<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q




              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                For the quarterly period ended December 31, 2000

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
              For the transition period from _________ to _________

                         Commission file number 0-19891

                               SCHULER HOMES, INC.
             (Exact name of registrant as specified in its charter)

          Delaware                                             99-0293125
 (State or jurisdiction of                                 (I.R.S. Employer
 incorporation or organization)                           Identification No.)


                         828 Fort Street Mall, Suite 400
                           Honolulu, Hawaii 96813-4321
               (Address of principal executive offices) (Zip Code)

                                 (808-521-5661)
              (Registrant's telephone number, including area code)

                                 Not Applicable
              (Former name, former address and former fiscal year,
                          if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

         YES   X         NO
             -----          -----

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.


                                                         OUTSTANDING AT
        CLASS OF COMMON STOCK                           JANUARY 31, 2001
        ---------------------                          -----------------
    Common Stock, $.01 par value                          20,138,942
<PAGE>

<TABLE>

                                                SCHULER HOMES, INC.

                                                      INDEX

<S>               <C>                                                                                     <C>
PART I.           FINANCIAL INFORMATION

Item 1.           Financial Statements

                  Independent Accountants' Review Report..............................................     3

                  Consolidated Balance Sheets - December 31, 2000 and 1999............................     4

                  Consolidated Statements of Operations - Three and nine months ended December
                        31, 2000 and 1999.............................................................     5

                  Consolidated Statements of Cash Flows - Nine months ended December 31,
                        2000 and 1999.................................................................     6

                  Notes to Consolidated Financial Statements..........................................     7

Item 2.           Management's Discussion and Analysis of Financial Condition and Results
                        of Operations.................................................................    11

Item 3.           Quantitative and Qualitative Disclosures About Market Risk..........................    23

PART II.          OTHER INFORMATION

Item 1.           Legal Proceedings...................................................................    24

Item 6.           Exhibits and Reports on Form 8-K....................................................    24

SIGNATURES............................................................................................    25


EXHIBIT INDEX.........................................................................................    26

</TABLE>







                                                     2
<PAGE>

                         PART I -- FINANCIAL INFORMATION

Item 1.  Financial Statements.


                     INDEPENDENT ACCOUNTANTS' REVIEW REPORT


The Board of Directors and Stockholders
Schuler Homes, Inc.

We have reviewed the accompanying interim consolidated balance sheet of Schuler
Homes, Inc. as of December 31, 2000, and the related consolidated statements of
operations for the three-month and nine-month periods ended December 31, 2000
and 1999, and the consolidated statements of cash flows for the nine-month
periods ended December 31, 2000 and 1999. These financial statements are the
responsibility of the Company's management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with auditing standards generally accepted in the United States,
which will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.

Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying interim consolidated financial statements
referred to above for them to be in conformity with accounting principles
generally accepted in the United States. See Note 1.

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of Schuler Homes,
Inc. as of December 31, 1999, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then ended (not
presented herein) and in our report dated March 14, 2000, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated balance sheet as of
December 31, 1999 is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.


                                             ERNST & YOUNG LLP



Honolulu, Hawaii
February 13, 2001







                                       3
<PAGE>

<TABLE>
<CAPTION>
                               SCHULER HOMES, INC.
                           CONSOLIDATED BALANCE SHEETS


                                                                             December 31, 2000   December 31, 1999
                                                                             -----------------   -----------------
                                                                                 (unaudited)
<S>                                                                          <C>                 <C>
ASSETS
------

Cash and cash equivalents (restricted-Note 1) ...............................   $   3,680,000    $   6,673,000
Real estate inventories (Note 2) ............................................     476,528,000      436,305,000
Investments in unconsolidated joint ventures ................................      10,479,000        8,346,000
Deferred income taxes (Note 3)...............................................      16,624,000        2,362,000
Intangibles, net (Note 4) ...................................................      13,589,000       15,506,000
Other assets (Note 4) .......................................................      33,278,000       21,274,000
                                                                                -------------    -------------

Total assets ................................................................   $ 554,178,000    $ 490,466,000
                                                                                =============    =============

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Accounts payable ............................................................   $  37,145,000    $  31,819,000
Accrued expenses ............................................................      22,499,000       19,041,000
Notes payable to banks (Note 5) .............................................     104,980,000       78,183,000
Notes payable to others (Note 2) ............................................       9,051,000        2,409,000
9% senior notes due 2008 ....................................................      98,831,000       98,671,000
6-1/2% convertible subordinated debentures due 2003 .........................      57,500,000       57,500,000
                                                                                -------------    -------------

Total liabilities ...........................................................     330,006,000      287,623,000

Commitments and contingencies (Notes 5 and 6)

Minority interest in consolidated subsidiary ................................       2,844,000        1,695,000

Stockholders' equity (Note 7):
    Common stock, $.01 par value; 30,000,000 shares authorized;
       21,438,642 and 21,371,825 shares issued at December 31, 2000 and 1999,
       respectively .........................................................         214,000          214,000
Additional paid-in capital ..................................................      96,396,000       96,038,000
Retained earnings ...........................................................     133,435,000      113,482,000
Treasury stock, at cost; 1,299,700 and 1,278,400 shares at December 31, 2000
       and 1999, respectively ...............................................      (8,717,000)      (8,586,000)
                                                                                -------------    -------------

Total stockholders' equity...................................................     221,328,000      201,148,000
                                                                                -------------    -------------

Total liabilities and stockholders' equity...................................   $ 554,178,000    $ 490,466,000
                                                                                =============    =============
</TABLE>


                             See accompanying notes.






                                                      4
<PAGE>

<TABLE>
<CAPTION>
                               SCHULER HOMES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS


                                                   Three months ended December 31,  Nine months (Note 1) Ended December 31,
                                                   -------------------------------  ---------------------------------------
                                                      2000                1999               2000            1999
                                                      ----                ----               ----            ----
                                                   unaudited            unaudited         unaudited        unaudited
                                                   ---------            ---------         ---------        ---------
<S>                                               <C>              <C>                 <C>              <C>
Revenues:
    Home and lot sales .........................   $ 153,493,000    $ 150,927,000       $ 487,040,000    $ 410,885,000
Costs and expenses:
    Home and lot sales .........................     117,207,000      121,248,000         371,147,000      328,470,000
    Selling and commissions ....................       9,060,000        9,124,000          29,423,000       25,598,000
    General and administrative .................       8,289,000        7,081,000          26,196,000       20,074,000
    Non-cash charge for impairment of long-
       lived assets (Note 2) ...................             --               --           36,398,000              --
                                                   -------------    -------------       -------------    -------------
       Total costs and expenses ................     134,556,000      137,453,000         463,164,000      374,142,000
                                                   -------------    -------------       -------------    -------------

Operating income ...............................      18,937,000       13,474,000          23,876,000       36,743,000
Income (loss) from unconsolidated joint ventures        (182,000)         429,000             134,000        1,249,000
Minority interest in pretax income of
      consolidated subsidiary ..................        (372,000)        (172,000)           (999,000)        (351,000)
Other expense (Notes 4 and 5) ..................      (1,805,000)      (1,359,000)         (6,575,000)      (3,490,000)
                                                   -------------    -------------       -------------    -------------
   Income before provision for income taxes ....      16,578,000       12,372,000          16,436,000       34,151,000
Provision for income taxes (Note 3) ............       6,455,000        4,813,000           6,175,000       13,221,000
                                                   -------------    -------------       -------------    -------------
Net income .....................................   $  10,123,000    $   7,559,000       $  10,261,000    $  20,930,000
                                                   =============    =============       =============    =============

Net income per share (Note 8):
Basic...........................................   $       0.50     $        0.38       $        0.51    $        1.05
                                                  ===============    ============       =============    =============
Diluted.........................................   $       0.46     $        0.37       $        0.51    $        1.04
                                                  ===============    ============       ==============   =============
</TABLE>









                             See accompanying notes.

