<PAGE>
Filed by Schuler Homes, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed to be filed pursuant to Rule 14a-12
of the Securities Act of 1934
Subject: Schuler Homes, Inc. and Schuler Holdings, Inc.
Commission File No. 333-48872
THE FOLLOWING IS A MEMORANDUM ISSUED TO THE EMPLOYEES OF SCHULER HOMES, INC.
ON NOVEMBER 1, 2000.
[Schuler Homes, Inc. Logo]
Date: November 1, 2000
To: All Employees
From: James K. Schuler, President/CEO
Re: Third Quarter Earnings Release
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WOW ! *** TERRIFIC ! *** HOORAY ! *** YOU DID IT AGAIN !!! ***
ANOTHER QUARTER OF GREAT EARNINGS
PRODUCED BY A TEAM COMMITTED TO EXCELLENCE AND RESULTS
Once again, revenues, closings, net income and backlog increased. Our goal for
this year is to close sales on over 3,000 homes with annual revenues in excess
of $600 million. With total closings, through the third quarter, of 2,325 homes
and $494 million in revenues, we are well on track to reach or exceed our
company-wide goals, thanks to everyone's hard work.
Please take a moment to review the attached earnings release for the third
quarter of 2000, and to congratulate yourselves and your fellow team players on
a super great job. We appreciate your continued exceptional performance,
commitment to excellence and focus on customer service.
The big, big news for the quarter was our announcement of the merger with
Western Pacific Housing, a major California homebuilder. We expect the merger to
be completed in January 2001. This merger would not have been possible without
all your past support and hard work.
Congratulations on your success. You're the best !! At Schuler Homes,
"Excellence is not a standard, excellence is a way of life." If you have any
questions, please feel free to contact Pam Jones or myself at (808) 521-5661.
<PAGE>
NEWS RELEASE
For Further Information:
James K. Schuler President & CEO (808) 521-5661
Pamela S. Jones Senior Vice President (808) 521-5661
of Finance & CFO
FOR RELEASE: Wednesday, November 1, 2000; 8:00 A.M. EASTERN
SCHULER HOMES, INC. ANNOUNCES FINANCIAL RESULTS FOR THE QUARTER ENDED SEPTEMBER
30, 2000
Honolulu, Hawaii -- Schuler Homes, Inc. (NASDAQ: SHLR) today reported financial
results for the quarter ended September 30, 2000:
2000 THIRD QUARTER FINANCIAL HIGHLIGHTS VS. 1999 THIRD QUARTER
- REVENUES INCREASED 25.0% TO $160.4 MILLION
- CLOSINGS INCREASED 5.8% TO 732 UNITS
- BACKLOG INCREASED 11.5% TO AN AGGREGATE SALES VALUE OF $241.8 MILLION
- NET INCOME (EXCLUDING NON-CASH CHARGE) INCREASED 70.8% TO $11.4 MILLION
Schuler Homes, Inc. reported sales of residential real estate (revenues) of
$160.4 million from the closings of 732 sales for the quarter ended September
30, 2000, a 25.0% increase from revenues of $128.3 million (692 closings) during
the third quarter of last year.
Operating income and net income during the third quarter of 2000, before the
non-cash charge for impairment of long-lived assets discussed below, were $20.6
million and $11.4 million ($0.53 per share-diluted), respectively, representing
increases of 85.6% and 70.8%, respectively, over operating income of $11.1
million and net income of $6.7 million during the third quarter of last year.
These results reflect the 2000 third quarter operating margin of 12.8%, a
significant improvement over last year's third quarter operating margin of 8.6%.
The expansion of the Company's operating margin is primarily due to sales price
increases in the Company's Colorado and Northern California divisions, as well
as higher gross margins in the Company's Hawaii and Washington divisions.
