UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
Amendment No. 1
to
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
--------------------------------
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
------------------------------
NONE
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
The Current Report on Form 8-K/A1 amends the Current Report on Form 8-K
filed by Monterey Homes Corporation on July 1, 1997 solely to add the financial
statements of the business acquired by Item 7(a) and the pro forma financial
information required by Item 7(b).
<TABLE>
<CAPTION>
Page
----
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
<S> <C>
(a) Financial Statements of the business acquired. 3
The required financial statements of the business acquired are attached.
(b) Pro Forma Financial Information
The required pro forma financial information of the business is attached. 12
(c) Exhibit
23.1 Consent of Ernst & Young LLP
</TABLE>
2
<PAGE>
Report of Independent Auditors
The Board of Directors
Legacy Homes, Ltd.
We have audited the accompanying balance sheets of Legacy Homes, Ltd., as of
December 31, 1995 and 1996, and the related statements of income, changes in
partner's capital and cash flows for each of the three years in the period ended
December 31, 1996. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Legacy Homes, Ltd. at December
31, 1995 and 1996, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Dallas, Texas
April 15,1997, except for Note 6, as
to which the date is July 1, 1997
3
<PAGE>
Legacy Homes, Ltd.
Balance Sheets
<TABLE>
<CAPTION>
December 31
1995 1996
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents ........................................... $ 3,710,690 $ 3,201,007
Due from title companies ............................................ 285,527 27,400
Note receivable ..................................................... -- 503,825
Other receivables ................................................... 199,962 453,938
Inventories:
Finished homes and construction in progress..................... 9,657,959 13,991,188
Developed residential lots ..................................... 1,306,216 3,169,411
Land under development ......................................... 1,650,702 469,467
Model homes .................................................... 2,051,640 2,273,000
------------- -------------
14,666,517 19,903,066
Prepaid expenses and other .......................................... 15,307 18,460
Furniture and equipment, net ........................................ 301,860 486,683
------------- -------------
Total assets ........................................................ $ 19,179,863 $ 24,594,379
============= =============
Liabilities and partners' capital
Trade payables ...................................................... $ 2,621,098 $ 2,969,136
Due to affiliate for land under development ......................... 1,277,647 --
Accrued expenses .................................................... 1,626,987 1,673,224
Customer deposits ................................................... 659,409 720,546
Notes payable ....................................................... -- 4,458,378
Notes payable - related parties ..................................... 3,459,350 3,380,000
Partners' capital ................................................... 9,535,372 11,393,095
------------- -------------
Total liabilities and partners' capital ............................. $ 19,179,863 $ 24,594,379
============= =============
</TABLE>
See accompanying notes
4
<PAGE>
Legacy Homes, Ltd.
Statements of Income
<TABLE>
<CAPTION>
Year ended December 31
1994 1995 1996
-----------------------------------------------
<S> <C> <C> <C>
Revenues............................................. $ 55,982,719 $ 61,554,098 $ 85,114,000
Cost of sales........................................ 45,153,087 49,219,011 67,715,026
-------------- -------------- --------------
10,829,632 12,335,087 17,398,974
Selling, general and administrative expenses......... 5,814,800 6,592,151 8,550,038
-------------- -------------- --------------
5,014,832 5,742,936 8,848,936
Other:
Interest income.................................. 207,189 201,513 106,722
Interest expense................................. (167,377) (241,519) (354,952)
-------------- -------------- --------------
39,812 (40,006) (248,230)
-------------- -------------- --------------
Net income........................................... $ 5,054,644 $ 5,702,930 $ 8,600,706
============== ============== ==============
</TABLE>
Statements of Changes in Partners' Capital
<TABLE>
<S> <C>
Balance at December 31, 1993.......................................... $ 7,621,438
Net income................................................... 5,054,644
Partners' distribution....................................... (2,699,504)
--------------
Balance at December 31, 1994.......................................... 9,976,578
Net income................................................... 5,702,930
Partners' distributions...................................... (6,144,136)
--------------
Balance at December 31, 1995.......................................... 9,535,372
Net income................................................... 8,600,706
Partners' distributions...................................... (6,742,983)
--------------
Balance at December 31, 1996.......................................... $ 11,393,095
==============
</TABLE>
See accompanying notes
5
<PAGE>
Legacy Homes, Ltd.
