SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 27, 1997
------------------
D.R. HORTON, INC.
-----------------
(Exact name of registrant as specified in its charter)
Delaware 1-14112 75-2386963
-------- ------- ----------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1901 Ascension Blvd., Suite 100, Arlington, Texas 76006
------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (817) 856-8200
--------------
------------------------------------------------------------
(Former name or former address, if changed since last report.)
Item 2. Acquisition or Disposition of Assets
On February 27, 1997, D.R. Horton, Inc. (the "Company"), consummated the
acquisition of the equity interests of the entities comprising The Torrey Group
of Companies ("Torrey"). The Torrey Acquisition was effected pursuant to a Stock
Purchase Agreement among the Company and Ghassan M. Saab, the Ghassan M. Saab
Trust, Burl T. Horton, Linda G. Sloman and Archie D. Rivers (collectively, the
"Sellers"). Under the terms of the Stock Purchase Agreement, the Company paid at
closing consideration consisting of $28.5 million in cash and 844,444 shares of
Common Stock, and agreed to a contingent payment estimated at $1 million, for
all the outstanding capital stock of the entities comprising Torrey. The Company
also assumed and refinanced approximately $89 million of indebtedness, other
obligations and minority interests. The consideration for the Torrey Acquisition
was determined through arms-length negotiations between the Company and the
Sellers. Funds for the Torrey Acquisition were obtained from the Company's
existing credit facilities led by Bank America and Nations Bank.
Torrey has been the leading builder of single-family homes in the large and
growing Atlanta, Georgia market for the past three years as reported in Builder
Magazine. In addition to building homes in the Atlanta market, Torrey has
homebuilding operations in Charlotte and Raleigh/Durham, North Carolina, and
Greenville, South Carolina. The Company intends to continue the business
operations of Torrey through D.R. Horton, Inc.-Torrey, a wholly-owned
subsidiary of the Company.
Item 7. Financial Statements and Exhibits. Page
(a) Financial Statements of Business Acquired
Combined Balance Sheets - December 31, 1996. 3-4
Combined Statements of Income - Year Ended
December 31, 1996 5
Combined Statements of Equities - Year Ended
December 31, 1996 6-11
Combined Statement of Cash Flows - Year
Ended December 31, 1996 12
Notes to Combined Financial Statements 13-24
(b) Pro Forma Financial Information
Pro Forma Consolidated Financial Statements 25
Pro Forma Consolidated Balance Sheet -
December 31, 1996 26
Pro Forma Consolidated Statement of Income - Year
Ended September 30, 1996 27
Pro Forma Consolidated Statement of Income - Three
Months Ended December 31, 1996 28
Notes to Pro Forma Consolidated Financial Statements 29-30
(c) Exhibits.
Exhibit 2.1 Stock Purchase Agreement dated as of January 29, 1997
among D.R. Horton, Inc., Burl T. Horton, Ghassan
M. Saab and the Ghassan M. Saab Trust
Exhibit 2.2 First Amendment to Stock Purchase Agreement as of
February 26, 1997 by and among D.R. Horton, Inc.,
Ghassan M. Saab, Ghassan M. Saab Trust, Burl T. Horton,
Linda G. Sloman, and Archie D. Rivers.
Exhibit 23.1 Consent of Independent Auditors
Exhibit 28.1 Report of Whittington, McLemore, Land, Davis & White
P.C., Certified Public Accountants
2
S, G, TORREY ATLANTA, LTD, AND AFFILIATES
COMBINED BALANCE SHEET
December 31, 1996
ASSETS
Current Assets:
Cash $ 4,902,674
Accounts receivable - other (Note 6) 581,799
Inventories (Notes 2 & 5) 94,183,874
Prepaid expenses 658,638
Earnest money 662,072
-------
Total Current Assets $ 100,989,057
-------------
Property and Equipment:
Office furniture and equipment $ 1,618,374
Autos and trucks 560,120
Tools and equipment 646,655
Model home furnishings 1,066,049
Building and land (Note 5) 3,110,787
---------
Total Property and Equipment $ 7,001,985
Less Accumulated Depreciation (2,053,060)
----------
Net Property and Equipment $ 4,948,925
-------------
Other Assets:
Deposits $ 93,124
Land 200,000
-------
Total Other Assets $ 293,124
-------------
Total Assets $ 106,231,106
=============
(continued)
The accompanying notes are an integral part of these financial statements.
3
S G TORREY ATLANTA, LTD AND AFFILIATES
COMBINED BALANCE SHEET
December 31, 1996
LIABILITIES
Current Liabilities:
Short-term debt (Note 3) $ 54,297,297
Current portion of long-term debt 12,114,923
Accounts payable 11,449,494
Retainage withheld 546,151
Customers' deposits 357,907
Accrued expenses 3,342,622
---------
Total Current Liabilities $ 82,108,394
-------------
Long-term Liabilities:
Long-term debt (Note 4) $ 13,550,164
Less current portion 12,114,923
----------
Total Long-term Liabilities $ 1,435,241
-------------
Minority Interest (Note 11): $ 5,785,472
-------------
STOCKHOLDERS' EQUITY
Stockholders' Equity (Exhibit B): $ 15,641,032
Partnership Capital (Exhibit B): 1,260,967
---------
$ 16,901,999
-------------
Total Liabilities and Stockholders' Equity $ 106,231,106
=============
The accompanying notes are an integral part of these financial statements.
4
S. G. TORREY ATLANTA, LTD. AND AFFILIATES
COMBINED STATEMENT OF INCOME
For the Year Ended December 31, 1996
Revenues $ 200,598,387
Cost of Goods Sold - (Note 15) 171,519,338
-----------
Gross profit 29,079,049
Selling, general and administrative expenses (18,819,528)
-----------
Income from Operations $ 10,259,521
Other:
Other income 741,491
Other expenses (213,117)
Minority interest (1,001,435)
----------
Net income before income taxes $ 9,786,460
Income tax expense (Note 1) 0
---------
Net income $ 9,786,460
================
The accompanying notes are an integral part of these financial statements.
