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TheStreet Open House

Forestar Group Inc. Reports Second Quarter 2012 Results

Stocks in this article: FOR

“We are encouraged by our momentum in accelerating value realization and growing net asset value. We realize that momentum is achieved one step at a time, therefore, we carefully evaluate each of our strategic alternatives to invest in those which offer the greatest return and maximize shareholder value while maintaining a strong balance sheet and financial flexibility. We are committed to delivering the greatest value from every acre and meeting our Triple in FOR initiatives,” concluded Mr. DeCosmo.

The Company will host a conference call on August 8, 2012 at 2:00 pm ET to discuss results of second 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 1-800-638-5495 at least 15 minutes prior to the start of the meeting. Those wishing to access the call from outside North America should dial 1-617-614-3946. 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 55405782.

About Forestar Group

Forestar Group Inc. operates in three business segments: mineral resources, real estate and fiber resources. At the end of the second quarter 2012, the real estate segment owns directly or through ventures almost 145,000 acres of real estate located in eight 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 72 entitled, developed and under development projects in seven states and eleven markets encompassing almost 15,600 acres, comprised of almost 24,000 planned 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 Also included in the mineral resources segment is a 45% nonparticipating royalty interest in groundwater produced or withdrawn for commercial purposes from approximately 1.4 million acres in Texas, Louisiana, Georgia and Alabama and about 17,800 acres of groundwater leases in central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. Forward-looking statements are typically identified by words or phrases such as “will,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “forecast,” and other words and terms of similar meaning. 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, including the timing to consummate the proposed merger, the risk that a condition to closing of the proposed merger may not be satisfied; our ability to achieve the synergies and value creation contemplated by the proposed merger; our ability to promptly and effectively integrate Credo’s businesses, and the diversion of management time on merger-related matters. Other factors and uncertainties that might cause such differences include, but are not limited to: general economic, market, or business conditions; changes in commodity prices; 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

 
Second Quarter First Six Months
2012     2011 2012     2011
(In thousands,

except per share)

(In thousands,

except per share)

Revenues

Real estate $ 26,647 $ 19,615 $ 44,569

$

40,754

Mineral resources 7,148 4,580 16,574 11,913
Fiber resources   1,517     1,290     2,261     2,658  
Total revenues $ 35,312   $ 25,485   $ 63,404  

$

55,325

 
 

Segment earnings

Real estate $ 7,666 $ 1,007 $ 19,243

$

3,582

Mineral resources 3,953 3,102 9,828 8,700
Fiber resources   594     704     984     1,344  
Total segment earnings 12,213 4,813 30,055 13,626
Items not allocated to segments:
General and administrative expense (a) (7,120 ) (7,081 ) (11,482 ) (10,997 )
Share-based compensation income (expense) 67 148 (5,164 ) (3,952 )
Interest expense (3,664 ) (4,653 ) (7,555 ) (8,662 )
Other corporate non-operating income   47     24     111     51  
Income (loss) before taxes 1,543 (6,749 ) 5,965 (9,934 )
Income tax (expense) benefit   (732 )   2,828     (2,352 )   3,540  
Net income (loss) attributable to Forestar Group Inc. $ 811   $ (3,921 ) $ 3,613  

$

(6,394

)

 
Net income (loss) per common share:
Basic $ 0.02 $ (0.11 ) $ 0.10

$

(0.18

)

Diluted $ 0.02 $ (0.11 ) $ 0.10

$

(0.18

)

 
Weighted average common shares outstanding (in millions):
Basic 35.2 35.5 35.2 35.5
Diluted 35.4 35.5 35.4 35.5
 
Second Quarter

Supplemental Financial Information:

2012 2011
(In thousands)
 
Cash and cash equivalents $ 45,474 $ 5,715
 
Borrowings under credit facility $ 130,000 $ 181,000
Other debt (b)   71,943     79,825  
Total debt $ 201,943   $ 260,825  
 
(a)   Second quarter and first six months 2012 general and administrative expenses include approximately $2.5 million in costs associated with the proposed acquisition of CREDO Petroleum Corporation. Second quarter and first six months 2011 general and administrative expenses include $2.7 million 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.
(b) Consists principally of consolidated venture non-recourse debt.
 
