Forestar Group Inc. Reports Third Quarter 2012 Results

Forestar Group Inc. (NYSE: FOR) today reported a third quarter 2012 net loss of approximately ($0.7) million, or ($0.02) per share, compared with third quarter 2011 net income of approximately $36.4 million, or $1.02 per diluted share outstanding. Third quarter 2012 results include a pre-tax gain of approximately $10.2 million, or $0.19 per share, after-tax, from the sale of the Broadstone Memorial multifamily community in Houston. In addition, third quarter 2012 results include after-tax expenses of approximately ($2.1) million, or ($0.06) per share, associated with the acquisition of CREDO Petroleum Corporation, and an after-tax loss of ($2.9) million, or ($0.08) per share, associated with the extinguishment of debt related to amendment and extension of our term loan. Third quarter 2011 result included a gain of approximately $1.12 per share, after-tax, from the sale of about 57,000 acres of timberland for approximately $87 million.

Third quarter 2012 net income excluding special items was $4.3 million, or $0.12 per share. * Third quarter 2012 special items include approximately $5.0 million or $0.14 per share, after-tax, principally associated with expenses related to the acquisition of Credo Petroleum and loss on extinguishment of debt.
   
3rd Qtr. 2012 3rd Qtr. 2011
Net income (loss) per share ($0.02 ) $ 1.02
 
Special items:
Credo acquisition expenses $ 0.06 $ -
Loss on extinguishment of debt and debt offering expenses $ 0.08 0.01
Gain on sale of timberland   -     ($1.12 )
Total special items $ 0.14 ($1.11 )
 
Net income (loss) per share before special items $ 0.12     ($0.09 )
 

* These are Non-GAAP financial measures. The reconciliation between GAAP and Non-GAAP measures is provided in the tables following this press release, and on the investor relations section of the company’s website.

“During third quarter we completed the acquisition of CREDO Petroleum, which is expected to generate attractive returns and additional value for shareholders, and provide a platform to accelerate value realization of our mineral assets. In addition, we finished the quarter with a solid balance sheet and over $170 million in available liquidity. Oil production remains well above 2011 levels and we are seeing renewed interest in mineral leasing associated with exploration for oil and liquids. Housing market conditions remain relatively steady and we continue to build a solid pipeline of multifamily development properties. In addition, we are generating significant cash flow and solid returns from the sale of our stabilized multifamily assets,” said Jim DeCosmo, president and chief executive officer of Forestar Group. “We are well positioned to accelerate value realization, capitalize on strategic growth opportunities and grow net asset value.”

Third Quarter Highlights

Strategic Initiatives
  • Completed the acquisition of CREDO Petroleum in an all cash transaction for $14.50 per share, representing an equity purchase price of $146 million

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

MINERAL RESOURCES
  • Oil production up over 63% compared with third quarter 2011, and up over 12% compared with second quarter 2012
  • Leased over 3,100 net mineral acres for over $1,100 per acre
  • 542 producing gross wells operated by exploration and production lessees, up 32 gross wells compared with third quarter 2011

Mineral Resources Segment Financial Results:
($ in millions)   3Q 2012   3Q 2011   2Q 2012
 
Segment Revenues $ 10.5 $ 5.9 $ 7.1
 
Segment Earnings $ 6.1 $ 3.6 $ 3.9
 

Mineral resources segment earnings increased in third quarter 2012 compared with third quarter 2011 and second quarter 2012 principally due to higher lease bonus revenues received and increased oil production, which more than offset lower oil and gas pricing and increased costs.