                                        5
<PAGE>

<TABLE>
<CAPTION>
                                             SCHULER HOMES, INC.
                                   CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                    Nine months ended December 31,
                                                                                  ---------------------------------
                                                                                       2000                1999
                                                                                  ---------------     -------------
                                                                                              (unaudited)
<S>                                                                                 <C>              <C>
OPERATING ACTIVITIES:
Net income ......................................................................   $  10,261,000    $  20,930,000
Adjustments to reconcile net income to net cash provided by (used in)
   operating activities:
     Depreciation and amortization expense ......................................       4,957,000        4,499,000
     Income distribution received from unconsolidated joint ventures in excess of
        income recognized (income from unconsolidated joint ventures recognized
        in excess of income distribution received) ..............................       1,476,000          773,000
     Change in principal balance of notes receivable ............................         748,000          236,000
     Forgiveness of receivables .................................................         921,000               --
     Minority interests .........................................................         999,000          351,000
     Non-cash charge for impairment of long-lived assets ........................      36,398,000               --
 Changes in assets and liabilities:
   (Increase) decrease in real estate ...........................................     (68,281,000)     (41,702,000)
   (Increase) decrease in other assets ..........................................     (12,893,000)      (1,489,000)
   Increase (decrease) in accounts payable ......................................       3,181,000        8,106,000
   Increase (decrease) in accrued expenses ......................................      (2,948,000)      (1,345,000)
   Change in deferred income taxes ..............................................     (13,805,000)         567,000
                                                                                    -------------    -------------
       Net cash provided by (used in) operating activities ......................     (38,986,000)      (9,074,000)

INVESTING ACTIVITIES:
Investment in unconsolidated joint ventures .....................................      (2,777,000)      (1,823,000)
Advances to unconsolidated joint ventures .......................................      (2,078,000)      (1,574,000)
Repayment of advances to unconsolidated joint ventures ..........................       1,976,000        1,032,000
Capital distributions from unconsolidated joint ventures ........................         603,000        1,735,000
 Purchase of furniture, fixtures, and equipment .................................      (1,572,000)        (797,000)
                                                                                    -------------    -------------
        Net cash provided by (used in) investing activities .....................      (3,848,000)      (1,427,000)


FINANCING ACTIVITIES:
Proceeds from bank borrowings ...................................................     238,697,000      236,946,000
Principal payments on bank borrowings ...........................................    (194,691,000)    (219,134,000)
Principal payments on notes payables to others ..................................      (2,910,000)      (1,177,000)
Advance to affiliate (Note 4) ...................................................              --       (4,810,000)
Repayment of advances to affiliates (Note 4) ....................................         351,000          404,000
Net decrease in discount on issuance of senior notes ............................         120,000          121,000
Proceeds from issuance of common stock from exercise of stock options ...........          92,000          104,000
Proceeds from issuance of common stock under Employee Stock Purchase Plan .......         118,000          183,000
Reacquisition of the Company's common stock .....................................              --       (2,969,000)
                                                                                    -------------    -------------
        Net cash provided by (used in) financing activities .....................      41,777,000        9,668,000
                                                                                    -------------    -------------

Increase (decrease) in cash .....................................................      (1,057,000)        (833,000)
Cash and cash equivalents (restricted) at beginning of period ...................       4,737,000        7,506,000
                                                                                    -------------    -------------
Cash and cash equivalents (restricted) at end of period .........................   $   3,680,000    $   6,673,000
                                                                                    =============    =============
</TABLE>

                             See accompanying notes.

                                        6
<PAGE>


                               SCHULER HOMES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


1.  General

    The accompanying unaudited consolidated financial statements have been
    prepared in accordance with generally accepted accounting principles for
    interim financial information and with the instructions to Form 10-Q and
    Article 10 of Regulation S-X. Accordingly, they do not include all of the
    information and footnotes required by generally accepted accounting
    principles for complete financial statements. In the opinion of management,
    all adjustments (consisting of normal recurring adjustments) considered
    necessary for a fair presentation have been included.

    In December of 2000, the Company changed its accounting year to end on March
    31 instead of December 31. As a result, the quarter ended December 31, 2000
    represented the third quarter in the Company's fiscal year ending March 31,
    2001.

    These financial statements should be read in conjunction with the Notes to
    Consolidated Financial Statements for the year ended December 31, 1999
    contained in the Company's 1999 annual report on Form 10-K.

    The Company has experienced, and expects to continue to experience,
    significant variability in quarterly sales and net income. The results of
    any interim period are not necessarily indicative of the results that can be
    expected for the entire year.

    The preparation of financial statements in conformity with generally
    accepted accounting principles requires management to make estimates and
    assumptions that affect the reported amounts of assets and liabilities and
    disclosure of contingent assets and liabilities at the date of the financial
    statements and the reported amounts of revenues and expenses during the
    reporting period. Actual results could differ from those estimates.

    Included in Cash and Cash Equivalents at December 31, 2000 is a restricted
    amount of $1,090,000, which primarily represents a collection allowance
    resulting from the sale of second mortgage notes and accounts restricted for
    certain development costs.

    On September 12, 2000, the Company and the owners of the group of
    privately-held partnerships and limited liability companies collectively
    known as Western Pacific Housing (WPH) signed an agreement providing for a
    reorganization in which the businesses and operations of the Company and
    WPH will be combined. Following a series of transactions provided for in
    this agreement, a new company, Schuler Holdings, Inc. (to be later renamed
    "Schuler Homes, Inc.") will acquire all of the common stock of the Company
    and the ownership interests in WPH as well as their businesses and
    operations. Existing stockholders of the Company will exchange their shares
    of the Company's stock for Class A common stock of this new company on a
    1-for-1 basis. The owners of WPH will exchange their interests in WPH for
    (and a lender of WPH will receive) shares of Class B common stock of this
    new company equal in an aggregate amount to the shares of Class A common
    stock issued to the Company's stockholders in the reorganization. At
    December 31, 2000, there were 20,138,942 shares of the Company's common
    stock outstanding.

    The holders of the Class A common stock initially will be entitled to elect
    five of the nine directors of the new company. The holders of the Class B
    common stock will be entitled to elect the remaining directors. In
    addition, the holders of each of these classes of common stock will vote
    separately as a class to approve some extraordinary transactions and some
    amendments of the new company's certificate of incorporation. On most other
    matters, holders of Class A common stock will have one vote per share and
    holders of Class B common stock will have one-half vote per share. The
    Class B common stock will automatically convert into Class A common stock
    (on a 1-for-1 basis) if, among other things, it is transferred to anyone
    other than a beneficial owner of the Class B common stock as of the date
    the reorganization is completed.

    The reorganization is structured to be tax-free to the Company's existing
    stockholders. For accounting purposes, the Company expects to treat
    the reorganization as a purchase of WPH. Under this method, the WPH assets
    acquired and liabilities assumed will be recorded at their fair market
    value when the reorganization is completed. Any excess of purchase price
    over the fair market value of net asets acquired will be recorded as
    goodwill.

    Pending regulatory and shareholder approval, the Company expects to close
    its transaction with WPH in early April 2001. The special meeting of
    stockholders to vote upon the transaction is scheduled for March 8, 2001 at
    the Company's offices in Honolulu. The Company estimates the total number
    of common shares outstanding upon the closing of the transaction to be
    approximately 40.3 million.

2.  Real Estate Inventories

    Inventories which are substantially completed are carried at the lower of
    cost or fair value less cost to sell. Fair value is determined by applying a
    risk adjusted discount rate to estimates of future cash flows. In addition,
    land held for future development or inventories under current development
    are adjusted to fair value, only if an impairment to their value is
    indicated. In contemplation of the pending transaction to combine WPH with
    the Company's business, the Company 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 $36,398,000 ($22,198,000 after-tax)
    during the quarter ended September 30, 2000, which resulted in reported
    operating and net losses for the quarter.

    The estimates of future cash flows require significant judgment relating to
    the level of sales prices, rate of new home sales, amount of marketing costs
    and price discounts needed in order to stimulate sales, rate of increase in
    the cost of building materials and labor, introduction of building code
    modifications, and economic and real estate market conditions in general.
    Accordingly, there exists at any date, a reasonable possibility that changes
    in estimates will occur in subsequent periods.


                                       7
<PAGE>

   Real estate inventories at December 31, 2000 consist of the following:

<TABLE>

     <S>                                                     <C>
     Unimproved land held for future development..........   $ 52,050,000
     Development projects in progress.....................    399,261,000
     Completed inventory (including lots held for sale)...     25,217,000
                                                             ------------
                                                             $476,528,000
                                                             ============
</TABLE>

     Completed inventory includes residential units which are substantially
     ready for occupancy.

     During the nine months ended December 31, 2000, the purchase price for
     certain of the land parcels purchased by the Company included notes payable
     to land sellers in the aggregate amount of $4,154,000.

3.   Income Taxes

     During the three months ended December 31, 2000, the Company made income
     tax payments, net of refunds, of $7,075,000.

     The deferred income taxes of $16,624,000 at December 31, 2000 relate
     primarily to the non-cash charge (see Note 2), which  was recognized in
     the Company's financial statements during the quarter ended September 30,
     2000, but which will be deducted for income tax return purposes as the
     Company sells the related land parcels.


4.   Related Party Transactions

     During the quarter ended June 30, 2000, $1,443,000 of Other Income
     (Expense) represented (i) the amortization of the unamortized balance of
     intangibles associated with the Company's acquisition of certain assets of
     Keys Homes in October 1998 and (ii) the forgiveness by the Company of a
     portion of the note receivable from the former owner of Keys Homes and
     former Oregon Division President, who has relinquished his right to a
     percentage of profits of the Oregon division. During the quarter ended
     September 30, 2000, the remaining note receivable balance of approximately
     $351,000 was repaid to the Company.

