-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 G3GDF+V8lPZkwdlsehIqviKgfHeQucIL/XNd9eYJ4FdRgfbTE+4VhNdvIczrbd80
 S2RGEmjq+0Rnb5aepLBXFQ==

<SEC-DOCUMENT>0000950132-01-500314.txt : 20010814
<SEC-HEADER>0000950132-01-500314.hdr.sgml : 20010814
ACCESSION NUMBER:		0000950132-01-500314
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20010630
FILED AS OF DATE:		20010813

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			AVALON HOLDINGS CORP
		CENTRAL INDEX KEY:			0001061069
		STANDARD INDUSTRIAL CLASSIFICATION:	REFUSE SYSTEMS [4953]
		IRS NUMBER:				341863889
		STATE OF INCORPORATION:			OH
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-14105
		FILM NUMBER:		1705576

	BUSINESS ADDRESS:	
		STREET 1:		ONE AMERICAN WAY
		CITY:			WARREN
		STATE:			OH
		ZIP:			44484
		BUSINESS PHONE:		3308568800
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>d10q.txt
<DESCRIPTION>FORM 10-Q
<TEXT>
<PAGE>

                                     2001
================================================================================

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C. 20549
                          __________________________

                                   FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934

                 For the quarterly period ended June 30, 2001

[_] 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 1-14105
                          __________________________


                          AVALON HOLDINGS CORPORATION

            (Exact name of registrant as specified in its charter)

                      Ohio                             34-1863889
          (State or other jurisdiction              (I.R.S. Employer
       of incorporation or organization)           Identification No.)

         One American Way, Warren, Ohio                44484-5555
    (Address of principal executive offices)           (Zip Code)

Registrant's telephone number, including area code: (330) 856-8800

Indicate by a 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 ___
                                             ---

The registrant had 3,185,240 shares of its Class A Common Stock and 618,091
shares of its Class B Common Stock outstanding as of August 7, 2001.

================================================================================
<PAGE>

                 AVALON HOLDINGS CORPORATION AND SUBSIDIARIES

                                     INDEX

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
PART I.  FINANCIAL INFORMATION

  Item 1.  Financial Statements

  Condensed Consolidated Statements of Operations for the Three and Six
  Months Ended June 30, 2001 and 2000 (Unaudited)..........................    3

  Condensed Consolidated Balance Sheets at June 30, 2001 (Unaudited)
  and December 31, 2000....................................................    4

  Condensed Consolidated Statements of Cash Flows for the Six
  Months Ended June 30, 2001 and 2000 (Unaudited)..........................    5

  Notes to Condensed Consolidated Financial Statements (Unaudited).........    6

  Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations.............................   10


PART II.  OTHER INFORMATION

  Item 1.  Legal Proceedings...............................................   17

  Item 2.  Changes in Securities and Use of Proceeds.......................   17

  Item 3.  Defaults upon Senior Securities.................................   17

  Item 4.  Submission of Matters to a Vote of Security Holders.............   17

  Item 5.  Other Information...............................................   17

  Item 6.  Exhibits and Reports on Form 8-K................................   17

SIGNATURE..................................................................   18
</TABLE>

                                       2
<PAGE>

                         PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AVALON HOLDINGS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands except for per share amounts)

<TABLE>
<CAPTION>
                                                     Three Months Ended             Six Months Ended
                                                           June 30,                     June 30,
                                                   ------------------------     ------------------------
                                                      2001          2000           2001          2000
                                                   ----------    ----------     ----------    ----------
<S>                                                <C>           <C>            <C>           <C>
Net operating revenues........................     $   17,434    $   21,463     $   34,196    $   42,715

Cost and expenses:
Cost of operations............................         15,587        19,470         30,839        38,551
Write-down of costs in excess of fair market
  value of net assets of acquired businesses..            486            --            486            --
Selling, general and administrative expense...          2,657         2,589          5,263         5,310
                                                   ----------    ----------     ----------    ----------

Loss from operations..........................         (1,296)         (596)        (2,392)       (1,146)

Other income:
Interest income...............................            145           220            328           480
Other income, net.............................             39            --            110            16
                                                   ----------    ----------     ----------    ----------

Loss before income taxes......................         (1,112)         (376)        (1,954)         (650)
Income tax benefit............................           (213)         (188)          (508)         (325)
                                                   ----------    ----------     ----------    ----------
Net loss......................................     $     (899)   $     (188)    $   (1,446)   $     (325)
                                                   ==========    ==========     ==========    ==========

Basic net loss per share......................     $     (.24)   $     (.05)    $     (.38)   $     (.09)
                                                   ==========    ==========     ==========    ==========
Weighted average shares outstanding (Note 2)..          3,803         3,803          3,803         3,803
                                                   ==========    ==========     ==========    ==========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

