-----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, FT4HhrC3IcbzF5p95y1NTAewkixIZZaJd6FNQL8Eka8cpXV6y8x70HKGrtFQlnuo 5poO0L/vSX3hOFSOjkKJfQ== 0000950134-02-001525.txt : 20020414 0000950134-02-001525.hdr.sgml : 20020414 ACCESSION NUMBER: 0000950134-02-001525 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20020221 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HORTON D R INC /DE/ CENTRAL INDEX KEY: 0000882184 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 752386963 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-14122 FILM NUMBER: 02555590 BUSINESS ADDRESS: STREET 1: 1901 ASCENSION BLVD STREET 2: STE 100 CITY: ARLINGTON STATE: TX ZIP: 76006 BUSINESS PHONE: 8178568200 MAIL ADDRESS: STREET 1: 1901 ASCENSION BLVD STREET 2: SUITE 100 CITY: ARLINGTON STATE: TX ZIP: 76006 8-K 1 d94437e8-k.txt FORM 8-K 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 FEBRUARY 21, 2002 ----------------- (Date of Report--Date of Earliest Event Reported) D.R. HORTON, INC. ----------------- (Exact Name of Registrant as Specified in its Charter) DELAWARE 1-14122 75-2386963 -------- ------- ---------- (State or Other Jurisdiction (Commission File Number) (IRS Employer Identification No.) of Incorporation)
1901 ASCENSION BOULEVARD, SUITE 100, ARLINGTON, TEXAS 76006 ----------------------------------------------------------- (Address of Principal Executive Offices) (817) 856-8200 -------------- (Registrant's Telephone Number, Including Area Code) ----------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On February 21, 2002, the stockholders of D.R. Horton, Inc. and Schuler Homes, Inc., each a Delaware corporation, approved the merger of Schuler into D.R. Horton, with D.R. Horton as the surviving corporation, and the merger became effective. Under the terms of the merger agreement, based on the average closing price of D.R. Horton common stock of $36.766 for the 15 consecutive trading days ended, and including, February 15, 2002, Schuler stockholders who did not elect to receive the merger consideration in all cash or all stock will receive the base merger consideration consisting of a combination of $4.09 in cash and 0.487 shares of D.R. Horton common stock for each share of Schuler common stock. Schuler stockholders who elected to receive the merger consideration in all stock will receive 0.598 shares of D.R. Horton common stock in exchange for each share of Schuler common stock. Since both the total amount of cash and the total number of shares of D.R. Horton common stock were fixed, the merger consideration payable to Schuler stockholders who elected to receive all cash was prorated. As a result of proration, such Schuler stockholders who elected to receive the merger consideration in all cash will receive $10.523 in cash and 0.312 shares of D.R. Horton common stock for each share of Schuler common stock. The aggregate merger consideration paid by D.R. Horton consisted of approximately 20,083,000 shares of D.R. Horton common stock and $168,668,000 in cash. In addition, D.R. Horton assumed approximately $731,000,000 in Schuler debt in the merger. The cash portion of the merger consideration was funded through existing cash and borrowing under D.R. Horton's revolving credit facility. On the effective date of the merger, as contemplated by the merger agreement, James K. Schuler was elected to the D.R. Horton board of directors. In addition, pursuant to the terms of the merger agreement, D.R. Horton will issue to Schuler employees options to purchase approximately 533,000 shares of D.R. Horton common stock that replace their Schuler stock options, which were terminated pursuant to the Schuler stock option plans. The exercise price, term and vesting schedule of such D.R. Horton stock options will be comparable to the corresponding terms of the Schuler stock options replaced. In addition, Schuler stock options held by a Schuler executive officer became fully vested and exercisable for approximately 11,000 shares of D.R. Horton common stock upon the closing of the merger. Other information concerning the merger has been previously reported in, and is described in, the Joint Proxy Statement/Prospectus, dated January 17, 2002, which is part of D.R. Horton's Registration Statement on Form S-4 (Registration No. 333-73888), and D.R. Horton's Current Reports on Form 8-K, dated January 22, 2002 and February 15, 2002. Schuler designs, builds and markets single-family residences, townhomes, and condominiums primarily to entry-level, first-time and, to a lesser extent, second-time move-up buyers in western suburban markets. Prior to the merger, the company was one of the top fifteen homebuilders in the country and was among the top five homebuilders in California, Colorado, Hawaii, Washington and Oregon with a growing presence in Arizona. D.R. Horton currently intends to operate the business of Schuler as a separate region of D.R. Horton and to build and sell homes under the Schuler Homes, Melody Homes, Western Pacific Housing and Stafford Homes names. The effectiveness of the merger was publicly announced by means of a news release attached hereto as Exhibit 99.1. