
Interest expense 1,808 2,352 4,160 766 782 1,548
Minority interest -- 397 397 -- 123 123
-------- -------- ------- ------ ------- -------
Total expenses 15,572 22,228 37,800 8,356 7,381 15,737
Income (loss) from
discontinued operations $ (78) $ 3,817 $ 3,739 $ 63 $ 1,023 $ 1,086
======== ======== ======= ====== ======= =======
14
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued
DISCONTINUED OPERATIONS - continued
The net assets and liabilities of the discontinued operations included
in the accompanying consolidated balance sheets as of September 30, 1999 and
December 31, 1998 are as follows:
As of September 30, 1999
--------------------------------------
Vacation Florida
Ownership Utilities Total
--------- --------- ---------
Assets
Cash and cash equivalents $ -- $ 4,141 $ 4,141
Other receivables, net -- 1,902 1,902
Land and other inventories -- 66 66
Property, plant and equipment, net -- 5,818 5,818
Other assets -- 681 681
-------- -------- ---------
Total assets $ -- $ 12,608 $ 12,608
======== ======== =========
Liabilities and contributions in aid of construction
Accounts payable $ -- $ 304 $ 304
Accrued and other liabilities -- 6,994 6,994
Minority interest -- 25 25
-------- -------- ---------
Total liabilities -- 7,323 7,323
Contributions in aid of construction -- 3,170 3,170
-------- -------- ---------
Total liabilities & contributions in aid of construction $ -- $ 10,493 $ 10,493
======== ======== =========
As of December 31, 1998
--------------------------------------
Vacation Florida
Ownership Utilities Total
--------- --------- ---------
Assets
Cash and cash equivalents $ 32 $ 471 $ 503
Restricted cash 198 35 233
Contracts and mortgage notes receivable, net 22,861 -- 22,861
Other receivables, net 319 3,959 4,278
Land and other inventories 7,357 256 7,613
Property, plant and equipment, net 196 164,751 164,947
Other assets 1,916 9,812 11,728
Regulatory assets -- 2,836 2,836
Reserve for estimated loss on disposal (6,400) -- (6,400)
-------- -------- ---------
Total assets $ 26,479 $182,120 $ 208,599
======== ======== =========
Liabilities and contributions in aid of construction
Notes, mortgage notes and other debt:
Notes, collateralized by contracts and mortgage
notes receivable $ 18,298 $ -- $ 18,298
Real estate 3,647 -- 3,647
Utilities -- 39,219 39,219
Accounts payable 38 1,171 1,209
Accrued and other liabilities 266 8,374 8,640
Minority interest -- 5,472 5,472
-------- -------- ---------
Total liabilities 22,249 54,236 76,485
Contributions in aid of construction -- 60,621 60,621
-------- -------- ---------
Total liabilities & contributions in aid of construction $ 22,249 $114,857 $ 137,106
======== ======== =========
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16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
RESULTS OF OPERATIONS
The following discussion of the Company's financial condition and
results of operations should be read in conjunction with the consolidated
financial statements and notes thereto included elsewhere in this Form 10-Q.
Net income (loss) for the nine and three month periods ended September
30, 1999 was $91,892 or $10.02 per share and ($5,502) or ($0.60) per share,
respectively, compared to a net loss of $14,878 or $1.62 and $5,557 or $0.60
per share for the same periods of 1998. The increase in net income for the nine
months was primarily attributable to an increase in real estate operating
results (which includes a pre-tax gain of $7,043 from the sale of Cape Coral
assets), an increase in interest income, a decrease in interest expense, an
after-tax gain of $90,417 on the sale of the assets of Florida Utilities and an
extraordinary loss on the early extinguishment of debt recorded during the
first quarter of 1998 partially mitigated by an increase in general and
administrative expense. The increase in net income for the three months was
primarily attributable to an increase in real estate operating results, an
increase in interest income and a decrease in interest expense partially
mitigated by an increase in general and administrative expense.