5
S. G. TORREY ATLANTA, LTD. AND AFFILIATES
COMBINED STATEMENT OF EQUITY
For the Year Ended December 31, 1996
Beginning
Beginning Common Common
Common Stock Stock
Entities' Name Stock *** Issued
S. G. Torrey - Atlanta $150 $
Torrey Homes of NC 150,150
Torrey Homes of SC 220,150
Torrey Development of GA 500
Torrey Development of NC 150
Torrey Development of SC 150
Torrey Realty Services of GA 500
Torrey Realty Services
of NC - Charlotte 0 150
Torrey Realty Services of NC 150
Torrey Realty Services of SC 150
The Mallard Group 150
Torrey Marietta, L.P. 0
Montclaire II, L.P. 0
Provincial Realty & Investment 500
Green Thumb, Inc. 150
A. G. Roth Insurance Agency 150
S. G. 1 0 150
Torrey Homes, Inc. 500 0
The Torrey Corporation 0 150
Torrey Mansour, L.P. 0
Torrey Cobb., L.P. 0
TDC 98 Partnership, L.P. 0
TDC 100 Partnership, L.P. 0
TDC 102 Partnership, L.P. 0
TDC 301 Partnership, L.P. 0
TDC 302 Partnership, L.P. 0
TDC 303 Partnership, L.P. 0
TDC 304 Partnership, L.P. 0
Preferred Management - GA 0 150
Preferred Management - NC 0 150
Preferred Management - SC 0 150
Torrey Dominion Walk 0 0 0
- - -
Total at December 31, 1996 $373,500 $300 $600
======== ==== ====
(Continued)
***Previously Uncombined Companies
The accompanying notes are an integral part of these financial statements.
6
S. G. TORREY ATLANTA, LTD. AND AFFILIATES
COMBINED STATEMENT OF EQUITY
For the Year Ended December 31, 1996
(Continued)
Beginning
Total Beginning Retained
Common Retained Earnings
Entities' Name Stock Earnings ***
S. G. Torrey - Atlanta $150 $8,364,801 $
Torrey Homes of NC 150,150 (339)
Torrey Homes of SC 220,150 (271)
Torrey Development of GA 500 1,840,045
Torrey Development of NC 150 (77)
Torrey Development of SC 150 (68)
Torrey Realty Services of GA 500 679,098
Torrey Realty Services 0
of NC - Charlotte 150 0
Torrey Realty Services of NC 150 (1,488)
Torrey Realty Services of SC 150 0
The Mallard Group 150 (71,001)
Torrey Marietta, L.P. 0 0
Montclaire II, L.P. 0 0
Provincial Realty & Investment 500 752,223
Green Thumb, Inc. 150 14,949
A. G. Roth Insurance Agency 150 (19,355)
S. G. 1 150 (78)
Torrey Homes, Inc. 500 (2,036)
The Torrey Corporation 150 (40)
Torrey Mansour, L.P. 0
Torrey Cobb., L.P. 0
TDC 98 Partnership, L.P. 0
TDC 100 Partnership, L.P. 0
TDC 102 Partnership, L.P. 0
TDC 301 Partnership, L.P. 0
TDC 302 Partnership, L.P. 0
TDC 303 Partnership, L.P. 0
TDC 304 Partnership, L.P. 0
Preferred Management - GA 150 (1,473)
Preferred Management - NC 150
Preferred Management - SC 150 (2,429)
Torrey Dominion Walk 0 0 0
- - -
Total at December 31, 1996 $374,400 $11,556,363 ($3,902)
======== =========== =======
(Continued)
***Previously Uncombined Companies
The accompanying notes are an integral part of these financial statements.
7
S. G. TORREY ATLANTA, LTD. AND AFFILIATES
COMBINED STATEMENT OF EQUITY
For the Year Ended December 31, 1996
(Continued)
Ending
Net Retained
Entities' Name Income Distribution Earnings
S. G. Torrey - Atlanta $7,609,244 ($4,045,025) $11,929,020
Torrey Homes of NC (660,620) (660,959)
Torrey Homes of SC (273,235) (273,506)
Torrey Development of GA 923,662 (682,516) 2,081,191
Torrey Development of NC 87,386 87,309
Torrey Development of SC 27,780 27,712
Torrey Realty Services of GA 253,144 (243,756) 688,486
Torrey Realty Services 0
of NC - Charlotte (74,977) (74,977)
Torrey Realty Services of NC (88,159) (89,647)
Torrey Realty Services of SC (77,575) (77,575)
The Mallard Group 980,900 (195,005) 714,894
Torrey Marietta, L.P. 0 0
Montclaire II, L.P. 0 0
Provincial Realty & Investment 163,184 915,407
Green Thumb, Inc. 27,209 42,158
A. G. Roth Insurance Agency 24,990 (14,000) (8,365)
S. G. 1 26,268 26,190
Torrey Homes, Inc. (23,233) (25,269)
The Torrey Corporation (15,979) (16,019)
Torrey Mansour, L.P. 0
Torrey Cobb., L.P. 0
TDC 98 Partnership, L.P. 0
TDC 100 Partnership, L.P. 0
TDC 102 Partnership, L.P. 0
TDC 301 Partnership, L.P. 0
TDC 302 Partnership, L.P. 0
TDC 303 Partnership, L.P. 0
TDC 304 Partnership, L.P. 0
Preferred Management - GA (1,473)
Preferred Management - NC 0
Preferred Management - SC (15,516) (17,945)
Torrey Dominion Walk 0 0 0
- - -
Total at December 31, 1996 $8,894,473 ($5,180,302) $15,266,632
========== =========== ===========
(Continued)
***Previously Uncombined Companies
The accompanying notes are an integral part of these financial statements.