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. The balance sheet of Schuler Homes, Inc. as of March 31, 2001, the consolidated financial statements of Schuler Residential, Inc. as of March 31, 2001 and 2000 and for the years ended March 31, 2001, December 31, 1999 and 1998, and the three month period ended March 31, 2000, the combined financial statements of Western Pacific Housing as of March 31, 2001 and 2000 and for the years ended March 31, 2001, 2000 and 1999, and the reports of Ernst & Young LLP, independent auditors, included therein, are incorporated herein by reference to the Annual Report of Schuler Homes, Inc. on Form 10-K (SEC File No. 000-32461) for the fiscal year ended March 31, 2001. The unaudited consolidated financial statements of Schuler Homes, Inc. as of June 30, 2001, September 30, 2001 and December 31, 2001 are incorporated herein by reference to the Quarterly Reports of Schuler Homes, Inc. on Form 10-Q for the quarters ended June 30, 2001, September 30, 2001 and December 31, 2001. (b) PRO FORMA FINANCIAL INFORMATION. The unaudited pro forma combined condensed balance sheet and statement of income reflecting the assumed merger of D.R. Horton, Inc. and Schuler Homes, Inc. as of September 30, 2001 and for the year ended September 30, 2001 are incorporated herein by reference to Amendment No. 3 to D.R. Horton's Registration Statement on Form S-4 (Registration No. 333-73888), dated January 16, 2002. The unaudited pro forma combined condensed balance sheet and statement of income reflecting the assumed merger of D.R. Horton, Inc. and Schuler Homes, Inc. as of December 31, 2001 and for the quarter ended December 31, 2001 are attached hereto as Exhibit 99.2 and incorporated herein by reference. (c) EXHIBITS. 2.1 Agreement and Plan of Merger dated as of October 22, 2001, as amended on November 8, 2001, by and between D.R. Horton, Inc. and Schuler Homes, Inc. (conformed as amended and incorporated by reference to Annex I to the Joint Proxy Statement/Prospectus contained in the Registration Statement on Form S-4 (Registration No. 333-73888), dated January 16, 2002). D.R. Horton agrees to furnish supplementally a copy of omitted schedules to the SEC upon request. 8.1 Tax opinion of Gibson, Dunn & Crutcher LLP, Dallas, Texas 8.2 Tax opinion of Gibson, Dunn & Crutcher LLP, Los Angeles, California 23.2 Consent of Ernst & Young LLP, Los Angeles, California. 99.1 Joint Press Release dated February 21, 2002. 99.2 Unaudited pro forma combined condensed balance sheet and statement of income of D.R. Horton, Inc. and Schuler Homes, Inc. as of December 31, 2001 and for the quarter ended December 31, 2001. 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 hereunto duly authorized. Date: February 21, 2002 D. R. Horton, Inc. By: /s/ SAMUEL R. FULLER ------------------------------------- Samuel R. Fuller Executive Vice President, Treasurer, and Chief Financial Officer EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 2.1 Agreement and Plan of Merger dated as of October 22, 2001, as amended on November 8, 2001, by and between D.R. Horton, Inc. and Schuler Homes, Inc. (conformed as amended and incorporated by reference to Annex I to the Joint Proxy Statement/Prospectus contained in the Registration Statement on Form S-4 (Registration No. 333-73888), dated January 16, 2002). D.R. Horton agrees to furnish supplementally a copy of omitted schedules to the SEC upon request. 8.1* Tax opinion of Gibson, Dunn & Crutcher LLP, Dallas, Texas 8.2* Tax opinion of Gibson, Dunn & Crutcher LLP, Los Angeles, California 23.2* Consent of Ernst & Young LLP, Los Angeles, California. 99.1* Joint Press Release dated February 21, 2002. 99.2* Unaudited pro forma combined condensed balance sheet and statement of income of D.R. Horton, Inc. and Schuler Homes, Inc. as of December 31, 2001 and for the quarter ended December 31, 2001.