Avatar's real estate revenues for the nine and three months ended
September 30, 1999 increased $67,064 or 103.35%, and $12,115 or 64.21%,
respectively, while the real estate expenses increased by $51,125 or 73.16% and
$8,052 or 35.90% when compared to the same period of 1998. The increase in real
estate revenues for the nine and three months ended September 30, 1999 is
generally a result of increased residential homebuilding revenues. Contributing
to the increase in real estate revenues for the nine months ended September 30,
1999 was the sale by the Company in the second quarter of substantially all of
its real estate assets located in Cape Coral, Florida for $44,859. The increase
in real estate expenses for the nine and three month periods ended September
30, 1999, when compared to the same period of 1998, is generally a result of
related costs associated with the increased sales volume. Contributing to the
increase in real estate expenses for the nine months ended September 30, 1999
was $37,816 of costs associated with the sale in the second quarter of the Cape
Coral real estate assets. Operating profits for residential homebuilding for
the nine and three months ended September 30, 1999 increased $7,753 and $4,066,
respectively, when compared to the same period of 1998 due to the increased
closings of higher-margin product at Harbor Islands and Cape Coral.
16
17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) --CONTINUED
RESULTS OF OPERATIONS - CONTINUED
Data from homebuilding operations for the nine and three months ended
September 30, 1999 and 1998 is summarized as follows:
Nine Months Three Months
------------------------- -----------------------
1999 1998 1999 1998
------- ------- ------- -------
Units closed
Number of units 356 336 136 104
Aggregate dollar volume $70,071 $45,958 $27,873 $13,156
Average price per unit $197 $137 $205 $127
Units sold, net
Number of units 403 413 130 146
Aggregate dollar volume $93,030 $81,033 $34,195 $29,818
Average price per unit $231 $196 $263 $204
Backlog September 30,
1999 1998
-------- -------
Number of units 444 453
Aggregate dollar volume $107,670 $92,118
Average price per unit $243 $203
Data from the national and international retail land sales programs,
terminated in the second quarter of 1996, is as follows:
September 30,
1999 1998
------- ------
Retail Land Sales Operations Data
Deferred gross profit $ 2,700 $ 3,347
Interest income 1,433 2,448
Loss on contract cancellations (53) (43)
Contract servicing expense (401) (426)
Interest expense (127) (1,043)
Balance Sheet Data
Contracts and mortgage notes receivable, net 8,766 17,017
Debt collateralized by contracts and mortgages receivable -- 10,895
Contract servicing expense and loss on contract cancellations are included
under the caption "Real estate expenses" on the consolidated statements of
operations.
Interest income for the nine and three months ended September 30, 1999
increased $1,253 or 28.88% and $1,322 or 104.09%, respectively, compared to the
same period in 1998. The increase is primarily attributable to higher interest
income earned during 1999 from the investment of the proceeds generated from
the sale of Florida Utilities and Cape Coral assets.
General and administrative expenses for the nine and three months
ended September 30, 1999 increased $1,434 or 19.02% and $1,146 or 47.79%,
respectively, compared to the same period in 1998. The increase is primarily
attributable to higher executive compensation and professional fees.
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18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) --CONTINUED
RESULTS OF OPERATIONS - CONTINUED
Interest expense for the nine and three months ended September 30,
1999 decreased $2,683 or 27.03% and $1,239 or 38.98%, respectively, compared to
the same period in 1998. The decrease is primarily attributable to a reduction
of the outstanding debt associated with real estate and notes collateralized by
contracts and mortgage notes receivable.
For the nine months ended September 30, 1998, the Company recorded a
$2,308 extraordinary loss due to the early extinguishment of the $33,000
aggregate amount of 8% and 9% Senior Debentures due 2000. The extraordinary
loss resulted from the unamortized portion of the discounts associated with the
$33,000 aggregate amount of 8% and 9% Senior Debentures due 2000 written off
upon extinguishment.
On April 15, 1999, Florida Cities Water Company and Poinciana
Utilities, Inc., two operating subsidiaries of Avatar Utilities Inc., a
wholly-owned subsidiary of the Company, that owned and operated water and
wastewater utilities located in the counties of Brevard, Collier, Hillsborough,
Lee, Osceola, Polk and Sarasota, Florida, closed on the sale of substantially
all of their assets used in the Florida Utilities operations to The Florida
Governmental Utility Authority for a cash sales price of $208,619, subject to
certain adjustments. The sale transaction resulted in a gain of $90,417, net of
income tax expense of $12,170, which is classified in the accompanying
consolidated statement of operations as a gain from the sale of discontinued
operations.
