UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 31, 1996
-------------------------------
MONTEREY HOMES CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 1-9977 86-0611231
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
6613 North Scottsdale Road, Suite 200, Scottsdale, Arizona 85250
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 998-8700
--------------
Homeplex Mortgage Investments Corporation
5333 North Seventh Street, Suite 219, Phoenix, Arizona 85014
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
This Current Report on Form 8-K/A2 amends the Current Report on Form
8-K filed by Monterey Homes Corporation (the "Company") on January 14, 1997, as
amended by the Current Report on Form 8-K/A1 filed by the Company on January 22,
1997, solely to add the pro forma financial information required by Item 7(b).
Item 7(b) Pro Forma Financial Information
-------------------------------
The required pro forma financial information is set forth below.
<PAGE>
Unaudited Pro Forma Condensed Combined Balance Sheet
September 30,1996
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Historical Pro Forma Pro Forma
Monterey Homeplex Combined Adjustments(2) Combined
-------------- ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Assets:
Real estate under development $ 44,495 $ 0 $ $44,495 (b) $ (510) $ 43,985
Real estate loans and other
receivables 560 1,415 1,975 1,975
Residual interests - 4,225 4,225 4,225
Cash and cash equivalents 2,386 13,820 16,206 16,206
Option deposits 494 - 494 494
Other assets 1,287 571 1,858 (b) (698) 846
(a) (314)
Deferred tax asset (c) 6,783 6,783
Goodwill (c) 1,763 1,763
-------------- ------------ -------------- ------------ --------------
Total Assets $ 49,222 $ 20,031 $ 69,253 $ 7,024 $ 76,277
============== ============ ============== ============ ==============
Liabilities & Stockholders' Equity:
Accounts payable and accruals $ 4,043 $ 1,037 $ 5,080 5,080
Home sale deposits 5,326 5,326 5,326
Notes payable 39,684 39,684 39,684
-------------- ------------ -------------- ------------- ---------------
Total Liabilities 49,053 1,037 50,090 - 50,090
-------------- ------------ -------------- ------------- ---------------
Common stock 5 99 104 (d) $ (53) 46
(c) (5)
Additional paid-in capital 8 84,046 84,054 (d) 8,557 92,603
(c) (8)
Retained earnings (accumulated
deficit) 156 (64,741) (64,585) (d) (1,467) (66,052)
Treasury stock - (410) (410) (410)
-------------- ------------ -------------- ------------- ---------------
Total Stockholders' Equity 169 18,994 19,163 7,024 26,187
-------------- ------------ -------------- ------------- ---------------
Total Liabilities and
Stockholders' Equity $ 49,222 $ 20,031 $ $69,253 $ 7,024 $ 76,277
============== ============ ============== ============= ===============
</TABLE>
See accompanying "Notes to Unaudited Pro Forma Condensed
Combined Financial Data."
<PAGE>
Unaudited Pro Forma Condensed Combined Income Statement
For the Nine Months Ended September 30, 1996
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Historical
----------------------------- Pro Forma Pro Forma
Monterey Homeplex Combined Adjustments(3) Combined
----------- -------------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C>
Home and land sales $ 51,836 $ 51,836 $ 51,836
Cost of home and land sales 43,882 43,882 (e) $ 225 44,107
----------- -------------- ------------- ------------ --------------
Gross Margin 7,954 7,954 (225) 7,729
Selling, general and administrative expenses 4,127 $ 867 4,994 (f) 338 5,115
(g) (243)
(h) 344
(i) (169)
(j) 66
(m) (28)
(n) (187)
----------- -------------- ------------- ------------ --------------
Operating income (loss) 3,827 (867) 2,960 (346) 2,614
----------- -------------- ------------- ------------ --------------
Other income (expense):
Interest income on real estate
loans 510 510 510
Income from residual interests 799 799 799
Interest expense (238) (238) (238)
Miscellaneous income, net 69 491 560 560
----------- -------------- ------------- ------------ --------------
Total other income (expense) 69 1,562 1,631 1,631
----------- -------------- ------------- ------------ --------------
Income before extraordinary loss and income 3,896 695 4,591 (346) 4,245
taxes
Extraordinary loss from early extinguishment (149) (149) (l) 149 0
of debt
----------- -------------- ------------- ------------ --------------
Income before income taxes 3,896 546 4,442 (197) 4,245
Income tax expense 0 (k) 467 467
=========== ============== ============ ============= ==============
Net income $ 3,896 $ 546 $ 4,442 $ (664) $ 3,778
=========== ============== ============ ============= ==============
Net income per share: **
Primary
Before extraordinary item $ 0.21 $ 0.78
Extraordinary item (0.04) -
-------------- --------------
Total $ 0.17 $ 0.78
============== ==============
Fully Diluted
Before extraordinary item $ 0.21 $ 0.75
Extraordinary item (0.04) -
-------------- --------------
Total $ 0.17 $ 0.75
============== ==============
Weighted average common shares
outstanding -- primary 3,317,705 4,833,601
============== ==============
Weighted average common shares
outstanding -- fully diluted 3,348,559 5,036,908
============== ==============
</TABLE>
** Net income per share and weighted average common share amounts restated
to reflect a one for three stock split on December 31, 1996
See accompanying "Notes to Unaudited Pro Forma Condensed
Combined Financial Data."