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Operating activities
Net income.......................................... $ 5,054,644 $ 5,702,930 $ 8,600,706
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation................................ 152,128 195,064 246,998
Loss on disposal of fixed assets............ - - 8,633
Changes in operating assets and
liabilities:
Due from title companies............ (446,387) 160,860 258,127
Other receivables................... 192,775 (138,929) (253,976)
Inventories......................... 1,049,300 (3,536,577) (5,236,549)
Prepaid expenses and other.......... (152,460) 181,122 (3,153)
Trade payables...................... (259,626) 907,103 348,038
Due to affiliate.................... - 1,277,647 (1,277,647)
Accrued expenses.................... 92,055 863,195 46,237
Customer deposits................... (157,761) 38,687 61,137
--------------- -------------- --------------
Net cash provided by operating activities........... 5,524,668 5,651,102 2,798,551
Investing activities
Purchase of furniture and equipment................. (96,597) (191,124) (440,454)
Advanced on note receivable......................... - - (605,000)
Payments received on note receivable................ - - 101,175
--------------- -------------- --------------
Net cash used in investing activities............... (96,597) (191,124) (944,279)
Financing activities
Proceeds from notes payable......................... 30,917,209 30,829,124 54,939,532
Payments on notes payable........................... (32,021,429) (37,468,213) (50,481,154)
Proceeds from notes payable - related parties....... 1,360,140 3,380,000 -
Payments on notes payable - related parties......... (1,254,668) (255,040) (79,350)
Partners' distributions............................. (2,699,504) (6,144,136) (6,742,983)
---------------- --------------- ---------------
Net cash used in financing activities............... (3,698,252) (9,658,265) (2,363,955)
---------------- --------------- ---------------
Decrease in cash and cash equivalents............... 1,729,819 (4,198,287) (509,683)
Cash and cash equivalents at beginning of year...... 6,179,158 7,908,977 3,710,690
--------------- -------------- --------------
Cash and cash equivalents at end of year............ $ 7,908,977 $ 3,710,690 $ 3,201,007
=============== ============== ==============
</TABLE>
See accompanying notes
6
<PAGE>
Legacy Homes, Ltd.
Notes to Financial Statements
December 31, 1996
1. Summary of Significant Accounting Policies
Organization
The Partnership is primarily engaged in the construction and sale of residential
housing in Dallas/Fort Worth and Austin. The Partnership designs, builds and
sells single-family homes on finished lots which it purchases ready for home
construction or which it develops.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized at the time of the closing of a sale, when title to and
possession of the property transfers to the buyer.
Cash Equivalents
The Partnership considers all highly liquid investments with an initial maturity
of three months or less when purchased to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (specific identification method) or
net realizable value. In addition to direct land acquisition and housing
construction costs, inventory costs include interest and real estate taxes,
which are capitalized in inventory during the development and construction
periods.
Furniture and Equipment
Furniture and equipment are stated on the basis of cost. Depreciation is
computed by the straight-line method based on estimated useful lives.
Accumulated depreciation at December 31, 1995 and 1996 was $708,235 and
$448,252, respectively.
Income Taxes
The Partnership is not subject to federal income taxes as its income is reported
on the partners' income tax returns. Accordingly, no provision for federal
income tax liability has been recorded in the financial statements.
7
<PAGE>
Legacy Homes, Ltd.
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Advertising
Advertising costs are expensed when incurred. Advertising expense was $419,092,
$518,710 and $616,935 in 1994, 1995 and 1996, respectively.
2. Notes Payable
Notes payable at December 31, 1996 consisted of interim construction loans
payable to financial institutions under a master note agreement which was
amended in 1996. The Partnership may borrow up to $30 million at prime, and the
obligation is secured by inventory and guaranteed by the general partner. The
master note agreement contains various covenants, including net worth
requirements, debt to home completion values, liabilities to net worth ratios
and restrictions on the payment of distributions. The master note agreement has
a one year term, due on July 31, 1997, but is reviewed annually for renewal.
Interest costs for the year ended December 31, 1994, 1995 and 1996 are:
1994 1995 1996
--------------- --------------- ---------------
Capitalized $ 581,161 $ 518,577 $ 608,375
Not capitalized 167,377 241,519 354,952
--------------- --------------- ---------------
Total incurred $ 748,538 $ 760,096 $ 963,327
=============== =============== ===============
Paid $ 718,820 $ 817,275 $ 920,829
=============== =============== ===============
3. Related Party Transaction
The Partnership has notes payable to related parties. These loans bear interest
at prime and are due on demand or at various dates during 1997. Interest on
these loans amounted to $55,716, $47,100 and $285,870 for 1994, 1995 and 1996,
respectively.