REAL ESTATE

  • Sold 269 fully developed residential lots at an average price of $54,100 per lot, with average lot prices up 17% compared with third quarter 2011
  • 1,294 lots under option contracts
  • Sold 18 commercial acres for approximately $134,000 per acre
  • Sold Broadstone Memorial, a 401-unit multifamily property in Houston for over $56 million, generating approximately $30 million in cash and over $26 million in debt reduction
  • Purchased a multifamily site in Nashville, TN for approximately $11.4 million

Real Estate Segment Financial Results:
($ in millions)   3Q 2012   3Q 2011   2Q 2012
 
Segment Revenues $ 27.1 $ 19.1 $ 26.6
 
Segment Earnings (Loss) $ 12.7 ($4.3 ) $ 7.7
 

Third quarter 2012 real estate segment earnings were higher compared with third quarter 2011 principally due to a $10.2 million pre-tax gain associated with the previously announced sale of the Broadstone Memorial multifamily community located in Houston. In addition, third quarter 2012 real estate segment results include approximately $1.3 million in earnings associated with the sale of 18 commercial acres and $1.1 million in earnings associated with a loan secured by a mixed-use community in Houston.

Third quarter 2011 real estate segment earnings include $3.4 million in charges principally related to environmental remediation activities at our San Joaquin River project located near Antioch, California.

FIBER RESOURCES
  • Sold approximately 197,400 tons of fiber - recreational leasing remains strong

Fiber Resources Segment Financial Results:
($ in millions)   3Q 2012   3Q 2011   2Q 2012
 
Segment Revenues $ 3.0 $ 1.3 $ 1.5
 
Segment Earnings $ 1.8 $ 0.5 $ 0.6
 

Third quarter 2012 fiber resources segment earnings increased compared with third quarter 2011 principally due to increased fiber sales activity and higher pricing. Recreational leasing activity remained strong during third quarter, with almost 99% of available land leased for recreation.

OUTLOOK

“We continue to generate momentum through our oil and gas strategic initiatives – increasing exploration, production and reserves. Drilling activity in East Texas and Louisiana is focused on oil and liquids principally related to the Austin Chalk and Wilcox formations. The acquisition of CREDO Petroleum Corporation is expected to create significant increases in production and reserves, and expand our ability to report additional reserve categories.”

“Residential real estate fundamentals in Texas remain favorable, with relatively stable demand and low levels of desirable inventory. Communities in good locations continue to experience lot demand and our backlog remains strong. Our multifamily development pipeline continues to grow as we purchased a multifamily site in Nashville, Tennessee for approximately $11.4 million during third quarter. Following quarter-end, our venture closed the sale of Las Brisas, a stabilized multifamily community located in Austin, Texas, generating almost $10 million in proceeds to Forestar. As a result, we have generated approximately $40 million in cash flow in 2012 from the sale of two stabilized multifamily communities.”

“Forestar is well positioned to take advantage of strategic growth opportunities and we are committed to delivering the greatest value from every acre,” concluded Mr. DeCosmo.

The Company will host a conference call on November 7, 2012 at 2:00 p.m. ET to discuss results of third quarter 2012. The meeting may be accessed through webcast or conference call. The webcast may be accessed through Forestar’s Internet site at www.forestargroup.com. To access the conference call, listeners from North America should dial 1-800-901-5213 at least 15 minutes prior to the start of the call. Those wishing to access the call from outside North America should dial 1-617-786-2962. The password is Forestar. Replays of the call will be available for two weeks following 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 71438673.

About Forestar Group

Forestar Group Inc. operates in three business segments: real estate, mineral resources and fiber resources. At the end of third quarter 2012, the real estate segment owns directly or through ventures over 143,000 acres of real estate located in nine states and thirteen 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 over 14,450 acres, comprised of almost 23,900 planned residential lots and 2,400 commercial acres. The mineral resources segment includes approximately 735,000 net acres of oil and gas mineral interests, with approximately 593,000 acres of fee ownership located principally in Texas, Louisiana, Alabama, and Georgia and over 142,000 net acres of leasehold and overriding royalty interests principally located in Nebraska, Kansas, Oklahoma, North Dakota and Texas. These leasehold interests include approximately 6,000 net mineral acres in the core of the prolific Bakken and Three Forks formations. In addition, the mineral resources segment owns 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 our ability to achieve the synergies and value creation contemplated by the merger with Credo, 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
 