AVALON HOLDINGS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                   June 30,    December 31,
                                                                     2001          2000
                                                                 -----------   ------------
<S>                                                              <C>           <C>
Assets                                                           (Unaudited)
- ------
Current assets:
 Cash and cash equivalents......................................   $  14,028     $  11,022
 Short-term investments.........................................          33           759
 Accounts receivable, net.......................................      13,495        16,156
 Refundable income taxes........................................          --           327
 Deferred income taxes..........................................         564           564
 Prepaid expenses and other current assets......................       1,568         2,124
                                                                   ---------     ---------
  Total current assets..........................................      29,688        30,952

Properties and equipment, less accumulated depreciation
 and amortization of $17,832 in 2001 and $16,670 in 2000........      29,204        30,099
Costs in excess of fair market value of net assets of acquired
 businesses, net................................................         558         1,082
Other assets, net...............................................         147           177
                                                                   ---------     ---------
  Total assets..................................................   $  59,597     $  62,310
                                                                   =========     =========

Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
 Accounts payable...............................................   $   4,325     $   5,242
 Accrued payroll and other compensation.........................       1,329         1,249
 Accrued income taxes...........................................         605           596
 Other accrued taxes............................................         255           305
 Other liabilities and accrued expenses.........................       1,950         1,831
                                                                   ---------     ---------
  Total current liabilities.....................................       8,464         9,223

Deferred income taxes...........................................         731         1,239
Other noncurrent liabilities....................................         120           120

Shareholders' equity :
 Class A Common Stock, $.01 par value...........................          32            32
 Class B Common Stock, $.01 par value...........................           6             6
 Paid-in capital................................................      58,096        58,096
 Accumulated deficit............................................      (7,852)       (6,406)
                                                                   ---------     ---------
  Total shareholders' equity....................................      50,282        51,728
                                                                   ---------     ---------
  Total liabilities and shareholders' equity....................   $  59,597     $  62,310
                                                                   =========     =========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

AVALON HOLDINGS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)

<TABLE>
<CAPTION>
                                                                                       Six Months Ended
                                                                                            June 30,
                                                                                     --------------------
                                                                                       2001        2000
                                                                                     --------    --------
<S>                                                                                  <C>
Operating activities:
 Net loss.........................................................................   $ (1,446)   $   (325)
 Reconciliation of net loss to cash from operating activities:
    Depreciation and amortization.................................................      1,595       1,607
    Write-down of costs in excess of fair market value of net assets of acquired
      businesses..................................................................        486          --
    Provision for deferred income taxes...........................................       (508)        (13)
    Provision for losses on accounts receivable...................................         65          72
    (Gain) Loss on disposal of property and equipment.............................        (40)          3
  Changes in operating assets and liabilities
      Accounts receivable.........................................................      2,596      (1,937)
      Refundable income taxes.....................................................        327          --
      Prepaid expenses and other current assets...................................        556         224
      Other assets................................................................         28          (1)
      Accounts payable............................................................       (917)        265
      Accrued payroll and other compensation......................................         80        (592)
      Accrued income taxes........................................................          9        (395)
      Other accrued taxes.........................................................        (50)       (127)
      Other liabilities and accrued expenses......................................        119         645
                                                                                     --------    --------
         Net cash provided by (used in) operating activities......................      2,900        (574)
                                                                                     --------    --------

Investing activities:
 Purchases and sales of short-term investments, net...............................        727      (4,703)
 Capital expenditures.............................................................       (820)     (4,402)
 Proceeds from sales of property and equipment....................................        199          33
                                                                                     --------    --------
         Net cash provided by (used in) investing activities......................        106      (9,072)
                                                                                     --------    --------

Increase (Decrease) in cash and cash equivalents..................................      3,006      (9,646)
Cash and cash equivalents at beginning of year....................................     11,022      18,726
                                                                                     --------    --------
Cash and cash equivalents at end of period........................................   $ 14,028    $  9,080
                                                                                     ========    ========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>

                 AVALON HOLDINGS CORPORATION AND SUBSIDIARIES
             Notes to Condensed Consolidated Financial Statements
                                  (Unaudited)
                                 June 30, 2001

Note 1.  Basis of Presentation

The unaudited condensed consolidated financial statements of Avalon Holdings
Corporation and subsidiaries (collectively "Avalon") and related notes included
herein have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission. Accordingly, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
consistent with such rules and regulations. The accompanying unaudited condensed
consolidated financial statements and related notes should be read in
conjunction with the consolidated financial statements and related notes
included in Avalon's 2000 Annual Report to Shareholders.

In the opinion of management, these unaudited condensed consolidated financial
statements include all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the financial position of Avalon as of June
30, 2001, and the results of operations and cash flows for the interim periods
presented.

The operating results for the interim periods are not necessarily indicative of
the results to be expected for the full year.

Note 2.  Basic Net Income (Loss) Per Share

Basic net loss per share has been computed using the weighted average number of
common shares outstanding each period which was 3,803,331. There were no common
equivalent shares outstanding and therefore diluted per share amounts are equal
to basic per share amounts for the three and six months ended June 30, 2001 and
2000.