     In connection with the acquisition of certain assets of a homebuilder in
     July 1999 that established the new divisions in Southern California and
     Arizona, the Company issued 400,000 shares of its common stock to the
     owners of the seller, who became officers of the new divisions. In
     addition, the Company provided a loan to the seller in the amount of
     $4,810,000, which balance at December 31, 2000 was $4,406,000 and is
     included in Other Assets. The loan is due on December 31, 2004 and bears
     interest at 7% per annum. Accrued interest receivable relating to the loan
     was approximately $335,000 at December 31, 2000.

     As a part of the Company's July 1999 asset acquisition, officers in the new
     divisions who formerly owned the acquired assets received membership
     interests in SRHI, LLC, which provide them with an interest in the profits
     of the new divisions, until the sooner of the occurrence of certain agreed
     upon events or December 31, 2004, which may be extended to December 31,
     2006. SRHI, LLC is an affiliate of the Company. Upon consummation of the
     pending transaction with WPH, the Company will purchase the SRHI, LLC
     membership interests from the former owners of the acquired assets for
     $9,000,000, payable as follows: $2,500,000 upon the later of the
     consummation of the pending transaction or January 1, 2001, $2,000,000 on
     the one-year anniversary of the consummation of the pending transaction,
     and a note for $4,500,000 that matures four years after the consummation of
     the pending transaction and that bears interest at 7% per annum. See Note
     9.


5.   Notes Payable to Banks

     The Company has a Revolving Credit Facility with a consortium of banks in
     the amount of $170,000,000. The Company has a one-time option to reduce the
     amount of the facility by up to $30,000,000 on an irrevocable basis. The
     facility expires on July 1, 2002 and includes an option for the lenders to
     extend the term for an additional year as of July 1 of each year. The
     Company can select an interest rate based on either LIBOR (1, 2, 3 or
     6-month term) or prime for each borrowing. Based on the Company's leverage
     and interest coverage ratios, as defined, the interest rate may vary from
     LIBOR plus 1.5% to LIBOR plus 2%, or from prime plus 0% to prime plus
     0.25%. The Company's ability to draw upon its line of credit is dependent
     upon meeting certain financial ratios and covenants. As of December 31,
     2000, the Company met such financial ratios and covenants.

     The Company entered into two interest rate swaps. One swap required the
     Company to pay a fixed rate of 5.75% on


                                       8
<PAGE>


     $30,000,000, while receiving in return an interest payment at a floating
     one-month LIBOR. However, if the one-month LIBOR reset at or above 7%, the
     swap reversed for that payment period and no interest payments were
     exchanged. The second swap, which became effective on August 9, 1999,
     required the Company to pay interest at a floating one month LIBOR on
     $30,000,000, while receiving in return an interest payment at a fixed rate
     of 6.31%. The interest rate differential on these swaps to be received or
     paid was recognized during the period as an adjustment to interest
     incurred. In October 2000, both swaps were canceled at a cost of
     approximately $18,000.

     Notes Payable to Banks at December 31, 2000 consist of borrowings under its
     credit facilities. At December 31, 2000, the Company's bank borrowings were
     at interest rates of prime (9.5%) and LIBOR plus 1.5% (8.2%). At December
     31, 2000, $65,020,000 of the Company's line of credit is unused, of which
     $9,357,000 is restricted for outstanding but unused letters of credit.

     The interest amounts in this paragraph relate to Notes Payable to Banks,
     Notes Payable to Others, Senior Notes and the Convertible Subordinated
     Debentures. The Company paid interest of approximately $6,531,000 during
     the quarter ended December 31, 2000. Interest incurred during the quarter
     ended December 31, 2000 was approximately $5,558,000. All of such interest
     was capitalized to real estate inventories except for $1,481,000, which was
     expensed (included in Other Income (Expense)) and not capitalized, as such
     interest did not meet the requirements for capitalization. Interest,
     previously capitalized to real estate inventories, expensed as a component
     of cost of sales during the quarter ended December 31, 2000 totaled
     $3,654,000.


6.   Commitments and Contingencies

     At December 31, 2000, the Company had under contract to purchase for
     approximately $8,025,000, land for residential development.

     The Company is also from time to time involved in routine litigation or
     threatened litigation arising in the ordinary course of its business. Such
     matters, if decided adversely to the Company, would not, in the opinion of
     management, have a material adverse effect on the financial condition of
     the Company.


7.   Stockholders' Equity

     In November 1998, the Company adopted a stock repurchase program to
     reacquire up to an aggregate of $10,000,000 of its outstanding common
     stock. As of September 30, 2000, the Company had repurchased 525,700 shares
     under the program at a total cost of $3,718,000. The program expired on
     December 31, 2000.

8.   Net Income Per Share

     Basic net income per share for the quarter and nine months ended December
     31, 2000 were computed using the weighted average number of common shares
     outstanding during the periods of 20,131,249 and 20,113,543, respectively.
     Basic net income per share for the quarter and nine months ended December
     31, 1999 were computed using the weighted average number of common shares
     outstanding during the periods of 20,087,970 and 19,985,411, respectively.

     Diluted net income per share for the three-month periods ended December 31,
     2000 and 1999 and the nine-month period ended December 31, 1999 was
     computed by adding to net income the interest expense of $600,000, $841,000
     and $2,607,000 (net of related income taxes), which is applicable to
     convertible subordinated debentures, and dividing by 23,080,686, 22,721,960
     and 22,619,401, 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 nine months ended
     December 31, 2000


                                       9
<PAGE>


     resulted in amounts greater than the basic net income per share.
     Accordingly, the basic net income per share for these periods is also
     presented as the diluted net income per share.

9.   Subsequent Event

     In connection with its 1997 purchase of a 49.0% interest in Stafford Homes,
     the Company had an option to purchase the remaining 51.0% interest in
     Stafford Homes based on a pre-determined formula, subject to specified
     contingencies. In January 1999, the Company increased its ownership
     interest in Stafford Homes to 89.0% and refinanced Stafford Homes' existing
     debt. The Company acquired the remaining 11.0% interest in Stafford Homes
     in January 2001.


                                      10
<PAGE>


Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations.

     Except for historical information contained herein, matters discussed in
Management's Discussion and Analysis of Financial Condition and Results of
Operations contain "forward-looking statements" within the meaning of the
Private Securities Litigation Act of 1995 that involve risks and uncertainties.
The Company's actual results may differ materially from the results discussed
in the forward-looking statements. Forward-looking statements are based on
various factors and assumptions that include risks and uncertainties,
including, but not limited to the closing and profitability of sales in backlog
reported, the market for homes generally and in areas where the Company
operates, the availability and cost of land, changes in economic conditions and
interest rates, increases in raw material and labor costs, consumer confidence,
government regulation, weather conditions and general competitive factors, all
or each of which may cause actual results to differ materially. In addition,
other factors that might cause such a difference include other risks detailed
in the Company's Annual Report on Form 10-K and other documents filed by the
Company with the Securities and Exchange Commission from time to time.

OVERVIEW

     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: Arizona,
Colorado, Hawaii, Northern California, Oregon, Southern California and
Washington.

     For the quarter ended December 31, 2000, revenues were $153.5 million
compared to revenues of $150.9 million during the same quarter last year.
Operating income and net income during the quarter ended December 31, 2000 were
$18.9 million and $10.1 million ($0.46 per share-diluted), respectively,
representing increases of 40.5% and 33.9%, respectively, over operating income
of $13.5 million and net income of $7.6 million during the same quarter of last
year. These results reflect an operating margin for the quarter ended December
31, 2000 of 12.3%, a significant improvement over last year's same quarter
operating margin of 8.9%. The expansion of the Company's operating margin is
primarily due to sales price increases in the Company's Colorado and Northern
California divisions.

     For the twelve months ended December 31, 2000, revenues were $647.8
million compared to revenues of $506.8 million during the same period last
year. Operating income and net income during the twelve months ended December
31, 2000, before the non-cash charge impairment of long-lived assets discussed
below, were $76.9 million and $42.2 million, respectively, representing
increases of 67.5% and 64.2%, respectively, over operating income of $45.9
million and net income of $25.7 million during the twelve months ended December
31, 1999. After giving effect to the non-cash charge for impairment of
long-lived assets discussed below, the Company had operating and net income of
$40.5 million and $20.0 million, respectively, for the twelve months ended
December 31, 2000.

