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Forestar Group Inc. Reports First Quarter 2012 Results

The Company will host a conference call on May 10, 2012 at 2:00 pm ET to discuss results of first quarter 2012. The meeting may be accessed through webcast or by conference call. The webcast may be accessed through Forestar’s Internet site at www.forestargroup.com. To access the conference call, listeners calling from North America should dial 1-866-510-0711 at least 15 minutes prior to the start of the meeting. Those wishing to access the call from outside North America should dial 1-617-597-5379. The password is Forestar. Replays of the call will be available for two weeks following the completion of the live call and can be accessed at 1-888-286-8010 in North America and at 1-617-801-6888 outside North America. The password for the replay is 14249248.

About Forestar Group

Forestar Group Inc. operates in three business segments: mineral resources, real estate and fiber resources. At the end of the first quarter 2012, the real estate segment owns directly or through ventures over 146,000 acres of real estate located in nine states and twelve markets in the U.S. The real estate segment has 16 real estate projects representing approximately 27,600 acres currently in the entitlement process, and 73 entitled, developed and under development projects in seven states and eleven markets encompassing over 16,000 acres, comprised of almost 27,000 residential lots and over 2,400 commercial acres. The mineral resources segment manages approximately 594,000 net acres of oil and gas mineral interests located principally in Texas, Louisiana, Alabama, and Georgia. Also included in the mineral resources segment is a 45% nonparticipating royalty interest in groundwater produced or withdrawn for commercial purposes from approximately 1.4 million acres in Texas, Louisiana, Georgia and Alabama and about 17,800 acres of groundwater leases in central Texas. The fiber resources segment includes the sale of wood fiber and management of our recreational leases. Forestar’s address on the World Wide Web is www.forestargroup.com.

Forward-looking Statements

This release contains “forward-looking statements” within the meaning of the federal securities laws. These statements reflect management’s current views with respect to future events and are subject to risk and uncertainties. We note that a variety of factors and uncertainties could cause our actual results to differ significantly from the results discussed in the forward-looking statements. Factors and uncertainties that might cause such differences include, but are not limited to: general economic, market, or business conditions; the opportunities (or lack thereof) that may be presented to us and that we may pursue; fluctuations in costs and expenses including development costs; demand for new housing, including impacts from mortgage credit availability; lengthy and uncertain entitlement processes; cyclicality of our businesses; accuracy of accounting assumptions; competitive actions by other companies; changes in laws or regulations; and other factors, many of which are beyond our control. Except as required by law, we expressly disclaim any obligation to publicly revise any forward-looking statements contained in this news release to reflect the occurrence of events after the date of this news release.

   
FORESTAR GROUP INC.
(UNAUDITED)

Business Segments

 
First Quarter
  2012     2011  
(In thousands,

except per share)

Revenues

Real estate $ 17,922 $ 21,139
Mineral resources 9,426 7,333
Fiber resources   744     1,368  
Total revenues $ 28,092   $ 29,840  
 

Segment earnings

Real estate $ 11,577 $ 2,575
Mineral resources 5,875 5,598
Fiber resources   390     640  
Total segment earnings 17,842 8,813
Items not allocated to segments:
General and administrative expense (4,362 ) (3,916 )
Share-based compensation expense (5,231 ) (4,100 )
Interest expense (3,891 ) (4,009 )
Other non-operating income   64     27  
Income (loss) before taxes 4,422 (3,185 )
Income tax (expense) benefit   (1,620 )   712  
Net income (loss) attributable to Forestar Group Inc. $ 2,802   $ (2,473 )
 
Net income (loss) per common share:
Basic $ 0.08 $ (0.07 )
Diluted $ 0.08 $ (0.07 )
 
Weighted average common shares outstanding:
Basic 34.9 35.4
Diluted 35.2 35.4
 
First Quarter

Supplemental Financial Information:

  2012     2011  
(In thousands)
 
Cash & Cash Equivalents $ 6,801 $ 5,608
 
Borrowings under credit facility $ 136,000 $ 136,000
Other debt (a)   91,865     94,600  
Total debt $ 227,865   $ 230,600  

(a) Consists principally of consolidated venture non-recourse debt.

FORESTAR GROUP INC.

MINERAL RESOURCES SEGMENT

PERFORMANCE METRICS

 
 
First Quarter
MINERAL RESOURCES   2012     2011
Leasing Activity
Acres Leased 800 4,900
Average Bonus / Acre $ 360 $ 340
Delay Rental Payments $ 1,115,000 $ 156,000
 
Royalties 1
Oil Production (Barrels) 69,200 32,000
Average Oil Price ($ / Barrel) $ 97.57 $ 82.49
Natural Gas Production (MMcf) 452.2 466.8
Average Natural Gas Price ($ / Mcf) $ 3.23 $ 3.72
MMcfe Production 2 867.4 658.6
Average Price ($ / MMcfe) $ 9.47 $ 6.64
 
Well Activity 3
Net Acres Held By Production 32,000 30,000
Wells Drilled 4 2
Productive Wells 534 496

1 Includes our share of activity from a venture in which we own a 50% interest. Our share of venture natural gas production activity is 90 MMcf in first quarter 2012 and 159 MMcf in first quarter 2011. 2 MMcfe - Million Cubic Feet Equivalent (converting oil to natural gas at 6 Mcfe / Bbl) 3 Wells are operated by third-party lessees / operators

FIRST QUARTER 2012 MINERAL RESOURCES PIPELINE 1

Forestar’s mineral resources segment includes approximately 594,000 net mineral acres principally located in Texas, Louisiana, Alabama and Georgia.