8
S. G. TORREY ATLANTA, LTD. AND AFFILIATES
COMBINED STATEMENT OF EQUITY
For the Year Ended December 31, 1996
(Continued)
Beginning
Ending Beginning Partnership
Stockholders Partnership Capital
Entities' Name Equity Capital ***
S. G. Torrey - Atlanta $11,929,170 $
Torrey Homes of NC (510,809)
Torrey Homes of SC (53,356)
Torrey Development of GA 2,081,691
Torrey Development of NC 87,459
Torrey Development of SC 27,862
Torrey Realty Services of GA 688,986
Torrey Realty Services
of NC - Charlotte (74,827)
Torrey Realty Services of NC (89,497)
Torrey Realty Services of SC (77,425)
The Mallard Group 715,044
Torrey Marietta, L.P. 0 228,386
Montclaire II, L.P. 0 (368,567)
Provincial Realty & Investment 915,907
Green Thumb, Inc. 42,308
A. G. Roth Insurance Agency (8,215)
S. G. 1 26,340
Torrey Homes, Inc. (24,769)
The Torrey Corporation (15,869)
Torrey Mansour, L.P. 0
Torrey Cobb., L.P. 0 41,832
TDC 98 Partnership, L.P. 0 14,181
TDC 100 Partnership, L.P. 0 354
TDC 102 Partnership, L.P. 0
TDC 301 Partnership, L.P. 0
TDC 302 Partnership, L.P. 0
TDC 303 Partnership, L.P. 0
TDC 304 Partnership, L.P. 0
Preferred Management - GA (1,323)
Preferred Management - NC 150
Preferred Management - SC (17,795)
Torrey Dominion Walk 0 0 0
- - -
Total at December 31, 1996 $15,641,032 ($140,181) $56,367
=========== ========= =======
(Continued)
***Previously Uncombined Companies
The accompanying notes are an integral part of these financial statements.
9
S. G. TORREY ATLANTA, LTD. AND AFFILIATES
COMBINED STATEMENT OF EQUITY
For the Year Ended December 31, 1996
(Continued)
Contri-
buted Net
Entities' Name Capital Income Distributions
S. G. Torrey - Atlanta
Torrey Homes of NC
Torrey Homes of SC
Torrey Development of GA
Torrey Development of NC
Torrey Development of SC
Torrey Realty Services of GA
Torrey Realty Services
of NC - Charlotte
Torrey Realty Services of NC
Torrey Realty Services of SC
The Mallard Group
Torrey Marietta, L.P. 168,463 (396,849)
Montclaire II, L.P. 327,834 (95,000)
Provincial Realty & Investments
Green Thumb, Inc.
A. G. Roth Insurance Agency
S. G. 1
Torrey Homes, Inc.
The Torrey Corporation
Torrey Mansour, L.P. 139,053 (126,189)
Torrey Cobb., L.P. 75,791
TDC 98 Partnership, L.P. 45,176
TDC 100 Partnership, L.P. 88,119
TDC 102 Partnership, L.P. 375,000 (413)
TDC 301 Partnership, L.P. 19,193
TDC 302 Partnership, L.P. 275,000 (131)
TDC 303 Partnership, L.P. (76)
TDC 304 Partnership, L.P. 450,000 (190)
Preferred Management - GA
Preferred Management - NC
Preferred Management - SC
Torrey Dominion Walk 0 29,168 (29,168)
- ------ -------
Total at December 31, 1996 $1,100,000 $891,987 ($647,206)
========== ======== =========
(Continued)
***Previously Uncombined Companies
The accompanying notes are an integral part of these financial statements.
10
S. G. TORREY ATLANTA, LTD. AND AFFILIATES
COMBINED STATEMENT OF EQUITY
For the Year Ended December 31, 1996
(Continued)
Ending
Partnership
Entities' Name Capital
S. G. Torrey - Atlanta $0
Torrey Homes of NC 0
Torrey Homes of SC 0
Torrey Development of GA 0
Torrey Development of NC 0
Torrey Development of SC 0
Torrey Realty Services of GA 0
Torrey Realty Services 0
of NC - Charlotte 0
Torrey Realty Services of NC 0
Torrey Realty Services of SC 0
The Mallard Group 0
Torrey Marietta, L.P. 0
Montclaire II, L.P. (135,733)
Provincial Realty & Investment 0
Green Thumb, Inc. 0
A. G. Roth Insurance Agency 0
S. G. 1 0
Torrey Homes, Inc. 0
The Torrey Corporation 0
Torrey Mansour, L.P. 12,864
Torrey Cobb., L.P. 117,623
TDC 98 Partnership, L.P. 59,357
TDC 100 Partnership, L.P. 88,473
TDC 102 Partnership, L.P. 374,587
TDC 301 Partnership, L.P. 19,193
TDC 302 Partnership, L.P. 274,869
TDC 303 Partnership, L.P. (76)
TDC 304 Partnership, L.P. 449,810
Preferred Management - GA 0
Preferred Management - NC 0
Preferred Management - SC 0
Torrey Dominion Walk 0
-
Total at December 31, 1996 $1,260,967
==========
***Previously Uncombined Companies
The accompanying notes are an integral part of these financial statements.