Note 3.  Short-Term Investments

Avalon's securities investments that are bought and held principally for the
purpose of selling them in the near term are classified as trading securities.
Trading securities are recorded at fair value on the balance sheet, with the
change in fair value during the period included in earnings. Trading securities
are invested primarily in debt securities and are included in the Condensed
Consolidated Balance Sheet under the caption "Short-term investments". The
balance of Avalon's trading securities at June 30, 2001 was approximately
$33,000. As of June 30, 2001 the unrealized gain on trading securities was
immaterial.

Note 4.  Comprehensive Income

Avalon has no items that qualify as a component of other comprehensive income as
defined in Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income and, therefore, comprehensive income equals net income for
all periods presented.

Note 5.  Long-lived Asset Impairment

The analytical laboratory business of Avalon's technical environmental services
operations has experienced operating losses due to increased competition and
operational inefficiencies. As a result, during the second quarter of 2001, the
analytical laboratory operations implemented a reduction and

                                       6
<PAGE>

reorganization of its workforce. Although Avalon believes the operational
inefficiencies have been appropriately addressed, the analytical laboratory
business has not been able to increase its net operating revenues to a level
necessary to cover the continuing costs associated with the laboratory
operations, many of which are fixed. Therefore, in accordance with Avalon's
asset impairment policy, Avalon performed an evaluation of the long-lived assets
of the Export, Pennsylvania analytical laboratory operations including the costs
in excess of fair market value of net assets of acquired businesses ("goodwill")
to determine if the carrying value of such assets was recoverable. To ascertain
whether an impairment existed, Avalon estimated the undiscounted sum of the
expected future cash flows of the Export, Pennsylvania analytical laboratory
operations to determine if such sum was less than the carrying value of the
long-lived assets. The evaluation indicated the existence of an impairment and
Avalon measured the extent of the impairment by determining the fair market
value of the long-lived assets based upon quoted market prices. As a result, the
Company recorded a write-down of goodwill in the amount of $.5 million.

Note 6. Legal Matters

In September 1995, certain subsidiaries of Avalon were informed that they had
been identified as potentially responsible parties by the Indiana Department of
Environmental Management with respect to a Fulton County, Indiana, hazardous
waste disposal facility which is subject to remedial action under Indiana
Environmental Laws. Such identification was based upon the subsidiaries having
been involved in the transportation of hazardous substances to the facility. A
large number of waste generators and other waste transportation and disposal
companies were also identified as responsible or potentially responsible parties
with respect to this facility. During the fourth quarter of 1999, Avalon became
a party to an Agreed Order and a Participation Agreement regarding the
remediation of a portion of this site. The Participation Agreement provides for,
among other things, the allocation of all site remediation costs except for
approximately $3 million. Avalon's total liability for the allocated costs under
the Participation Agreement was approximately $71,000 which Avalon has paid.

The additional unallocated site remediation costs are currently estimated to be
approximately $3 million and Avalon's total accrued liability relating to the
remediation of this portion of the site on an undiscounted basis is $120,000
which is included in the June 30, 2001 Condensed Consolidated Balance Sheets
under the caption "Other noncurrent liabilities." The extent of any ultimate
liability of any of Avalon's subsidiaries with respect to these additional costs
is unknown. The measurement of environmental liabilities is inherently difficult
and the possibility remains that technological, regulatory or enforcement
developments, the results of environmental studies or other factors could
materially alter Avalon's expectations at any time. Currently, however, because
of the expected sharing among responsible and potentially responsible parties,
the availability of legal defenses, and typical settlement results, Avalon
currently estimates that the ultimate liability of this matter will be
consistent with the amounts recorded on Avalon's financial statements.

In the ordinary course of conducting its business, Avalon also becomes involved
in lawsuits, administrative proceedings and governmental investigations,
including those related to environmental matters. Some of these proceedings may
result in fines, penalties or judgments being assessed against Avalon which,
from time to time, may have an impact on its business and financial condition.
Although the outcome of such lawsuits or other proceedings cannot be predicted
with certainty, Avalon does not believe that any uninsured ultimate liabilities,
fines or penalties resulting from such pending proceedings, individually or in
the aggregate, would have a material adverse effect on it.

Note 7.  Business Segment Information.

For business segment information, Avalon considered its operating and management
structure and the types of information subject to regular review by its "chief
operating decision maker." On this basis, Avalon's reportable segments include
transportation services, technical environmental services, waste

                                       7
<PAGE>

disposal brokerage and management services and golf and related operations.
Avalon accounts for intersegment net operating revenue as if the transactions
were to third parties. The segment disclosures are presented on this basis for
all periods presented.

Avalon's primary business segment provides transportation services that include
transportation of hazardous and nonhazardous waste as well as general and bulk
commodities. The technical environmental services segment provides environmental
consulting, engineering, site assessments, analytical laboratory, remediation
services and operates and manages a captive landfill for an industrial customer.
The waste disposal brokerage and management services segment provides disposal
brokerage and management services for both hazardous and nonhazardous waste. The
golf and related operations includes the operations of a public golf course and
travel agency. Avalon does not have significant operations located outside the
United States and, accordingly, geographical segment information is not
presented.