     In December of 2000, the Company changed its accounting year to end on
March 31 instead of December 31. As a result, the quarter ended December 31,
2000 represented the third quarter in the Company's fiscal year ending March
31, 2001. For the nine months ended December 31, 2000, revenues were $487.0
million compared to revenues of $410.9 million during the same period last
year. Operating income and net income during the nine months ended December 31,
2000, before the non-cash charge for impairment of long-lived assets discussed
below, were $60.3 million and $32.5 million, respectively, representing
increases of 64.3% and 55.5%, respectively, over operating income of $36.7
million and net income of $20.9 million during the nine months ended December
31, 1999. After giving effect to the non-cash charge for impairment of
long-lived assets discussed below, the Company had operating and net income of
$23.9 million and $10.3 million, respectively, for the nine months ended
December 31, 2000.

     In connection with its 1997 purchase of a 49.0% interest in Stafford
Homes, the Company had an option to purchase the remaining 51.0% interest in
Stafford Homes based on a pre-determined formula, subject to specified
contingencies. In January 1999, the Company increased its ownership interest in
Stafford Homes to 89.0% and refinanced Stafford Homes' existing debt. The
Company acquired the remaining 11.0% interest in Stafford Homes in January 2001.

PENDING TRANSACTION WITH WESTERN PACIFIC HOUSING

     On September 12, 2000, the Company signed an agreement with the owners of
the group of privately-held partnerships and limited liability companies
collectively known as Western Pacific Housing (WPH) to combine the business of
WPH with the


                                      11
<PAGE>


Company, effectively doubling the size of the Company. WPH is the sixth largest
homebuilder in California and has a strong market presence in major population
centers of Northern and Southern California. The Company believes the
transaction with WPH will create a well-diversified homebuilder focused on the
Western United States that will rank among the top 15 homebuilders in the
United States and among the leaders in several markets - one of the largest in
the California market, and in the top 3 in Colorado, Hawaii, Washington
and Oregon, with a growing presence in Arizona. See Note 1 to the unaudited
interim financial statements of the Company set forth under Item 1 above.

     On a pro forma combined basis, based on the financial results for the
Company and WPH for the three months ended December 31, 2000, the combined
company would have had revenues of $353.6 million primarily from the closings
of 1,188 new homes during the three months ended December 31, 2000. On a pro
forma combined basis, net income after taxes during the three months ended
December 31, 2000 would have totaled $20.6 million, with pro forma combined
diluted earnings of $0.49 per share.

     On a pro forma combined basis, the combined company's revenues for the
twelve months ended December 31, 2000 would have totaled $1,269.8 million,
primarily from the closings of 4,822 new homes. The combined company's pro
forma combined net income after taxes for the twelve months ended December 31,
2000 would have been $73.1 million, or $1.76 per share diluted, excluding the
non-cash charge recognized by the Company during the three months ended
September 30, 2000.

     The combined company will operate with a fiscal year-end of March 31. As a
result, the three months ended December 31, 2000 would have represented the
third quarter in our pro forma combined fiscal year ending March 31, 2001.
During the nine months ended December 31, 2000, the combined company's pro
forma combined revenues would have totaled $853.1 million, primarily from the
closings of 3,303 new homes. The combined company's pro forma combined net
income after taxes would have been $46.4 million, or $1.12 per share diluted,
for the nine months ended December 31, 2000, excluding the non-cash charge
recognized by the Company during the three months ended September 30, 2000.

     As of December 31, 2000, the Company and WPH together would have had 1,954
sales in backlog with an aggregate sales value of $580.9 million, 83 active
projects in the sales stage and control of over 28,900 lots, approximately 49%
of which are under option.

     Based on backlog levels as of December 31, 2000, anticipated construction
schedules and current market conditions, the combined company anticipates pro
forma results for the year ending March 31, 2001 of approximately $1.3 billion
in revenues and pro forma combined net income approximating $75.0 million,
excluding the Company's non-cash charge recognized during the three months
ended September 30, 2000. In light of the combined company's plan to continue
expanding in most of its markets, and given the current strength of its
markets, particularly in California and Colorado, the combined company believes
its revenues and resulting net income for the twelve months ended March 31,
2002 will surpass its pro forma combined revenues and resulting net income for
the twelve months ended March 31, 2001 by 10.0% to 15.0%.


RESULTS OF OPERATIONS

     The selected consolidated financial data of the Company on the following
page are qualified by reference to and should be read in conjunction with the
consolidated financial statements, related notes thereto and other financial
data included elsewhere herein and in the Company's 1999 Annual Report on Form
10-K. These historical results are not necessarily indicative of the results to
be expected in the future.





                                      12
<PAGE>

<TABLE>
<CAPTION>
                                              STATEMENTS OF OPERATIONS DATA

                                             Three months ended December 31,  Twelve months ended December 31,
                                             -------------------------------  --------------------------------
                                                  2000             1999             2000             1999
                                                  ----             ----             ----             ----
                                                unaudited       unaudited         unaudited
                                                ---------       ---------         ---------
<S>                                          <C>               <C>              <C>              <C>
Revenues:
    Home and lot sales ....................   $ 153,493,000    $ 150,927,000    $ 647,776,000    $ 506,778,000
Costs and expenses:
    Home and lot sales ....................     117,207,000      121,248,000      497,966,000      403,684,000
    Selling and commissions ...............       9,060,000        9,124,000       38,325,000       31,747,000
    General and administrative ............       8,289,000        7,081,000       34,580,000       25,481,000
    Non-cash charge for impairment of long-
       lived assets (1) ...................              --               --       36,398,000               --
                                              -------------    -------------    -------------    -------------
       Total costs and expenses ...........     134,556,000      137,453,000      607,269,000      460,912,000
                                              -------------    -------------    -------------    -------------
Operating income ..........................      18,937,000       13,474,000       40,507,000       45,866,000
Income from unconsolidated joint ventures .        (182,000)         429,000          887,000        1,322,000
Minority interest in pretax income of
      consolidated subsidiary .............        (372,000)        (172,000)      (1,149,000)        (444,000)
Other expense .............................      (1,805,000)      (1,359,000)      (7,956,000)      (4,851,000)
                                              -------------    -------------    -------------    -------------
   Income before provision for income taxes      16,578,000       12,372,000       32,289,000       41,893,000
Provision for income taxes ................       6,455,000        4,813,000       12,336,000       16,173,000
                                              -------------    -------------    -------------    -------------
Net income ................................   $  10,123,000    $   7,559,000    $  19,953,000    $  25,720,000
                                              =============    =============    =============    =============
Net income per share:
Basic (2).................................    $        0.50    $        0.38    $        0.99    $        1.29
                                              =============    =============    =============    =============
Diluted (3)...............................    $        0.46    $        0.37    $        0.99    $        1.28
                                              =============    =============    =============    =============

<CAPTION>
                                              Nine months (4) ended December 31,
                                              ----------------------------------
                                                   2000              1999
                                                   ----              ----
                                                 unaudited        unaudited
                                                 ---------        ---------
<S>                                          <C>                <C>
Revenues:
    Home and lot sales ....................    $ 487,040,000    $ 410,885,000
Costs and expenses:
    Home and lot sales ....................      371,147,000      328,470,000
    Selling and commissions ...............       29,423,000       25,598,000
    General and administrative ............       26,196,000       20,074,000
    Non-cash charge for impairment of long-
       lived assets (1) ...................       36,398,000               --
                                               -------------    -------------
       Total costs and expenses ...........      463,164,000      374,142,000
                                               -------------    -------------
Operating income ..........................       23,876,000       36,743,000
Income from unconsolidated joint ventures .          134,000        1,249,000
Minority interest in pretax income of
      consolidated subsidiary .............         (999,000)        (351,000)
Other expense .............................       (6,575,000)      (3,490,000)
                                               -------------    -------------
   Income before provision for income taxes       16,436,000       34,151,000
Provision for income taxes ................        6,175,000       13,221,000
                                               -------------    -------------
Net income ................................    $  10,261,000    $  20,930,000
                                               =============    =============
Net income per share:
Basic (2).................................     $        0.51    $        1.05
                                               =============    =============
Diluted (3)...............................     $        0.51    $        1.04
                                               =============    =============
</TABLE>


(1) Represents a non-cash after-tax charge of approximately $22.2 million
    recognized during the quarter ended September 30, 2000, pursuant to
    Financial Accounting Standards Board Statement No. 121. This was due to
    Schuler Homes' plan, in contemplation of the merger with Western Pacific, 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 where it has a concentration of land.
(2) Basic net income per share was computed using weighted average number of
    shares of 20,131,249, 20,109,559 and 20,113,543 for the three, twelve and
    nine month periods ended December 31, 2000, respectively, and 20,087,970,
    19,997,759 and 19,985,411 for the three, twelve and nine month periods ended
    December 31, 1999, respectively.
(3) Diluted net income per share for the three-month periods ended December 31,
    2000 and 1999, the twelve-month period ended December 31, 1999 and the
    nine-month period ended December 31, 1999 was computed by adding to net
    income the interest expense of $600,000, $841,000, $3,342,000 and $2,607,000
    (net of related income taxes), which is applicable to convertible
    subordinated debentures, and dividing by 23,080,686, 22,721,960, 22,631,749
    and 22,619,401, 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 twelve and nine-month
    periods ended December 31, 2000 resulted in amounts greater than or equal to
    the basic net income per share. Accordingly, the basic net income per share
    is also presented as the diluted net income per share.
(4) In December 2000, the Company changed its accounting year to end on March 31
    instead of December 31. As a result, the quarter ended December 31, 2000
    represented the third quarter of the Company's fiscal year ending March 31,
    2001.

