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Form 8-K Forestar Group Inc. For: May 10

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May 10, 2016 6:12 PM EDT



 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Date of Report: May 10, 2016
(Date of earliest event reported)
 
FORESTAR GROUP INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
Commission File Number
 
26-1336998
(State or other jurisdiction of incorporation or organization)
 
001-33662
 
(I.R.S. Employer
Identification No.)
 

6300 Bee Cave Road, Building Two, Suite 500
Austin, Texas 78746
(Address of principal executive offices) (zip code)
 
(512) 433-5200
(Registrant’s telephone number, including area code)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: 
o       Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o       Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o       Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o       Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

1



Item 2.02. Results of Operations and Financial Condition.
 
On May 10, 2016, Forestar Group Inc. (the “Company”) issued a press release announcing the Company’s results for the quarter ended March 31, 2016. A copy of the press release is furnished as Exhibit 99.1.

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
 
On May 10, 2016, the Company announced that William G. Currie and David L. Weinstein will retire from the Board of Directors effective September 1, 2016. In furtherance of the Company's initiative to reduce costs, the size of the Board will be reduced from nine to seven members upon the retirements of Messrs. Currie and Weinstein. A copy of the press release regarding these events is attached as Exhibit 99.1.

 Item 7.01. Regulation FD Disclosure
 
On May 11, 2016, management of the Company will participate in a conference call discussing the Company’s results for the quarter ended March 31, 2016. Copies of the presentation materials to be used by management are furnished as Exhibit 99.2 of this report.


Item 9.01. Financial Statements and Exhibits.
 
(d) Exhibits.
 
Exhibit
 
Description
 
 
 
99.1

 
Press release, dated May 10, 2016
 
 
 
99.2

 
Presentation materials to be used by management in a conference call on May 11, 2016, discussing the Company’s results for the quarter ended March 31, 2016.




2



SIGNATURE
 
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
FORESTAR GROUP INC.
 
 
 
 
 
 
Date:
May 10, 2016
By:
/s/ Charles D. Jehl
 
 
 
Name:
Charles D. Jehl
 
 
 
Title:
Chief Financial Officer


3



EXHIBIT INDEX
 
Exhibit
 
Description
 
 
 
99.1

 
Press release, dated May 10, 2016
 
 
 
99.2

 
Presentation materials to be used by management in a conference call on May 11, 2016, discussing the Company’s results for the quarter ended March 31, 2016.

4
Exhibit 99.1



NEWS
RELEASE

FOR IMMEDIATE RELEASE
CONTACT:     Anna E. Torma
(512) 433-5312

FORESTAR GROUP INC. REPORTS FIRST QUARTER 2016 RESULTS

Additional progress executing key initiatives to reduce costs, exit non-core assets and focus on maximizing shareholder value
First Quarter 2016
•
Sold Kansas / Nebraska oil and gas assets for $21.0 million
•
Sold over 900 net acres and 9 producing wells in Bakken / Three Forks for $9.5 million
•
Sold Music Row multifamily site for $15.0 million
•
Sold 360° multifamily venture interest and received a development fee for a total of $15.1 million
•
Retired $8.6 million of senior secured notes, reducing annual interest expense by $0.7 million
•
Reduced SG&A by 24% compared with first quarter 2015
Subsequent Events - Second Quarter 2016
•
Sold remaining Bakken / Three Forks oil and gas assets for $50.0 million - over 130 producing wells and nearly 8,100 net acres
•
Sold Eleven, a stabilized multifamily community, for $60.2 million
•
Sold Radisson Hotel & Suites for $130.0 million
•
Engaged LandVest to market approximately 72,000 acres of timberland and undeveloped land, primarily in Georgia

AUSTIN, TEXAS, May 10, 2016—Forestar Group Inc. (NYSE: FOR) (“Forestar” or the “Company”) today reported first quarter 2016 net loss of approximately ($4.4) million, or ($0.13) per share outstanding, compared with first quarter 2015 net loss of approximately ($8.2) million, or ($0.24) per share outstanding.

Focused on Significantly Reducing Costs and Completing Non-Core Asset Sales
“Forestar has made additional progress reducing costs and exiting non-core assets. Key accomplishments include the sale of our Bakken / Three Forks oil and gas assets for nearly $60.0 million in two transactions and closing the previously announced sale of Kansas / Nebraska oil and gas assets for $21.0 million. These transactions substantially complete our exit of non-core oil and gas working interest assets. In multifamily, in the first quarter, Forestar sold our Nashville Music Row community site and our Denver 360° venture interest generating combined proceeds of $29.1 million. Additionally, in second quarter 2016, we closed the sale of Eleven, a stabilized multifamily community in Austin, generating proceeds of $35.2 million net of repayment of $23.9 million in debt and the sale of the Radisson Hotel & Suites in Austin generating proceeds of $112.0 million net of debt repayment of $15.4 million. We are focused on executing our key initiatives and delivering value for shareholders,” said Phil Weber, Chief Executive Officer of Forestar.