The accounting policies of the segments are consistent with those described for
the consolidated financial statements in the summary of significant accounting
policies. Avalon measures segment profit for internal reporting purposes as
income (loss) before taxes. Business segment information including the
reconciliation of segment income (loss) to consolidated loss before taxes is as
follows (in thousands):

<TABLE>
<CAPTION>
                                                    Three Months Ended     Six Months Ended
                                                         June 30,              June 30,
                                                    ------------------    ------------------
                                                       2001       2000       2001       2000
                                                    -------    -------    -------    -------
<S>                                                 <C>        <C>        <C>        <C>
Net operating revenues from:
Transportation services:
 External customers revenues....................    $ 7,813    $10,456    $15,217    $20,909
 Intersegment revenues..........................      1,110      1,649      2,311      3,165
                                                    -------    -------    -------    -------
 Total transportation services..................      8,923     12,105     17,528     24,074
                                                    -------    -------    -------    -------

Technical environmental services:
 External customers revenues....................      5,162      6,374      9,912     13,459
 Intersegment revenues..........................          6         20         10         45
                                                    -------    -------    -------    -------
 Total technical environmental services.........      5,168      6,394      9,922     13,504
                                                    -------    -------    -------    -------

Waste disposal brokerage and management:
 External customers revenues....................      4,164      4,441      8,674      8,056
 Intersegment revenues..........................         79        642        266      2,502
                                                    -------    -------    -------    -------
 Total waste disposal brokerage and management
  services......................................      4,243      5,083      8,940     10,558
                                                    -------    -------    -------    -------

Golf and related operations:
 External customers revenues                            295        113        393        212
 Intersegment revenues..........................         54         57         91        136
                                                    -------    -------    -------    -------
 Total golf and related operations..............        349        170        484        348
                                                    -------    -------    -------    -------

Other businesses:
 External customers revenues....................         --         79         --         79
 Intersegment revenues..........................         --         --         --         --
                                                    -------    -------    -------    -------
 Total other businesses.........................         --         79         --         79
                                                    -------    -------    -------    -------

 Segment operating revenues.....................     18,683     23,831     36,874     48,563
 Intersegment eliminations......................     (1,249)    (2,368)    (2,678)    (5,848)
                                                    -------    -------    -------    -------
 Total net operating revenues...................    $17,434    $21,463    $34,196    $42,715
                                                    -------    -------    -------    -------
</TABLE>

                                       8
<PAGE>

Business Segment Information (continued)

<TABLE>
<CAPTION>
                                                        Three Months Ended     Six Months Ended
                                                             June 30,              June 30,
                                                        ------------------    ------------------
                                                           2001       2000       2001       2000
                                                        -------    -------    -------    -------
<S>                                                     <C>        <C>        <C>        <C>
Income (loss) before taxes:
 Transportation services.............................  $    (31)   $    142   $  (138)   $   218
 Technical environmental services....................      (264)        111      (303)       296
 Waste disposal brokerage and management
  services...........................................       156         314       392        615
 Golf and related operations.........................      (279)       (265)     (514)      (381)
 Other businesses....................................        --         (42)       (3)      (106)
                                                       --------    --------   -------    -------
 Segment income (loss) before taxes..................      (418)        260      (566)       642

 Corporate interest income...........................       106         194       241        428
 Corporate other income, net.........................         7           1        11         12
 General corporate expenses..........................      (807)       (831)   (1,640)    (1,732)
                                                       --------    --------   -------    -------
 Loss before taxes...................................  $ (1,112)   $   (376)  $(1,954)   $  (650)
                                                       --------    --------   -------    -------

Other significant noncash items
 Write-down of costs in excess of fair market value
  of net assets of acquired businesses:
 Technical environmental services....................  $    486    $     --   $   486    $    --
                                                       --------    --------   -------    -------
   Total.............................................  $    486    $     --   $   486    $    --
                                                       --------    --------   -------    -------

Interest income:

 Transportation services.............................  $     17    $     11   $    37    $    23
 Technical environmental services....................        10           7        22         12
 Waste disposal brokerage and management
  services...........................................        11           7        25         15
 Golf and related operations.........................         1           1         3          2
 Corporate...........................................       106         194       241        428
                                                       --------    --------   -------    -------
   Total.............................................  $    145    $    220   $   328    $   480
                                                       --------    --------   -------    -------

<CAPTION>

                                                       June 30,   December 31,
                                                         2001         2000
                                                       --------   ------------
<S>                                                    <C>        <C>
Identifiable assets:
 Transportation services.............................  $ 13,397    $   14,365
 Technical environmental services....................    12,238        14,253
 Waste disposal brokerage and management.............
  services...........................................     3,736         4,027
 Golf and related operations.........................    12,417        12,238
 Other businesses....................................        66            67
 Corporate...........................................    31,014        31,246
                                                       --------    ----------
   Sub Total.........................................    72,868        76,196
 Elimination of Intersegment Receivables.............   (13,271)      (13,886)
                                                       --------    ----------
   Total.............................................  $ 59,597    $   62,310
                                                       ========    ==========
</TABLE>

                                       9
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides information which management believes is
relevant to an assessment and understanding of the operations and financial
condition of Avalon Holdings Corporation and its subsidiaries. As used in this
report, the term "Avalon" means Avalon Holdings Corporation and its wholly owned
subsidiaries, taken as a whole, unless the context indicates otherwise.

Statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations which are not historical in nature are
intended to be, and are hereby identified as, 'forward looking statements.'
Avalon cautions readers that forward looking statements, including, without
limitation, those relating to Avalon's future business prospects, revenues,
working capital, liquidity, capital needs, interest costs, and income, are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those indicated in the forward looking statements, due to
risks and factors identified herein and from time to time in Avalon's reports
filed with the Securities and Exchange Commission.


Liquidity and Capital Resources
- -------------------------------

For the first six months of 2001, Avalon utilized existing cash and cash
provided by operations to fund capital expenditures and meet operating needs.

During the first six months of 2001, capital spending for Avalon totaled $.8
million which was principally related to capital improvements to the golf course
and to a lesser extent the purchase of equipment for Avalon's transportation and
technical environmental services operations. Avalon's capital spending in 2001,
excluding acquisitions, is expected to be in the range of $2 million to $3
million which will relate principally to capital improvements to the golf
course, golf course related facilities and acquiring additional transportation
equipment.

Working capital decreased to $21.2 million at June 30, 2001 compared with $21.7
million at December 31, 2000.

The decrease in Accounts Receivable at June 30, 2001 compared with December 31,
2000 is primarily due to a significant decline in net operating revenues for the
second quarter of 2001 when compared with the fourth quarter of 2000.

The decrease in Accounts Payable at June 30, 2001 compared with December 31,
2000 is primarily the result of the payment of insurance premiums during the
first six months of 2001.

Management believes that cash provided from operations, the availability of
working capital, as well as Avalon's ability to incur indebtedness, will be, for
the foreseeable future, sufficient to meet operating requirements and fund
capital expenditure programs.  Avalon does not currently have a credit facility.

Avalon is not aggressively pursuing potential acquisition candidates but will
continue to consider acquisitions that make economic sense.  While Avalon has
not entered into any pending agreements for acquisitions, it may do so at any
time.  Such potential acquisitions could be financed by existing working
capital, secured or unsecured debt, issuance of common stock, or issuance of a
security with characteristics of both debt and equity, any of which could impact
liquidity in the future.

                                       10
<PAGE>

Results of Operations

Overall performance

Net operating revenues in the second quarter of 2001 decreased to $17.4 million
compared with $21.5 million in the prior year's second quarter. Cost of
operations were $15.6 million in the second quarter of 2001 compared with $19.5
million in the prior year quarter. Avalon recorded a net loss of $.9 million or
a loss of $.24 per share for the second quarter of 2001 compared with a net loss
of $.2 million or a loss of $.05 per share for the second quarter of 2000. For
the first six months of 2001, net operating revenues decreased to $34.2 million
compared with $42.7 million for the first six months of 2000. Cost of operations
were $30.8 million for the first six months of 2001 compared with $38.6 million
for the first six months of the prior year. During the first six months of 2001,
Avalon recorded a net loss of $1.4 million or a loss of $.38 per share compared
with a net loss of $.3 million or a loss of $.09 per share for the first six
months of 2000.

Performance in the Second Quarter of 2001 compared with the Second Quarter of
2000

Segment performance

Segment performance should be read in conjunction with Note 7 to the Condensed
Consolidated Financial Statements.

Net operating revenues of the transportation services segment decreased to $8.9
million in the second quarter of 2001 compared with $12.1 million in the second
quarter of the prior year. The decrease in net operating revenues is primarily
attributable to a significant decrease in the level of business of the
transportation brokerage operations and a decrease in the transportation of
hazardous waste. The decrease in the net operating revenues of the
transportation brokerage operations is primarily because the net operating
revenues in the second quarter of 2000 included significant revenues related to
a one-time project in the New England states. The decreased net operating
revenues for the transportation of hazardous waste was primarily as a result of
a decline in the volume of hazardous waste transportation for certain customers.
The transportation services segment incurred a loss before taxes of $31,000 in
the second quarter of 2001 compared with income before taxes of $.1 million for
the second quarter of 2000 primarily as a result of the significant decrease in
the level of business of both the transportation brokerage operations and the
transportation of hazardous waste.

