UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 1, 1997
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MONTEREY HOMES CORPORATION
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(Exact name of registrant as specified in its charter)
Maryland 1-9977 86-0611231
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
6613 North Scottsdale Road, Suite 200, Scottsdale, Arizona 85250
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 998-8700
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NONE
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(Former name or former address, if changed since last report.)
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Item 2. Acquisition or Disposition of Assets.
On May 29, 1997, Monterey Homes Corporation ("Monterey") signed a
definitive agreement with Legacy Homes, Ltd., Legacy Enterprises, Inc., and John
Landon and Eleanor Landon (together, the "Legacy Entities"), to acquire
substantially all of the assets of Legacy Homes, Ltd. and Legacy Enterprises,
Inc. and a related mortgage banking business. The transaction was effective as
of July 1, 1997.
The consideration for the assets and stock acquired consisted of
$1,581,685 in cash (paid out of working capital and subject to final accounting
adjustments), 666,667 shares of Monterey common stock and deferred contingent
payments for the four years following the close of the transaction. The deferred
contingent payments will be equal to 12% of the pre-tax income of Monterey and
20% of the pre-tax income of the Texas division of Monterey. In no event will
the total of the deferred contingent payments exceed $15 million. In addition,
Monterey assumed substantially all the liabilities of the Legacy Entities,
including indebtedness that was incurred prior to the closing of the
transactions to fund distributions to the shareholders of Legacy Homes that
reduced its book value to less than $200,000.
The assets purchased from the Legacy Entities principally consist of
real property and other residential home building assets located in the
Dallas/Ft. Worth, Houston and Austin metropolitan areas. Monterey will continue
the operations of the Legacy Entities.
In connection with the transactions, John Landon has entered into a
four-year employment agreement with Monterey pursuant to which he has been
appointed Chief Operating Officer and Co-Chief Executive Officer of Monterey,
and President and Chief Executive Officer of Monterey's newly acquired Texas
operations. Mr. Landon has also been granted an option to purchase 166,667
shares of Monterey's common stock, exercisable in equal annual increments over
three years, commencing July 1, 1998. In addition, Monterey has agreed to use
reasonable best efforts to cause Mr. Landon to be elected to its Board of
Directors.
Monterey officials believe that actual 1997 revenues, factoring in the
Legacy acquisition, could reach $150 million, and earnings could reach $10
million, or approximately $1.61 per share. Company officials also estimate that
pro forma 1997 revenues (giving effect to the transaction as if it had occurred
on January 1, 1997) could reach $200 million.
"Safe Harbor" Statement under the Private Securities Litigation Reform
Act of 1995: Any statements set forth above that are not historical in nature
are forward-looking statements that involve risks and uncertainties that could
cause actual results to differ materially from those in the forward-looking
statements. Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Potential risks
and uncertainties
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include such factors as the strength and competitive pricing environment of the
single-family housing market, changes in the availability and pricing of
residential mortgages, changes in the availability and pricing or real estate in
the markets in which Monterey operates, demand for and acceptance of Monterey's
products, the success of planned marketing and promotional campaigns, the
ability of Monterey and acquisition candidates, including the Legacy Entities,
to successfully integrate their operations, and other factors identified in
Exhibit 99.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(a) Financial Statements Page
It is impractical to file the Report with the
financial statements required by Item 7(a) of Form
8-K. Such statements will be filed by amendment as
soon as completed and available, but in no event
later than 60 days after the date from which this
Report is required to be filed.
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<S> <C> <C>
(b) Pro Forma Financial Information
It is impractical to file this Report with the pro
forma financial information required by Item 7(b) of
Form 8-K. Such information will be filed by amendment
as soon as completed and available, but in no event
later than 60 days after the date from which this
Report is required to be filed.
(c) Exhibits
Exhibit No. Description Page
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2 Agreement of Purchase and Sale of Assets, Incorporated
dated as of May 29, 1997, by and among by reference
Monterey, Legacy Homes, Ltd., Legacy to Form 8-
Enterprises, Inc. and John and Eleanor Landon K/A, dated
June 18, 1997
99 Private Securities Litigation Reform Act of
1995 Safe Harbour Compliance Statement for
Forward-Looking Statements
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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 hereunto duly authorized.
MONTEREY HOMES CORPORATION
Date: July 15, 1997 By: /s/ Larry W. Seay
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Larry W. Seay
Vice President of Finance and
Chief Financial Officer
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EXHIBIT 99
Private Securities Litigation Reform Act of 1995
Safe Harbor Compliance Statement for Forward-Looking Statements
In passing the Private Securities Litigation Reform Act of 1995 (the
"PSLRA"), Congress encouraged public companies to make "forward-looking
statements"1 by creating a safe-harbor to protect companies from securities law
liability in connection with forward-looking statements. Monterey Homes
Corporation (the "Company" or "Monterey") intends to qualify both its written
and oral forward-looking statements for protection under the PSLRA.
To qualify oral forward-looking statements for protection under the
PSLRA, a readily available written document must identify important factors that
could cause actual results to differ materially from those in the
forward-looking statements. Monterey provides the following information in
connection with its continuing effort to qualify forward-looking statements for
the safe harbor protection of the PSLRA.
Important factors currently known to management that could cause actual
results to differ materially from those in forward-looking statements include,
but are not limited to, the following: (i) changes in national and local
economic and other conditions, such as employment levels, availability of
mortgage financing, interest rates, consumer confidence, and housing demand;
(ii) risks inherent in homebuilding activities, including delays in construction
schedules, cost overruns, changes in government regulation, increases in real
estate taxes and other local government fees; (iii) changes in costs or
availability of land, materials, and labor; (iv) fluctuations in real estate
values; (v) the timing of home closings and land sales; (vi) the Company's
ability to continue to acquire additional land or options to acquire additional
land on acceptable terms; (vii) lack of geographic diversification of the
Company's operation, especially when (A) real estate analysts are predicting
that new home sales in the Phoenix, Arizona metropolitan area will slow
significantly during 1997 and 1998 and (B) new home sales in the Tucson, Arizona
metropolitan area are expected to remain relatively flat during 1997; (viii)
limited product diversification in that the Company derives most of its revenue
from sales of semi-custom luxury homes; (ix) the inability of the Company to
obtain sufficient capital on terms acceptable to the Company to fund its planned
capital and other expenditures; (x) changes in local, state and federal rules
and regulations governing real estate developing and homebuilding activities and
environmental matters, including "no growth" or "slow growth" initiatives,
building permit allocation ordinances and building moratoriums; (xi) expansion
by the Company into new markets in which the Company has no operating
experience; (xii) the inability of the Company to identify acquisition
candidates that will result in successful combinations; (xiii) the failure of
the Company to make acquisitions on terms acceptable to the Company; (xiv) the
loss of key employees of the Company, including William W. Cleverly, Steven J.
Hilton and John Landon; and (xv) factors that may affect the Company's mortgage
assets, including general conditions in the financial markets, changes in
prepayment rates and changes in interest rates.
Forward-looking statements express expectations of future events. All
forward-looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to these
inherent uncertainties, the investment community is urged not to place undue
reliance on forward-looking statements. In addition, Monterey
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1 "Forward-looking statements" can be identified by use of words
such as "expect," "believe," "estimate," "project,"
"forecast," "anticipate," "plan," and similar expressions.
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undertakes no obligation to update or revise forward-looking statements to
reflect changed assumptions, the occurrence of unanticipated events or changes
to projections over time.