Income (loss) from discontinued operations before income taxes
(vacation ownership and Florida Utilities operations) for the nine and three
months ended September 30, 1999 decreased $2,493 or 66.68% and $1,082 or
99.63%, respectively, compared to the same period of 1998. Income (loss) before
income taxes from the Florida utilities operations for the nine and three
months ended September 30, 1999 when compared to the same periods in 1998
decreased by $2,753 and $889, respectively. The decrease in income before
income taxes from the Florida utilities operations for the nine and three
months ended 1999 when compared to 1998 is primarily the result of reduced
operations due to the sale of the assets of the Florida Utilities operations.
On July 30, 1999, the Company closed on the sale of its timeshare subsidiary
under a contract executed during the second quarter of 1999. The net cash sales
price was $3,497, subject to certain adjustments. In addition, the Company
revised the estimate of the net realizable value of the discontinued operations
based on the July 30, 1999 closing and current business conditions. As a
result, the Company recorded an estimated loss on the disposal of the timeshare
operations of $2,150 and $2,000 for the nine months ended September 30, 1999
and 1998, respectively, less income tax benefit of $817 and $0 for the nine
months ended September 30, 1999 and 1998, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary business activities are capital intensive in
nature. Significant capital resources are required to finance planned active
adult communities, homebuilding construction in process, community
infrastructure, selling expenses and working capital needs, including funding
of debt service requirements, operating deficits and the carrying cost of land.
The Company expects to fund its operations and capital requirements through a
combination of cash and operating cash flows.
18
19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) --CONTINUED
LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
On June 30, 1999, Avatar Properties Inc., a wholly-owned subsidiary of
the Company, closed on the sale of substantially all of its real estate assets
located in Cape Coral, Florida. The sales price was $44,859, subject to certain
adjustments. The available net cash proceeds from the sale was approximately
$37,000 after the payment of related indebtedness and expenses. Avatar retains
a 692-acre site in northeast Cape Coral for potential future inclusion in its
active adult community development operations.
As described in "Results of Operations", substantially all of the
assets used in the Florida Utilities operations were sold on April 15, 1999 for
a cash sales price of $208,619, subject to certain adjustments. The sale
transaction resulted in a gain of $90,417, net of income tax expense of $12,170
which is classified in the accompanying consolidated statement of operations as
a gain from the sale of discontinued operations.
For the nine months ended September 30, 1999, net cash used in
operating activities amounted to $24,807 as a result of a decrease in accounts
payable and accrued and other liabilities of $17,929 and expenditures on land
development and housing operations of $4,512, partially offset by principal
payments collected on contract receivables of $7,017. Net cash provided by
investing activities of $185,695 resulted from proceeds from the sale of
Florida Utilities and Cape Coral assets of $164,071 and $37,588, respectively,
partially offset by investments in property, plant and equipment of $13,752 and
marketable securities of $2,212. Net cash used in financing activities of
$38,428 resulted primarily from repayment of $35,267 in land development and
construction loans.
For the nine months ended September 30, 1998, net cash used in
operating activities amounted to $22,797 as a result of an increase in
inventories, which included expenditures from land development and housing
operations of $14,911, and an increase in other assets of $3,485, partially
offset by principal payments collected on contract receivables of $10,980. Net
cash used in investing activities of $1,484 resulted primarily from investments
in property, plant and equipment. Net cash provided by financing activities of
$51,547 resulted primarily from proceeds of $111,500 from the issuance of 7%
Convertible Subordinated Notes (the "Notes") after repayment of $33,000 of the
8% and 9% Senior Debentures due 2000 and $37,170 in land development and
construction loans.
During the second quarter of 1999 the Company repaid all unsecured and
secured lines of credit, exclusive of timeshare credit facilities, which were
assumed by the buyer of the timeshare subsidiary on July 30, 1999.