During 1995, the Partnership purchased land for approximately $1,600,000 from a
related party. During 1996, the Partnership developed and sold 56 lots from this
land. There were 58 lots in ending inventory at December 31, 1996 related to the
land purchased in 1995.
The Partnership leased its administrative office space from an affiliate under a
short term rental agreement for approximately $20,000, $27,000 and $34,000
during 1994, 1995 and 1996, respectively.
8
<PAGE>
Legacy Homes, Ltd.
Notes to Financial Statements (continued)
4. Profit Sharing Plan
The Partnership has a 401(k) savings plan for all eligible employees. Under the
plan, the Partnership matches employees' voluntary contributions up to a maximum
of 1.8% of each participant's earnings. The Partnership has the option to make
discretionary contributions to the plan. Amounts charged to expense for the plan
approximated $15,000, $24,000 and $34,000 during 1994, 1995 and 1996,
respectively.
5. Lot Options
To ensure the future availability of various developed lots in the ordinary
course of business, the Partnership enters into option agreements to purchase
developed lots.
6. Disposition of Assets
On May 29, 1997, the Partnership signed a definitive agreement to sell
substantially all of its assets to Monterey Homes Corporation. The transaction
became effective as of July 1, 1997.
9
<PAGE>
The following Unaudited Financial Data presents the results of operations of
Legacy Homes, Ltd. for the six months ended June 30, 1997 and the financial
position as of June 30, 1997.
Legacy Homes, Ltd.
Balance Sheet
(Unaudited)
June 30, 1997
<TABLE>
<S> <C>
Cash and cash equivalents....................................... $ 1,275,168
Due from title companies........................................ 1,088,645
Advances to partners............................................ 650,000
Other receivables............................................... 206,623
Real estate under development................................... 18,727,774
Option deposits................................................. 812,281
Other assets.................................................... 567,369
-------------------
$ 23,327,860
===================
Accounts payable and accrued liabilities........................ $ 4,950,103
Home sale deposits.............................................. 941,582
Notes payable................................................... 17,345,628
-------------------
Total liabilities...................................... 23,237,313
-------------------
Partners' capital............................................... 90,547
-------------------
$ 23,327,860
===================
</TABLE>
Legacy Homes, Ltd.
Income Statement
(Unaudited)
Six Months Ended June 30, 1997
<TABLE>
<S> <C>
Revenues $ 39,727,991
Cost of Sales.................................................... 32,958,779
-------------------
Gross Profit............................................ 6,769,212
Selling, general and administrative.............................. 1,511,996
-------------------
Operating income........................................ 5,257,216
Other income..................................................... 332,836
-------------------
Net income $ 5,590,052
===================
</TABLE>
10
<PAGE>
Legacy Homes, Ltd.
Statement of Cash Flows
(Unaudited)
Six Months Ended June 30, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income.................................................... $ 5,590,052
Depreciation and amortization................................. 126,353
Increase in due from title companies.......................... (1,061,245)
Decrease in other receivables................................. 247,315
Decrease in real estate under development..................... 1,175,292
Increase in option deposits................................... (812,281)
Increase in other assets...................................... (188,579)
Increase in accounts payable and accrued liabilities.......... 307,743
Increase in home sale deposits................................ 221,036
----------------
Net cash provided by operating activities............ 5,605,686
----------------
Cash flows from investing activities:
Advances to partners.......................................... (650,000)
Payment received on note receivable........................... 503,825
----------------
Net cash used in investing activities................ (146,175)
----------------
Cash flows from financing activities:
Borrowings.................................................... 30,769,151
Repayment of borrowings....................................... (21,261,901)
Partner capital distributions................................. (16,892,600)
----------------
Net cash used in financing activities.............. (7,385,350)
----------------
Net decrease in cash and cash equivalents.............................. (1,925,839)
Cash and cash equivalents at beginning of period....................... 3,201,007
----------------
Cash and cash equivalents at end of period............................. $ 1,275,168
================
</TABLE>
11
<PAGE>
Unaudited Pro Forma Condensed Combined Balance Sheet
June 30, 1997
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Legacy
--------------------------------
Legacy Mortgage Monterey Pro Forma
------ -------- -------- ---------
Ltd Co. Combined Historical Combined Adjustments Combined
--- --- -------- ---------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Cash and cash equivalents ....... $ 1,275 $ 32 $ 1,307 $ 7,263 $ 8,570 $ (1,553) (a) $ 7,017
Real estate under development ... 1,946 94 2,040 45,107 47,147 -- 47,147
Real estate loan & other ........
