-----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, ChMZYrjVoLJhQUh+3t+JWxXJObIv/i0lrs4+6l1pybwftG0UDcjGcOBvr7rTI80K GH25EzAkc45k0ObI268x0Q== 0000950134-02-002568.txt : 20020415 0000950134-02-002568.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950134-02-002568 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020221 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020325 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/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-14122 FILM NUMBER: 02584722 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/A 1 d95342ae8-ka.txt AMENDMENT NO. 1 TO FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A (AMENDMENT NO. 1) 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 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 statements of income reflecting the merger of D.R. Horton, Inc. and Schuler Homes, Inc. as of December 31, 2001 and for the quarter ended December 31, 2001 and the year ended September 30, 2001 are attached hereto as Exhibit 99.2 and incorporated herein by reference. (c) EXHIBITS. 23.2 Consent of Ernst & Young LLP, Los Angeles, California. 99.2 Unaudited pro forma combined condensed balance sheet and statements of income of D.R. Horton, Inc. and Schuler Homes, Inc. as of December 31, 2001 and for the quarter ended December 31, 2001 and the year ended September 30, 2001. 2 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: March 25, 2002 D. R. Horton, Inc. By: /s/ SAMUEL R. FULLER ---------------------------------------- Samuel R. Fuller Executive Vice President, Treasurer, and Chief Financial Officer 3 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 23.2 Consent of Ernst & Young LLP, Los Angeles, California. 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 and for the year ended September 30, 2001.
4 EX-23.2 3 d95342aex23-2.txt CONSENT OF ERNST & YOUNG LLP, LOS ANGELES, CA 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/A (Amendment No. 1), 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 March 22, 2002 EX-99.2 4 d95342aex99-2.txt UNAUDITED PRO-FORMA - BALANCE SHEET & STATEMENTS 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, and for the year ended September 30, 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. The unaudited pro forma combined condensed statement of income for the year ended September 30, 2001 assumes the merger occurred on October 1, 2000. 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 historical financial information about D.R. Horton and Schuler for the year ended September 30, 2001 has been derived from the D.R. Horton and Schuler (and its predecessor) audited and unaudited financial statements. The unaudited pro forma combined condensed financial statements should be read in conjunction with the accompanying notes and the historical consolidated financial statements of D.R. Horton and Schuler. 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. 1 D.R. HORTON, INC. 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 65,628 345,162B(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 -- -- 265,583B(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 =========== =========== =========== ===========
2 D.R. HORTON, INC. 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 =========== =========== =========== ===========
3 D.R. HORTON, INC. UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2001
COMBINED PRO FORMA PRO FORMA D.R. HORTON SCHULER (E) ADJUSTMENTS COMBINED ----------- ----------- ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE DATA) HOMEBUILDING: Revenues .............................................. $ 4,383,552 $ 1,540,818 $ -- $ 5,924,370 Cost of sales ......................................... 3,527,142 1,207,165 1,294 B(3) 4,735,601 ----------- ----------- ----------- ----------- Gross profit .......................................... 856,410 333,653 (1,294) 1,188,769 Selling, general & administrative expense ............. 432,013 159,450 2,847 B(2) 592,095 (1,500) B(4) (715) B(6) Interest expense ...................................... 8,809 6,856 302 B(3) 15,967 Other expense ......................................... 34,747 13,985 -- 48,732 ----------- ----------- ----------- ----------- 380,841 153,362 (2,228) 531,975 ----------- ----------- ----------- ----------- FINANCIAL SERVICES: Revenues .............................................. 71,962 -- -- 71,962 Selling, general & administrative expense ............. 47,387 -- -- 47,387 Interest expense ...................................... 5,288 -- -- 5,288 Other (income) ........................................ (7,669) -- -- (7,669) ----------- ----------- ----------- ----------- 26,956 -- -- 26,956 ----------- ----------- ----------- ----------- Income before income taxes and cumulative effect of change in accounting principle ..................... 407,797 153,362 (2,228) 558,931 Income taxes .......................................... 152,924 61,204 (844) B(5) 213,284 ----------- ----------- ----------- ----------- Income before cumulative effect of change in accounting principle .................................. $ 254,873 $ 92,158 $ (1,384) $ 345,647 =========== =========== =========== =========== Income before cumulative effect of change in accounting principle per common share: Basic ......................................... $ 3.37 $ 2.28 -- $ 3.61 Diluted ....................................... $ 3.31 2.18 -- $ 3.56 =========== =========== =========== =========== Cash dividends per common share ....................... $ 0.19 -- -- D $ 0.19 =========== =========== =========== =========== Weighted average number of common shares outstanding: Basic ......................................... 75,677 40,399 20,083 C 95,760 Diluted ....................................... 76,953 43,174 20,204 C 97,157 =========== =========== =========== ===========
4 D.R. HORTON, INC. NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AND UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS 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 statements of income reflect 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, and for the year ended September 30, 2001, assuming that the merger had taken place on October 1, 2000. 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. 5 D.R. HORTON, INC. NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AND UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME - (CONTINUED) NOTE B. PRO FORMA ADJUSTMENTS The following adjustments are included in the unaudited pro forma combined condensed balance sheet and statements of income as of and for the three months ended December 31, 2001, and for the year ended September 30, 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 ==========