11
S. G. TORREY ATLANTA, LTD. AND AFFILIATES
COMBINED STATEMENT OF CASH FLOWS
Year ended December 31, 1996
December 31,
Cash Flows from Operating Activities: 1996
Net income $ 9,786,460
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 824,804
Accounts receivable (increase) (26,178)
Inventory (increase) (41,598,420)
Prepaid expenses (increase) (197,271)
Earnest money (increase) (40,972)
Other assets decrease 669,270
Accounts payable increase 6,403,385
Accrued liabilities increase 571,948
-------
Net cash used in operating activities (23,606,974)
-----------
Cash Flows from Investing Activities:
Purchases of property and equipment (1,975,483)
----------
Net cash used in investing activities (1,975,483)
----------
Cash Flows from Financing Activities:
Minority interests 5,785,472
Repayment of long-term debt (4,093,091)
Contributed equity 1,153,365
Distributions to owners (5,827,508)
Net borrowings for short-term debt 30,818,268
----------
Net cash provided by investing activities 27,836,506
----------
Net Increase in Cash: 2,254,049
---------
Cash at Beginning of Year 2,648,625
---------
Cash at End of Year $ 4,902,674
================
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest (excluding interest in
cost of sales and inventory) $ 39,911
================
The accompanying notes are an integral part of these financial statements
12
S. G. TORREY ATLANTA, LTD. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 1996
Note 1 - Summary of Significant Accounting Policies
(a) Combination Policy
The accompanying combined financial statements include the accounts of the
following:
S. G. Torrey Atlanta, Ltd. S Corporation
Torrey Homes of North Carolina - Charlotte S Corporation
Torrey Homes of North Carolina - Raleigh S Corporation
Torrey Homes of South Carolina S Corporation
Torrey Development Corp. of Georgia S Corporation
Torrey Development Corp. of North Carolina S Corporation
Torrey Development Corp. of South Carolina S Corporation
Torrey Realty Services of Georgia S Corporation
Torrey Realty Services of North Carolina - Charlotte S Corporation
Torrey Realty Services of North Carolina - Raleigh S Corporation
Torrey Realty Services of South Carolina S Corporation
The Mallard Group, Inc. S Corporation
Torrey Marietta, L.P. Partnership
Montclaire II, L.P. Partnership
Provincial Realty and Investments S Corporation
Green Thumb, Inc. S Corporation
A. G. Roth Insurance Agency C Corporation
S. G. 1, Inc. S Corporation
Torrey Homes, Inc. S Corporation
The Torrey Corporation C Corporation
Torrey Mansour, L.P. Partnership
Torrey Cobb, L.P. Partnership
TDC 98 Partnership, L.P. Partnership
TDC 100 Partnership, L.P. Partnership
TDC 102 Partnership, L.P. Partnership
TDC 301 Partnership, L.P. Partnership
TDC 302 Partnership, L.P. Partnership
TDC 303 Partnership, L.P. Partnership
TDC 304 Partnership, L.P. Partnership
Preferred Management - Georgia C Corporation
Preferred Management - North Carolina C Corporation
Preferred Management - South Carolina C Corporation
Torrey Dominion Walk Partnership
All of the above companies are under common control for the year ended December
31, 1996. Intercompany transactions and balances have been eliminated in the
combination.
13
S. G. TORREY ATLANTA, LTD. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 1996
Note 1 - Summary of Significant Accounting Policies (continued)
(b) Nature of Business
Torrey is engaged primarily in the construction and sale of single-family
housing in three (3) southeastern states in the United States. Torrey designs,
builds and sells single-family houses on finished lots which it purchases ready
for home construction or it develops. Torrey purchases undeveloped land to
develop into finished lots for future construction of single-family houses and
for sale to others.
(c) Revenue and Cost Recognition
Upon the closing of sales, S.G. Torrey Atlanta, Ltd. and Affiliates recognize
revenue from all homebuilding activities using the deposit method. During
construction, all direct material and labor costs and those indirect costs
related to acquisition and construction are capitalized, and all customer
deposits are treated as liabilities. Capitalized costs are charged to earnings
upon closing. Costs incurred in connection with completed homes, including sales
commissions and operating expenses, are charged to expense as incurred.
Provision for estimated losses on uncompleted contracts and on speculative
projects is made in the period in which such losses are determined. Estimates
are made by management with regard to warranty accruals and accruals on houses
that have been sold.
(d) Depreciation of Equipment and Leasehold Improvements
Equipment and leasehold improvements are depreciated using straight-line and
accelerated methods over the estimated useful lives of the assets. The useful
lives of the assets range from two to seven years for equipment and furniture;
the building's estimated useful life is 39 years. Depreciation expense for the
year ended December 31, 1996, totaled $824,804.
14
S. G. TORREY ATLANTA, LTD. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 1996
Note 1 - Summary of Significant Accounting Policies (continued)
(e) Income Taxes
The following companies, with the consent of their stockholders, have elected to
have their income taxed under Section 1363 of the Internal Revenue Code and a
similar section of the Georgia income tax law which provides that, in lieu of
corporation income taxes, the stockholders are taxed on their proportionate
share of the corporation's taxable income:
S. G. Torrey Atlanta, Ltd.
Torrey Homes of North Carolina
Torrey Homes of South Carolina
Torrey Development Corporation
Torrey Development Corporation of North Carolina
Torrey Development Corporation of South Carolina
Torrey Realty Services of GA
The Mallard Group, Inc.
Provincial Realty and Investments
Green Thumb, Inc.
Torrey Homes, Inc.
S.G. 1, Inc.
Torrey Realty of North Carolina
Torrey Realty of South Carolina
The following companies are partnerships which pass through their income to
their partners and also do not incur any income taxes:
Torrey Marietta, L.P.
Montclaire II, L.P.
Torrey Mansour, L.P.
Torrey Cobb, L.P.
TDC 98 Partnership, L.P.
TDC 100 Partnership, L.P.
TDC 102 Partnership, L.P.
TDC 301 Partnership, L.P.
TDC 302 Partnership, L.P.
TDC 303 Partnership, L.P.
TDC 304 Partnership, L.P.