receivables ............... 18,728 -- 18,728 1,571 20,299 -- 20,299
Option deposits ................. 812 -- 812 1,319 2,131 -- 2,131
Residual interests .............. -- 1 -- 3,856 3,856 -- 3,856
Other assets .................... 567 -- 568 800 1,368 (350) (a) 1,018
Deferred tax asset .............. -- -- -- 6,783 6,783 3,621 10,404
Goodwill ........................ -- -- -- 1,719 1,719 1,519 (b) 3,238
-------- -------- -------- -------- -------- -------- --------
Total Assets $ 23,328 127 $ 23,455 $ 68,418 $ 91,873 $ 3,237 $ 95,110
======== ======== ======== ======== ======== ======== ========
Liabilities and Stockholders'
Equity
Accounts payable & accruals ..... $ 4,950 $ 20 $ 4,970 $ 7,344 $ 12,314 $ -- $ 12,314
Home sale deposits .............. 942 34 976 7,697 8,673 -- 8,673
Notes payable ................... 17,346 -- 17,346 23,839 41,185 -- 41,185
-------- -------- -------- -------- -------- -------- --------
Total Liabilities 23,238 54 23,292 38,880 62,172 -- 62,172
-------- -------- -------- -------- -------- -------- --------
Stockholders Equity
Common stock .................... -- -- -- 46 46 7 (c) 53
Additional paid-in capital ...... 90 73 163 92,990 93,153 3,230 (c) 96,383
Retained earnings (loss) ........ -- -- -- (63,088) (63,088) -- (63,088)
Treasury stock .................. -- -- -- (410) (410) -- (410)
-------- -------- -------- -------- -------- -------- --------
Total Equity 90 73 163 29,538 29,701 3,237 32,938
-------- -------- -------- -------- -------- -------- --------
Total Liabilities &
Stockholders Equity $ 23,328 $ 127 $ 23,455 $ 68,418 $ 91,873 $ 3,237 $ 95,110
======== ======== ======== ======== ======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Data
12
<PAGE>
Unaudited Pro Forma Condensed Combined Income Statement
For the Year Ended December 31, 1996
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Pro Forma Historical Pro Forma Pro Forma
Monterey Legacy Combined Adjustments Combined
-------- ------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Home and land sales........... $ 87,754 $ 85,114 $ 172,868 $ -- $ 172,868
Cost of home and land sales... 75,099 67,715 142,814 1,513 (d) 144,327
----------- ----------- ----------- ------------ -----------
Gross margin.................. 12,655 17,399 30,054 (1,513) 28,541
Selling, general and admin.
expense.................... 7,777 8,550 16,327 191 (e) 16,895
275 (g)
102 (f)
Operating income 4,878 8,849 13,727 (2,081) 11,646
Other income, net............. 1,998 (248) 1,750 -- 1,750
----------- ----------- ----------- ----------- -----------
Income before income taxes.... 6,876 8,601 15,477 (2,081) 13,396
Income tax expense............ 756 756 115 (h) 871
----------- ----------- ----------- ----------- -----------
Net Income ................. $ 6,120 $ 8,601 $ 14,721 $ (2,196) $ 12,525
=========== =========== =========== =========== ===========
Net income per share: $ 2.27
===========
Weighted average common shares
outstanding 5,520,000
===========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Data
13
<PAGE>
Unaudited Pro Forma Condensed Combined Income Statement
For the Six Months Ended June 30,1997
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Actual Historical Pro Forma Pro Forma
Monterey Legacy Combined Adjustments Combined
-------- ------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Home and land sales........... $ 37,117 $ 39,728 $ 76,845 $ -- $ 76,845
Cost of home and land sales... 31,829 32,959 64,788 757 (d) 65,545
----------- ----------- ----------- ------------ -----------
Gross margin.................. 5,288 6,769 12,057 (757) 11,300
Selling, general and admin.
expense.................... 4,274 1,512 5,786 70 (e) 6,017
138 (g)
23 (g)
Operating income 1,014 5,257 6,271 (988) 5,283
Other income, net............. 1,456 333 1,789 0 1,789
----------- ----------- ----------- ----------- -----------
Income before income taxes.... 2,470 5,590 8,060 (988) 7,072
Income tax expense............ 224 224 236 (h) 460
----------- ----------- ----------- ----------- -----------
Net Income ................. $ 2,246 $ 5,590 $ 7,836 $ (1,224) $ 6,612
=========== ============ =========== ============ ===========
Net income per share: $ $1.20
===========
Weighted average common shares
outstanding 5,520,000
===========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Data
14
<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 acquisition of the assets of Legacy Homes,
Ltd. and Legacy Enterprises, Inc. by a subsidiary of Monterey Homes Corporation
(the "Legacy Acquisition") and the merger of Monterey Mortgage Acquisition Corp.
into Texas Home Mortgage Corporation (the "Merger") occurred on January 1, 1996.