- ---------- * Filed herewith EX-8.1 3 d94437ex8-1.txt TAX OPINION OF GIBSON, DUNN & CRUTCHER LLP EXHIBIT 8.1 [Letterhead of Gibson, Dunn & Crutcher LLP, Dallas, Texas] February 21, 2002 Direct Dial Client No. (214) 698-3100 C 39334-00015 D.R. Horton, Inc. 1901 Ascension Blvd., Suite 100 Arlington, Texas 76006 Re: Acquisition of Schuler Homes, Inc. Ladies and Gentlemen: You have requested our opinion regarding certain federal income tax consequences of the proposed merger (the "Merger") of Schuler Homes, Inc., a Delaware corporation ("Schuler"), with and into D.R. Horton, Inc., a Delaware corporation ("DHI"). In formulating our opinion, we have reviewed such documents as we deemed necessary or appropriate, including the Agreement and Plan of Merger, dated as of October 22, 2001, by and between DHI and Schuler, as amended as of November 8, 2001 (the "Merger Agreement"), and the Joint Proxy Statement/Prospectus of DHI and Schuler that is included in the Registration Statement on Form S-4, as declared effective by the U.S. Securities and Exchange Commission on January 17, 2002 (the "Prospectus"). Our opinion set forth below assumes (i) the accuracy of the statements and facts concerning the Merger set forth in the Merger Agreement and the Prospectus; (ii) that the Merger will be consummated in the manner contemplated by, and in accordance with, the terms set forth in the Merger Agreement and the Prospectus; and (iii) the accuracy of (a) the representations made to us by DHI, which are set forth in a Certificate dated February 21, 2002, and (b) the representations made to us by Schuler, which are set forth in a Certificate dated February 21, 2002. Based upon the foregoing and in reliance thereon, and subject to the qualifications, exceptions, assumptions and limitations herein contained, we are of the opinion that: 1. The Merger will be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). 2. DHI and Schuler will each be treated as a party to the reorganization within the meaning of Section 368(b) of the Code. Furthermore, the discussion under the caption "United States Federal Income Tax Consequences of the Merger" in the Prospectus accurately describes the foregoing opinion and the material federal income tax consequences of the Merger and, to the extent the statements in that discussion constitute matters of law or legal conclusions, they are our opinion. We express no opinion concerning any tax consequences of the Merger other than those specifically set forth or referred to herein. Our opinion is based on current provisions of the Code, Treasury Regulations promulgated thereunder, published pronouncements of the Internal Revenue Service, and case law, any of which may be changed at any time with retroactive effect. Any change in applicable law or the facts and circumstances surrounding the Merger, or any inaccuracy in the statements, facts, assumptions, and representations on which we relied, may affect the continuing validity of the opinion set forth herein. We assume no responsibility to inform you of any such changes or inaccuracy that may occur or come to our attention. This opinion has been furnished solely in connection with the transactions described herein and may not be relied upon for any other purpose without our specific, prior, written consent. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement, to references to this opinion in the Registration Statement, and to the use of our name under the caption "United States Federal Income Tax Consequences of the Merger." In giving this consent, we do not admit that we are included in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder. Very truly yours, GIBSON, DUNN & CRUTCHER LLP EX-8.2 4 d94437ex8-2.txt TAX OPINION OF GIBSON, DUNN & CRUTCHER LLP EXHIBIT 8.2 [Letterhead of Gibson, Dunn & Crutcher LLP, Los Angeles, California] February 21, 2002 Direct Dial Client No. (213) 229-7000 C 89576-00008 Schuler Homes, Inc. 400 Continental Blvd., Suite 100 El Segundo, California 90245 Re: Acquisition of Schuler Homes, Inc. by D.R. Horton, Inc. Ladies and Gentlemen: You have requested our opinion regarding certain federal income tax consequences of the proposed merger (the "Merger") of Schuler Homes, Inc., a Delaware corporation ("Schuler"), with and into D.R. Horton, Inc., a Delaware corporation ("DHI"). In formulating our opinion, we have reviewed such documents as we deemed necessary or appropriate, including the Agreement and Plan of Merger, dated as of October 22, 2001, by and between DHI and Schuler, as amended as of November 8, 2001 (the "Merger Agreement"), and the Joint Proxy Statement/Prospectus of DHI and Schuler that is included in the Registration Statement on Form S-4, as declared effective by the U.S. Securities and Exchange Commission on January 17, 2002 (the "Prospectus"). Our opinion set forth below assumes (i) the accuracy of the statements and facts concerning the Merger set forth in the Merger Agreement and the Prospectus; (ii) that the Merger will be consummated in the manner contemplated by, and in accordance with, the terms set forth in the Merger Agreement and the Prospectus; and (iii) the accuracy of (a) the representations made to us by Schuler, which are set forth in a Certificate dated February 21, 2002, and (b) the representations made to us by DHI, which are set forth in a Certificate dated February 21, 2002. Based upon the foregoing and in reliance thereon, and subject to the qualifications, exceptions, assumptions and limitations herein contained, we are of the opinion that: 3. The Merger will be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). 