Forestar Group Inc. Reports Third Quarter 2016 Results

Forestar Group Inc. (NYSE: FOR) ("Forestar" or the "Company") today reported third quarter 2016 net income of approximately $9.7 million, or $0.23 per share outstanding, compared with third quarter 2015 net loss of approximately ($164.2) million, or ($4.79) per share outstanding. Third quarter 2016 earnings from continuing operations were approximately $16.8 million, or $0.40 per share outstanding, compared with third quarter 2015 net loss from continuing operations of approximately ($57.3) million, or ($1.67) per share outstanding.

Significant progress: Sold Non-Core Assets, Strengthened Balance Sheet, Reduced Costs and Focused on Core Community Development Business

"In one year, we have made significant progress transforming Forestar through the execution of our key initiatives to divest non-core assets, reduce outstanding debt, reduce SG&A costs and focus on maximizing shareholder value. Key highlights include selling $425 million in non-core assets, reducing outstanding debt by over $320 million, and reducing annual interest expense by approximately $23 million going forward. Once non-core asset sales are fully executed, projected annual SG&A costs are expected to decrease by over $50 million compared with 2015 actuals. In addition, we have transformed our capital structure by significantly reducing leverage, which has strengthened our balance sheet and created flexibility," said Phil Weber, Chief Executive Officer of Forestar.

"In addition to executing these initiatives, we have focused on maximizing shareholder value delivered from our core community development business. Builder demand for residential lots in our key communities remains steady. At third quarter-end 2016, we have over 2,080 residential lots under option contract with builders, the highest number of lots under option contract in over five years," continued Mr. Weber.

Business Segments

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

REAL ESTATE

Third Quarter 2016 Highlights (Includes Ventures)
  • Sold 332 developed residential lots for $70,000 per lot
  • Sold 243 residential tract acres for $26,800 per acre
  • Sold 110 commercial acres for approximately $76,200 per acre
    • Includes 108 acres - Antioch, CA project for $7 million
  • Sold approximately 6,500 acres of undeveloped land for $2,410 per acre
  • Incurred $7.6 million in non-cash impairments, primarily related to a multifamily site under contract in Austin
           

Segment Financial Results:
 
($ in millions) Q3 2016 Q3 2015 Q2 2016
Segment Revenues $45.3 $28.0 $46.4
Segment Earnings $15.0 $5.2 $73.3
 

Real estate segment earnings increased in third quarter 2016 compared with third quarter 2015 principally due to higher undeveloped land sales activity which was offset by non-cash impairment charges of $7.6 million related to one non-core multifamily site and two non-core community development projects. Commercial sale activity in third quarter 2016 is primarily related to sale of 108 acres from our San Joaquin River project in Antioch, California for $7 million which generated approximately $37 million in tax losses to offset tax gains. Residential tract sale activity in third quarter 2016 is related to the bulk sale of 243 acres from a venture project near Austin for $6.5 million which contributed approximately $1.4 million in segment earnings. Second quarter 2016 real estate segment earnings includes gain on sale of non-core assets of $107.7 million, principally due to a $95.3 million gain associated with the sale of the Radisson Hotel & Suites and over $10.3 million in gains associated with the sale of our Eleven multifamily community and sale of our Dillon multifamily site, which were partially offset by non-cash impairment charges of $48.8 million related to five non-core community development projects and one non-core multifamily site.

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