Torrey Dominion Walk
The following companies were C Corporations for the year ended December 31,
1996:
Torrey Realty Services of North Carolina - Charlotte
A.G. Roth Insurance Agency
The Torrey Corporation
Preferred Management Systems - North Carolina
Preferred Management Systems - South Carolina
Preferred Management Systems
All of the above had no taxable income for the year ended December 31, 1996.
15
S. G. TORREY ATLANTA, LTD. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 1996
Note 1 - Summary of Significant Accounting Policies (continued)
(f) Disclosure of Cash Flow Policy
For purposes of the statement of cash flows, Torrey considers all highly liquid
debt instruments purchased with a maturity of three months or less to be cash
equivalents.
Note 2 - Inventories
Inventories are stated at the lower of cost or net realizable value and consist
of completed residential construction, construction in progress, developed lots
available for construction, and undeveloped land.
Inventories consist of the following components:
Contract Homes - Contracts entered through February 7, 1997 $ 22,553,025
Speculative
Completed homes and homes under construction 41,977,817
Development of lots in process 29,653,032
----------
Total $ 94,183,874
===============
Note 3 - Short-term Debt
Construction loans bearing interest at rates ranging from prime + 1% to prime +
1 1/2% are secured by inventories and are payable as the secured projects are
sold. The combined construction loans payable at December 31, 1996, are as
follows:
December 31,
1996
Fidelity National Bank 1,734,509
SouthTrust Bank 4,885,271
Riverside Bank 522,919
Collateral Mortgage Bank 1,615,498
Home Bank Mortgage 1,804,262
First Alliance 902,619
First Capital Bank 825,341
Premier Bank 2,710,768
Smyrna Bank and Trust 283,986
Wachovia Bank 6,305,038
Banc Mortgage Financial 642,335
Regions Bank 4,082,366
NationsBank 4,761,849
Primary Capital Investments 5,547,002
---------
$ 51,199,411
===============
16
S. G. TORREY ATLANTA, LTD. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 1996
Note 3 - Short-term Debt (Continued)
Development loans bearing interest at prime + 1% to + 1 1/2% are secured by
undeveloped land inventories and are payable as the secured projects are sold.
The combined development loans payable at December 31, 1996, are as follows:
December 31,
1996
First Union National Bank $ 1,052,777
Wachovia Bank 479,526
First Alliance 1,539,132
---------
$ 3,071,435
===============
The combined companies also have a line of credit with Regions Bank in the
amount of $1,400,000 as of December 31, 1996. The amount borrowed as of December
31, 1996, was $26,451. The interest rate is prime + 1%. The line of credit is
secured by the building and land.
Note 4 - Long-term Debt
The combined companies have long-term notes payable due to Apple Commercial
Credit and Repro Products. The balance of these notes payable at December 31,
1996, is $22,609. The notes are secured by computers and a copier.
17
S. G. TORREY ATLANTA, LTD. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 1996
Note 4 - Long-term Debt (continued)
The combined companies have long-term notes payable with the following banks.
The notes bear interest rates from prime plus 1% to prime plus 1 1/2% and are
secured by undeveloped land inventories, and development lots in process.
Balance at
Original Date of Due December 31,
Bank Amount Note Date 1996
HomeBank Mortgage $ 3,375,000 06/14/96 06/14/98 $ 1,940,735
Fidelity National Bank 708,000 05/15/96 11/15/97 361,990
First Capital Bank 08/04/94 08/04/97 79,840
First Union National 1,832,250 10/16/95 04/16/97 565,458
Bank
Wachovia Bank 1,569,000 10/18/95 10/18/97 909,921
NationsBank 1,982,000 11/17/95 05/17/97 1,318,000
NationsBank 1,450,930 12/29/95 03/01/98 1,076,950
Regions Bank 833,000 03/01/96 09/01/97 833,000
NationsBank 655,000 08/07/96 01/01/98 79,792
Premier Lending Corp. 496,700 12/09/96 06/09/98 141,803
Premier Lending Corp. 675,200 12/09/96 06/09/98 88,532
NationsBank 573,000 12/01/96 03/01/98 7,831
First Union National 3,306,000 06/01/94 12/01/97 466,150
Bank
Premier Lending Corp. 906,352 04/15/96 10/15/97 541,924
First Union National 3,562,500 11/07/95 11/01/00 974,000
Bank
SouthTrust Bank of GA 4,200,000 06/07/96 06/07/98 1,881,520
First Union National 2,661,010 03/15/96 03/15/98 1,376,642
Bank
First Union National 1,174,425 12/01/96 12/01/98 20,317
Bank
First Union National 1,283,150 05/24/96 05/24/98 863,150
Bank
-------
$ 13,527,555
===============
18
S. G. TORREY ATLANTA, LTD. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 1996
Note 4 - Long-term Debt (continued):
The following are maturities of long-term debt for each of the next five years
ending:
December 31,
1996
December 31, 1997 $ 12,114,923
December 31, 1998 1,435,241
December 31, 1999 0
December 31, 2000 0
December 31, 2001 0
-
$ 13,550,164
===============
Note 5 - Book Value of Assets Pledged:
The book value of assets pledged at December 31, 1996, is as follows:
December 31,
1996
Building and land $ 2,198,365
Inventories 94,184,264
Apple Computer 20,204
------
$ 96,402,833
===============
Note 6 - Accounts Receivable - Other:
The companies have accounts receivable from various sources at December 31,
1996, as follows:
December 31,
1996
Related - S.G. Torrey Flint $ 358,251
SouthTrust Bank 43,712
Homeowners' associations 29,580
Advances to agents 59,486
Others 70,856
Employees 19,914
------
$ 581,799
===============