                                       13
<PAGE>

    The following table sets forth, for the periods indicated, the percentage of
the Company's revenues represented by selected financial data.

<TABLE>
<CAPTION>
                                                     Three months ended
                                                        December 31,
                                                       2000       1999
                                                      ------     ------
<S>                                                    <C>        <C>
Revenues                                               100.0%     100.0%

Costs and expenses:
      Home and lot sales                                76.4       80.3
      Selling and commissions expense                    5.9        6.1
      General and administrative expense                 5.4        4.7
                                                      ------     ------
Total costs and expenses                                87.7       91.1
                                                      ------     ------

Operating income                                        12.3%       8.9%
                                                      ======     =======

<CAPTION>
                                                     Twelve months ended
                                                       2000       1999
                                                      ------     ------
<S>                                                    <C>        <C>
Revenues                                               100.0%     100.0%

Costs and expenses:
      Home and lot sales                                76.9       79.6
      Selling and commissions expense                    5.9        6.3
      General and administrative expense                 5.3        5.0
      Non-cash charge for impairment of long-lived
       assets                                            5.6          -
                                                      ------     ------
Total costs and expenses                                93.7       90.9
                                                      ------     ------

Operating income                                         6.3%       9.1%
                                                      ======     =======

<CAPTION>
                                                      Nine months ended
                                                       2000       1999
                                                      ------     ------
<S>                                                    <C>        <C>
Revenues                                               100.0%     100.0%

Costs and expenses:
      Home and lot sales                                76.2       80.0
      Selling and commissions expense                    6.0        6.2
      General and administrative expense                 5.4        4.9
      Non-cash charge for impairment of long-lived
       assets                                            7.5          -
                                                      ------     ------
Total costs and expenses                                95.1       91.1
                                                      ------     ------

Operating income                                         4.9%       8.9%
                                                      ======     =======
</TABLE>

REVENUES

     The Company's Revenues for the quarter ended December 31, 2000 were
approximately $153.5 million as compared to approximately $150.9 million during
the quarter ended December 31, 1999. This represents an increase of
approximately $2.6 million or 1.7%. The increase in revenues reflects higher
average sales prices of home sales closed. The Company's average sales price per
unit increased to $246,000 during the quarter ended December 31, 2000 from an
average sales price per unit during the same quarter in 1999 of $216,000.

     The Company's Revenues for the twelve months ended December 31, 2000 were
approximately $647.8 million as compared to approximately $506.8 million during
the twelve months ended December 31, 1999. This represents an increase of
approximately
                                       14
<PAGE>


$141.0 million or 27.8%. The increase in revenues reflects a larger number of
unit sales closed at higher average sales prices. The Company's average sales
price per unit increased to $229,000 during the twelve months ended December
31, 2000 from an average sales price per unit during the twelve months ended
December 31, 1999 of $200,000.

     The Company's Revenues for the nine months ended December 31, 2000 were
approximately $487.0 million as compared to approximately $410.9 million during
the nine months ended December 31, 1999. This represents an increase of
approximately $76.2 million or 18.5%. The increase in revenues reflects a larger
number of unit sales closed at higher average sales prices. The Company's
average sales price per unit increased to $234,000 during the nine months ended
December 31, 2000 from an average sales price per unit during the nine months
ended December 31, 1999 of $202,000.

     The following table sets forth the number of sales closed during the
three-month, twelve-month and nine-month periods ended December 31, 2000 and
1999, which includes 100% of the sales closed at projects developed by the
Company's joint ventures.

<TABLE>
<CAPTION>
                                   Three months ended          Twelve months ended         Nine months ended
                                       December 31,               December 31,                December 31,
                                   2000         1999           2000           1999         2000          1999
                                   ----         ----           ----           ----         ----          ----
<S>                                <C>          <C>            <C>          <C>           <C>            <C>
Consolidated:
  Colorado                         268           373           1,509        1,368         1,086          1,072
  Hawaii                            86            90             318(1)       319           230(1)         254
  Northern California               93            97             332          256           254            233
  Oregon                            46            65             266          308           187            248
  Southern California               23            --              25           --            25             --
  Washington (2)                    89            74             336          273           281            216
                                 -----         -----           -----        -----         -----          -----
      Total Consolidated           605           699           2,786        2,524         2,063          2,023
Unconsolidated Joint Ventures:
  Colorado (3)                      --            24              36           80            11             80
  Hawaii (4)                         9             5              41           21            35             14
  Southern California (5)           17             9              93           18            66             18
                                 -----         -----           -----        -----         -----          -----
       Total                       631           737           2,956        2,643         2,175          2,135

</TABLE>

(1)  Excludes 12 sales that closed prior to April 1, 2000 under the Company's
     "zero-down" sales program, for which the second mortgage notes were sold
     during the quarter ended June 30, 2000.
(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.

COSTS AND EXPENSES - HOME AND LOT SALES

     Costs and Expenses - Home and Lot Sales represents the acquisition,
development and construction costs attributable to home, lot and land sales
closed. Acquisition, development and construction costs include primarily land
acquisition costs, site work and land development costs, construction material
and labor costs, engineering and architectural costs, loan fees, interest, and
other direct and indirect costs attributable to development, project management
and construction activities.

     Costs and Expenses - Home and Lot Sales decreased from approximately $121.2
million during the quarter ended December 31, 1999 to approximately $117.2
million during the same period in 2000, representing a decrease of approximately
$4.0 million or 3.3%. This decrease reflects a smaller number of units closed
and an improvement in profitability. As a percentage of related revenues, Costs
and Expenses - Home and Lot Sales decreased from 80.3% in the quarter ended
December 31,1999 to 76.4% in

                                       15
<PAGE>


the quarter ended December 31, 2000. This decrease is primarily attributable
to higher margins realized in Northern California, Colorado, Hawaii and
Washington. Sales price increases in the Company's Colorado and Northern
California markets were the main contributors to this margin expansion.
Average sales prices of homes closed in Colorado increased from approximately
$186,000 during the quarter ended December 31, 1999 to $216,000 during the
quarter ended December 31, 2000. In Northern California, the average sales
price increased from $268,000 to $302,000 during the same periods. While some
of the sales price increases are the result of a different mix of homes
closed, much of it is due to market strength.

     Costs and Expenses - Home and Lot Sales increased from approximately $403.7
million during the twelve months ended December 31, 1999 to approximately $498.0
million during the same period in 2000, representing an increase of
approximately $94.3 million or 23.4%. This increase reflects a larger number of
units closed and related increased revenue. As a percentage of revenues, Costs
and Expenses - Home and Lot Sales decreased from 79.6% to 76.9%.

     Costs and Expenses - Home and Lot Sales increased from approximately $328.5
million during the nine months ended December 31, 1999 to approximately $371.1
million during the same period in 2000, representing an increase of
approximately $42.7 million or 13.0%. This increase reflects a larger number of
units closed and related increased revenue. As a percentage of revenues, Costs
and Expenses - Home and Lot Sales decreased from 80.0% to 76.2%.

     Increased sales prices in many of the Company's mainland markets, coupled
with the closings of home sales in projects in which land costs were lower than
the cost at which land can be purchased today, positively impacted the Company's
profit margins during the quarter, twelve and nine months ended December 31,
2000. The Company believes that since there can be no assurance that it will be
able to raise sales prices in the future at the same rate as increases in land
and construction costs, profit margins in the future will likely be lower than
those achieved in the quarter ended December 31, 2000.

     Total interest incurred during the quarters ended December 31, 2000 and
1999 was approximately $5.6 million and $5.0 million, respectively. Of the
amounts incurred, approximately $1.5 million and $1.1 was expensed currently
(included in Other Expense), in the quarters ended December 31, 2000 and 1999,
respectively, and the remaining interest incurred was capitalized to development
projects. Interest capitalized to projects is expensed through Costs and
Expenses - Home and Lot Sales as sales are closed and revenue is recognized in
the particular project. The amount of previously capitalized interest, which was
expensed through Costs and Expenses - Home and Lot Sales, totaled $3.7 million
and $4.4 million during the quarters ended December 31, 2000 and 1999,
respectively.