4. DHI and Schuler will each be treated as a party to the reorganization within the meaning of Section 368(b) of the Code. Furthermore, the discussion under the caption "United States Federal Income Tax Consequences of the Merger" in the Prospectus accurately describes the foregoing opinion and the material federal income tax consequences of the Merger and, to the extent the statements in that discussion constitute matters of law or legal conclusions, they are our opinion. We express no opinion concerning any tax consequences of the Merger other than those specifically set forth herein. Our opinion is based on current provisions of the Code, Treasury Regulations promulgated thereunder, published pronouncements of the Internal Revenue Service, and case law, any of which may be changed at any time with retroactive effect. Any change in applicable law or the facts and circumstances surrounding the Merger, or any inaccuracy in the statements, facts, assumptions, and representations on which we relied, may affect the continuing validity of the opinion set forth herein. We assume no responsibility to inform you of any such changes or inaccuracy that may occur or come to our attention. This opinion has been furnished solely in connection with the transactions described herein and may not be relied upon for any other purpose without our specific, prior, written consent. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement, to references to this opinion in the Registration Statement, and to the use of our name under the caption "United States Federal Income Tax Consequences of the Merger." In giving this consent, we do not admit that we are included in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder. Very truly yours, GIBSON, DUNN & CRUTCHER LLP SLT/ESB EX-23.2 5 d94437ex23-2.txt CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the D.R. Horton, Inc. Current Report on Form 8-K, dated as of February 21, 2002, of our report dated June 27, 2001 for Schuler Homes, Inc., our report dated May 16, 2001 for Schuler Residential, Inc. and our report dated April 30, 2001 for Western Pacific Housing, each included in Schuler Homes, Inc.'s Annual Report (Form 10-K), filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP Los Angeles, California February 19, 2002 EX-99.1 6 d94437ex99-1.txt JOINT PRESS RELEASE DATED FEBRUARY 21, 2002 EXHIBIT 99.1 PRESS RELEASE FOR MORE INFORMATION CONTACT: Sam Fuller, CFO, or Stacey H. Dwyer, EVP ADDRESS: 1901 Ascension Boulevard, Suite 100, Arlington, Texas 76006 PHONE: 817-856-8200 DATE: February 21, 2002 FOR IMMEDIATE RELEASE D.R. HORTON/SCHULER HOMES MERGER COMPLETED ARLINGTON, TEXAS -- D.R. Horton, Inc. (NYSE: DHI) and Schuler Homes, Inc. (NASDAQ: SHLR) Thursday, February 21, 2002 announced that the stockholders of D.R. Horton and Schuler approved the merger of Schuler into D.R. Horton and the merger became effective. Under the terms of the merger agreement, based on the average closing price of D.R. Horton common stock of $36.766 for the 15 consecutive trading days ended, and including, February 15, 2002, Schuler stockholders who did not elect to receive the merger consideration in all cash or all stock will receive the base merger consideration consisting of a combination of $4.09 in cash and 0.487 shares of D.R. Horton common stock for each share of Schuler common stock. Schuler stockholders who elected to receive the merger consideration in all stock will receive 0.598 shares of D.R. Horton common stock in exchange for each share of Schuler common stock. Since both the total amount of cash and the total number of shares of D.R. Horton common stock were fixed, the merger consideration payable to Schuler stockholders who elected to receive all cash was prorated. As a result of proration, such Schuler stockholders who elected to receive the merger consideration in all cash will receive $10.523 in cash and 0.312 shares of D.R. Horton common stock for each share of Schuler common stock. The aggregate merger consideration paid by D.R. Horton consisted of approximately 20,083,000 shares of D.R. Horton common stock and $168,668,000 in cash. In addition, D.R. Horton assumed approximately $731,000,000 in Schuler debt in the merger. The cash portion of the merger consideration was funded through existing cash and borrowing under D.R. Horton's revolving credit facility. As a result of the merger, former Schuler employees will receive options to purchase approximately 533,000 shares of D.R. Horton common stock to replace their Schuler stock options. The terms of the replacement options will be substantially comparable to the replaced Schuler options. Exchange instructions and letters of transmittal will be mailed shortly to all Schuler stockholders who did not make an election to receive all D.R. Horton common stock or all cash. Donald R. Horton, Chairman of the Board of D.R. Horton, said: "We are proud to welcome Jim Schuler