On April 26, 1999, Avatar's Board of Directors authorized the
expenditure of up to $15,000 to purchase from time to time shares of its common
stock and/or the Notes in the open market, through privately negotiated
transactions or otherwise, depending on market and business conditions and
other factors. As of September 30, 1999, the Company repurchased $2,633
principal amount of the Notes and $637 of its common stock.
19
20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -CONTINUED
YEAR 2000
The Year 2000 issue relates to computer systems programmed to use
two digits rather than four to define the applicable year. Computer systems and
other programmable devices utilizing time/date-sensitive software and hardware
may recognize a date using "00" as the year 1900 rather than the Year 2000
which could result in the computer or device shutting down, performing
incorrect computations or performing inconsistently.
Various systems could be affected, ranging from complex
information technology (IT) computer systems and applications which may be
impacted by the Year 2000 issue and the actions related to non-IT systems and
equipment which include embedded technology which may be impacted by the Year
2000 problem and the actions related thereto. In addition, the failure to be
Year 2000 compliant by third party vendors and suppliers with whom a company
has material relationships could adversely affect such company.
The Company's systems that integrate all major aspects of the
Company's business, including inventory control, planning, labor utilization
and financial reporting, were designed in the early 1990's and are
substantially Year 2000 compliant. Since 1997, the Company has been continually
assessing the ability of the information system to handle the "Year 2000
Issue", and currently does not expect this issue to be material to the
Company's business based upon its assessment of its own system.
State of Readiness
The Company has conducted a comprehensive review of its computer
systems to identify those systems that could be affected by the Year 2000 issue
and has developed an implementation plan to resolve the issue. The
implementation plan includes the following phases: formation of a team of
internal resources to inventory affected technology and assess the impact of
the Year 2000 issue; develop solution plans; modify or replace existing
processes, hardware and software; test and certify modified, existing and new
processes; and develop contingency plans. All components of software and
hardware of the Company are currently in various phases of review, modification
or implementation.
As of September 30, 1999, all critical hardware and software
systems utilized by the Company have been tested and/or verified as Year 2000
compliant. Certain non-critical software systems were determined not to be Year
2000 compliant and have been modified and converted to compliant systems.
Testing systems utilized to verify compliance include the posting to the
systems of the date of January 1, 2000 as though the date were effective. The
Company has tested all critical IT and non-IT systems as of September 30, 1999.
Offsite testing of critical systems was performed during the second quarter of
1999 in conjunction with the Company's standard testing of its business
recovery program. The offsite test was successful in that it revealed no
significant issues. Additional offsite testing was conducted during October
1999 to
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21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) --CONTINUED
YEAR 2000 - CONTINUED
substantiate the results of the prior test. This additional offsite testing
revealed no additional issues.
The Company also developed a third-party vendor and business partner
awareness program, which communicates matters of concern to the Company
pertaining to the Year 2000 issue. A comprehensive Year 2000 questionnaire has
been circulated to material third-party vendors and business partners to enable
the Company to ascertain their status of Year 2000 readiness and/or compliance.
The Company's questionnaire was prepared and circulated during the third
quarter of 1998 to more than 300 parties. There can be no assurance that
systems of third parties on which the Company relies will be converted in a
timely manner, or that a failure to properly convert by another company would
not have a material adverse effect on the Company. For those critical
third-party vendors and business partners who reported failure to be compliant
or who do not respond to the Company's questionnaire, the Company believes it
has developed a contingency plan to seek alternate vendors or maintain adequate
levels of supplies to prevent the interruption in, or failure of, certain
normal business activities or operations.
Cost of addressing Year 2000
The Company is in its final phase with its implementation plan to
address Year 2000 issues. During the past few years nominal expenditures were
effected to upgrade and/or replace certain software, which expenditures were
not directly related to Year 2000 issues but to general improvements to the
systems. Total expenditures related to the Year 2000 project are estimated not
to exceed $200 with $50 related to equipment and $150 to software. All costs
associated with the Company's Year 2000 effort have come from, or are expected
to come from, cash flow from operations.
Because it was not necessary to replace the Company's midrange
computer and/or its major operating systems, nominal expenditures to date are
estimated to approximate $170. It is not possible to determine absolute
expenditures because appropriate modifications to software applications systems
were made from time to time as potential issues were discovered. Costs
associated therewith were not specifically designated and for the most part
represented installation of equipment and conversion and/or modification of
systems performed by employees of the Company.