     Total interest incurred during the twelve months ended December 31, 2000
and 1999 was approximately $20.3 million and $18.7 million, respectively. Of the
amounts incurred, approximately $5.4 million and $3.1 million was expensed
currently (included in Other Expense), in the twelve months ended December 31,
2000 and 1999, respectively, and the remaining interest incurred was capitalized
to development projects. The amount of previously capitalized interest, which
was expensed through Costs and Expenses - Home and Lot Sales, totaled $15.9
million and $16.3 million during the twelve months ended December 31, 2000 and
1999, respectively.

     Total interest incurred during the nine months ended December 31, 2000 and
1999 was approximately $15.4 million and $14.3 million, respectively. Of the
amounts incurred, approximately $4.3 million and $2.1 million was expensed
currently (included in Other Expense), in the nine months ended December 31,
2000 and 1999, respectively, and the remaining interest incurred was capitalized
to development projects. The amount of previously capitalized interest, which
was expensed through Costs and Expenses - Home and Lot Sales, totaled $11.9
million and $13.4 million during the nine months ended December 31, 2000 and
1999, respectively.

     Average debt outstanding was approximately $267.0 million and $260.8
million during the quarters ended December 31, 2000 and 1999, respectively. The
Company's average interest rate on its debt for the quarters ended December 31,
2000 and 1999 was approximately 8.3% and 7.7%, respectively. Average debt
outstanding was approximately $252.7 million and $241.5 million during the
twelve months ended December 31, 2000 and 1999, respectively. The Company's
average interest rate on its debt for the twelve months ended December 31, 2000
and 1999 was approximately 8.0% and 7.8%, respectively. Average debt outstanding
was approximately $253.3 million and $245.6 million during the nine months ended
December 31, 2000 and 1999, respectively. The Company's average interest rate on
its debt for the nine months ended December 31, 2000 and 1999 was approximately
8.1% and 7.8%, respectively. The Company's Notes Payable to Banks bear interest
based on prime or LIBOR. Changes in the prime or LIBOR rates will affect the
amount of interest being capitalized to inventory and subsequently expensed
through Costs and Expenses - Home and Lot Sales as sales are closed and revenue
is recognized.

                                       16
<PAGE>


COST AND EXPENSES - SELLING AND COMMISSIONS

      Selling and commissions expense represents the selling and marketing
costs associated with the sale of homes. Such costs include commissions, sales
incentives offered to buyers, advertising costs, model and sales office costs
and other general sales and marketing costs.

     Selling costs and commissions represented approximately 5.9% and 6.1% of
revenues from home and lot sales during the quarters ended December 31, 2000
and 1999, respectively. Selling costs and commissions represented approximately
5.9% and 6.3% of Total Revenues during the twelve months ended December 31,
2000 and 1999, respectively. Selling costs and commissions represented
approximately 6.0% and 6.2% of Total Revenues during the nine months ended
December 31, 2000 and 1999, respectively.

COSTS AND EXPENSES - GENERAL AND ADMINISTRATIVE

     General and Administrative Expenses include salaries, office and other
administrative costs. Indirect costs attributable to specific projects are
capitalized and deducted as part of Costs and Expenses - Home and Lot Sales.

     General and Administrative Expenses increased by $1.2 million or 17.1%
during the quarter ended December 31, 2000 as compared to the same period in
1999, primarily due to expansion at the Company's U.S. mainland divisions. As
a percentage of sales, General and Administrative Expenses increased from 4.7%
during the quarter ended December 31, 1999 to 5.4% during the quarter ended
December 31, 2000. This increase is a result of General and Administrative
Expenses incurred at the new Southern California and Arizona divisions, where
only 25 home sales had closed as of December 31, 2000. In addition, the
increase includes the accrual of incentive bonuses, which reward employees for
higher profit margins and higher returns on investment.

     General and Administrative Expenses increased by $9.1 million or 35.7%
during the twelve months ended December 31, 2000 as compared to the same period
in 1999. As a percentage of sales, General and Administrative Expense was 5.3%
and 5.0% during the twelve months ended December 31, 2000 and 1999,
respectively.

     General and Administrative Expenses increased by $6.1 million or 30.5%
during the nine months ended December 31, 2000 as compared to the same period
in 1999. As a percentage of sales, General and Administrative Expense was 5.4%
and 4.9% during the nine months ended December 31, 2000 and 1999, respectively.

NON-CASH CHARGE FOR IMPAIRMENT OF LONG-LIVED ASSETS

      In contemplation of the pending transaction with WPH, the Company 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.

INCOME (LOSS) FROM UNCONSOLIDATED JOINT VENTURES

      Income (Loss) from Unconsolidated Joint Ventures represents (i) the
Company's 50% interest in the operations of two joint ventures in Hawaii,
(ii) beginning in the second quarter of 1999, the Company's 50% interest in
its joint venture in Colorado and (iii) beginning in the third quarter of
1999, the Company's 24.5% to 49% interest in joint ventures in Southern
California. During the quarter ended December 31, 2000, 17 home sales closed
at the Southern California joint venture projects. These particular projects
experienced higher construction costs during that quarter. The more
profitable Colorado joint venture project had completely sold and closed all
of its homes prior to the beginning of the quarter ended December 31, 2000.
As a result, income from unconsolidated joint ventures declined from income
of $429,000 in the quarter ended December 31, 1999 to a loss of $182,000 in
the quarter ended December 31, 2000. At December 31, 2000, the only remaining
activity for the Southern California joint venture projects was the sale and
closing of 5 as yet unsold homes and the closing of 3 home sales in backlog.

MINORITY INTEREST IN PRETAX INCOME OF CONSOLIDATED SUBSIDIARY

     Minority Interest in Pretax Income of Consolidated Subsidiary represents
the income relating to the 11% of Stafford Homes not owned by the Company. The
Company acquired the remaining 11.0% interest in Stafford Homes in January 2001.

                                      17
<PAGE>


OTHER INCOME (EXPENSE)

     Other Income (Expense) consists primarily of (i) interest incurred less
interest capitalized to inventory (interest expense), (ii) amortization of
financing fees, net of amounts capitalized to inventory, and (iii) amortization
of goodwill and covenants-not-to-compete; reduced by (iv) interest income. In
addition, the increase in Other Expense from the quarter, twelve and nine
months ended December 31, 1999 to the quarter, twelve and nine months ended
December 31, 2000 is due to a higher amount of interest expensed rather than
capitalized at the Oregon division, resulting from a decrease in the amount of
inventory under construction due to the current softness in the Oregon real
estate market conditions and also due to the following, which occurred during
the quarter ended June 30, 2000: (i) the amortization of the unamortized
balance of intangibles associated with the Company's acquisition of certain
assets of Keys Homes in October, 1998 and (ii) the forgiveness by the Company
of a portion of the note receivable from the former owner of Keys Homes and
former Oregon Division President, who has relinquished his right to a
percentage of profits of the Oregon division.

PROVISION (CREDIT) FOR INCOME TAXES

     The Company's effective income tax rate for the quarters ended December
31, 2000 and 1999 was approximately 38.9%. The Company's effective income tax
rate for the twelve months ended December 31, 2000 and 1999 was approximately
38.2% and 38.6%, respectively. The Company's effective income tax rate for the
nine months ended December 31, 2000 and 1999 was approximately 37.6% and 38.7%,
respectively.

BACKLOG

      The Company's homes are generally offered for sale in advance of their
construction upon applicable regulatory approval and sold pursuant to standard
sales contracts. The Company's standard sales contract may be canceled by the
buyer at any time prior to closing. The Company does not recognize revenues on
homes covered by such contracts until the sales are closed. Homes covered by
such sales contracts are considered by the Company as its backlog.

     The following table sets forth the Company's backlog for both homes and
residential lots at December 31, 2000 and 1999, which includes homes and lots
sold pursuant to the Company's "zero-down" sales program and 100% of the
backlog related to projects developed by the Company's unconsolidated joint
ventures.

<TABLE>
<CAPTION>
                                                     December 31, 2000               December 31, 1999
                                                   ---------------------           ---------------------
                                                              Aggregate                       Aggregate
                                                   Number    Sales Value           Number    Sales Value
                                                   ------    -----------           ------    -----------
<S>                                                <C>      <C>                    <C>      <C>
Consolidated:
  Colorado                                           538    $110,998,000             624    $119,127,000
  Hawaii                                              86      29,811,000              65      17,117,000
  Northern California                                148      42,402,000              98      28,142,000
  Oregon                                              50       9,865,000              59      10,069,000
  Southern California                                 59      17,007,000              --              --
  Washington                                          70      24,199,000              69      21,937,000
  Arizona                                              3         691,000              --              --
                                                    ----    ------------            ----    ------------
     Total Consolidated                              954     234,973,000             915     196,392,000

Unconsolidated Joint Ventures:
  Colorado                                            --              --              28       5,117,000
  Hawaii                                              25       3,191,000               8       1,134,000
  Southern California                                  3       1,671,000              23       6,084,000
                                                    ----    ------------            ----    ------------
      Total                                          982    $239,835,000             974    $208,727,000
                                                    ====    ============            ====    ============
</TABLE>


                                                  18
<PAGE>


     The average sales prices of the homes and lots comprising backlog for
consolidated projects at December 31, 2000 and 1999 were $246,000 and $215,000,
respectively. Due to the ability of buyers to cancel their sales contracts, no
assurances can be given that homes or residential lots in backlog will result
in actual closings. The higher average sales price at December 31, 2000
compared to December 31, 1999 is primarily attributable to increased sales
prices in the Company's mainland U.S. divisions due to strong mainland U.S.
housing markets and a different mix of homes sold.