19
S. G. TORREY ATLANTA, LTD. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 1996
Note 7 - Pass-through Taxable Income or (Losses) to Shareholders and Partners:
The various companies passed through the following taxable income (losses) to
its shareholders:
December 31,
1996
S.G. Torrey Atlanta, Ltd. $ 7,776,657
Torrey Homes of North Carolina (687,050)
Torrey Homes of South Carolina (287,686)
Torrey Development of Georgia 1,913,555
Torrey Development of North Carolina 85,719
Torrey Development of South Carolina 30,279
Torrey Realty Services of Georgia 256,075
Torrey Realty Services of North Carolina (161,513)
Torrey Realty Services of South Carolina (76,827)
The Mallard Group, Inc. 980,899
Montclaire II, L.P. 327,834
Provincial Realty and Investments 189,172
Green Thumb, Inc. 27,620
S.G. 1, Inc. 13,757
Torrey Homes, Inc. (23,235)
Torrey Mansour, L.P. 139,053
Torrey Cobb, L.P. 75,791
Torrey Marietta, L.P. 168,464
TDC 98 Partnership, L.P. 45,176
TDC 100 Partnership, L.P. 88,119
TDC 102 Partnership, L.P. 19,193
TDC 301 Partnership, L.P. (131)
TDC 302 Partnership, L.P. (76)
TDC 303 Partnership, L.P. (190)
TDC 304 Partnership, L.P. (413)
Torrey Dominion Walk 29,168
Note 8 - Concentration of Credit Risk
The combined companies have demand deposits in several financial institutions in
excess of federally insured amounts. The financial institutions and amounts in
the accounts are as follows:
Balance at
12/31/96
SouthTrust $ 131,305
First Union - A.G. Roth Insurance Agency 149,717
First Union - S.G. Torrey Atlanta, Ltd. 3,624,757
First Union - Torrey Realty Services 134,500
First Union - Torrey Mansour, L.P. 109,445
First Union - Torrey Cobb, L.P. 187,620
First Union - TDC 301 Partnership, L.P. 108,106
--- -------
$ 4,445,450
===============
The combined companies are engaged in the business of constructing single family
housing subdivisions primarily in the metro-Atlanta, Raleigh-Durham, Charlotte
and Greenville areas. The inventory is located in these areas.
20
S. G. TORREY ATLANTA, LTD. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 1996
Note 9 - Statement of Common Stock: As of
December 31,
1996
S. G. Torrey Atlanta, Ltd. (an S Corporation)
Common Stock, no par value; stated value .10;
10,000 shares authorized, 1,500 shares issued
and outstanding $ 150
Torrey Realty Services, Inc. (an S Corporation)
Common Stock, no par value; stated value .10;
100,000 shares authorized, 5,000 shares issued
and outstanding $ 500
Torrey Development Corporation (an S Corporation)
Common Stock, no par value; stated value .33;
10,000 shares authorized; 1,500 shares issued
and outstanding $ 500
Torrey Homes, Inc. (an S Corporation)
Common Stock, no par value; stated value 1.00;
10,000 shares authorized; 500 shares issued
and outstanding $ 500
Provincial Realty and Investment, Inc. (an S Corporation)
Common Stock, no par value; stated value .10;
10,000 shares authorized; 5,000 shares issued
and outstanding $ 500
A.G. Roth Insurance Agency, Inc. (a C Corporation)
Common Stock, no par value; stated value .33;
10,000 shares authorized; 500 shares issued
and outstanding $ 150
Green Thumb, Inc. (an S Corporation)
Common Stock, no par value; stated value .15;
10,000 shares authorized; 1,000 shares issued
and outstanding $ 150
Torrey Homes of North Carolina (an S Corporation)
Common Stock, no par value; stated value 150.15
10,000 shares authorized; 1,000 shares issued
and outstanding $ 150,150
Torrey Homes of South Carolina (an S Corporation)
Common Stock, no par value; stated value 220.15
10,000 shares authorized; 1,000 shares issued
and outstanding $ 220,150
Torrey Development of North Carolina (an S Corporation)
Common Stock, no par value; stated value .15;
10,000 shares authorized; 1,000 shares issued
and outstanding $ 150
21
S. G. TORREY ATLANTA, LTD. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 1996
Note 9 - Statement of Common Stock (continued): As of
December 31,
1996
Torrey Development of South Carolina (an S Corporation)
Common Stock, no par value; stated value .15;
10,000 shares authorized; 1,000 shares issued and
outstanding $ 150
Torrey Realty Services of North Carolina (a C Corporation)
Common Stock, no par value; stated value .15;
10,000 shares authorized; 1,000 shares issued and
outstanding $ 150
Torrey Realty Services of South Carolina (an S Corporation)
Common Stock, no par value; stated value .15;
10,000 shares authorized; 1,000 shares issued and
outstanding $ 150
The Mallard Group, Inc. (an S Corporation)
Common Stock, no par value; stated value .15;
10,000 shares authorized; 1,000 shares issued
and outstanding $ 150
S.G. 1, Inc. (an S Corporation)
Common Stock, no par value; stated value .15;
10,000 shares authorized; 1,000 shares issued
and outstanding $ 150
The Torrey Corporation (a C Corporation)
Common Stock, no par value; stated value .15;
10,000 shares authorized; 1,000 shares issued
and outstanding $ 150
Preferred Management Systems
Common Stock, no par value; stated value .15;
10,000 shares authorized; 1,000 shares issued
and outstanding $ 150
Preferred Management Systems of North Carolina, Inc.
Common Stock, no par value; stated value .15;
10,000 shares authorized; 1,000 shares issued
and outstanding $ 150
Preferred Management Systems of South Carolina, Inc.
Common Stock, no par value; stated value .15;
10,000 shares authorized; 1,000 shares issued
and outstanding $ 150
Torrey Realty Services of Charlotte, North Carolina, Inc.