James K. Schuler, President, Chief Executive Officer and Chairman of the Board
of Schuler Homes, Inc. commented, "2000 is proving to be an exciting and
successful year for Schuler
<PAGE>
Homes. The majority of our divisions have experienced significant revenue growth
and margin expansion during the first nine months of 2000. The outlook for the
Company's December 2000 quarter with anticipated earnings per share of at least
$0.41 would result in calendar 2000 annual earnings per share of at least $1.91
(excluding the non-cash charge recognized this quarter), almost 50% higher than
the $1.28 per share earned in 1999."
On September 12, 2000, the Company announced it had agreed to merge with
privately-held Western Pacific Housing, effectively doubling the size of the
Company. As announced on September 12, 2000, in contemplation of the merger,
Schuler Homes plans to increase its product offerings in Hawaii by adding
projects in various areas on the islands of Oahu, Maui, Kauai and Hawaii, while
reducing its investment in longer term land parcels in areas where it has a
concentration of land. The change in strategy resulted in the recognition of a
non-cash charge for impairment of long-lived assets, pursuant to Financial
Accounting Standards Board Statement No. 121, of approximately $36.4 million
($22.2 million after-tax) during the quarter ended September 30, 2000, which
resulted in reported operating and net losses for the quarter.
Mr. Schuler added, "We are working closely with Western Pacific's management
team to close the merger by early 2001 and are more enthusiastic than ever about
the combination of our two companies. This combination will take the Company to
a new level in terms of scale, market penetration, financial resources and
management depth, merging two companies with proud traditions, proven track
records and profit margins which are among the highest in the industry. As a
well-diversified Western United States homebuilder, together we are positioned
well for future growth in some of the top residential markets in the nation."
For the first nine months of 2000, Schuler Homes' revenues increased 38.9% to
$494.3 million from $355.9 million in revenues during the first nine months of
1999. For the nine months ended September 30, 2000, before the non-cash charge
for impairment of long-lived assets, operating income increased to $58.0
million, or 79.0%, from $32.4 million for the nine months ended September 30,
1999, and net income increased to $32.0 million from $18.2 million, an increase
of 76.4%. The Company closed the sales of 2,325 units in the first nine months
of 2000 compared to 1,906 closings in the first nine months of 1999, an increase
of 22.0%.
In Colorado, the Company completely sold out of a number of its projects in the
first half of 2000 as a result of the strong rate of orders experienced earlier
this year. As of September 30, 2000, the Colorado division was offering homes
for sale from 9 active communities as compared to 13 a year ago. The Company has
raised its sales prices in Colorado to slow orders to match its construction
pace and is developing a number of new sites to increase the number of active
communities over the next year in this division from 9 to approximately 15 a
year from now. At September 30, 2000, the Company's backlog was 976 units with
an aggregate sales value of $241.8 million, which reflected the reduced number
of active communities in the Colorado division. The backlog at September 30,
1999 was 1,032 units with an aggregate sales value of $216.9 million.
The Company's cash and cash equivalents were approximately $3.2 million, total
debt was $253.5 million, and stockholders' equity totaled $211.1 million at
September 30, 2000. During the quarter ended September 30, 2000, earnings before
interest, taxes, depreciation, amortization, and the non-cash charge (EBITDA)
totaled $26.3 million compared to EBITDA of $17.5 million during the third
quarter of 1999. During the quarters ended September 30, 2000 and 1999, interest
incurred was $5.1 and $4.8 million, respectively.
A conference call is scheduled for today, November 1, 2000 at 3:00 PM EDT and
will be hosted by James K. Schuler, President and Chief Executive Officer and
Pamela S. Jones, Senior Vice
<PAGE>
President of Finance and Chief Financial Officer of Schuler Homes, Inc. The
call is open to all interested parties and will broadcast live over the
internet via www.streetevents.com. The dial-in number is 888.208.1812.
The international dial-in number is 719.457.2642. For those who are not
available to listen to the live broadcast, a replay will be available
shortly after the call on the Streetevents web site.
The Company has experienced, and expects to continue to experience, significant
variability in sales and net income. Numerous factors contribute to this
variability. The Company's historical financial performance is not necessarily a
meaningful indicator of future results and, in general, the Company's financial
results will vary from development to development, and from geographic area to
geographic area.