     At December 31, 2000, the Company's Colorado division's backlog was 538
units, as compared to 624 units at December 31, 1999. In Colorado, the Company
completely sold out of a number of its projects prior to June 30, 2000 as a
result of the strong rate of orders experienced earlier in the year. As of
December 31, 2000, the Colorado division was offering homes for sale from 11
active communities as compared to 13 a year ago. The Company is developing a
number of new sites to increase the number of active communities over the next
year in this division from 11 to approximately 15 a year from now. At December
31, 2000, the Company's Colorado division had approximately 7,467 lots that it
either owned or controlled under option contracts.


VARIABILITY OF RESULTS; OTHER FACTORS

     The Company has experienced, and expects to continue to experience,
significant variability in sales and net income. There are a number of factors
which could cause the Company's operating results to vary from quarter to
quarter. They include the following:

 -   the timing of home closings, a substantial portion of which historically
     have occurred in the last month of each quarter

 -   the Company's ability to acquire additional land on favorable terms for
     future developments

 -   the condition of real estate markets and economies in which the Company
     operates

 -   the cyclical nature of the homebuilding industry and changes in prevailing
     interest rates

 -   costs of material and labor

 -   delays in construction schedules caused by timing of inspections and
     approval by regulatory agencies, including zoning approvals, building
     permits and receipt of entitlements

 -   the timing of completion of necessary public infrastructure

 -   the timing of utility hookups

     The Company's historical financial performance is not necessarily a
meaningful indicator of its future results and, in general, the Company's
financial results will vary from development to development, and from fiscal
quarter to fiscal quarter.

     As a homebuilder, the Company is subject to numerous risks, many of which
are beyond its control, including:

 -   Adverse weather conditions, such as droughts, floods, earthquakes,
     wildfires or other natural disasters, which could damage the Company's
     projects, cause delays in completion of its projects or reduce consumer
     demand for its projects


                                      19
<PAGE>


 -   Shortages in labor or materials that could delay completion of the
     Company's projects and increase the prices it pays for labor or materials,
     thereby affecting its sales and profitability

 -   An oversupply of new homes or alternatives to new homes, such as rental
     properties and used homes, could occur and could depress prices and reduce
     margins for the sale of new homes

 -   Competitors could engage in promotional pricing which may force us to
     decrease our sales prices or offer other incentives to our customers which
     may decrease our revenues and profits

 -   Landslides, soil subsidence, earthquakes and other geologic events could
     occur that could damage the Company's projects, cause delays in the
     completion of its projects or reduce consumer demand for its projects. Many
     of the Company's projects are located in California, which has experienced
     significant earthquake activity, including the 1994 earthquake in
     Northridge, California. Losses associated with these events may not be
     insurable, insurable at a reasonable cost or subject to effective
     indemnification arrangements. In addition to direct damage to the Company's
     projects, earthquakes or other geologic events could damage roads and
     highways providing access to those projects, thereby adversely affecting
     the Company's ability to market homes in those areas and possibly
     increasing the costs of completion.

 -   Construction defects, soil subsidence, inadequate sales disclosure notices
     and other building-related claims may be asserted against the Company.

     Weather may significantly influence demand in some of the Company's
markets. Weekend weather is a particularly strong factor since that is when the
majority of home sales are initiated. In addition, adverse weather conditions
may delay site improvements and foundation work, among other construction
processes. There can be no assurance that weather patterns which result in
unseasonably cool temperatures, rain or snow, water shortages or floods, or any
of the other factors described above will not materially adversely affect the
Company's financial condition or results of operations.

     The residential homebuilding industry is cyclical and highly sensitive to
changes in general economic and business conditions, both local and national,
such as levels of employment, consumer confidence and income, availability of
financing for acquisitions, construction and permanent mortgages, interest rate
levels and demand for housing. Sales of new homes are also affected by the
condition of the resale market for used homes, including foreclosed homes.

     General economic and business conditions, both local and national, may be
less favorable in the future. For example, California underwent a significant
recession in the early 1990s. Since the Company has many projects in
California, a decline in the economic and business conditions in California
could significantly affect the demand for its homes. Increases in the rate of
inflation could adversely affect the Company's margins by increasing its costs
and expenses. In times of high inflation, demand for housing may decline and
the Company may be unable to recover its increased costs through higher sales
prices.

     Inflation can increase the cost of homebuilding materials, labor and other
construction-related costs. Conversely, deflation can reduce the value of
homebuilders' inventories and cause the Company to reduce its sales prices,
resulting in decreased profits.

     The homebuilding industry is subject to significant variability and
fluctuations in real estate values. As a result, the Company may be required to
write-down the book value of their real estate assets in accordance with
generally accepted accounting principles, and some of those write-downs could
be material. In addition, certain of the Company's currently planned projects
as well as future projects may be longer term in nature than those developed in
the past by the Company. The increased length of such projects further exposes
the Company to the risks inherent in the homebuilding industry, including
reductions in the value of land inventory. For example, in contemplation of the
pending transaction with WPH, the Company 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.

     Since 1996, the Company has significantly expanded its operations by
moving into the Colorado, Northern California, Oregon, Southern California,
Washington and Arizona markets. New markets may be less stable and may involve
delays, problems and expenses, including construction issues and risks not
typically found in the markets with which the Company is most familiar. There
can be no assurance that the Company will successfully establish operations
outside of its existing markets or that its expansion will not adversely affect
its results of operations or financial condition.


                                      20
<PAGE>

     The Company recently experienced substantial growth. While the Company has
recently expanded their management, particularly with respect to administrative
personnel in the land acquisition, construction management, financial and
administrative areas, there can be no assurance that the Company will be able to
hire the necessary personnel or develop the infrastructure necessary to meet
anticipated future growth.

      Virtually all purchasers of the Company's homes finance their purchases
with mortgage financing from lenders. In general, housing demand is adversely
affected by increases in interest rates, unavailability of mortgage financing,
increasing housing costs and unemployment. The increases in mortgage interest
rates over the past year and any further increases in mortgage interest rates
may adversely affect the ability of prospective buyers to finance home purchases
and may adversely impact the Company's revenues, gross profit margins and net
income. The Company's homebuilding activities are also dependent upon the
availability and cost of mortgage financing for buyers of homes owned by
potential customers so those customers ("move-up buyers") can sell their homes
and purchase a home from the Company.

      In developing a project, the Company must obtain the approval of numerous
governmental authorities regulating such matters as permitted land uses and
levels of density and the installation of utility services such as electricity,
water and waste disposal. The Company is also subject to local, state and
federal statutes and rules regulating environmental matters, protection and
preservation of archeological finds, worker safety, advertising, consumer
credit, zoning, building moratoriums, building design and density requirements
which limit the number of homes that can be built within a particular project,
and fees imposed to defray the cost of providing certain governmental services
to developing areas. These laws may result in delays, cause the Company to incur
substantial compliance costs and prohibit or severely restrict development in
certain regions or areas.

      To varying degrees, certain permits and approvals are required to complete
the residential developments in progress or currently being planned by the
Company. The ability of the Company to obtain necessary approvals and permits
for these projects is often beyond the Company's control and could restrict or
prevent the development of otherwise desirable property. In addition, the
continued effectiveness of permits already granted is subject to factors such as
changes in policies, rules and regulations and their interpretation and
application.


      The Company may also be subject to additional costs, delays or may be
precluded entirely from developing its projects because of government
regulations that could be imposed due to growth control initiatives or
unforeseen health, safety, welfare, archeological or environmental concerns.

      The homebuilding industry is highly competitive. Homebuilders compete for,
among other things, desirable properties, financing, raw materials and skilled
labor. The Company competes both with large homebuilding companies, some of
which have greater financial resources that it does and with smaller local
builders. The Company also competes for sales with individual resales of
existing homes and with available rental housing. If the Company cannot compete
successfully for the raw materials and resources to construct its homes or with
respect to sales of its homes, it could have a material adverse effect on its
financial condition and results of operations.