Net operating revenues of the technical environmental services segment decreased
to $5.2 million in the second quarter of 2001 compared with $6.4 million in the
second quarter of the prior year. The decrease in net operating revenues was
primarily the result of a decrease in the net operating revenues of the
engineering and consulting business, the analytical laboratory business and to a
lesser extent the remediation services business. The analytical laboratory
business of Avalon's technical environmental services operations has experienced
operating losses due to increased competition and operational inefficiencies. As
a result, during the second quarter of 2001, the laboratory operations
implemented a reduction and reorganization of its workforce. Although Avalon
believes the operational inefficiencies have been appropriately addressed, the
analytical laboratory business has not been able to increase net operating
revenues to a level necessary to cover the costs associated with the laboratory
operations, many of which are fixed. In accordance with Avalon's asset
impairment policy, Avalon performed an evaluation of the long-lived assets of
the Export, Pennsylvania analytical laboratory operations including the costs in
excess of fair market value of net assets of acquired businesses ("goodwill") to
determine if the carrying value of such assets was recoverable. To ascertain
whether an impairment existed, Avalon

                                       11
<PAGE>

estimated the undiscounted sum of the expected future cash flows of the Export,
Pennsylvania analytical laboratory operations to determine if such sum was less
than the carrying value of the long-lived assets. The evaluation indicated the
existence of an impairment and Avalon measured the extent of the impairment by
determining the fair market value of the long-lived assets based upon quoted
market prices. As a result, the Company recorded a write-down of goodwill in the
amount of $.5 million. Excluding the write-down of goodwill, the technical
environmental services segment recorded income before taxes of $.2 million in
the second quarter of 2001 compared with income before taxes of $.1 million in
the second quarter of 2000. The increase in income before taxes is primarily the
result of improved operating margins of both the remediation and engineering and
consulting businesses partially offset by the increased loss before taxes of the
analytical laboratory business.

Net operating revenues of the waste disposal brokerage and management services
segment decreased to $4.2 million in the second quarter of 2001 compared with
$5.1 million in the second quarter of the prior year. The decrease in net
operating revenues is primarily the result of a decrease in the level of
disposal brokerage and management services provided. Income before taxes
decreased to $.2 million in the second quarter of 2001 compared with $.3 million
in the second quarter of 2000 as a result of decreased net operating revenues.

Avalon's golf and related operations segment consists primarily of the operation
of a golf course and travel agency.  The golf course, which is located in
Warren, Ohio, was closed during the first quarter and part of the second quarter
of 2001 due to seasonality.  The golf course resumed operations during May 2001.
Net operating revenues for the golf and related operations segment increased to
$.3 million in the second quarter of 2001 compared with $.2 million in the
second quarter of 2000.  The net operating revenues in the second quarter of
2000 are primarily related to the travel agency.  During the second quarter of
2000, the golf course was closed while significant capital improvements were
being made to the course.  The golf and related operations segment incurred a
loss before taxes of $.3 million in both the second quarter of 2001 and 2000.
The loss before taxes of the golf and related operations segment is primarily as
a result of the increased expenses of the golf course operations and the fact
that the golf course was closed during the first six weeks of the second quarter
of 2001.

Interest income

Interest income decreased to $.1 million in the second quarter of 2001 compared
with $.2 million in the second quarter of 2000 primarily due to a decrease in
investment rates during the second quarter of 2001 compared with the prior year
quarter.

General corporate expenses

General corporate expenses were $.8 million in both second quarter of 2001 and
2000.

Net income

Avalon incurred a net loss of $.9 million in the second quarter of 2001 compared
with a net loss of $.2 million in the second quarter of the prior year.
Avalon's overall effective tax rate, including the effect of state income tax
provisions, was 19% in the second quarter of 2001 compared with 50% in the prior
year's second quarter.  The overall effective rate is different than statutory
rates primarily due to state income taxes, the nondeductibility for tax purposes
of the amortization and write-down of costs in excess of fair market value of
net assets of acquired businesses and other nondeductible expenses.

                                       12
<PAGE>

Performance in the First Six Months of 2001 compared with the First Six Months
of 2000

Segment performance

Net operating revenues of the transportation services segment decreased to $17.5
million for the first six months of 2001 compared with $24.1 million for the
first six months of the prior year.  The decrease is primarily attributable to a
significant decrease in the net operating revenues of the transportation
brokerage operations and a decrease in the transportation of hazardous waste.
The decrease in net operating revenues of the transportation brokerage
operations is primarily because the net operating revenues in the first six
months of 2000 included significant revenues related to a one-time project in
the New England states. The decreased net operating revenues for the
transportation of hazardous waste was primarily as a result of a decline in the
volume of hazardous waste transportation for certain customers. The
transportation services segment incurred a loss before taxes of $.1 million for
the first six months of 2001 compared with income before taxes of $.2 million
for the first six months of the prior year. The decrease is primarily the result
of the significant decrease in the level of business of both the transportation
brokerage operations and the transportation of hazardous waste.