Schuler Homes Inc. designs, constructs, markets and sells single-family
residences, townhomes and condominiums primarily to entry-level and
first-time move-up buyers. The Company operates in seven geographic markets:
Colorado, Hawaii, Northern California, Southern California, Oregon, Washington
and Arizona.
Certain statements in this press release may be "forward-looking statements" as
defined by the Private Securities Litigation Reform Act of 1995. Such statements
involve risks, uncertainties and other factors that may cause actual results to
differ materially from those which are anticipated. Such factors include, but
are not limited to, changes in general economic conditions, the market for homes
generally and in areas where the company has developments, the availability and
cost of land suitable for residential development, materials prices, labor
costs, interest rates, consumer confidence, competition, environmental factors
and government regulations affecting the Company's operations. See the Company's
Annual Report on Form 10-K for the year ended December 31, 1999 for further
discussion of these and other risks and uncertainties applicable to the
Company's business.
In connection with the proposed merger of Schuler Homes and Western Pacific, a
Registration Statement has been filed with the Securities and Exchange
Commission, and a preliminary Proxy Statement/Prospectus is included in that
Registration Statement. Other materials relating to the merger also may be filed
with the Securities and Exchange Commission. INVESTORS ARE URGED TO READ THE
PRELIMINARY PROXY STATEMENT/PROSPECTUS, REGISTRATION STATEMENT AND OTHER
RELEVANT DOCUMENTS TO BE FILED WITH THE SEC, INCLUDING THE DEFINITIVE PROXY
STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE, BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION.
Materials filed with the SEC will be available electronically, without charge,
at an internet site maintained by the SEC. The address of that site is
http://www.sec.gov. In addition, the Proxy Statement/Prospectus filed with the
SEC by Schuler Homes will be mailed to their stockholders and may be obtained
without charge upon request to Schuler Homes, Inc., attention Pamela S. Jones,
(808) 521-5661.
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SCHULER HOMES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
2000 1999 2000 1999
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues:
Home and lot sales.............................. $ 160,363,000 $ 128,335,000 $ 488,079,000 $ 355,851,000
Land sales...................................... --- --- 6,204,000 ---
--------------- ---------------- --------------- ----------------
Total revenues............................... 160,363,000 128,335,000 494,283,000 355,851,000
Costs and expenses:
Home and lot sales.............................. 120,621,000 102,642,000 376,604,000 282,436,000
Land sales...................................... --- --- 4,155,000 ---
Selling and commissions......................... 10,205,000 8,101,000 29,265,000 22,623,000
General and administrative....................... 8,959,000 6,505,000 26,291,000 18,400,000
--------------- ---------------- --------------- ----------------
Total costs and expenses..................... 139,785,000 117,248,000 436,315,000 323,459,000
--------------- ---------------- --------------- ----------------
Operating income before non-cash charge for
impairment of long-lived assets................ 20,578,000 11,087,000 57,968,000 32,392,000
Non-cash charge for impairment of long-
lived assets (1)............................... 36,398,000 --- 36,398,000 ---
--------------- ---------------- --------------- ----------------
Operating income (loss)............................. (15,820,000) 11,087,000 21,570,000 32,392,000
Income (loss) from unconsolidated joint
ventures....................................... (14,000) 556,000 1,069,000 893,000
Minority interest in pretax income of
consolidated subsidiary......................... (261,000) (99,000) (777,000) (272,000)
Other income (expense).............................. (1,701,000) (625,000) (6,151,000) (3,492,000)
--------------- ---------------- --------------- ----------------
Income (loss) before provision (credit)
for income taxes............................... (17,796,000) 10,919,000 15,711,000 29,521,000
Provision (credit) for income taxes................. (7,034,000) 4,224,000 5,881,000 11,360,000
--------------- ---------------- --------------- ----------------
Net income (loss).................................. $ (10,762,000) $ 6,695,000 $ 9,830,000 $ 18,161,000
=============== ================ =============== ================
Net income (loss) per share:
Basic (2)........................................... $ (0.54) $ 0.34 $ 0.49 $ 0.91
=============== ================ =============== ================
Diluted (3)......................................... $ (0.54) $ 0.33 $ 0.49 $ 0.91
=============== ================ =============== ================
</TABLE>
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(1) Represents a non-cash after-tax charge of approximately $22.2 million,
pursuant to Financial Accounting Standards Board Statement No. 121. This is
due to Schuler Homes' plan, in contemplation of the merger, to increase its
product offerings in Hawaii by adding projects in various areas on the
islands of O'ahu, Maui, Kauai and Hawaii while reducing its investment in
longer term land parcels where it has a concentration of land.
