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Forestar Group Inc. Reports First Quarter 2014 Results

Forestar Group Inc. (NYSE: FOR) today reported first quarter 2014 net income of approximately $8.3 million, or $0.19 per diluted share outstanding, compared with first quarter 2013 net income of approximately $4.0 million, or $0.11 per diluted share outstanding.

“During first quarter, record residential lot sales activity was fueled by growing builder demand for lots in high quality locations. We also increased lot development activities in existing communities in response to higher demand, with the majority of lots being developed already under contract with homebuilders. Multifamily market conditions remained strong in our target markets, and we continue to grow our multifamily business, finishing the quarter with four projects under construction and adding two new sites to our development pipeline. We continued to strengthen our real estate portfolio through the acquisition of our partner's interest in Lantana, an award-winning community near Dallas. Oil and gas activity continued to be negatively impacted by severe weather conditions in North Dakota, however, production in the Bakken and Three Forks formations in North Dakota and the Lansing-Kansas City formation in Kansas and Nebraska is expected to accelerate going forward. We are focused on executing and delivering our Growing FORward strategic initiatives to grow through strategic and disciplined investment and increase returns,” said Jim DeCosmo, president and chief executive officer of Forestar Group.

First Quarter 2014 Significant Highlights

  • Sold 974 developed residential lots, including 367 bulk lot sales, up over 118% compared with first quarter 2013, with 831 acres of residential tract sales
  • Oil production up over 16% compared with first quarter 2013, with 21 new gross wells drilled reaching total depth in first quarter 2014

Forestar manages its operations through three business segments: real estate, oil and gas and other natural resources.

REAL ESTATE

First Quarter 2014 Significant Highlights (Includes Ventures)

  • Sold 9,329 acres of undeveloped land for over $2,100 per acre
  • Sold 974 developed residential lots, including 367 bulk lot sales from two non-core communities; over 1,400 lots under option contracts with homebuilders
  • Sold 831 acres of residential tracts for over $1,800 per acre
  • Acquired partner's interest in Lantana master-planned community near Dallas for $8 million

Segment Financial Results:

($ in millions)       1Q 2014       1Q 2013       4Q 2013
Segment Revenues $ 65.5 $ 78.7 $ 77.7
Segment Earnings $ 23.6 $ 19.4 $ 27.7

First quarter 2014 real estate segment earnings were higher compared with first quarter 2013 principally due to increased undeveloped land sales and higher residential lot sales. In first quarter 2014, undeveloped land sales increased compared with first quarter 2013 principally due to a sale of over 8,400 acres for approximately $1,850 per acre, generating segment earnings of approximately $13.2 million. Residential lot and tract sales included two bulk transactions totaling 367 lots and 831 acres of residential tracts associated with two non-core communities in Georgia. Excluding these bulk transactions, average lot prices and margins were up 7% compared with first quarter 2013. First quarter 2014 real estate segment results also included $2.3 million in charges associated with additional costs at two multifamily venture projects. In addition, first quarter 2013 real estate segment earnings included $10.9 million associated with the sale of Promesa, a multifamily community in Austin. Real estate segment earnings decreased in first quarter 2014 compared with fourth quarter 2013 primarily due to lower residential and commercial tract sales.

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