<PAGE>
Unaudited Pro Forma Condensed Combined Income Statement
For the Twelve Months Ended December 31, 1995
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Historical
----------------------- Pro Forma Pro Forma
Monterey Homeplex Combined Adjustments(3) Combined
-------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Home and land sales $ 71,491 $ 71,491 $ 71,491
Cost of home and land sales 60,332 0 60,332 (e) 225 60,557
-------- ----------- ---------- ----------- ----------
Gross Margin 11,159 0 11,159 (225) 10,934
Selling, general and administrative expenses 4,898 1,599 6,497(f) 450 6,792
(g) (646)
(h) 458
(i) (55)
(j) 88
-------- ----------- ---------- ----------- ----------
Operating income (loss) 6,261 (1,599) 4,662 (520) 4,142
-------- ----------- ---------- ----------- ----------
Other income (expense):
Interest income on real estate
loans 1,618 1,618 1,618
Income from residual interests 1,283 1,283 1,283
Interest expense (868) (868) (868)
Miscellaneous income, net 140 663 803 803
-------- ----------- ---------- ----------- ----------
Total other income (expense) 140 2,696 2,836 2,836
-------- ----------- ---------- ----------- ----------
Income before income taxes 6,401 1,097 7,498 (520) 6,978
Income tax expense $ - (k) 768 768
======== =========== ========== =========== ==========
Net income $ 6,401 $ 1,097 $ 7,498 $ (1,288) $ 6,210
======== =========== ========== =========== ==========
Net income per share: **
Primary $ 0.34 $ 1.28
========== =========
Fully Diluted $ 0.34 $ 1.23
========== =========
Weighted average common shares
outstanding -- primary 3,245,767 4,833,601
=========== ==========
Weighted average common shares
outstanding -- fully diluted 3,245,767 5,036,908
=========== ==========
</TABLE>
** Net income per share and weighted average common share amounts restated
to reflect a one for three stock split on December 31, 1996
See accompanying "Notes to Unaudited Pro Forma
Condensed Combined Financial Data."
<PAGE>
Notes To Unaudited Pro Forma Condensed Combined Financial Data
1. Overview. The Unaudited Pro Forma Condensed Combined Income Statements are
presented as if the combination of Monterey and Homeplex occurred on January 1,
1995 and January 1, 1996, for the year ended December 31, 1995 and the nine
months ended September 30, 1996, respectively. The Unaudited Pro Forma Condensed
Combined Balance Sheet is presented assuming the combination occured on
September 30, 1996.
The combination is recorded as a purchase in accordance with generally accepted
accounting principles and, accordingly, the assets and liabilities of the
acquired entity (Monterey) are presented at their estimated fair values as of
that date.
In connection with the merger, the Monterey Stockholders and Warrantholders
received 1,288,726 shares of the Combined Entity's (previously Homeplex with the
name changed to Monterey Homes effective January 1, 1997) Common Stock on
December 31, 1996, the effective date of the transaction. The Warrantholders
have rights to 16.5 % of the 1,288,726 shares at an exercise price per share to
be agreed upon by the Monterey Stockholders and the Warrantholders. In addition,
the Combined Entity issued 266,667 Contingent Shares, subject to trading price
thresholds and employment restrictions. Of these shares, 43,947 shares will be
reserved for issuance upon the exercise of the warrants discussed above. The
remaining 222,720 shares will be issued to the Monterey Stockholders if certain
Combined Entity Common Stock price targets are reached for twenty consecutive
days at any time during the five years following December 31, 1996, provided
that at the time of any such issuance to a Monterey Stockholder, such
Stockholder is still employed with the Combined Entity. If the stock price does
not reach such thresholds within five years following December 31, 1996 such
Contingent Stock will not be issued.
In addition, pursuant to the Employment Agreements, options to purchase one
million shares of the Combined Entity common Stock was granted to the Monterey
Stockholders at an exercise price of $1.75, which options vest over the three
years following December 31, 1996 and expire at the end of the sixth year
following December 31, 1996. Compensation expense will be recorded over the
three year vesting period for an amount by which the stock price on December 31,
1996 exceeds the exercise price multiplied by the total number of options.
Subsequent to the Merger, a one for three reverse stock split occurred. All net
income per share, weighted average share amounts and share amounts included in
the accompanying Unaudited Pro Forma Condensed Combined Financial Data and these
footnotes have been adjusted to reflect this reverse stock split.
By effecting the Merger, Homeplex caused a change in its tax status from a REIT
to a C-corporation and Monterey terminated its Subchapter S tax status.
