Forestar Group Inc. Reports Third Quarter 2009 Results
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AUSTIN, Texas--(BUSINESS WIRE)-- Forestar Group Inc. (NYSE: FOR) today reported third quarter 2009 net income of $19.5 million, or $0.54 per diluted share, compared with third quarter 2008 net income of $0.9 million, or $0.02 per diluted share. Third quarter 2009 results include a gain of $0.45 per diluted share, after-tax, from the sale of about 20,000 acres of HBU timberland for approximately $39.5 million.
"We had a good quarter and continued to make significant progress executing our strategy and near-term strategic initiatives, which we believe will enhance shareholder value," said Jim DeCosmo, president and chief executive officer of Forestar Group. "Third quarter highlights include:
- Selling 20,000 acres of HBU timberland in Georgia for approximately $39.5 million
- Receiving $20.3 million in reimbursements from special public improvement districts
- Leasing 10,795 net mineral acres for $15.8 million
- Reducing investment in real estate development and lowering costs by $58.8 million YTD 3rd Qtr. 2009
- Reducing debt $13 million during 3rd Qtr. 2009, and $124 million since 1st Qtr. 2009
Forestar manages its operations through three business segments:
- Real estate,
- Mineral resources, and
- Fiber resources
At the end of third quarter 2009, our real estate segment includes over 255,000 acres of land owned directly or through ventures located in nine states and twelve markets. Mineral resources include about 622,000 net acres of oil and gas mineral interests located principally in Texas, Louisiana, Alabama and Georgia. Mineral resources also include a 45% nonparticipating royalty interest in groundwater produced or withdrawn for commercial purposes from approximately 1.38 million acres in Texas, Louisiana, Georgia and Alabama. Fiber resources include the sale of wood fiber and management of our recreational leases.
REAL ESTATE
3rd Qtr. 3rd Qtr. 2nd Qtr.
Segment Earnings
2009 2008 2009
($ in Millions) $0.1 $1.7 $5.0
Third quarter 2009 real estate segment earnings were negatively impacted by $4.7 million in impairment charges, principally associated with a condominium project located in Austin, Texas and two joint venture projects located in Tampa, Florida.
During third quarter 2009 we received approximately $20.3 million from a special public improvement district as reimbursement for qualified infrastructure costs. These reimbursements were accounted for as a reduction in our investment basis.
Second quarter 2009 real estate segment earnings were negatively impacted by a $4.1 million loss from equity in earnings of unconsolidated ventures, principally due to an impairment charge related to a venture investment in a project located near Atlanta, Georgia.
Sales Activity
3rd Qtr. 2009 3rd Qtr. 2008
Sales Price Sales Price
Undeveloped Land* 5,313 acres $2,100 / acre 1,774 acres $4,800 / acre
Residential Lots* 168 lots $52,700 / lot 149 lots $62,200 / lot
Commercial Acres* 2 acres $435,400 / acre 23 acres $252,300 / acre
* Includes venture activity
During third quarter 2009, over 5,300 acres of undeveloped land were sold at an average sales price of over $2,100 per acre, including a single transaction of approximately 3,100 acres of rural undeveloped land.
Residential sales activity for all wholly and partially-owned projects during third quarter 2009 included the sale of 168 lots at an average price of approximately $52,700 per lot. Third quarter 2009 average residential lot prices were negatively impacted by a higher mix of smaller residential lots principally associated with increased demand for entry-level homes from the federal housing tax credit program for first-time home buyers.
During third quarter 2009, approximately two acres of commercial land were sold at an average sales price of $435,400 per acre in a real estate venture located near Austin, Texas.
Real Estate Pipeline
At the end of third quarter 2009, our real estate segment includes over 255,000 acres of land owned directly or through ventures located in nine states and twelve markets.
3rd Qtr. 2009 Real Estate Pipeline
In Developed &
Real Estate Undeveloped Entitlement Entitled Under Total Acres*
Process Development
Undeveloped Land
Owned 200,148
206,901
Ventures 6,753
Residential
Owned 26,928 7,929 675
42,557
Ventures 1,080 4,585 1,360
Commercial
Owned 3,502 1,056 520
5,849
Ventures 517 254
Total Acres 206,901 31,510 14,087 2,809 255,307
Estimated Residential Lots 25,676 3,957 29,633
* Total acres excludes Forestar's 58% ownership interest in the Ironstob, LLC venture which controls approximately 16,000 acres of undeveloped land
Entitlement Activity
Including ventures, Forestar has 21 real estate projects representing over 31,500 acres in the entitlement process, and over 14,000 acres of entitled land, representing over 25,600 residential lots and almost 1,600 commercial acres.