      The Company generally provides limited warranties of at least one to two
years for workmanship and materials and for longer periods with respect to
structural components. Because the Company contracts its homebuilding work to
contractors or subcontractors who provide the Company with an indemnity and lien
release prior to receiving payment from the Company for their work, claims
relating to workmanship and materials are generally the primary responsibility
of the Company's contractors and subcontractors. However, to the extent that the
Company's contractors and subcontractors do not cover warranty claims, the
Company has established reserves to cover warranty expenses. The Company's
historical experience is that warranty expenses generally fall within the
reserves established, although there can be no assurance that the Company will
continue to have this same experience in the future. From time to time, the
Company purchases structural warranty coverage from third party insurers, and it
expects to continue to do so as it deems necessary.


LIQUIDITY AND CAPITAL RESOURCES

The Company uses its liquidity and capital resources to, among other things, (i)
support its operations including its inventories of land, home sites and homes;
(ii) provide working capital; (iii) fund market expansion, including
acquisitions, investments in and advances to joint ventures, and start-up
operations; and (iv) make interest and principal payments on outstanding debt.

                                       21
<PAGE>


     The Company anticipates continuing to acquire land for use in its future
homebuilding operations, including raw land, finished lots and partially
developed land. The Company currently intends to acquire a portion of the land
inventories required in future periods through takedowns of lots subject to
option contracts entered into in prior periods and under new option contracts.
The use of option contracts lessens the Company's land-related risks and
improves liquidity. Because of increased demand for undeveloped, partially
developed and finished lots in certain of the markets where the Company builds
homes, the Company's ability to acquire lots using option contracts has been
reduced or has become more expensive.

     The Company has a Revolving Credit Facility with a consortium of banks
in the amount of $170.0 million. The Company has a one-time option to reduce
the amount of the facility by up to $30.0 million on an irrevocable basis.
The facility expires on July 1, 2002 and includes an option for the lenders
to extend the term for an additional year as of July 1 of each year. The
Company can select an interest rate based on either LIBOR (1, 2, 3 or 6-month
term) or prime for each borrowing. Based on the Company's leverage and
interest coverage ratios, as defined under the credit agreement, the interest
rate may vary from LIBOR plus 1.5% to LIBOR plus 2%, or from prime plus 0% to
prime plus 0.25%. The Revolving Credit Facility contains covenants, including
certain financial covenants, and also contains provisions, which may, in
certain circumstances, limit the amount the Company may borrow. In December
2000, the Company's Revolving Credit Facility was amended to designate new
subsidiary companies as guarantors and to increase the amount the Company can
invest in homebuilding joint ventures. At January 31, 2001 and December 31,
2000, the Company had outstanding borrowings under the facility of
approximately $133.9 million and $105.0 million, respectively. The Company
intends to maintain its existing revolving credit facility following the
pending transaction with WPH and is currently in the process of increasing
the amount of its revolving credit facility to $200.0 million, although there
can be no assurance that the increase will be consummated.

     The Company previously entered into two interest rate swaps. One swap
required the Company to pay a fixed rate of 5.75% on $30.0 million, while
receiving an interest payment at a floating one-month LIBOR. However, if the
one-month LIBOR reset at or above 7.0%, the swap reversed for that payment
period and no interest payments were exchanged. The second swap, which became
effective on August 9, 1999, required the Company to pay interest at a floating
one-month LIBOR on $30.0 million, while receiving in return an interest payment
at a fixed rate of 6.31%. The interest rate differential on these swaps to be
received or paid was recognized during the period as an adjustment to interest
incurred. Both swaps were cancelled on October 12, 2000 at a cost of
approximately $18,000.

     At January 31, 2001, the Company had commitments to purchase parcels of
land for approximately $13.7 million. The Company expects to utilize a
combination of cash flow from operations and bank financing to purchase these
land parcels. The Company intends to consummate the purchases of these land
parcels during the next 12 to 24 months. However, no assurances can be given
that these purchases will be completed.

     In November 1998, the Company adopted a stock repurchase program to
reacquire up to an aggregate of $10.0 million of its outstanding common stock.
As of December 31, 2000, the Company had repurchased 525,700 shares under the
program at a total cost of $3.7 million. The program expired on December 31,
2000.

     As a part of the Company's July 1999 asset acquisition that established new
divisions in Southern California and Arizona, officers in the new divisions who
formerly owned acquired assets received membership interests in SRHI, LLC, which
provide them with an interest in the profits of the new divisions, until the
sooner of the occurrence of certain agreed upon events or December 31, 2004,
which may be extended to December 31, 2006. SRHI, LLC is an affiliate of the
Company. Upon consummation of the pending transaction with WPH, the Company will
purchase the SRHI, LLC membership interests from the former owners of the
acquired assets for $9.0 million, payable as follows: $2.5 million upon the
later of the consummation of the pending transaction with WPH or January 1,
2001, $2.0 million on the one-year anniversary of the consummation of the
pending transaction, and a note for $4.5 million that matures four years after
the consummation of the pending transaction and that bears interest at 7.0% per
annum.

     The Company has no material commitments or off-balance sheet financing
arrangements that would tend to affect future liquidity. The Company anticipates
that it can satisfy its current and near-term capital requirements based on its
current capital resources and additional liquidity available under existing
credit agreements. The Company believes it can meet its long-term capital needs,
including meeting debt payments and refinancing or paying off other long-term
debt, from operations and external financing sources, assuming that no
significant adverse changes in the Company's business or general economic
conditions occur. However, there can be no assurance that the Company will not
require additional financing. The Company may need to raise additional funds to
support more rapid expansion, respond to competitive pressures, acquire
companies in the homebuilding

                                       22
<PAGE>


industry and other related industries, or respond to unanticipated
requirements. For example, the Company is evaluating financing opportunities
and alternatives in connection with the pending transaction with Western
Pacific. The Company may seek to raise additional funds through private or
public sales of debt or equity securities, bank debt, or otherwise. There can
be no assurance that additional funding will be available on attractive
terms, or at all.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

     Based upon the Company's average bank borrowings of $81.0 million during
calendar year 1999, if the interest rate indexes on which the Company's bank
borrowing rates are based increased 100 basis points in the year ending March
31, 2001, interest incurred would increase and cash flow would decrease for the
year ending March 31, 2001 by $810,000. The decreased cash flow derives from
increased interest on the portion of the bank borrowings. The Company would
expense a portion of the increased interest as a period cost for the year ending
March 31, 2001. The balance of the increased interest would be capitalized to
real estate inventories and expensed as part of the cost of residential real
estate sales in the year ending March 31, 2001 and in future years.

















                                       23
<PAGE>


                          PART II -- OTHER INFORMATION

Item 1.  Legal Proceedings.

Reference is made to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000 for a discussion of the termination of the Fairway Village
litigation matter.

A firm called Gadient & Associates claims that the Company owes it a purported
"finder's fee" of approximately $5.5 million in connection with the Company's
pending transaction with WPH. The Company believes that this claim is without
merit and intends to vigorously oppose it. To that end, in December 2000, the
Company filed an action in Hawaii state court seeking, among other relief, a
ruling that Gadient is not entitled to a finder's fee or other compensation in
connection with the pending transaction.

Item 6.  Exhibits and Reports on Form 8-K.

      (a)  Exhibits.

              EXHIBIT
              NUMBER             DOCUMENT DESCRIPTION

               10.1   First Amendment to Third Amended and Restated Credit
                      Agreement, dated as of December 5, 2000, between the
                      Company, certain Banks, First Hawaiian Bank and Bank of
                      America, N.A.

               10.2   First Amendment to Guaranty by wholly-owned subsidiaries
                      of the Company to certain Banks, First Hawaiian Bank and
                      Bank of America, N.A., dated as of December 5, 2000.


      (b)  Reports on Form 8-K. A Current Report on Form 8-K was filed on
           December 27, 2000 reporting the change in fiscal year-end of the
           registrant from December 31 to March 31. This event was reported
           under Item 8 of such Form 8-K.






                                       24
<PAGE>



                                   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 thereto duly authorized.



                                        SCHULER HOMES, INC.



Date: February 13, 2000                 By:  /s/ James K. Schuler
                                           -------------------------------
                                        James K. Schuler
                                        Chairman of the Board,
                                        President and Chief Executive Officer



Date: February 13, 2000                By:  /s/ Douglas M. Tonokawa
                                          --------------------------------
                                         Douglas M. Tonokawa
                                         Vice President of Finance,
                                         Chief Accounting Officer
                                         (principal accounting officer)







                                       25
<PAGE>


                                  EXHIBIT INDEX



Number   Description
------   -----------

10.1     First Amendment to Third Amended and Restated Credit Agreement, dated
         as of December 5, 2000, between the Company, certain Banks, First
         Hawaiian Bank and Bank of America, N.A.

10.2     First Amendment to Guaranty by wholly-owned subsidiaries of the Company
         to certain Banks, First Hawaiian Bank and Bank of America, N.A., dated
         as of December 5, 2000.



















                                       26