(2) Basic net income per share was computed using weighted average number of
shares of 20,108,434 and 20,102,329 for the three and nine month periods
ended September 30, 2000, respectively, and 19,968,925 and 19,967,688 for
the three and nine month periods ended September 30, 1999, respectively.
(3) Diluted net income per share for the three month period ended September 30,
1999 was computed by adding to net income the interest expense of $842,000
(net of related income taxes), which is applicable to convertible
subordinated debentures, and dividing by 22,602,915, which represents the
weighted average number of shares assuming conversion of all convertible
subordinated debentures. The computation of diluted net income per share for
the three and nine months ended September 30, 2000 and the nine months ended
September 30, 1999, resulted in amounts greater than the basic net income
per share. Accordingly, the basic net income per share is also presented as
the diluted net income per share.
<PAGE>
<TABLE>
<CAPTION>
UNIT CLOSINGS:
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
----- ---- ---- ----
<S> <C> <C> <C> <C>
Consolidated:
Colorado 388 339 1,241 995
Hawaii (1) 68 71 232 229
Northern California 88 76 239 159
Oregon 71 85 220 243
Southern California 2 --- 2 ---
Washington (2) 92 71 247 199
----- ---- ---- ----
Total Consolidated 709 642 2,181 1,825
Unconsolidated Joint Ventures:
Colorado (3) --- 36 36 56
Hawaii (4) 9 5 32 16
Southern California (5) 14 9 76 9
----- ---- ---- ----
Total 732 692 2,325 1,906
===== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
BACKLOG (6):
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
Aggregate Aggregate
Number Sales Value Number Sales Value
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
Consolidated:
Colorado 474 $ 99,586,000 621 $ 114,218,000
Hawaii (1) 88 26,491,000 97 26,955,000
Northern California 164 47,592,000 114 30,280,000
Oregon 54 10,008,000 66 12,763,000
Southern California 56 14,535,000 --- ---
Washington (2) 104 34,985,000 77 21,662,000
------ ----------- ------ -----------
Total Consolidated 940 233,197,000 975 205,878,000
Unconsolidated Joint Ventures:
Colorado (3) --- --- 41 7,156,000
Hawaii (4) 21 2,595,000 6 820,000
Southern California (5) 15 5,962,000 10 3,063,000
------ ----------- ------ -----------
Total 976 $ 241,754,000 1,032 $ 216,917,000
====== =========== ====== ===========
</TABLE>
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(1) Includes homes and lots sold pursuant to the Company's "zero-down" sales
program in Hawaii.
(2) Reflects 100% of the information with respect to Stafford Homes, in which
the Company acquired a 49% interest in July 1997. In January 1999, the
Company increased its ownership interest in Stafford Homes to 89%.
(3) Reflects 100% of the information with respect to the Company's 50%-owned
joint venture in Colorado.
(4) Reflects 100% of the information with respect to the Company's two 50% owned
joint ventures in Hawaii.
(5) Reflects 100% of the information with respect to the Company's 24.5% to
49%-owned joint ventures in Southern California.
(6) Due to the ability of buyers to cancel their sales contracts, no assurances
can be given that units included in backlog will result in actual closings.
