Forestar Group Inc. Reports First Quarter 2013 Results

Before you go, we thought you'd like these...
Before you go close icon

Forestar Group Inc. Reports First Quarter 2013 Results

Accelerating Value Realization through Higher Residential Lot Sales, Increased Oil Production and Capitalizing on Multifamily Opportunities

AUSTIN, Texas--(BUSINESS WIRE)-- Forestar Group Inc. (NYS: FOR) today reported first quarter 2013 net income of approximately $4.0 million, or $0.11 per diluted share, compared with first quarter 2012 net income of approximately $2.8 million, or $0.08 per diluted share outstanding.


"During first quarter, increased residential lot sales activity continued to reflect positive momentum and signs of a sustainable housing recovery. Residential real estate markets in Texas continue to benefit from low finished lot inventories combined with a significant increase in housing starts. Multifamily market conditions also remain strong in our target markets, and during the quarter, we sold Promesa, a wholly-owned multifamily community we developed in Austin, for $41 million, generating earnings of $10.9 million. In addition, oil and gas revenues continued to gain momentum, with increased oil production in the Bakken and Three Forks formations in North Dakota and the Lansing-Kansas City formation in Kansas and Nebraska, principally due to our acquisition of Credo Petroleum. We are focused on executing and delivering our Triple in FOR strategic initiatives to accelerate value realization, optimize transparency and disclosure and grow net asset value through strategic and disciplined investments," said Jim DeCosmo, president and chief executive officer of Forestar Group.

First Quarter 2013 Significant Highlights

  • Sold Promesa, a wholly-owned multifamily community we developed in Austin for $41 million, generating earnings of $10.9 million
  • Sold 446 developed residential lots, a 56% increase compared with first quarter 2012
  • Oil production up over 113% compared with first quarter 2012, principally due to the acquisition of Credo Petroleum

Segment Reporting Change

Forestar has realigned its reportable segments to better reflect the underlying market fundamentals and operating strategy of its core businesses. With this change, we have aggregated our fiber and water resources operating results in other natural resources. The company manages its operations through three business segments: real estate, oil and gas and other natural resources.

REAL ESTATE

First Quarter 2013 Significant Highlights

  • Sold Promesa, a wholly-owned multifamily community we developed in Austin for $41.0 million, generating earnings of $10.9 million
  • Sold 446 developed residential lots, a 56% increase compared with first quarter 2012 - Almost 1,800 lots under option contracts
  • Sold 919 acres of undeveloped land for over $2,900 per acre
  • Sold 3 commercial acres for over $382,000 per acre

Segment Financial Results:

($ in millions)  1Q 2013  1Q 2012  4Q 2012
 
Segment Revenues$78.7$17.9$48.4
 
Segment Earnings$19.4$11.6$21.7
 

First quarter 2013 real estate segment earnings were higher compared with first quarter 2012 principally due to higher residential lot sales. Real estate segment earnings declined in first quarter 2013 compared with fourth quarter 2012 primarily due to lower undeveloped land sales.

OIL AND GAS

First Quarter 2013 Significant Highlights

  • Oil production up over 113% compared with first quarter 2012, principally due to the acquisition of Credo Petroleum
  • 22 new productive oil and gas wells drilled; 965 producing wells at quarter-end, up from 534 wells in first quarter 2012, principally due to acquisition of Credo Petroleum

Segment Financial Results:

($ in millions)  1Q 2013  1Q 2012  4Q 2012
 
Segment Revenues$15.5$9.4$17.2
 
Segment Earnings$5.1$7.1$7.1
 

Oil and gas segment earnings decreased in first quarter 2013 compared with first quarter 2012 principally due to reduced oil volumes associated with our owned mineral interests, lower oil prices, decreased delay rental revenues and incremental personnel costs, which were partially offset by increased oil production attributable to the acquisition of Credo Petroleum. Oil and gas segment earnings decreased in first quarter 2013 compared with fourth quarter 2012 primarily due to lower oil production, which was partially offset by higher oil prices.

OTHER NATURAL RESOURCES

First Quarter 2013 Significant Highlights

  • Sold over 191,000 tons of fiber for $15.65 per ton
  • Recreational leasing remains strong

Segment Financial Results:

($ in millions)  1Q 2013  1Q 2012  4Q 2012
 
Segment Revenues$3.3$0.7$3.0
 
Segment Earnings (Loss)$1.3($0.9)$0.8
 

First quarter 2013 other natural resources segment earnings were higher compared with first quarter 2012 principally due to over 162,000 tons of additional fiber sales and a 35% increase in average pricing per ton. Other natural resources segment earnings increased in first quarter 2013 compared with fourth quarter 2012 primarily due to higher fiber sales.

OUTLOOK

"Housing markets continue to show solid signs of a sustainable recovery, with growing demand for residential lots and increased interest in residential and commercial tracts. Our backlog remains strong and we are well positioned to accelerate real estate sales during this housing recovery. Our multifamily team successfully developed, leased, and monetized our Promesa community in only 24 months, generating well above cost of capital returns for our business, reflections of the project quality, experience of our team and favorable multifamily market conditions. We continue to build a solid pipeline of multifamily development opportunities, with construction at our multifamily ventures in Austin and Denver on target to begin delivering units in 2013, and our sites in Dallas, Nashville and Charlotte should be under construction by year-end. We will continue to evaluate and acquire additional multifamily sites to further increase our pipeline of quality multifamily development opportunities.