Development Activity
Forestar has over 2,800 acres developed and under development owned directly or through ventures. During third quarter 2009 the company invested $16.1 million in real estate development activity, compared with $25.6 million in third quarter 2008. "Excluding our contributions to the resort at Cibolo Canyons, third quarter 2009 investment in development was down about 80% compared with third quarter 2008," added Mr. DeCosmo.
Investment in Real Estate Development ($ in millions) 3rd Qtr. 2009 3rd Qtr. 2008 Reduction Investment in Development $16.1 $25.6 Contribution to Resort at Cibolo ($12.2 ) ($6.0 ) Canyons Net Investment in Development $3.9 $19.6 (80 %)
MINERAL RESOURCES
3rd Qtr. 3rd Qtr. 2nd Qtr.
Segment Earnings
2009 2008 2009
($ in Millions) $17.8 $8.2 $6.4
Third quarter 2009 mineral resources segment earnings include approximately $15.8 million in lease bonus payments generated from leasing 10,795 net mineral acres to oil and gas companies for $1,465 per acre.
Mineral Activity*
Third Quarter 2009
Revenues Activity
Royalties $2.6 million Natural Gas Production (MMCF) 284.8
Average Price / MCF $3.35
Oil Production (Barrels) 25,400
Average Price / Barrel $63.46
Other Lease Revenues $16.2 million Acres Leased 10,795
Average Bonus / Acre $1,465
Total Revenues $18.8 million
* Includes our share of venture activity
Including ventures, our share of oil and gas production related to our royalty interests was about 25,400 barrels of oil and approximately 284.8 MMCF of natural gas during third quarter 2009. In addition, Forestar generated other lease revenues of $16.2 million principally related to leasing 10,795 net mineral acres for $15.8 million and receiving over $0.4 million in delay rental payments.
Forestar's mineral resources segment includes approximately 622,000 net mineral acres located in Texas, Louisiana, Alabama and Georgia.
Third Quarter 2009
Mineral Ownership 1
State Available Leased Held by Total3
for Lease2 Production
Texas 116,000 109,000 19,000 244,000
Louisiana 104,000 10,000 7,000 121,000
Alabama 55,000 2,000 - 57,000
Georgia 200,000 - - 200,000
475,000 121,000 26,000 622,000
1 Includes ventures
2 Includes approximately 6,500 net acres subject to lease option.
3 Excludes approximately 249 net mineral acres located in Colorado
FIBER RESOURCES
3rd Qtr. 3rd Qtr. 2nd Qtr.
Segment Earnings
2009 2008 2009
($ in Millions) $2.1 $1.9 $3.3
Fiber Sales Activity
During third quarter 2009 Forestar generated approximately $3.1 million in revenues from the sale of approximately 279,600 tons of fiber, the majority of which was sold to Temple-Inland Inc. at market prices.
Comments
"During third quarter 2009 we continued to make significant progress in executing our near-term strategic initiatives, despite difficult market conditions. Since the announcement of our strategic initiatives, we have sold over 95,000 acres of timberland for almost $160 million, and reduced debt by $124 million or 35% since the end of first quarter 2009. We firmly believe the execution of our strategic initiatives will enhance shareholder value."
The Company will host a conference call on November 4, 2009 at 10:00 am EDT to discuss results of third quarter 2009. 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 1-800-573-4842 at least 15 minutes prior to the start of the meeting. Those wishing to access the call from outside North America should dial 1-617-224-4327. 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 83753032.