Third Quarter First Nine Months
  2012       2011     2012       2011  
(In thousands,

except per share)
(In thousands,

except per share)

Revenues
Real estate $ 27,115 $ 19,060 $ 71,684 $ 59,814
Mineral resources 10,479 5,871 27,053 17,784
Fiber resources   3,016       1,310     5,277       3,968  
Total revenues $ 40,610     $ 26,241   $ 104,014     $ 81,566  
 

Segment earnings (loss)
Real estate $ 12,688 $ (4,266 ) $ 31,931 $ (684 )
Mineral resources 6,091 3,592 15,919 12,292
Fiber resources   1,798       446     2,782       1,790  
Total segment earnings (loss) 20,577 (228 ) 50,632 13,398
Items not allocated to segments:
General and administrative expense (a) (8,000 ) (4,827 ) (19,482 ) (15,824 )
Share-based compensation income (expense) (6,327 ) 3,553 (11,491 ) (399 )
Gain on sale of assets 16 61,784 16 61,784
Interest expense (8,094 ) (4,271 ) (15,649 ) (12,933 )
Other corporate non-operating income   47     26     158     77  
Income (loss) before taxes (1,781 ) 56,037 4,184 46,103
Income tax (expense) benefit   1,078     (19,609 )   (1,274 )   (16,069 )
Net income (loss) attributable to Forestar Group Inc. $ (703 ) $ 36,428   $ 2,910   $ 30,034  
 
Net income (loss) per common share:
Basic $ (0.02 ) $ 1.03 $ 0.08 $ 0.85
Diluted $ (0.02 ) $ 1.02 $ 0.08 $ 0.84
 
Weighted average common shares outstanding (in millions):
Basic 35.2 35.5 35.2 35.5
Diluted 35.2 35.8 35.4 35.9
 
Third Quarter

Supplemental Financial Information:
  2012     2011  
(In thousands)
 
Cash and cash equivalents $ 10,279 $ 29,121
 
Borrowings under credit facility $ 227,000 $ 130,000
Other debt (b)   49,651     93,697  
Total debt $ 276,651   $ 223,697  
(a)   Third quarter and first nine months 2012 general and administrative expenses include approximately $3.2 million and $5.7 million respectively in costs associated with the acquisition of CREDO Petroleum Corporation. Third quarter and first nine months 2011 general and administrative expenses include $0.5 million and $3.2 million respectively 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
 
Third Quarter First Nine Months
2012     2011 2012     2011
Leasing Activity from Owned Mineral Interests
Acres Leased 3,120 380 3,900 7,700
Average Bonus / Acre $ 1,130 $ 265 $ 975 $ 288
Delay Rentals $ 592,800 $ 252,800 $ 2,154,600 $ 479,300
Oil & Gas Production

Royalty Interests1
Gross Wells 542 510 542 510
Oil Production (Barrels) 62,300 41,600 179,900 99,500
Average Oil Price ($ / Barrel) $ 75.00 $ 97.79 $ 88.29 $ 94.32
Natural Gas Production (MMcf) 411.1 402.6 1,241.5 1,226.4
Average Natural Gas Price ($ / Mcf) $ 1.86 $ 3.11 $ 2.11 $ 2.70
BOE Production2 130,800 108,700 386,800 303,900
Average Price ($ / BOE) $ 41.55 $ 48.97 $ 47.84 $ 41.79

Working Interests3
Gross Wells 10 8 10 8
Oil Production (Barrels) 6,700 700 19,900 2,700
Average Oil Price ($ / Barrel) $ 83.35 $ 99.78 $ 96.96 $ 90.96
Natural Gas Production (MMcf) 15.3 5.4 57.6 22.1
Average Natural Gas Price ($ / Mcf) $ 2.74 $ 5.16 $ 3.16 $ 4.91
BOE Production2 9,300 1,600 29,500 6,400
Average Price ($ / BOE) $ 64.98 $ 61.27 $ 71.59 $ 55.60