       
FORESTAR GROUP INC.
MINERAL RESOURCES SEGMENT
PERFORMANCE METRICS
 
Second Quarter First Six Months
MINERAL RESOURCES 2012     2011 2012     2011
Leasing Activity
Acres Leased - 2,532 805 7,366
Average Bonus / Acre - $ 187 $ 357 $ 289
Delay Rentals $ 447,000 $ 70,000 $ 1,561,800 $ 226,500
 
Royalties 1
Oil Production (Barrels) 61,600 27,900 130,700 59,900
Average Oil Price ($ / Barrel) $ 94.64 $ 102.23 $ 96.19 $ 91.69
Natural Gas Production (MMcf) 420.4 373.5 872.7 840.3
Average Natural Gas Price ($ / Mcf) $ 2.31 $ 3.92 $ 2.79 $ 3.81
BOE Production 2 131,600 90,200 276,200 199,900
Average Price ($ / BOE) $ 51.65 $ 47.88 $ 54.34 $ 43.46
 
Well Activity 3
Net Acres Held By Production 35,600 30,100 35,600 30,100
Wells Drilled 7 5 11 7
Productive Wells 541 501 541 501
 
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 82 MMcf and 172 MMcf in second quarter and first six months 2012, and 128 MMcf and 286 MMcf in second quarter and first six months 2011.
2 BOE – Barrels of oil equivalent (converting natural gas to oil at 6 Mcfe / Bbl)
3 Wells are operated by third-party lessees / operators
 

SECOND 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 196,000 30,000 26,000 252,000
Louisiana 120,000 15,000 9,000 144,000
Georgia 156,000 - - 156,000
Alabama 40,000 - - 40,000
California 1,000 - - 1,000
Indiana 1,000 - - 1,000
Total 514,000 45,000 35,000 594,000
 
1   Includes ventures
2 Excludes 477 net mineral acres located in Colorado, which includes 379 leased acres and 29 acres held by production
 
       
FORESTAR GROUP INC.
REAL ESTATE SEGMENT
PERFORMANCE METRICS
 
Second Quarter First Six Months
REAL ESTATE 2012     2011 2012     2011
Owned, Consolidated & Equity Method Ventures:
Residential Lots Sold 427 283 712 497
Revenue per Lot Sold $ 44,700 $ 52,400 $ 48,000 $ 50,600
Commercial Acres Sold 37.5 4.0 37.5 24.0
Revenue per Commercial Acre Sold $ 47,000 $ 185,300 $ 47,000 $ 157,900
Undeveloped Acres Sold 930 780 1,400 3,410
Revenue per Acre Sold $ 2,800 $ 3,300 $ 2,600 $ 2,500
Owned & Consolidated Ventures:
Residential Lots Sold 345 158 482 303
Revenue per Lot Sold $ 42,700 $ 59,200 $ 48,200 $ 56,900
Commercial Acres Sold 37.5 4.0 37.5 4.0
Revenue per Commercial Acre Sold $ 47,000 $ 185,300 $ 47,000 $ 185,300
Undeveloped Acres Sold 930 760 1,200 3,390
Revenue per Acre Sold $ 2,800 $ 3,300 $ 2,600 $ 2,500
Ventures Accounted For Using the Equity Method:
Residential Lots Sold 82 125 230 194
Revenue per Lot Sold $ 53,000 $ 43,900 $ 47,600 $ 40,900
Commercial Acres Sold - - - 20.0
Revenue per Commercial Acre Sold - - - $ 152,500
Undeveloped Acres Sold - 20 200 20
Revenue per Acre Sold - $ 3,000 $ 2,800 $ 3,000
 