About Forestar Group
Forestar Group Inc. operates in three business segments: real estate, mineral resources and fiber resources. The real estate segment owns directly or through ventures over 255,000 acres of real estate located in nine states and twelve markets in the U.S. The real estate segment has 21 real estate projects representing over 31,500 acres currently in the entitlement process, and 75 entitled, developed and under development projects in seven states and eleven markets encompassing over 16,000 acres, comprised of over 29,600 residential lots and over 2,300 commercial acres. The mineral resources segment manages about 622,000 net acres of oil and gas mineral interests. The fiber resources segment include the sale of wood fiber and management of our recreational leases. The company also has a 45% nonparticipating royalty interest in groundwater produced or withdrawn for commercial purposes from approximately 1.38 million acres in Texas, Louisiana, Georgia and Alabama. 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. 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. Factors and uncertainties that might cause such differences include, but are not limited to: general economic, market, or business conditions; 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
2009 2008 2009 2008
(In thousands, (In thousands,
except per share) except per share)
Revenues
Real estate $ 22,921 $ 20,930 $ 70,155 $ 73,491
Mineral resources 18,828 9,539 31,767 40,193
Fiber resources 3,558 3,474 12,928 9,079
Total revenues $ 45,307 $ 33,943 $ 114,850 $ 122,763
Segment earnings
Real estate $ 92 $ 1,656 $ 5,641 $ 6,073
Mineral resources 17,850 8,182 29,033 37,934
Fiber resources 2,080 1,938 8,279 6,189
Total segment earnings 20,022 11,776 42,953 50,196
Items not allocated to
segments
General and administrative (5,874 ) (4,454 ) (17,750 ) (14,808 )
(a)
Share-based compensation (3,396 ) (1,130 ) (7,717 ) (4,658 )
Gain on sale of assets 24,833 - 104,047 -
Interest expense (5,440 ) (5,079 ) (15,653 ) (15,747 )
Other non-operating income 287 79 382 233
Income before taxes 30,432 1,192 106,262 15,216
Income tax expense (10,956 ) (320 ) (39,761 ) (4,986 )
Net income attributable to $ 19,476 $ 872 $ 66,501 $ 10,230
Forestar Group Inc.
Diluted earnings per share:
Net income $ 0.54 $ 0.02 $ 1.85 $ 0.28
Average diluted shares 36.2 35.8 36.0 35.9
outstanding
Third Quarter
Supplemental Financial 2009 2008
Information
(In thousands)
Cash and cash equivalents $ 43,542$ 7,254
125,000 218,000
Borrowings under credit
facility
Other debt (b) 99,966 96,586
Total debt $ 224,966$ 314,586
(a) Third quarter 2009 general and administrative costs include approximately $1.8 million impairment charge associated with our interest in corporate aircraft contributed to us by Temple-Inland prior to spin-off. First nine months 2009, general and administrative costs also include approximately $3.2 million paid to outside advisors regarding an evaluation by our Board of Directors of an unsolicited shareholder proposal.
(b) Consists principally of consolidated venture non-recourse debt.
Information about our real estate projects and our ventures for third quarter-end 2009 follows:
Third Quarter
2009 2008
Owned & Consolidated Ventures:
Entitled, developed and under development projects
Number of projects 54 56
Residential lots remaining 20,467 20,623
Commercial acres remaining 1,702 1,589
Undeveloped land and land in entitlement process
Number of projects 19 24
Acres in entitlement process 30,430 32,680
Acres undeveloped (a) 201,384 311,597
Ventures accounted for using the equity method:
Ventures' lot sales (first nine months)
Lots sold 126 205
Revenue per lot sold $ 65,165 $ 55,942
Ventures' entitled, developed, and under development
projects
Number of projects 21 21
Residential lots remaining 9,166 9,346
Commercial acres sold (first nine months) 4 39
Revenue per acre sold $ 196,996 $ 285,681
Commercial acres remaining 645 666
Ventures' undeveloped land and land in entitlement process
Number of projects 2 2
Acres in entitlement process 1,080 1,080
Acres sold (first nine months) 1 486
Revenue per acre sold $ 10,000 $ 6,306
Acres undeveloped 5,517 5,641
(a) Includes 74,000 acres classified as assets held for sale.
A summary of projects in the entitlement process(a) at third quarter-end 2009 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
Burt Creek Dawson 970
Crossing Coweta 230
Dallas Highway Haralson 1,060
Fincher Road Cherokee 3,950
Fox Hall Coweta 960
Garland Mountain Cherokee/Bartow 350
Home Place Coweta 1,510
Jackson Park Jackson 700
Martin's Bridge Banks 970
Mill Creek Coweta 770
Serenity Carroll 440
Waleska Cherokee 150
Wolf Creek Carroll/Douglas 12,230
Yellow Creek Cherokee 1,060
Texas
Lake Houston Harris/Liberty 3,700
San Jacinto Montgomery 150
Entrada(c) Travis 240
Woodlake Village(c) Montgomery 840
Total 31,510
(a) A project is deemed to be in the entitlement process when customary steps necessary for the preparation and submittal of an application, 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.