State   Available for Lease   Leased   Held by Production   Total 2
Texas 195,000 30,000 27,000 252,000
Louisiana 120,000 19,000 5,000 144,000
Georgia 156,000 - - 156,000
Alabama 40,000 - - 40,000
California 1,000 - - 1,000
Indiana 1,000 - - 1,000
Total   513,000   49,000   32,000   594,000

1 Includes ventures 2 Excludes 477 net mineral acres located in Colorado

   

FORESTAR GROUP INC.

REAL ESTATE SEGMENT

PERFORMANCE METRICS

 
First Quarter
REAL ESTATE   2012       2011
Owned, Consolidated & Equity Method Ventures:
Residential Lots Sold 285 214
Revenue per Lot Sold $ 53,000 $ 48,200
Commercial Acres Sold - 20.0
Revenue per Commercial Acre Sold - $ 152,500
Undeveloped Acres Sold 455 2,630
Revenue per Acre Sold $ 2,400 $ 2,300
Owned & Consolidated Ventures:
Residential Lots Sold 137 145
Revenue per Lot Sold $ 62,000 $ 54,300
Commercial Acres Sold - -
Revenue per Commercial Acre Sold - -
Undeveloped Acres Sold 320 2,630
Revenue per Acre Sold $ 2,300 $ 2,300
Ventures Accounted For Using the Equity Method:
Residential Lots Sold 148 69
Revenue per Lot Sold $ 44,600 $ 35,500
Commercial Acres Sold - 20.0
Revenue per Commercial Acre Sold - $ 152,500
Undeveloped Acres Sold 135 -
Revenue per Acre Sold $ 2,600 -
         

FIRST QUARTER 2012

REAL ESTATE PIPELINE

 
Real Estate Undeveloped

In Entitlement Process

Entitled

Developed & Under Development

Total Acres*
 
Undeveloped Land
Owned 95,360 102,261
Ventures 6,901
 
Residential
Owned 24,867 9,669 734 38,811
Ventures 3,240 301
 
Commercial
Owned 2,723 1,246 614 5,179
Ventures 399 197
 
Total Acres 102,261 27,590 14,554 1,846 146,251
                     
Estimated Residential Lots       24,108   2,815   26,923

* In addition, Forestar owns a 58% interest in a venture which controls approximately 16,000 acres of undeveloped land in Georgia with minimal investment. Excludes acres associated with fully developed commercial and income producing properties.

   

FORESTAR GROUP INC.

FIBER RESOURCES SEGMENT

PERFORMANCE METRICS

 
First Quarter
FIBER RESOURCES   2012       2011
Fiber Sales *
Pulpwood Tons Sold 24,400 65,600
Average Pulpwood Price / Ton $ 10.18 $ 9.18
Sawtimber Tons Sold 4,400 15,500
Average Sawtimber Price / Ton $ 19.48 $ 16.98
 
Total Tons Sold 28,800 81,100
Average Price / Ton $ 11.59 $ 10.67
 
Recreational Activity
Average Acres Leased 131,000 200,000
Average Lease Rate / Acre $ 8.80 $ 8.91

*The majority of our fiber sales were to International Paper at market prices.

FORESTAR GROUP INC.
PROJECTS IN ENTITLEMENT
   

A summary of projects in the entitlement process (a) at first quarter-end 2012 follows:

 
Project

Project

County

Acres (b)

 

California

 
Hidden Creek Estates Los Angeles 700
Terrace at Hidden Hills Los Angeles 30
 

Georgia

 
Ball Ground Cherokee 500
Crossing Coweta 230
Fincher Road Cherokee 3,890
Fox Hall Coweta 960
Garland Mountain Cherokee/Bartow 350
Home Place Coweta 1,510
Martin’s Bridge Banks 970
Mill Creek Coweta 770
Serenity Carroll 440
Waleska Cherokee 100
Wolf Creek Carroll/Douglas 12,230
Yellow Creek Cherokee 1,060
 

Texas

 
Lake Houston Harris/Liberty 3,700
San Jacinto Montgomery 150
 
Total 27,590

(a) A project is deemed to be in the entitlement process when customary steps necessary for the preparation of an application for governmental land-use approvals, like conducting pre-application meetings or similar discussions with governmental officials, have commenced, or an application has been filed. Projects listed may have significant steps remaining, and there is no assurance that entitlements ultimately will be received.

(b) Project acres, which are the total for the project regardless of our ownership interest, are approximate. The actual number of acres entitled may vary.

   

FORESTAR GROUP INC.