Net operating revenues of the technical environmental services segment decreased
to $9.9 million in the first six months of 2001 compared with $13.5 million in
the first six months of 2000. The decrease is primarily attributable to a
decrease in net operating revenues of the remediation services business, the
engineering and consulting business and analytical laboratory business. The
analytical laboratory business of Avalon's technical environmental services
operations has experienced operating losses due to increased competition and
operational inefficiencies. As a result, during the second quarter of 2001, the
laboratory operations implemented a reduction and reorganization of its
workforce. Although Avalon believes the operational inefficiencies have been
appropriately addressed, the analytical laboratory business has not been able to
increase net operating revenues to a level necessary to cover the costs
associated with the laboratory operations, many of which are fixed. Therefore,
in accordance with Avalon's asset impairment policy, Avalon performed an
evaluation of the long-lived assets of the Export, Pennsylvania analytical
laboratory operations including the costs in excess of fair market value of net
assets of acquired businesses ("goodwill") to determine if the carrying value of
such assets was recoverable. To ascertain whether an impairment existed, Avalon
estimated the undiscounted sum of the expected future cash flows of the Export,
Pennsylvania analytical laboratory operations to determine if such sum was less
than the carrying value of the long-lived assets. The evaluation indicated the
existence of an impairment and Avalon measured the extent of the impairment by
determining the fair market value of the long-lived assets based upon quoted
market prices. As a result, the Company recorded a write-down of goodwill in the
amount of $.5 million. Excluding the write-down of goodwill, income before taxes
for the first six months of 2001 decreased to $.2 million compared with $ .3
million for the first six months of the prior year. The decrease is primarily
the result of a decrease in the level of services provided by the analytical
laboratory operations and remediation business. The analytical laboratory
operations incurred significantly larger losses before taxes for the first six
months of 2001 compared with the first six months of the prior year which offset
the increased income before taxes of the engineering and consulting business.
The engineering and consulting business incurred a loss before taxes for the
first six months of 2000.

Net operating revenues of the waste disposal brokerage and management services
segment decreased to $8.9 million in the first six months of 2001 compared with
$10.6 million in the first six months of 2000. The decrease in net operating
revenues is primarily the result of a decrease in the level of disposal
brokerage and management services provided. Income before taxes decreased to
$.4 million for the first

                                       13
<PAGE>

six months of 2001 compared with $.6 million for the first six months of the
prior year as a result of the decreased net operating revenues.

Avalon's golf and related operation segment consists primarily of the operations
of a golf course and travel agency. The golf course, which is located in Warren,
Ohio, was closed during the first quarter and part of the second quarter of 2001
due to seasonality. The golf course resumed operations during May 2001. The golf
course was closed during the first six months of 2000 to make significant
capital improvements. Net operating revenues for the golf and related operations
segment increased to $.5 million for the first six months of 2001 compared with
$.3 million of the first six months of 2000. The net operating revenues for the
first six months of 2000 are primarily related to the travel agency. Net
operating revenues of the travel agency declined slightly during the first six
months of 2001 compared with the first six months of 2000. The golf and related
operations segment incurred a loss before taxes of $.5 million in the first six
months of 2001 compared with a loss before taxes of $.4 million in the first six
months of the prior year. The loss before taxes of the golf and related
operations segment is primarily as a result of the increased expenses of the
golf course operations and the fact that the golf course was closed for the
first four and a half months of 2001.

Interest Income

Interest income decreased to $.3 million for the first six months of 2001
compared with $.5 million for the first six months of the prior year, primarily
due to a decline in the average amount of cash and cash equivalents and short-
term investments during the first six months of 2001 compared with the first six
months of the prior year and a decrease in investment rates.

General Corporate Expenses

General corporate expenses decreased to $1.6 million in the first six months of
2001 compared with $1.7 million for the first six months of the prior year.
Such decrease is primarily the result of a decrease in various administrative
expenses.

Net Income

Avalon recorded a net loss of $1.4 million in the first six months of 2001
compared with a net loss of $.3 million in the first six months of the prior
year. Avalon's overall effective tax rate, including the effect of state income
tax provisions, was 26% in the first six months of 2001 compared with 50% in the
first six months of the prior year. The effective tax rate for the current and
prior year period is different than the federal statutory rates due to state
income taxes, the nondeductibility for tax purposes of the amortization and
write-down of costs in excess of fair market value of net assets of acquired
businesses and other nondeductible expenses.

Trends and Uncertainties

In the ordinary course of conducting its business, Avalon becomes involved in
lawsuits, administrative proceedings and governmental investigations, including
those relating to environmental matters.  Some of these proceedings may result
in fines, penalties or judgments being assessed against Avalon which, from time
to time, may have an impact on its business and financial condition. Although
the outcome of such lawsuits or other proceedings cannot be predicted with
certainty, Avalon does not believe that any uninsured ultimate liabilities,
fines or penalties resulting from such pending proceedings, individually or in
the aggregate, would have a material adverse effect on it.

                                       14
<PAGE>

The federal government and numerous state and local governmental bodies are
continuing to consider legislation or regulations to either restrict or impede
the disposal and/or transportation of waste. A significant portion of Avalon's
transportation and disposal brokerage and management revenues is derived from
the disposal or transportation of out-of-state waste. Any law or regulation
restricting or impeding the transportation of waste or the acceptance of out-of-
state waste for disposal could have a significant negative effect on Avalon.