and all the members of the Schuler family of builders to the D.R. Horton family. Since we announced the merger in October, D.R. Horton and Schuler have been laying a foundation for the integration of the companies. Both companies have a history of successfully integrating acquisitions, and we expect the combination to proceed smoothly as we work toward our goal of becoming the largest and most profitable builder in the United States. Schuler strengthens D.R. Horton's current market position while expanding its geographic presence and product offerings in key Western markets. We believe the combined companies will be the "bellwether" of the homebuilding industry. Founded in 1978, D.R. Horton, Inc. is engaged in the construction and sale of high quality homes designed principally for the entry-level and first time move-up markets. D.R. Horton currently builds and sells homes under the D.R. Horton, Arappco, Cambridge, Continental, Dietz-Crane, Dobson, Emerald, Mareli, Milburn, Regency, SGS Communities, Torrey and Trimark names in 20 states and 38 markets, with a geographic presence in the Midwest, Mid-Atlantic, Southeast, Southwest and Western regions of the United States. The Company also provides mortgage financing and title services for homebuyers through its subsidiaries CH Mortgage, DRH Title Company, Principal Title, Travis Title Company, Metro Title Company, Century Title Company and Custom Title Company. Schuler designs, builds and markets single-family residences, townhomes, and condominiums primarily to entry-level, first-time and, to a lesser extent, second-time move-up buyers in western suburban markets. Prior to the merger, Schuler was one of the top fifteen homebuilders in the country and was among the top five homebuilders in California, Colorado, Hawaii, Washington and Oregon with a growing presence in Arizona. D.R. Horton currently intends to operate the business of Schuler as a separate region of D.R. Horton and to build and sell homes under the Schuler Homes, Melody Homes, Western Pacific Housing and Stafford Homes names. Portions of this document may constitute "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995. Although D.R. Horton and Schuler believe any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. All forward-looking statements are based upon information available to D.R. Horton and Schuler on the date this release was issued. Neither D.R. Horton nor Schuler undertakes any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Factors that may cause the actual results to be materially different from the future results expressed by the forward-looking statements include, but are not limited to: changes in general economic, real estate and business conditions; changes in interest rates and the availability of mortgage financing; governmental regulations and environmental matters; the combined companies' substantial leverage; competitive conditions within the industry; the availability of capital and the combined companies' ability to integrate their operations, successfully effect the cost savings, operating efficiencies and revenue enhancements that are believed available and otherwise to successfully effect their other growth strategies. Additional information about issues that could lead to material changes in performance is contained in D.R. Horton's and Schuler's annual reports on Form 10-K and most recent quarterly reports on Form 10-Q, which are filed with the SEC. EX-99.2 7 d94437ex99-2.txt UNAUDITED PRO FORMA COMBINED BALANCE SHEET. EXHIBIT 99.2 UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS On February 21, 2002, Schuler Homes, Inc. merged with and into D.R. Horton, Inc., with D.R. Horton as the surviving corporation. The following unaudited pro forma combined condensed financial statements give effect to the merger. The merger will be accounted for as a purchase of Schuler by D.R. Horton. The unaudited pro forma combined condensed financial statements reflect the financial position of D.R. Horton and Schuler as of December 31, 2001, and the operations of D.R. Horton and Schuler for the three months ended December 31, 2001. The unaudited pro forma combined condensed balance sheet assumes the merger occurred on the date of the balance sheet. The unaudited pro forma combined condensed statement of income for the three months ended December 31, 2001 assumes the merger occurred on October 1, 2001. This financial information about D.R. Horton and Schuler as of and for the three months ended December 31, 2001 has been derived from the D.R. Horton and Schuler unaudited financial statements contained in the Quarterly Report of D.R. Horton, Inc. on Form 10-Q, filed February 14, 2002 and in the Quarterly Report of Schuler Homes, Inc. on Form 10-Q filed February 14, 2002. The unaudited pro forma combined condensed financial statements should be read in conjunction with the accompanying notes, the historical consolidated financial statements of D.R. Horton and Schuler and the Joint Proxy Statement/Prospectus of D.R. Horton and Schuler, dated January 17, 2002, filed with the Securities and Exchange Commission, including the unaudited pro forma combined condensed balance sheet and statement of income of D.R. Horton, Inc. and Schuler Homes, Inc. as of September 