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TheStreet Open House

Forestar Group Inc. Reports Second Quarter 2012 Results

Stock quotes in this article: FOR

Forestar Group Inc. (NYSE: FOR) today reported second quarter 2012 net income of approximately $0.8 million, or $0.02 per diluted share, compared with a second quarter 2011 net loss of approximately ($3.9) million, or ($0.11) per share outstanding. Second quarter 2012 results include after-tax expenses of approximately $1.6 million, or $0.05 per share, associated with the proposed acquisition of CREDO Petroleum Corporation. Second quarter 2011 results included after-tax expenses of approximately $1.8 million, or $0.05 per share paid to outside advisors related to private debt offerings which were withdrawn due to the deterioration in terms available to us in the capital markets.

“During second quarter we continued to strengthen our balance sheet, generating over $38 million in cash flow and reducing consolidated debt by $26 million. Oil production remains significantly above 2011 levels and increased lot sales activity reflects our ability to deliver lots while inventories in desirable locations remain in short supply,” said Jim DeCosmo president and chief executive officer of Forestar Group. “Our second quarter results continue to increase momentum by accelerating value realization and capitalizing on growth opportunities.”

Second Quarter Highlights

Strategic Initiatives

  • Announced definitive agreement to acquire CREDO Petroleum (NASDAQ:CRED) in an all cash transaction for $14.50 per share, representing an equity purchase price of $146 million
  • Generated over $38 million in cash flow and reduced consolidated debt by $26 million
  • Formed a venture with Canyon-Johnson Urban Funds for the development of Eleven, a 257-unit multifamily community in downtown Austin
  • Formed a venture with Guggenheim Real Estate for development of 360°, a 304-unit multifamily community in the Denver Tech Center submarket

Forestar manages its operations through three business segments: Mineral Resources, Real Estate and Fiber Resources.

MINERAL RESOURCES

  • Oil production up over 120% compared with second quarter 2011, but down 11% compared with first quarter 2012
  • Seven new oil and gas wells completed, including five oil wells and two natural gas wells
  • 541 producing wells operated by exploration and production lessees, up 40 wells compared with second quarter 2011

Segment Financial Results:

($ in millions)     2Q 2012       2Q 2011       1Q 2012
 
Segment Revenues $7.1 $4.6 $9.4
 
Segment Earnings $3.9 $3.1 $5.9
 

Mineral resources segment earnings increased in second quarter 2012 compared with second quarter 2011 principally due to higher oil production, which more than offset lower oil and gas pricing, additional operating costs and reduced lease bonus revenues. Mineral resources segment earnings decreased in second quarter 2012 compared with first quarter 2012 primarily due to lower oil production and reduced delay rental receipts.

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