The Legacy Acquisition and the Merger shall be collectively referred to as the
"Legacy Transaction". The Unaudited Pro Forma Condensed Combined Balance Sheet
is presented assuming the combination occurred on June 30, 1997.
The combination is recorded as a purchase in accordance with generally
accepted accounting principles and, accordingly, the assets and liabilities of
the acquired entity (Legacy) are presented at their estimated fair values as of
that date.
Pursuant to the Employment Agreement with John Landon, he will be
granted options to purchase 166,667 shares of Monterey Homes Common Stock at an
exercise price of $5.25, which will vest over the three years following the
acquisition and expire June 30, 2001. The value of the options are considered
compensation expense for the combined entity which will be recognized over the
three-year vesting period.
The historical financial information for Monterey Homes Corporation
("Monterey") is derived from the audited consolidated financial statements of
Monterey as of and for the year ended December 31, 1996, and the unaudited
consolidated financial statements of Monterey as of and for the six months ended
June 30, 1997. The historical financial information for Legacy is derived from
the audited financial statements of Legacy Homes, Ltd. and Texas Home Mortgage
Corporation, as of and for the year ended December 31, 1996, and the unaudited
financial statements of the respective entities as of and for the six months
ended June 30,1997. Legacy Enterprises, Inc., had no assets, liabilities or
operations for the relevant time period.
The pro forma information does not purport to present the financial
position or results of operations of Monterey and Legacy had the Legacy
Transaction, the distribution to the partners of Legacy Homes, Ltd. that reduced
its book value, and other events assumed therein occurred on the dates
specified, nor is it necessarily indicative of the results of operations of
Monterey and Legacy, as they may be in the future or as they may have been had
the Legacy Transaction and other such events been consummated on the dates
shown. The Unaudited Pro Forma Condensed Combined Financial Data should be read
in conjunction with the Agreement of Purchase and Sale of Assets dated May 29,
1997 between Monterey, Legacy and John and Eleanor Landon, and the audited and
unaudited historical financial statements and notes thereto of Monterey and
Legacy included elsewhere in this Form 8-K/A.
2). Pro Forma Condensed Combined Balance Sheet Adjustments at June 30,
1997.
a) To record payment for Legacy Homes, transfer of cash and
$350,000 in transaction costs.
b) To record goodwill and the increase in the deferred tax asset
associated with the Legacy Transaction.
15
<PAGE>
c) To record the effects of issuance of Monterey Common Stock to
Legacy and additional paid-in capital resulting from the
Legacy Transaction.
3). Pro Forma Condensed Combined Income Statement Adjustments for the
Year Ended December 31, 1996 and the Six Month Period Ended June
30, 1997.
d) To record interest expense related to an additional $17.8M
borrowing incurred in connection with the Legacy Transaction.
e) To record amortization of goodwill, which is being amortized
over 20 years.
f) To record compensation expense incurred in connection with the
issuance of options to purchase 166,667 shares of Monterey
Common Stock, to John Landon. Compensation expense is
recognized over the three year graded vesting period.
g) To adjust for additional compensation expense expected to be
incurred as specified in the Employment Agreement with Mr.
Landon.
h) To record the amount of income taxes, which has been
estimated at 6.5% of income before income taxes.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on behalf by the
undersigned, hereunto duly authorized.
MONTEREY HOMES CORPORATION
September 11, 1997
By: /s/ Larry W. Seay
-------------------------------
Larry W. Seay
Vice President of Finance &
Chief Financial Officer
18
Consent of Independent Auditors
We consent to the use of our report dated April 15, 1997, except for note 6, as
to which the date is July 1, 1997, with respect to the financial statements of
Legacy Homes, Ltd., incorporated by reference in Registration Statement (Form
S-8 No. 33-38330) and related Prospectus of Monterey Homes Corporation (formerly
Homeplex Mortgage Investment Corporation) filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Dallas, Texas
September 8, 1997