Total Oil & Gas Interests
Gross Wells 542 510 542 510
Oil Production (Barrels) 69,000 42,300 199,800 102,200
Average Oil Price ($ / Barrel) $ 75.81 $ 97.83 $ 89.15 $ 94.23
Natural Gas Production (MMcf) 426.4 408.0 1,299.1 1,248.4
Average Natural Gas Price ($ / Mcf) $ 2.24 $ 4.27 $ 2.61 $ 3.96
BOE Production2 140,100 110,300 416,300 310,300
Average Price ($ / BOE) $ 44.17 $ 53.31 $ 50.92 $ 46.96
Well Activity

Mineral Interests Owned4
Net Acres Held By Production 38,200 30,300 38,200 30,300
Gross Wells Drilled 2 9 13 16
Productive Gross Wells 542 510 542 510

Mineral Interests Leased5
Net Acres Held By Production 36,030 - 36,030 -
Gross Wells Drilled - - - -
Productive Gross Wells6 382 - 382 -

Total Well Activity
Net Acres Held By Production 74,230 30,300 74,230 30,300
Gross Wells Drilled 2 9 13 16
Productive Gross Wells       924       510       924       510

1
  Includes our share of venture activity in which we own a 50% interest. Our share of natural gas production is 75 MMcf and 247 MMcf in third quarter and first nine months 2012 and 112 MMcf and 398MMcf in third quarter and first nine months 2011

2
BOE – Barrels of oil equivalent (converting natural gas to oil at 6 Mcfe / Bbl)

3
Excludes Credo Petroleum Corporation acquired on September 28, 2012

4
Wells operated by third-party lessees/operators. Represent wells in which we own a royalty or working interest in a producing well

5
Oil and gas production excludes wells associated with acquisition of Credo Petroelum

6
Excludes 1,181 wells in which Credo Petroleum has an overriding royalty interest

THIRD QUARTER 2012 MINERAL RESOURCES PIPELINE

MINERAL INTERESTS OWNED 1

Forestar’s mineral resources segment includes approximately 593,000 owned net mineral acres principally located in Texas, Louisiana, Georgia and Alabama.
State  

Availablefor Lease
  Leased  

Held byProduction
  Total 2
Texas 201,000 25,000 26,000 252,000
Louisiana 120,000 12,000 12,000 144,000
Georgia 155,000 - - 155,000
Alabama 40,000 - - 40,000
California 1,000 - - 1,000
Indiana 1,000 - - 1,000
Total   518,000   37,000   38,000   593,000

1
  Represents net acres and includes ventures

2
Excludes 477 net mineral acres located in Colorado, which includes 379 leased acres and 29 acres held by production
 

MINERAL INTERESTS LEASED 1

Forestar’s mineral resources segment includes approximately 142,000 net mineral acres of leasehold and overriding royalty interests principally located in Nebraska, Kansas, Oklahoma, North Dakota and Texas principally as result of our September 28, 2012 acquisition of Credo Petroleum.
State   Undeveloped  

Held byProduction
  Total 2
Nebraska 53,000 2,000 55,000
Kansas 43,000 3,000 46,000
Oklahoma - 17,000 17,000
North Dakota 4,000 2,000 6,000
Texas 1,000 2,000 3,000
Other2 5,000 10,000 15,000
Total   106,000   36,000   142,000