                             
SECOND QUARTER 2012
REAL ESTATE PIPELINE
 
Real Estate Undeveloped

In Entitlement Process

Entitled

Developed & Under Development

Total Acres*

 
Undeveloped Land
Owned 94,655 101,556
Ventures 6,901
 
Residential
Owned 24,867 9,558 774 38,049
Ventures 2,537 313
 
Commercial
Owned 2,723 1,221 601 5,141
Ventures 399 197
 
Total Acres 101,556 27,590 13,715 1,885 144,746
                                         
Estimated Residential Lots 21,052 2,881 23,933
 

* 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
 
Second Quarter First Six Months
FIBER RESOURCES 2012     2011 2012     2011
Fiber Sales *
Pulpwood Tons Sold 80,800 70,700 105,200 136,300
Average Pulpwood Price / Ton $ 9.24 $ 9.22 $ 9.46 $ 9.20
Sawtimber Tons Sold 24,900 12,700 29,300 28,200
Average Sawtimber Price / Ton $ 19.46 $ 15.69 $ 19.47 $ 16.40
 
Total Tons Sold 105,700 83,400 134,500 164,500
Average Price / Ton $ 11.66 $ 10.21 $ 11.64 $ 10.44
 
Recreational Activity
Average Acres Leased 131,800 197,400 131,400 198,800
Average Lease Rate / Acre $ 8.84 $ 8.96 $ 8.82 $ 8.93
 

*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 second 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 second 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% 140 472 2 7
Pinery West Douglas 100% - - - 111
Stonebraker Weld 100% - 603 - -

Texas

Arrowhead Ranch Hays 100% - 259 - 6
Bar C Ranch Tarrant 100% 292 907 - -
Barrington Kingwood Harris 100% 23 157 - -
Cibolo Canyons Bexar 100% 705 770 68 82
Harbor Lakes Hood 100% 203 246 2 19
Hunter’s Crossing Bastrop 100% 390 100 38 71
La Conterra Williamson 100% 93 407 - 58
Maxwell Creek Collin 100% 769 230 10 -
Oak Creek Estates Comal 100% 116 531 13 -
Summer Creek Ranch Tarrant 100% 807 467 35 44
Summer Lakes Fort Bend 100% 446 684 56 -
Summer Park (g) Fort Bend 100% - 210 13 77
The Colony Bastrop 100% 431 718 22 31
The Preserve at Pecan Creek Denton 100% 356 438 - 7
Village Park Collin 100% 472 288 3 2
Westside at Buttercup Creek Williamson 100% 1,387 109 66 -
Other projects (11) Various 100% 2,493 170 207 23

Georgia

Seven Hills Paulding 100% 646 441 26 113
Villages of Burt Creek Dawson 100% - 1,715 - 57
Towne West Bartow 100% - 2,674 - 121
Other projects (17) Various 100% 1,718 2,976 3 705

Florida

Other projects (3) Various 100% 708 137 - -

Missouri and Utah

Other projects (2) Various 100% 476 78 - -
12,671 15,951 564 1,822
Projects in entities we consolidate

Texas

City Park Harris 75% 1,193 118 50 115
Lantana Denton 55% (e) 876 1,416 - -
Stoney Creek Dallas 90% 129 625 - -
Timber Creek Collin 88% - 614 - -
Other projects (3) Various Various 6 203 16 148

Georgia

The Georgian Paulding 75% 289 1,052 - -
2,493 4,028 66 263
Total owned and consolidated 15,164 19,979 630 2,085
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% 123 1,602 - 72
Lantana Denton Various (e) 1,450 82 16 42
Long Meadow Farms Fort Bend 37% 942 853 107 192
Southern Trails Brazoria 80% 538 445 - -
Stonewall Estates Bexar 50% 295 93 - -
Other projects (1) Nueces 50% - - - 15
Total in ventures 3,671 3,954 123 333
Combined Total 18,835 23,933 753 2,418
 
(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) Formerly Waterford Park
 

A summary of our significant commercial and income producing properties at second 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 (c)
Eleven Travis Austin 25% Multifamily 3

257 unit luxury apartment (c)

360 0 Arapahoe Denver 20% Multifamily 4

304 unit luxury apartment (c)

 

(a)   Interest owned reflects our total equity interest in the project, whether owned directly or indirectly.
(b) Formerly marketed as Ridge at Ribelin Ranch.
(c) Construction in progress




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