REAL ESTATE PROJECTS

 

A summary of our entitled, (a) developed & under development projects at first quarter-end 2012 follows:

 
Residential Lots (c) Commercial Acres (d)

Project

County

Interest Owned (b)

Lots Sold Since Inception

 

  Lots

Remaining

Acres Sold Since Inception

 

Acres Remaining (f)

Projects we own

California

San Joaquin River Contra Costa/

Sacramento

100 % - - - 288

Colorado

Buffalo Highlands Weld 100 % - 164 - -
Johnstown Farms Weld 100 % 115 497 2 7
Pinery West Douglas 100 % - - - 111
Stonebraker Weld 100 % - 603 - -

Texas

Arrowhead Ranch Hays 100 % - 259 - 6
Bar C Ranch Tarrant 100 % 291 908 - -
Barrington Kingwood Harris 100 % 12 168 - -
Cibolo Canyons Bexar 100 % 705 770 68 82
Harbor Lakes Hood 100 % 203 246 2 19
Hunter’s Crossing Bastrop 100 % 382 108 38 71
La Conterra Williamson 100 % 88 412 - 58
Maxwell Creek Collin 100 % 747 252 10 -
Oak Creek Estates Comal 100 % 113 534 13 -
Summer Creek Ranch Tarrant 100 % 807 467 - 79
Summer Lakes Fort Bend 100 % 418 712 56 -
The Colony Bastrop 100 % 428 721 22 31
The Preserve at Pecan Creek Denton 100 % 349 445 - 7
Village Park Collin 100 % 461 299 3 2
Waterford Park Fort Bend 100 % - 210 10 80
Westside at Buttercup Creek Williamson 100 % 1,372 124 66 -
Other projects (11) Various 100 % 2,490 173 207 23

Georgia

Seven Hills Paulding 100 % 645 442 26 113
Villages of Burt Creek Dawson 100 % - 1,715 - 57
Towne West Bartow 100 % - 2,674 - 121
Other projects (17) Various 100 % 1,712 2,987 3 705

Florida

Other projects (3) Various 100 % 599 246 - -

Missouri and Utah

Other projects (2) Various 100 % 470 84 - -
12,407 16,220 526 1,860
Projects in entities we consolidate

Texas

City Park Harris 75 % 1,185 126 50 115
Lantana Denton 55 % (e) 821 1,471 - -
Light Farms Collin 65 % (g) - 2,501 - -
Stoney Creek Dallas 90 % 111 643 - -
Timber Creek Collin 88 % - 614 - -
Other projects (3) Various Various 6 203 16 148

Georgia

The Georgian Paulding 75 % 289   1,052   -   -
2,412 6,610 66 263
Total owned and consolidated 14,819 22,830 592 2,123
Projects in ventures that we account for using the equity method

Texas

Entrada Travis 50 % - 821 - -
Fannin Farms West Tarrant 50 % 323 58 - 12
Harper’s Preserve Montgomery 50 % 96 1,629 - 72
Lantana Denton Various (e) 1,449 83 16 42
Long Meadow Farms Fort Bend 37 % 913 882 107 192
Southern Trails Brazoria 80 % 521 515 - -
Stonewall Estates Bexar 50 % 286 105 - -
Other projects (1) Nueces 50 % - - - 15
Total in ventures 3,588 4,093 123 333
Combined Total 18,407 26,923 715 2,456

(a) A project is deemed entitled when all major discretionary governmental land-use approvals have been received. Some projects may require additional permits and/or non-governmental authorizations for development.

(b) Interest owned reflects our net equity interest in the project, whether owned directly or indirectly. There are some projects that have multiple ownership structures within them. Accordingly, portions of these projects may appear as owned, consolidated and/or accounted for using the equity method.

(c) Lots are for the total project, regardless of our ownership interest. Lots remaining represent vacant developed lots, lots under development and future planned lots and are subject to change based on business plan revisions.

(d) Commercial acres are for the total project, regardless of our ownership interest and are net developable acres, which may be fewer than the gross acres available in the project.

(e) The Lantana project consists of a series of 24 partnerships in which our voting interests range from 25% to 55%. We account for three of these partnerships using the equity method and we consolidate the remaining partnerships.

(f) Excludes acres associated with commercial and income producing properties.

(g) In second quarter 2012, the consolidated venture sold 800 real estate acres, representing approximately 2,500 planned residential lots.

A summary of our significant commercial and income producing properties at first quarter-end 2012 follows:

      Interest      
Project   County   Market   Owned (a)   Type   Acres Description
Broadstone Memorial Harris Houston 100% Multifamily 9 401 unit luxury apartment
Radisson Hotel Travis Austin 100% Hotel 2 413 guest rooms and suites
Las Brisas Williamson Austin 59% Multifamily 30 414 unit luxury apartment
Promesa (b) Travis Austin 100% Multifamily 16 289 unit luxury apartment
(construction in progress)

(a) Interest owned reflects our total equity interest in the project, whether owned directly or indirectly.

(b) Formerly marketed as Ridge at Ribelin Ranch.





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