As is the case with any transportation company, an increase in fuel prices will
subject Avalon's transportation operations to increased operating expenses,
which, in light of competitive market conditions, Avalon may not be able to pass
on to its customers. Avalon's transportation operations continue to experience
higher fuel costs, some of which Avalon has not and will not be able to pass on
to its customers.

Avalon's transportation operations utilize power units which are subject to
long-term leases. A decrease in the level of transportation services provided
has resulted in the under utilization of many of these power units. Continuing
under utilization of these power units as a result of decreased net operating
revenues or otherwise, will adversely impact the future financial performance of
the transportation operations.

Competitive pressures continue to impact the financial performance of Avalon's
transportation services, technical environmental services and waste disposal
brokerage and management services. A decline in the rates which customers are
willing to pay could adversely impact the future financial performance of
Avalon.

The analytical laboratory business of the technical environmental services
operations has experienced significant losses before taxes as a result of a
decline in net operating revenues and operational inefficiencies. As a result,
during the second quarter of 2001, the laboratory operations implemented a
reduction and reorganization of its workforce. Avalon believes that the
operational inefficiencies have been appropriately addressed, however, failure
to increase net operating revenues will continue to adversely impact the future
financial performance of the analytical laboratory business because of the fixed
nature of many of the costs associated with the laboratory operations.

Avalon's waste disposal brokerage and management operations obtain and retain
customers by providing service and identifying cost-efficient disposal options
unique to a customer's needs. Consolidation within the solid waste industry has
resulted in reducing the number of disposal options available to waste
generators and has caused disposal pricing to increase. Avalon does not believe
that pricing changes alone will have a material effect upon its waste disposal
brokerage and management operations.  However, consolidation will have the
effect of reducing the number of competitors offering disposal alternatives
which may adversely impact the future financial performance of Avalon's waste
disposal brokerage and management operations.

A significant portion of Avalon's business is not subject to long-term
contracts. In light of current economic, regulatory, and competitive conditions,
there can be no assurance that Avalon's current customers will continue to
transact business with Avalon at historical levels. Failure by Avalon to retain
its current customers or to replace lost business could adversely impact the
future financial performance of Avalon.

                                       15
<PAGE>

As a result of the significant capital improvements to Avalon's golf course, the
greens fees charged customers to play a round of golf have been increased
substantially. Although Avalon believes that the capital improvements made to
the golf course justify the increased greens fees and will result in increased
net operating revenues and increased income before taxes, there can be no
assurance as to when such increases will be attained.

Avalon's golf course competes with many public and private courses in the area.
Although the course will continue to be available to the general public, in
order to market the redesigned golf course to a broader range of patrons, and in
light of the anticipated national recognition of the course, Avalon has created
the Avalon Lakes Golf Club. Membership requires payment of a one-time initiation
fee as well as annual dues. Members receive several benefits including reduced
greens fees and preferential tee times.

Avalon's golf course is located in Warren, Ohio and is significantly dependent
upon weather conditions during the golf season.  Additionally, all of Avalon's
other operations are somewhat seasonal in nature because a significant portion
of the operations are performed primarily in selected northeastern and
midwestern states.  As a result, Avalon's financial performance is adversely
affected by winter weather conditions.

Market Risk

Avalon does not have significant exposure to changing interest rates. Currently,
a 10% change in interest rates would have an immaterial effect on Avalon's
pretax earnings for the next fiscal year.  Avalon currently has no debt
outstanding and invests primarily in short-term money market funds and other
short-term obligations.  Avalon does not undertake any specific actions to cover
its exposure to interest rate risk and Avalon is not a party to any interest
rate risk management transactions.

Avalon does not purchase or hold any derivative financial instruments.



                         ============================

                                       16
<PAGE>

                          PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

     Reference is made to "Item 3. Legal Proceedings" in Avalon's Annual Report
     on Form 10-K for the year ended December 31, 2000 for a description of
     legal proceedings.

Item 2.  Changes in Securities and Use of Proceeds

     None

Item 3.  Defaults upon Senior Securities

     None

Item 4.  Submission of Matters to a Vote of Security Holders

     Avalon's Annual Meeting of Shareholders was held on April 30, 2001;
     however, no vote of security holders occurred with respect to any matters
     reportable under this Item 4.


Item 5.  Other Information

     None

Item 6.  Exhibits and Reports on Form 8-K

     (a)  Exhibits
          None

     (b)  Reports on Form 8-K
          None

                                       17
<PAGE>

                                   SIGNATURE

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.

                              AVALON HOLDINGS CORPORATION
                              (Registrant)



Date: August 13, 2001         By:            /s/ Timothy C. Coxson
    -------------------          --------------------------------------------
                              Timothy C. Coxson, Chief Financial Officer and
                              Treasurer (Principal Financial and Accounting
                              Officer and Duly Authorized Officer)

                                       18

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