Common Stock, no par value; stated value .15;
10,000 shares authorized; 1,000 shares issued
and outstanding $ 150
22
S. G. TORREY ATLANTA, LTD. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 1996
Note 10 - Contingencies:
At December 31, 1996, Torrey is involved in various legal actions arising from
the ordinary course of business. In the opinion of management, the ultimate
liability resulting from these actions is not expected to have a material
adverse effect on these financial statements.
Note 11 - Minority Interests:
The following is a schedule of the minority interests for S.G. Torrey Atlanta,
Ltd., and Affiliates:
Minority Minority
Interests Interests
Equity Income
Torrey Mansour, L.P. $ 19,294 $ 208,580
Torrey Cobb, L.P. 471,806 227,553
Torrey Dominion Walk, L.P. 0 108,065
TDC 98 Partnership, L.P. 2,471,753 135,528
TDC 100 Partnership, L.P. 1,365,267 264,357
TDC 301 Partnership, L.P. 457,579 57,579
TDC 303 Partnership, L.P. 999,773 (227)
------- ----
$ 5,785,472 $ 1,001,435
=============== ===============
Note 12 - Profit Sharing Plan:
Torrey has a 401-K plan for its employees. Employees are eligible to participate
after being employed for six months. Torrey's contribution is 50% of the
participant's contribution. Torrey's contribution cannot exceed 2.5% of eligible
salaries. The contribution for 1996 is approximately $175,000.
23
S. G. TORREY ATLANTA, LTD. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 1996
Note 13 - Subsequent Events:
On January 29, 1997, the stockholders signed an agreement to sell all its stock
of Torrey and its affiliates to D.R. Horton Inc., and subsidiaries, a company
engaged in the construction and sale of single-family housing.
Note 14 - Leases:
Torrey has entered into several leases for buildings, office equipment and model
home furniture. The total rent payment for 1996 was $302,733.
The future minimum rental payments are as follows:
1997 $ 353,489
1998 193,240
1999 21,848
2000 8,385
2001 699
Note 15 - Interest Expense:
Torrey has expensed approximately $6,400,000 of capitalized interest. The
interest expense is included in Cost of Goods Sold.
24
D. R. HORTON, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Consolidated Balance Sheet gives
effect to the acquisition by D.R. Horton, Inc. (the "Company") of the Common
Stock of The Torrey Group (Torrey), as if the purchase had occurred on December
31, 1996. The following Unaudited Pro Forma Consolidated Statements of Income
for the year ended September 30, 1996, and the three months ended December 31,
1996, combine the historical results of operations of the Company, Torrey and
the insignificant acquisitions of substantially all the assets and assumption of
related liabilities of Trimark Communities, LLC (Trimark) and SGS Communities,
Inc. (SGS), and assumes that the acquisitions had been effective as of the
beginning of the respective periods. All acquisitions will be accounted for
under the purchase method of accounting. The pro forma adjustments are based
upon the estimated fair values of the assets and assumed liabilities. The values
of these assets and liabilities are based upon estimates made from currently
available data. These estimates may change as additional information becomes
available.
The Unaudited Pro Forma Statements of Income are not necessarily
indicative of the actual results of operations which would have occurred had
the acquisitions been consummated at the beginning of such periods or
indicative of future results of operations. The Notes to the Unaudited Pro
Forma Consolidated Financial Statements provide a summary of the adjustments
made in determining the pro forma amounts. The statements should be read in
conjunction with the Company's historical consolidated financial statements
and the notes thereto included in the Company's report on Form 10-K for the year
ended September 30, 1996, the Company's latest quarterly report on Form 10-Q
for the period ended December 31, 1996, and Torrey's historical financial
statements and the notes thereto filed with this Form 8-K.
25
D.R. HORTON, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
December 31, 1996
(Dollars in thousands)
Pro
D.R. forma Pro
Horton Torrey adjustments forma
ASSETS
Cash................................ $ 15,125 $ 4,903 $ (4,903) (a) $ 15,125
Inventories......................... 400,453 94,184 2,400 (b) 497,037
Property and equipment (net)........ 5,754 4,949 921 (b) 11,624
Earnest money deposits and other assets 18,940 2,195 - 21,135
Excess of cost over net assets
acquired (net) 5,582 - 16,797 (c) 22,379
----- ------ ------
$ 445,854 $ 106,231 $ 15,215 $ 567,300
============= ========== ============ ==========
LIABILITIES
Accounts payable.................... $ 33,434 $ 11,450 $ - $ 44,884
Accrued expenses and customer deposits 24,440 4,247 - 28,687
Notes payable....................... 203,200 67,847 30,587 (a) 301,634
------- ------ ------ -------
261,074 83,544 30,587 375,205
------- ------ ------ -------
Minority interests.................. - 5,785 (5,785) 0
- ----- ------ -
STOCKHOLDERS' EQUITY
Preferred stock, $.10 par value,
30,000,000 shares authorized, no
shares issued....................... - - - -
Common stock, $.01 par value,
100,000,000 shares authorized,
32,415,729 actual and 33,260,173
pro forma shares, issued and
outstanding......................... 324 - 9 (d) 333
Additional capital.................. 160,049 - 7,306 (d) 167,355
Retained earnings................... 24,407 16,902 (16,902) (b) 24,407
------ ------ ------- ------
184,780 16,902 (9,587) 192,095
------- ------ ------ -------
$ 445,854 $ 106,231 $ 15,215 $ 567,300
============= ========== ============ ==========
See accompanying notes to pro forma consolidated financial statements.