6 D.R. HORTON, INC. NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AND UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS 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 three months and twelve months following the respective assumed dates of the merger is $835,000 and $2,847,000, respectively. 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 and twelve-month impact of additional interest costs assumed to have been 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. Most of such assumed additional interest costs were assumed to have been capitalized in inventory and a portion thereof subsequently amortized to cost of sales. Those assumed additional interest costs that were not capitalized in inventory were expensed. (4) Represents the estimated savings in compensation expense that would have occurred during the three months and twelve months following the respective assumed dates of 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% for the three months ended December 31, 2001, and 37.9% for the year ended September 30, 2001. (6) Represents the elimination of the goodwill amortization expense included in the Combined Pro Forma Schuler statement of income for the year ended September 30, 2001, as all of Schuler's prior goodwill balances will be eliminated in the merger with D.R. Horton. 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 ======
7 D.R. HORTON, INC. NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AND UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME - (CONTINUED) The pro forma combined basic net income per share for the three months ended December 31, 2001 and for the year ended September 30, 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 and the year ended September 30, 2001, assuming the issuance of approximately 20,083,000 shares of D.R. Horton common stock on October 1, 2001 for the three months ending December 31, 2001, and on October 1, 2000, for the year ended September 30, 2001. The pro forma combined diluted net income per share for the three months ended December 31, 2001 and the year ended September 30, 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, and year ended September 30, 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 for the three months ended December 31, 2001, and 121,000 shares for the year ended September 30, 2001. 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. NOTE E. COMBINED PRO FORMA SCHULER Schuler was formed in April 2001 when Schuler Residential combined with Western Pacific. Schuler Residential is the predecessor of Schuler. Therefore, the Schuler statement of income for the year ended September 30, 2001 is presented on a pro forma combined basis to include the combined operations of Schuler, Schuler Residential and Western Pacific for the year ended September 30, 2001 assuming that the combination had taken place on October 1, 2000. Following are the historical statements of income of Schuler, Schuler Residential and Western Pacific and the pro forma adjustments which comprise the combined pro forma Schuler statement of income for the year ended September 30, 2001. 8 D.R. HORTON, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AND UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME - (CONTINUED)
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, SIX MONTHS ENDED MARCH 31, 2001 2001 2001 ------------------------------------------------------------- ------------- ------------- PRO FORMA PRO FORMA SCHULER PRO FORMA COMBINED COMBINED RESIDENTIAL WESTERN PACIFIC ADJUSTMENTS SCHULER SCHULER SCHULER ----------- --------------- ----------- --------- ------------- ------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Revenues....................... $ 298,807 $ 543,190 $ -- $ 841,997 $ 698,821 $ 1,540,818 Cost of sales.................. 226,305 424,088 -- 650,393 556,772 1,207,165 ----------- --------------- ----------- --------- ------------- ------------- Gross profit................... 72,502 119,102 -- 191,604 142,049 333,653 Selling, general & administrative expense....... 35,417 48,943 (4,207)(a) 80,153 79,297 159,450 Interest expense............... 3,316 -- -- 3,316 3,540 6,856 Other expense.................. 704 14,003 -- 14,707 (722) 13,985 ----------- --------------- ----------- --------- ------------- ------------- Income before income taxes........................ 33,065 56,156 4,207 93,428 59,934 153,362 Income taxes................... 12,785 -- 24,580 (b) 37,365 23,839 61,204 ----------- --------------- ----------- --------- ------------- ------------- Net income..................... $ 20,280 $ 56,156 $ (20,373) $ 56,063 $ 36,095 $ 92,158 =========== =============== =========== ========= ============= ============= Net income per common share: Basic.................... $ 1.01 N/A -- $ 1.39 $ 0.89 $ 2.28 Diluted.................. $ 0.93 N/A -- $ 1.33 $ 0.86 $ 2.18 =========== =============== =========== ========= ============= ============= Cash dividends per common share................ -- N/A -- -- -- -- =========== =============== =========== ========= ============= ============= Weighted average number of common shares outstanding: Basic.................... 20,114 N/A 20,166 (c) 40,280 40,517 40,399 Diluted.................. 22,972 N/A 20,166 (c) 43,138 43,209 43,174 =========== =============== =========== ========= ============= =============
(a) Represents the exclusion of a non-cash charge for compensation expense recognized in conjunction with equity interests granted to Western Pacific executives related to the combination with Schuler Residential. This charge is a nonrecurring item and is not indicative of future operating results. (b) Represents the pro forma effect on the combined provision for income taxes resulting from the operations of Western Pacific and Schuler Residential for the six months ended March 31, 2001 and the other pro forma adjustment, based on an effective tax rate of 40.7%. Prior to its combination with Schuler Residential, Western Pacific was operated through a series of partnerships and was not subject to taxation at the entity level. (c) Represents the issuance of 20,166,000 Schuler shares of Class B common stock in the Western Pacific/Schuler Residential combination, assuming such shares were outstanding beginning on October 1, 2000. 9 -----END PRIVACY-ENHANCED MESSAGE-----