By utilizing the NOL Carryforward, it is anticipated that the income taxes paid
by the Combined Entity will consist primarily of state income taxes (since
utilization of the Homeplex state net operating loss may be significantly
limited) and the federal alternative minimum tax. Any federal income tax expense
generated by amortization of the deferred tax asset recognized for book purposes
is assumed to be offset by a decrease in the reserve against the deferred tax
asset and, accordingly, will have no net income statement impact.
<PAGE>
(2) Pro Forma Condensed Combined Balance Sheet Adjustments at September 30, 1996
(a) To record the payment of certain Merger costs and related expenses
incurred prior to and concurrent with the Effective Date of the Merger of $
1,873,579. Of the $ 1,873,579, $ 1,323,579 was paid by Homeplex, of which $
313,899 was attributed to the Merger and capitalized as of September 30, 1996
and included as a component of the purchase price. Subsequent to September 30,
1996 the remaining costs were incurred of which $465,198 was capitalized and $
554,482 was expensed in the fourth quarter of 1996. Additionally, $ 550,000 of
costs incurred by Monterey was attributed to the Merger and to the cost of
obtaining waivers from the holders of the Notes for prior defaults, and was
expensed.
(b) Utilizing a stock price of $2.21 per share of Homeplex common stock
(the average common stock per share price for five days before and after the
Merger, the purchase price is estimated as follows:
<TABLE>
<S> <C>
Consideration Paid:
Fair value of Homeplex common stock $8,544,256
Transaction costs 779,097
----------
Total consideration 9,323,353
Fair value of net assets of Monterey 776,865
Deferred tax asset value 6,783,000
----------
Fair value of net assets acquired 7,559,865
Excess of purchase price over fair value of net assets acquired $1,763,488
==========
</TABLE>
The excess of purchase price over the fair value of net assets acquired
is attributed to goodwill, which is being amortized over 20 years. The
allocation of the purchase price among the assets and liabilities of Monterey
results primarily in the write-off of certain deferred financing costs totaling
$698,038 (at September 30, 1996) which have no future value to the combined
entity and the adjustment of real estate under development (write down of
$510,000) to its estimated fair value. In addition, the transaction resulted in
the recording of the deferred tax asset relating to the benefit of operating
loss carryforwards, net of applicable valuation reserves and deferred tax assets
relating to the write-off of the deferred financing costs.
(c) To record the effects of the issuance of Homeplex common stock to
the Monterey Stockholders and Warrantholders and additional paid-in capital
resulting from the Merger.
(d) To reclassify the remaining equity accounts of Monterey into
Homeplex's equity accounts, while giving effect to the legal entity remaining
subsequent to the Merger.
<PAGE>
(3) Pro Forma Condensed Combined Income Statement Adjustments for the Nine Month
Period Ended September 30, 1996 and the Year Ended December 31, 1995.
(e) To record the amortization of additional capitalized interest
incurred in connection with the issuance of notes payable used to fund the Tax
Distribution and the Retained Earnings Distribution.
(f) To adjust for the compensation expense to be incurred as specified
in the Employment Agreements with Messrs. Cleverly and Hilton, net of previous
compensation expense no longer recognized by Monterey for these officers. This
amount also includes an adjustment to reflect additional compensation expense
for the bonuses to be paid to Messrs. Cleverly and Hilton for meeting certain
net income levels as specified in the Employment Agreements. The annual bonus
amount for each Monterey Stockholder is equal to the lesser of $200,000 or 4% of
pre-tax income.
(g) To eliminate compensation expense recorded by Homeplex for
employees terminated in connection with the Merger.
(h) To record compensation expense incurred in connection with the
issuance of options to purchase 333,333 shares of the combined entity's Common
Stock issued to the Monterey Stockholders on the Effective Date of the Merger.
The compensation expense for the options is being recognized over the three year
graded vesting period.
(i) To eliminate the amortization of deferred financing costs written
off in connection with the Merger.
(j) To record the amortization of goodwill, which is being amortized
over 20 years.
(k) To record the amount of income taxes relating to the alternative
minimum tax and state income taxes, which has been estimated at 11% of income
before income taxes.
(l) To eliminate the effects of the extraordinary item due to its
nonrecurring nature.
(m) To eliminate Homeplex's debt issuance costs amortized prior to the
payoff of the long-term debt.
(n) To eliminate the transaction costs incurred and expensed by
Monterey prior to the merger.
No effect has been given in the Pro Forma Condensed Combined Income Statement to
the potential compensation expense that would be recorded if the 222,720 of
Contingent Shares are subsequently earned and issued to the Monterey
Stockholders. Assuming the stock prices are reached in accordance with the
vesting periods previously described, and the Monterey Stockholders remain
employed by the combined entity in such periods, compensation expense relating
to such shares would amount to approximately $236,000, $667,000 and $933,000,
respectively, for the three years following the Merger.
<PAGE>
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 hereunto duly authorized.
MONTEREY HOMES CORPORATION
Date: March 6, 1997 By: /s/ Larry W. Seay
----------------------------------------
Larry W. Seay
Vice President of Finance and
Chief Financial Officer