30, 2001 and for the year ended September 30, 2001 included therein. The total merger consideration payable consisted of approximately 20,083,000 shares of D.R. Horton common stock and $168,668,000 in cash. For purchase accounting purposes, the measurement date of the transaction is deemed to be December 11, 2001, and the D.R. Horton shares issued in the merger are valued at $30.93 per share, which represents the average closing price for a period of 10 trading days beginning December 4, 2001 and ending December 17, 2001. The unaudited pro forma combined condensed financial statements have been included for comparative purposes only. As further discussed in the accompanying notes, the unaudited pro forma combined condensed financial statements do not purport to show what the financial position or operating results would have been if the merger had been consummated as of the dates indicated and should not be construed as representative of a future financial position or operating results. UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AS OF DECEMBER 31, 2001
PRO FORMA D.R. HORTON SCHULER ADJUSTMENTS COMBINED ------------ ------------ ------------- ------------ (IN THOUSANDS) ASSETS HOMEBUILDING: Cash ........................................................ $ 22,076 $ 11,526 $ -- $ 33,602 Inventories ................................................. 2,980,084 1,032,119 -- 4,012,203 Earnest money deposits and other assets ..................... 263,019 123,758 -- 386,777 Excess of cost over net assets acquired (net) ............... 136,765 65,628 345,162 B(1) 547,555 ------------ ------------ ------------- ------------ 3,401,944 1,233,031 345,162 4,980,137 ------------ ------------ ------------- ------------ FINANCIAL SERVICES: Cash ........................................................ 9,904 -- -- 9,904 Mortgage loans held for sale ................................ 233,858 -- -- 233,858 Other assets ................................................ 15,100 -- -- 15,100 ------------ ------------ ------------- ------------ 258,862 -- -- 258,862 ------------ ------------ ------------- ------------ $ 3,660,806 $ 1,233,031 $ 345,162 $ 5,238,999 ============ ============ ============= ============ LIABILITIES HOMEBUILDING: Accounts payable and other liabilities ...................... $ 465,617 $ 175,356 $ -- $ 640,973 Notes payable ............................................... 1,699,899 594,952 (81,915)B(1) 2,478,519 -- -- 265,583 B(1) -- ------------ ------------ ------------- ------------ 2,165,516 770,308 183,668 3,119,492 ------------ ------------ ------------- ------------ FINANCIAL SERVICES: Notes payable ............................................... 154,786 -- -- 154,786 Other liabilities ........................................... 7,849 -- -- 7,849 ------------ ------------ ------------- ------------ 162,635 -- -- 162,635 ------------ ------------ ------------- ------------ 2,328,151 770,308 183,668 3,282,127 ------------ ------------ ------------- ------------ Minority interests .......................................... 9,319 -- -- 9,319 ------------ ------------ ------------- ------------ STOCKHOLDERS' EQUITY Preferred stock ............................................. -- -- -- -- Common stock ................................................ 771 -- 201 B(1) 972 Class A common stock ........................................ -- 22 (22)B(1) -- Class B common stock ........................................ -- 19 (19)B(1) -- Unearned compensation ....................................... -- -- (7,512)B(2) (7,512) Additional capital .......................................... 708,346 255,858 (255,858)B(1) 1,339,874 620,966 B(1) 10,562 B(2) Retained earnings ........................................... 614,219 206,824 (206,824)B(1) 614,219 ------------ ------------ ------------- ------------ 1,323,336 462,723 161,494 1,947,553 ------------ ------------ ------------- ------------ $ 3,660,806 $ 1,233,031 $ 345,162 $ 5,238,999 ============ ============ ============= ============
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED DECEMBER 31, 2001
PRO FORMA D.R. HORTON SCHULER ADJUSTMENTS COMBINED ------------ ------------ ------------ ------------ (IN THOUSANDS, EXCEPT PER SHARE DATA) HOMEBUILDING: Revenues ................................... $ 1,134,968 $ 415,371 $ -- $ 1,550,339 Cost of sales .............................. 906,805 325,644 364 B(3) 1,232,813 ------------ ------------ ------------ ------------ Gross profit ............................... 228,163 89,727 (364) 317,526 Selling, general & administrative expense .. 118,417 46,368 835 B(2) 165,245 (375) B(4) Interest expense ........................... 1,196 521 -- 1,717 Other expense (income) ..................... 2,572 (1,909) -- 663 ------------ ------------ ------------ ------------ 105,978 44,747 (824) 149,901 ------------ ------------ ------------ ------------ FINANCIAL SERVICES: Revenues ................................... 24,922 -- -- 24,922 Selling, general & administrative expense .. 15,123 -- -- 15,123 Interest expense ........................... 1,336 -- -- 1,336 Other (income) ............................. (3,044) -- -- (3,044) ------------ ------------ ------------ ------------ 11,507 -- -- 11,507 ------------ ------------ ------------ ------------ Income before income taxes ................. 