"We continue to generate positive momentum through our oil and gas initiatives to increase exploration activity, production and reserves. During first quarter, we experienced a significant increase in North Dakota drilling activity, with approximately twelve Bakken or Three Forks wells (5% average working interest) reaching total depth during the quarter. We anticipate drilling activity in the Bakken to accelerate in the second half of 2013. In addition, exploration and drilling activity in Kansas and Nebraska also ramped up during first quarter, with 19 wells (59% average working interest) reaching total depth, ten of which have been economic. Our exploration initiatives in Kansas and Nebraska are yielding favorable success rates and strong risk-adjusted returns, and we continue to lease additional acreage in this basin. During first quarter 2013, Forestar acquired leasehold interests in over 28,000 net mineral acres in new and existing prospects in Nebraska and Kansas.

"We continue to increase our momentum toward delivering our Triple in FOR strategic initiatives, focused on accelerating value realization, increasing transparency and disclosure, and growing our net asset value through strategic and disciplined investments. We are off to a great start and we are well positioned for 2013," concluded Mr. DeCosmo.

The Company will host a conference call on May 8, 2013 at 10:00 am ET to discuss results of first quarter 2013. 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 1-877-280-4958 at least 15 minutes prior to the start of the meeting. Those wishing to access the call from outside North America should dial 1-857-244-7315. 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 95046996.

About Forestar Group

Forestar Group Inc. operates in three business segments: real estate, oil and gas and other natural resources. At the end of first quarter 2013, the real estate segment owns directly or through ventures almost 135,000 acres of real estate located in ten states and fourteen markets in the U.S. The real estate segment has 14 real estate projects representing approximately 25,980 acres currently in the entitlement process, and 72 entitled, developed and under development projects in eight states and twelve markets encompassing almost 14,400 acres, comprised of almost 23,600 planned residential lots and almost 2,400 commercial acres. The oil and gas segment includes approximately 792,000 net acres of oil and gas mineral interests, with approximately 590,000 acres of fee ownership located principally in Texas, Louisiana, Alabama, and Georgia and almost 202,000 net acres of leasehold interests principally located in Nebraska, Kansas, Oklahoma, North Dakota and Texas. These leasehold interests include almost 6,000 net mineral acres in the core of the prolific Bakken and Three Forks formations. The other natural resources segment includes sale of wood fiber and management of our recreational leases, and approximately 1.5 million acres of groundwater resources, including 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 20,000 acres of groundwater leases in central Texas. 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 synergies and value creation contemplated by the merger with Credo, and our ability to promptly and effectively integrate Credo's businesses. 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; 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

 
First Quarter
20132012
(In thousands,

except per share)

Revenues

Real estate$78,689$17,922
Oil and gas15,5049,426
Other natural resources 3,278  744 
Total revenues$97,471 $28,092 
 

Segment earnings

Real estate$19,446$11,577
Oil and gas5,1277,128
Other natural resources 1,252  (863)
Total segment earnings25,82517,842
 
Items not allocated to segments:
General and administrative expense(4,958)(4,362)
Share-based compensation expense(10,415)(5,231)
Interest expense(4,539)(3,891)
Other corporate non-operating income 31  64 
Income before taxes5,9444,422
Income tax expense (1,993) (1,620)
Net income attributable to Forestar Group Inc.$3,951 $2,802 
 
Net income per common share:
Basic$0.11$0.08
Diluted$0.11$0.08
 
Weighted average common shares outstanding:

Basic

35.3

34.9

Diluted

35.7

35.2
 
First Quarter

Supplemental Financial Information:

20132012
(In thousands)
 
Cash and cash equivalents$86,653$6,801
 
Borrowings under credit facility$200,000$136,000
Convertible senior notes, net of discount (a)97,593-
Other debt (b) 31,027  91,865 
Total debt$328,620 $227,865 
(a) Represents $125 million convertible senior notes issued February 2013, net of unamortized discount
(b)Consists principally of consolidated venture non-recourse debt.
  
 

FORESTAR GROUP INC.

REAL ESTATE SEGMENT

PERFORMANCE METRICS

 
First Quarter
REAL ESTATE2013  2012
Owned, Consolidated & Equity Method Ventures:
Residential Lots Sold446285
Revenue per Lot Sold$51,900$53,000
Commercial Acres Sold3-
Revenue per Commercial Acre Sold$382,700-
Undeveloped Acres Sold919455
Revenue per Acre Sold$2,900$2,400
Owned & Consolidated Ventures:
Residential Lots Sold355137
Revenue per Lot Sold$52,500$62,000
Commercial Acres Sold3-
Revenue per Commercial Acre Sold$382,700-
Undeveloped Acres Sold919320
Revenue per Acre Sold$2,900$2,300
Ventures Accounted For Using the Equity Method:
Residential Lots Sold91148
Revenue per Lot Sold$49,600$44,600
Commercial Acres Sold--
Revenue per Commercial Acre Sold--
Undeveloped Acres Sold-135
Revenue per Acre Sold-$2,600
         
 

FIRST QUARTER 2013

REAL ESTATE PIPELINE

 
Real EstateUndeveloped

In
Entitlement
Process

Entitled

Developed &
Under
Development

Total
Acres*

 
Undeveloped Land
Owned87,54394,444
Ventures6,901
 
Residential
Owned23,2729,00582135,277
Ventures1,898281
 
Commercial
Owned2,7081,2015915,077
Ventures387190
 
Total Acres94,44425,98012,4911,883134,798
               
Estimated Residential Lots     20,500  3,063  23,563

* 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.

OIL AND GAS SEGMENT

PERFORMANCE METRICS

 
First Quarter
2013  2012
Leasing Activity from Owned Mineral Interests
Acres Leased

310

805
Average Bonus / Acre$

316

$ Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners

Gift Finder Promo
More to Explore
Sun, Dec 04
Set Your Location
City, State, or Zip