1
  Represents net acres

2
Includes approximately 8,400 net acres of overriding royalty interests
 
         
FORESTAR GROUP INC.
REAL ESTATE SEGMENT
PERFORMANCE METRICS
 
Third Quarter First Nine Months
REAL ESTATE   2012       2011   2012       2011
Owned, Consolidated & Equity Method Ventures:
Residential Lots Sold 269 311 981 808
Revenue per Lot Sold $ 54,100 $ 46,200 $ 49,700 $ 48,900
Commercial Acres Sold 18 - 55 24
Revenue per Commercial Acre Sold $ 133,900 - $ 75,100 $ 157,900
Undeveloped Acres Sold 560 550 1,950 3,960
Revenue per Acre Sold $ 2,800 $ 2,800 $ 2,700 $ 2,600
Owned & Consolidated Ventures:
Residential Lots Sold 193 155 675 458
Revenue per Lot Sold $ 54,200 $ 52,200 $ 49,900 $ 55,300
Commercial Acres Sold 18 - 55 4
Revenue per Commercial Acre Sold $ 133,900 - $ 75,100 $ 185,300
Undeveloped Acres Sold 560 550 1,815 3,940
Revenue per Acre Sold $ 2,800 $ 2,800 $ 2,700 $ 2,600
Ventures Accounted For Using the Equity Method:
Residential Lots Sold 76 156 306 350
Revenue per Lot Sold $ 53,800 $ 40,200 $ 49,100 $ 40,600
Commercial Acres Sold - - - 20
Revenue per Commercial Acre Sold - - - $ 152,500
Undeveloped Acres Sold - - 135 20
Revenue per Acre Sold - - $ 2,600 $ 3,000
 
         

THIRD QUARTER 2012

REAL ESTATE PIPELINE
 
Real Estate Undeveloped

In EntitlementProcess
Entitled

Developed &UnderDevelopment

TotalAcres*
 
Undeveloped Land
Owned 94,111 101,012
Ventures 6,901
 
Residential
Owned 24,857 9,005 738 36,915
Ventures 2,092 223
 
Commercial
Owned 2,723 1,209 595 5,123
Ventures 399 197
 
Total Acres

101,012

27,580

12,705

1,753

143,050
                     
Estimated Residential Lots       21,250   2,614   23,864

* 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
 
Third Quarter First Nine Months
FIBER RESOURCES   2012       2011   2012       2011
Fiber Sales *
Pulpwood Tons Sold 160,000 85,800 265,200 222,100
Average Pulpwood Price / Ton $ 9.54 $ 7.57 $ 9.51 $ 8.57
Sawtimber Tons Sold 37,400 22,900 66,700 51,200
Average Sawtimber Price / Ton $ 20.21 $ 14.33 $ 19.88 $ 15.47
 
Total Tons Sold 197,400 108,700 331,900 273,300
Average Price / Ton $ 11.56 $ 8.99 $ 11.59 $ 9.86
 
Recreational Activity
Average Acres Leased 129,200 164,600 130,500 185,300
Average Lease Rate / Acre $ 8.84 $ 8.28 $ 8.84 $ 8.84

*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 third 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 90
Wolf Creek Carroll/Douglas 12,230
Yellow Creek Cherokee 1,060
 

Texas
 
Lake Houston Harris/Liberty 3,700
San Jacinto Montgomery 150
 

Total

27,580
 

(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 third quarter-end 2012 follows:
 

Residential Lots (c)

Commercial Acres (d)

Project

County

InterestOwned(b)

Lots Sold SinceInception
 

LotsRemaining

Acres Sold SinceInception
 

AcresRemaining (f)
Projects we own

California
San Joaquin River Contra Costa/

Sacramento
100 % - - - 288

Colorado
Buffalo Highlands Weld 100 % - 164 - -
Johnstown Farms Weld 100 % 162 451 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 % 35 145 - -
Cibolo Canyons Bexar 100 % 713 762 68 82
Harbor Lakes Hood 100 % 203 246 2 19
Hunter’s Crossing Bastrop 100 % 390 100 38 71
La Conterra Williamson 100 % 103 397 - 58
Maxwell Creek Collin 100 % 781 218 10 -
Oak Creek Estates Comal 100 % 131 516 13 -
Stoney Creek Dallas 90 % 141 613 - -
Summer Creek Ranch Tarrant 100 % 819 455 35 44
Summer Lakes Fort Bend 100 % 462 668 56 -
Summer Park (g) Fort Bend 100 % - 210 27 63
The Colony Bastrop 100 % 432 717 22 31
The Preserve at Pecan Creek Denton 100 % 356 438 - 7
Village Park Collin 100 % 483 277 3 2
Westside at Buttercup Creek Williamson 100 % 1,398 98 66 -
Other projects (11) Various 100 % 2,493 171 211 19