26
D.R. HORTON, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended September 30, 1996
(Dollars in thousands, except net income per share)
Pro
D.R. Trimark forma Pro
Horton and SGS(e) Torrey(f) adjustments forma
Revenues.................. $ 547,336 $ 49,274 $ 183,828 $ - $ 780,438
Cost of sales............. 449,054 36,854 155,593 (4,725) (g) 636,776
------- ------ ------- ------ -------
Gross profit 98,282 12,420 28,235 4,725 143,662
Selling, general and
administrative expenses... 53,860 5,374 16,131 1,484 (h) 76,849
------ ----- ------ ----- ------
Operating income 44,422 7,046 12,104 3,241 66,813
Other:
Interest (expense)........ (1,474) - - - (1,474)
Other income/(expense).... 1,484 (413) (594) 1,169 (i) 1,646
----- ---- ---- ----- -----
10 (413) (594) 1,169 172
-- ---- ---- ----- ---
Income before income taxes 44,432 6,633 11,510 4,410 66,985
Provision for income taxes (j) 17,053 2,586 4,489 1,720 25,848
------ ----- ----- ----- ------
Net income................ $ 27,379 $ 4,047 $ 7,021 $ 2,690 $ 41,137
========== ========== ========== ======== =========
Net income per share...... $ 0.87 $ 1.28
========== =========
Weighted average number of
common shares (in thousands) 31,420 844 (d) 32,264
====== === ======
See accompanying notes to pro forma consolidated financial statements.
27
D.R. HORTON, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended December 31, 1996
(Dollars in thousands, except net income per share)
Pro
D.R. Trimark forma Pro
Horton and SGS(e) Torrey(f) adjustments forma
Revenues.................. $ 144,381 $ 8,136 $ 62,374 $ - $ 214,891
Cost of sales............. 118,036 6,287 53,079 (1,162)(g) 176,240
------- ----- ------ ------ -------
Gross profit 26,345 1,849 9,295 1,162 38,651
Selling, general and
administrative expenses... 15,117 634 7,531 851 (h) 24,133
------ --- ----- --- ------
Operating income 11,228 1,215 1,764 311 14,518
Other:
Interest (expense)........ (784) - (192) - (976)
Other income/(expense).... 715 (207) 79 (171)(i) 416
--- ---- -- ---- ---
(69) (207) (113) (171) (560)
--- ---- ---- ---- ----
Income before income taxes 11,159 1,008 1,651 140 13,958
Provision for income taxes 4,352 392 644 55 5,443
----- --- --- -- -----
Net income................ $ 6,807 $ 616 $ 1,007 $ 85 $ 8,515
======== ========== ======== ========== =========
Net income per share...... $ 0.21 $ 0.25
======== =========
Weighted average number of
common shares (in thousand 33,003 844 d) 33,847
====== === ======
See accompanying notes to pro forma consolidated financial statements.
28
D.R. HORTON, INC. AND SUBSIDIARIES
UNAUDITED NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Reclassifications
Certain reclassifications have been made to Torrey's historical financial
statements to conform to the Company's classifications.
Note 2 - Pro Forma Adjustments
(a) Reflects cash consideration paid, repayment of certain Torrey notes payable,
costs incurred, and liabilities and debt assumed in the purchase of Torrey.
The Company financed the majority of the cash consideration through
borrowings under existing lines of credit.
(b) Adjusts the carrying value of purchased assets to estimated fair market
value and eliminates Torrey equity.
(c) Reflects the excess of cost over net assets acquired.
(d) Reflects the issuance of 844,444 shares of the Company's Common Stock as
partial consideration for the Acquisition. The shares issued are restricted
inasmuch as the persons in whose name they are registered cannot sell them
for a period of two years. Pursuant to the terms of the Stock Purchase
Agreement, the shares were valued at $11.25 each.
(e) Reflects the estimated financial results of Trimark Communities, LLC
("Trimark") and SGS Communities, Inc. ("SGS") for the twelve months ended
September 30, 1996 and from October 1, 1996 until the date of acquisition.
(Trimark and SGS were acquired on October 15 and December 2, 1996,
respectively). These acquisitions had an immaterial impact on the Company's
pro forma results of operations.
(f) Reflects the estimated financial results of Torrey for the twelve months
ended September 30, 1996 and three months ended December 31, 1996.
29
D.R. HORTON, INC. AND SUBSIDIARIES
UNAUDITED NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Three
Months
Year ended Ended
September 30, December 31,
1996 1996
(g) Adjustments to cost of sales are:
Net financing costs of incremental debt incurred
to finance acquisitions $1,661 $ 331
Reclassification of capitalized inventory costs
to conform to Company accounting policies (6,153) (1,317)
Reduction in warranty insurance costs paid to
third parties (233) (76)
Reduction in employee benefit costs - (100)
- ----
Total adjustments to cost of sales $(4,725) $(1,162)
======= =======
(h) Adjustments to selling, general and administrative expenses are:
Reduction in salaries and related employee
benefits $(5,116) $ (583)
Reductions in overhead items such as: insurance,
audit, bank charges, referral fees, autos,
telephone, etc., consistent with Company
policies, net of capitalized items expensed
under Company accounting policies (483) (105)
Amortization of excess of cost over net assets
acquired over 20 years 930 222
Reclassification of capitalized inventory costs
to conform to Company accounting policies 6,153 1,317
----- -----
Total adjustments to selling, general and
administrative expenses $ 1,484 $ 851
======= =======
(i) To eliminate earnings of minority interests which were purchased upon
consummation of the Torrey acquisition.
(j) Prior to their acquisition by the Company, Trimark, SGS and Torrey each
operated as an S Corporation under applicable provisions of the Internal
Revenue Code of 1986, as amended, and taxable income was taxed directly to
their stockholders. For pro forma purposes, income taxes are provided at the
Company's estimated incremental income tax rate.
30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
D.R. HORTON, INC.
Date: March 13, 1997 /s/ David J. Keller
-------------------
David J. Keller
Executive Vice President
Treasurer and Chief
Financial Officer
31