(c) We own a 50% interest in these projects.
A summary of activity within our entitled,(a) developed and under development projects at third quarter-end 2009 follows:
Residential Lots (c) Commercial Acres (d)
Lots Sold Acres
Interest Lots Sold Acres
Project County Owned(b) Since Remaining Since Remaining
Inception
Inception
Projects we
own
California
San Joaquin Contra 100% - - - 288
River Costa/Sacramento
Colorado
Buffalo Weld 100% - 164 - -
Highlands
Johnstown Weld 100% 115 493 2 8
Farms
Pinery West Douglas 100% - - - 115
Stonebraker Weld 100% - 603 - 13
Westlake Jefferson 100% - 21 - -
Highlands
Texas
Arrowhead Hays 100% - 232 - 6
Ranch
Caruth Lakes Rockwall 100% 265 384 - -
Cibolo Bexar 100% 580 1,167 64 81
Canyons
Harbor Lakes Hood 100% 199 250 - 14
Harbor Mist Calhoun 100% - 200 - -
Hunter's Bastrop 100% 322 169 38 68
Crossing
La Conterra Williamson 100% 53 456 - 60
Maxwell Collin 100% 665 346 10 -
Creek
Oak Creek Comal 100% 25 623 13 -
Estates
The Colony Bastrop 100% 409 2,240 22 49
The Gables
at North Collin 100% 195 88 - -
Hill
The Preserve
at Pecan Denton 100% 231 587 - 9
Creek
The Ridge at
Ribelin Travis 100% - - 179 16
Ranch
Westside at
Buttercup Williamson 100% 1,288 233 66 -
Creek
Other Various 100% 1,548 20 197 23
projects (7)
Georgia
Towne West Bartow 100% - 2,674 - 121
Other
projects Various 100% - 3,054 - 705
(14)
Missouri and
Utah
Other Various 100% 429 335 - -
projects (2)
6,324 14,339 591 1,576
Projects in entities we consolidate
Texas
City Park Harris 75% 1,099 212 50 105
Lantana Denton 55% (e) 468 1,828 - -
Light Farms Collin 65% - 2,517 - -
Stoney Creek Dallas 90% 68 686 - -
Timber Creek Collin 88% - 614 - -
Other Various Various 936 271 26 21
projects (5)
2,571 6,128 76 126
Total owned
and 8,895 20,467 667 1,702
consolidated
Projects in ventures that we account for using the equity method
Georgia
Seven Hills Paulding 50% 634 446 26 -
The Georgian Paulding 38% 288 1,097 - -
Other Various Various 1,845 249 3 -
projects (5)
Texas
Bar C Ranch Tarrant 50% 176 1,023 - -
Fannin Farms Tarrant 50% 279 101 - 15
West
Lantana Denton Various (e) 1,436 34 14 75
Long Meadow Fort Bend 19% 606 1,500 72 138
Farms
Southern Brazoria 40% 364 663 - -
Trails
Stonewall Bexar 25% 212 169 - -
Estates
Summer Creek Tarrant 50% 796 1,772 - 363
Ranch
Summer Lakes Fort Bend 50% 325 798 56 -
Village Park Collin 50% 339 221 3 2
Waterford Fort Bend 50% - 493 - 37
Park
Other Various Various 296 228 - 15
projects (2)
Florida
Other Various Various 473 372 - -
projects (3)
Total in 8,069 9,166 174 645
ventures
Combined 16,964 29,633 841 2,347
Total
(a) A project is deemed entitled when all major discretionary land-use approvals have been received. Some projects may require additional permits 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.
(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 15 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.
A summary of our commercial operating properties, commercial projects and condominium projects at third quarter-end 2009 follows:
Interest
Project County Market Owned(a) Type Description
Radisson Hotel Travis Austin 100% Hotel 413 guest rooms
and suites
Palisades West Travis Austin 25% Office 375,000 square
feet
Presidio at Travis Austin 60% Condominium 45 units
Judge's Hill
Las Brisas Williamson Austin 49% Multi-Family 414 unit luxury
apartment
Harbor Lakes Hood Dallas/Fort 100% Golf Club 18-hole golf
Golf Club Worth course and club
Gulf Coast Various Various 2% Multi-Family 9 apartment
Apartments communities
(a) Interest owned reflects our net equity interest in the project, whether owned directly or indirectly.
Source: Forestar Group Inc.
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