The estimated cost of the Company's Year 2000 project and the
dates on which the Company believes it will complete such efforts are based on
management's best estimates, which were derived using numerous assumptions
regarding future events, including the number of man-hours to program and/or
install equipment and software, as well as response to the Company's
questionnaire regarding vendor readiness. The Company does not separately track
internal costs related to the Year 2000 issue. Such costs are principally the
related payroll costs for the Company's Business Information Systems personnel.
The Company's estimated total expenditures related to the Year 2000 of $200
represents less than 5% of the Company's aggregate IT budgets for 1997, 1998
and 1999. There can be no assurance that these estimates will prove to be
accurate. Specific factors that could cause material differences with actual
results include, but are not limited to, the timeliness and effectiveness of
remediation efforts of third parties.
21
22
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) --CONTINUED
YEAR 2000 - CONTINUED
The Company believes its systems have been adequately and
appropriately reviewed and tested, and minor modifications and/or conversions
will be effected to non-critical systems.
Risk Presented by Year 2000 Issues
A failure by the Company to resolve a material Year 2000 issue could
result in the interruption in, or failure of, certain normal business activities
or operations and could materially and adversely affect the Company's financial
condition, results of operations and cash flows. The Company has assessed those
scenarios in which unexpected failures could have a material adverse effect on
the Company and has developed contingency plans designed to deal with such
scenarios. In general, the Company could continue basic real estate operations
in the event of failure of its computer systems. A subsidiary of the Company
manages various utilities operations which are highly regulated and the
operating systems were designed with manual overrides to operate the physical
plants in the event of failure of automated systems.
Based on current plans and assumptions, the Company does not expect
that the Year 2000 issue will have a material adverse impact on the Company as a
whole. Due to the general uncertainty inherent in the Year 2000 issue, however,
there can be no assurance that all Year 2000 issues will be foreseen and
corrected on a timely basis, or that no material disruption to the Company's
business operations will occur. Further, the Company's expectations are based on
the assumption that there will be no general failure of external local, national
or international systems (including power, communications, postal,
transportation, or financial systems) necessary for the ordinary conduct of
business.
Contingency Plan
In the normal course of business, the Company maintains contingency
plans designed to address various other potential interruptions. These
preexisting contingency plans are being incorporated into the Year 2000
contingency plan and are expected to assist in mitigating any adverse effect
due to interruption of support provided by third parties resulting from their
failure to be Year 2000 compliant. There can be no assurance, however, that
successful contingency plans to address the Year 2000 issue can, in fact, be
developed or implemented or that certain development and implementation would
be economically feasible.
22
23
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS) - CONTINUED
FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in this Form 10-Q constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other important factors that could cause the actual results, performance or
achievements of results, to differ materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such risks, uncertainties and other important factors include,
among others: the successful implementation of the Company's business strategy;
shifts in demographic trends affecting active adult communities and other real
estate development; the level of immigration and in-migration to the Company's
regional market areas; national and local economic conditions and events,
including employment levels, interest rates, consumer confidence, the
availability of mortgage financing and demand for new and existing housing; the
Company's access to future financing; competition; changes in, or the failure
or inability of the Company to comply with, government regulations; the ability
of the Company and third parties to address Year 2000 issues adequately; and
such other factors as are described in greater detail in the Company's filing
with the Securities and Exchange Commission, including its Annual Report on
Form 10-K for the fiscal year ended December 31, 1998.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
27 Financial Data Schedule (filed herewith)
REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AVATAR HOLDINGS INC.
Date: November 11, 1999 By: /s/ Lawrence R. Sherry
---------------------------- ------------------------------
Lawrence R. Sherry
Executive Vice President
and Chief Financial Officer
Date: November 11, 1999 By: /s/ Charles L. McNairy
---------------------------- ------------------------------
Charles L. McNairy
Executive Vice President and
Treasurer
Date: November 11, 1999 By: /s/ Michael P. Rama
---------------------------- ------------------------------
Michael P. Rama
Chief Accounting Officer
24