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 % 1,724 2,970 3 705

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

Missouri and Utah
Other projects (2) Various 100 % 477 77 - -
12,949 16,429 582 1,804
Projects in entities we consolidate

Texas
 
City Park Harris 75 % 1,201 110 50 115
Lantana Denton 55 % (e) 911 1,381 - -
Timber Creek Collin 88 % - 614 - -
Willow Creek Walter/Fort Bend 90 % - 231 - -
Other projects (3) Various Various 7 202 16 148

Georgia
The Georgian Paulding 75 % 289 1,052 - -
2,408 3,590 66 263
Total owned and consolidated 15,357 20,019 648 2,067
Projects in ventures that we account for using the equity method

Texas
 
Entrada Travis 50 % - 821 - -
Fannin Farms West Tarrant 50 % 324 24 - 12
Harper’s Preserve Montgomery 50 % 153 1,572 - 72
Lantana Denton Various (e) 1,451 81 16 42
Long Meadow Farms Fort Bend 37 % 967 828 107 192
Southern Trails Brazoria 80 % 553 430 - -
Stonewall Estates Bexar 50 % 299 89 - -
Other projects (1) Nueces 50 % - - - 15

Total in ventures
3,747 3,845 123 333
Combined Total 19,104 23,864 771 2,400

(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 25 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 third quarter-end 2012 follows:
            Interest            
Project    

County
    Market     Owned (a)     Type     Acres     Description
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)
3600 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

FORESTAR GROUP INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES(Unaudited)

Forestar’s Net Income and Earnings Per Share (EPS) excluding special items for the quarter and first nine months ended September 30, 2012 and 2011 are non-GAAP financial measures within the meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP financial measures are not in accordance with, or an alternative to, U.S. Generally Accepted Accounting Principles (GAAP). The company believes presenting non-GAAP Net Income and EPS is helpful to analyze financial performance without the impact of items that may obscure trends in the company’s underlying performance. A detailed reconciliation is provided below outlining the differences between these non-GAAP measures and the directly related GAAP measures.
 

Third Quarter
 

First Nine Months
($ in millions, except per share amounts)

2012
 

2011

2012
 

2011
 
Net income (loss), after-tax, in accordance with GAAP ($0.7 ) $ 36.4 $ 2.9 $ 30.0
 
Special items, after-tax
Credo acquisition expenses 2.1 - 3.7 -
Extinguishment of debt and debt offering expenses 2.9 0.3 2.9 2.1
Gain on sale of timberland   -     (40.2 )   -   (40.2 )
Total special items, after-tax $ 5.0     ($39.9 ) $ 6.6   (38.1 )
 
Net income, after-tax, excluding special items $ 4.3     ($3.5 ) $ 9.5   ($8.1 )
 
Net income (loss) per share, in accordance with GAAP ($0.02 ) $ 1.02 $ 0.08 $ 0.84
 
Special items, after-tax, per diluted share
Credo acquisition expenses 0.06 - 0.11 -
Extinguishment of debt and debt offering expenses 0.08 0.01 0.08 0.06
Gain on sale of timberland   -     ($1.12 )   -   (1.12 )
Total special items, after-tax $ 0.14     ($1.11 ) $ 0.19   ($1.06 )
 
Net income per share, excluding special items $ 0.12     ($0.09 ) $ 0.27   ($0.22 )
 
Average basic shares outstanding 35.2 35.5 35.2 35.5
Average diluted shares outstanding 35.2 35.8 35.4 35.9

Copyright Business Wire 2010

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