117,485 44,747 (824) 161,408 Income taxes ............................... 44,057 17,610 (313) B(5) 61,354 ------------ ------------ ------------ ------------ Net income ................................. $ 73,428 $ 27,137 $ (511) $ 100,054 ============ ============ ============ ============ Net income per common share: Basic .............................. $ 0.95 $ 0.67 -- $ 1.03 Diluted ............................ $ 0.94 $ 0.66 -- $ 1.02 ============ ============ ============ ============ Cash dividends per common share ............ $ 0.05 -- -- D $ 0.05 ============ ============ ============ ============ Weighted average number of common shares outstanding: Basic .............................. 76,961 40,790 20,083 C 97,044 Diluted ............................ 78,337 41,325 20,186 C 98,523 ============ ============ ============ ============
D.R. HORTON, INC. NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AND UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME NOTE A. BASIS OF PRESENTATION The unaudited pro forma combined condensed balance sheet reflects the combined financial position of D.R. Horton and Schuler as of December 31, 2001, on a pro forma basis assuming that the merger had taken place on December 31, 2001. The unaudited pro forma combined condensed statement of income reflects the combined results of operations of D.R. Horton and Schuler for the three months ended December 31, 2001, assuming that the merger had taken place on October 1, 2001. Under accounting principles generally accepted in the United States, the merger of Schuler into D.R. Horton will be accounted for under the purchase method of accounting. Accordingly, the purchase price will be allocated to the Schuler assets acquired and liabilities assumed based on their respective fair values, with the excess to be allocated to goodwill. The valuations and other studies required to determine the fair value of the Schuler assets acquired and liabilities assumed have not been performed and accordingly, the related adjustments reflected in the unaudited pro forma combined condensed financial statements are preliminary and subject to further revisions and adjustments. The adjustments are described in Note B. The adjustment to reflect the preliminary purchase price allocation, described in Note B (1), uses the book value of the Schuler assets acquired and liabilities assumed. This is a preliminary assumption, which will be adjusted based on the valuation analysis to be performed after the completion of the merger. Changes to the purchase price allocation as a result of such analysis will be recorded as corresponding increases or decreases in goodwill. On October 1, 2001, D.R. Horton adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets." In accordance with SFAS No. 142, goodwill will no longer be amortized but will be subject to periodic review for impairment, and as such, no pro forma adjustment for amortization of the goodwill resulting from the merger is presented in the unaudited pro forma combined condensed balance sheet and statement of income. Other identifiable intangibles are assumed to be insignificant. Under the terms of Schuler's senior and senior subordinated notes, of which $500 million principal amount is outstanding at December 31, 2001, the merger represents a "change of control" that provides the holders of such notes the right to require D.R. Horton to repurchase the Schuler notes at a purchase price in cash equal to 101% of the principal amount of the notes. D.R. Horton does not anticipate it will be required to repurchase a significant amount of the Schuler notes. Accordingly, no adjustment is included in the unaudited pro forma combined condensed financial statements to reflect the repurchase of any of the Schuler notes. D.R. HORTON, INC. NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AND UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME - (CONTINUED) NOTE B. PRO FORMA ADJUSTMENTS The following adjustments are included in the unaudited pro forma combined condensed balance sheet and statement of income as of and for the three months ended December 31, 2001. (1) Represents the preliminary purchase allocation, which reflects the cash and equity merger consideration paid by D.R. Horton, the elimination of the December 31, 2001 Schuler equity balance, and the recording of goodwill resulting from the transaction, as summarized below:
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS ---------- Cash Consideration ...................................................... $ 168,668 --------- Equity Consideration: Total number of D.R. Horton shares issued ............................. 20,083 D.R. Horton per share value at purchase accounting measurement date ... x$ 30.93 --------- Total equity consideration ............................................ 621,167 --------- Total cash and equity merger consideration .............................. 789,835 Estimated transaction costs related to merger ........................... 15,000 D.R. Horton stock options to be issued in connection with the merger (see Note B(2) below)..................................................... 3,050 --------- Total merger costs ...................................................... 807,885 Less Schuler equity balance at December 31, 2001 ........................ (462,723) --------- Increase in excess of purchase price over net assets acquired (goodwill) 345,162 Schuler goodwill balance at December 31, 2001 ........................... 65,628 --------- Total goodwill resulting from the merger ................................ $ 410,790 ========= Uses and Sources of Cash for Merger Consideration and Merger Costs: Cash consideration for Schuler equity ................................... $ 168,668 Pay off December 31, 2001 balance of Schuler revolving credit facility .. 81,915 Merger costs ............................................................ 15,000 --------- Total uses of cash ...................................................... $ 265,583 ========= Additional draws on D.R. Horton revolving credit facility ............... $ 265,583 =========
D.R. HORTON, INC. NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AND UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME - (CONTINUED) (2) Represents the estimated effect of the issuance of options to purchase approximately 533,000 shares of D.R. Horton common stock to Schuler employees to replace outstanding Schuler stock options. The fair value of the D.R. Horton stock options to be issued ($10,562,000) was estimated using the Black-Scholes option pricing model and is recorded as additional capital, the intrinsic value related to unvested options to be issued ($7,512,000) is recorded as unearned compensation and the remainder ($3,050,000) is recorded as a merger cost, which increases goodwill. The unearned compensation will be amortized over the remaining vesting period of the stock options. The estimated compensation expense related thereto for the first three months following the merger is $835,000. The following assumptions were used in the Black-Scholes model to determine the fair value of the D.R. Horton stock options to be issued in the merger: Risk-free interest rate: ....................................................4.1% Expected volatility of D.R. Horton Stock: ..................................49.5% Weighted average expected dividend yield: ...................................1.4% Weighted average expected life (in years): ..................................4.4
(3) Represents the pro forma three-month impact of additional interest costs assumed to be incurred to finance the cash portion of the merger consideration and other merger costs, at a 3.5% marginal interest rate, which approximates D.R. Horton's current floating rate on its revolving line of credit. (4) Represents the estimated savings in compensation expense that would have occurred during the first three months following the merger, related to D.R. Horton employment agreements with two members of Schuler management, as described in the Joint Proxy Statement/Prospectus of D.R. Horton and Schuler, dated January 17, 2002, filed with the Securities and Exchange Commission. (5) Represents the net effect on income tax expense of the pro forma adjustments, calculated using the pro forma combined effective income tax rate of 38%. NOTE C. PRO FORMA NUMBER OF SHARES OUTSTANDING AND NET INCOME PER SHARE The following table provides the pro forma number of shares issued in connection with the merger, and the pro forma number of shares of D.R. Horton common stock outstanding after the merger:
SHARES IN THOUSANDS Number of D.R. Horton common stock shares issued in the merger.......................... 20,083 Number of shares of D.R. Horton common stock outstanding as of December 31, 2001........ 77,093 ------ Number of shares of D.R. Horton common stock outstanding after the merger............... 97,176 ======
The pro forma combined basic net income per share for the three months ended December 31, 2001 is based on the weighted average number of shares of D.R. Horton common stock outstanding for the three months ended December 31, 2001, assuming the issuance of approximately 20,083,000 shares of D.R. Horton common stock on October 1, 2001. D.R. HORTON, INC. NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AND UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME - (CONTINUED) The pro forma combined diluted net income per share for the three months ended December 31, 2001 is based on the weighted average number of shares of D.R. Horton common stock outstanding during the three months ended December 31, 2001, adjusted for the effects of dilutive securities outstanding, plus the approximately 20,083,000 shares of D.R. Horton common stock issued in the merger and the dilutive effect of D.R. Horton stock options to be issued in the merger. Options to purchase approximately 533,000 shares of D.R. Horton common stock will be issued in the merger, which results in an incremental dilutive effect of 103,000 shares. NOTE D. DIVIDENDS The pro forma combined cash dividends per common share are not necessarily indicative of dividends to be paid to holders of D.R. Horton common stock in future periods. Future dividends will be determined by the D.R. Horton board of directors based on the earnings and financial condition of D.R. Horton and its subsidiaries, as well as other factors. -----END PRIVACY-ENHANCED MESSAGE-----