1




Residential Housing Demand Remains Favorable
“We continue to see favorable market demand for our communities supported by low developed lot supply inventory in all of our key markets, and above national average job growth in almost all of our markets. First quarter 2016 lot sales were in-line with prior year levels,” said Michael Quinley, President - Community Development.

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

REAL ESTATE

First Quarter 2016 Highlights (Includes Ventures)
•
Sold Music Row multifamily site generating $4.0 million in earnings
•
Sold 360° multifamily venture interest generating $10.8 million in earnings, including development fee
•
Sold 284 developed residential lots for over $70,300 per lot
•
Sold 8 commercial acres for over $331,000 per acre
•
Sold 1,972 acres of undeveloped land for $2,890 per acre

Segment Financial Results:
($ in millions)
 
Q1 2016
 
Q1 2015
 
Q4 2015
Segment Revenues
 
$36.1
 
$32.8
 
$102.6
Segment Earnings
 
$20.2
 
$9.1
 
$37.9

Real estate segment earnings increased in first quarter 2016 compared with first quarter 2015 principally due to $13.6 million in gains in first quarter 2016 associated with the sale of our interest in the 360° multifamily venture and sale of our wholly-owned Music Row multifamily community site. First quarter 2016 residential lot sales activity was in-line with first quarter 2015 levels with lower average pricing, due to mix. Real estate segment earnings declined in first quarter 2016 compared with fourth quarter 2015 principally due to lower residential lot and tract sales volumes. Fourth quarter 2015 real estate segment earnings also include $9.3 million in earnings generated by the sale of Midtown Cedar Hill multifamily community for $42.8 million.

OIL AND GAS

First Quarter 2016 Highlights (Includes Ventures)
•
Generated approximately $21.0 million in proceeds from selling Kansas / Nebraska properties
•
Generated $9.5 million in proceeds from the sale of over 900 net acres in the Bakken / Three Forks, 9 gross producing wells and reimbursement of capital costs on in progress wells
•
Reduced operating expenses by approximately 72% compared with first quarter 2015

Segment Financial Results:
($ in millions)
 
Q1 2016
 
Q1 2015
 
Q4 2015
Segment Revenues
 
$5.4
 
$13.2
 
$10.1
Segment Earnings (Loss)
 
($12.4)
 
$(2.9)
 
($38.4)

Oil and gas segment results decreased in first quarter 2016 compared with first quarter 2015 principally due to a net loss of ($11.0) million associated with the sale of 190,960 net leasehold acres and 185 gross (66 net) producing oil and gas wells primarily in Nebraska, Kansas, Oklahoma and North Dakota. Lower oil and gas prices and lower

2


production volumes also contributed to the year over year decline. Total oil and gas segment operating expenses were down approximately 72% in first quarter 2016 compared with first quarter 2015, principally due to lower staffing costs as result of our key initiative to exit non-core assets. First quarter 2015 oil and gas segment results include $2.8 million in restructuring costs partially offset by $1.2 million in gains associated with the sale of 290 net acres of leasehold interest in the Bakken / Three Forks. Oil and gas segment results in fourth quarter 2015 include non-cash impairment charges of $37.6 million.

OTHER NATURAL RESOURCES

First Quarter 2016 Highlights (Includes Ventures)
•
Sold over 8,500 tons of fiber for $13.30 per ton

Segment Financial Results:
($ in millions)
 
Q1 2016
 
Q1 2015
 
Q4 2015
Segment Revenues
 
$0.4
 
$1.8
 
$1.3
Segment Earnings (Loss)
 
($0.6)
 
($0.4)
 
($0.1)

First quarter 2016 other natural resources segment results decreased compared with prior year principally due to lower fiber sales and termination of a groundwater reservation agreement in second quarter 2015, partially offset by lower operating expenses. First quarter 2016 other natural resources segment results decreased compared with fourth quarter 2015 principally due to lower fiber sales. In first quarter 2016, we limited harvest activity as a result of exploring opportunistic exit of timberland and undeveloped land.

OUTLOOK

Fundamentals Stable in Forestar's Community Development Markets
“Residential lot demand continues to reflect relatively stable supply and demand fundamentals in our key communities. Second quarter is off to a solid start with over 150 lots closing from Houston area communities alone in the month of April. In addition, we expect incremental lot sales activity from new communities, including Charlotte and Nashville, throughout the year. With nearly 1,390 lots currently under option contracts with builders, we continue to project 2016 residential lot sales volume to be in the range of 1,600 - 1,800 lots,” said Michael Quinley.

Executing Key Initiatives
“Forestar has made significant progress executing our key initiatives. We remain focused on selling non-core assets and further reducing both segment and general and administrative costs,” concluded Mr. Weber.

In furtherance of the Company's initiative to reduce costs, the Board has elected to reduce its size from nine to seven members effective September 1, 2016. In support of this action, William G. Currie and David L. Weinstein have notified the Company that they will retire from the Board at that time. “On behalf of the Board, I would like to thank Bill Currie and David Weinstein for their service to Forestar,” said James A. Rubright, Chairman of the Board of Directors. “Their insights and contributions are greatly appreciated.”


The Company will host a conference call on May 11, 2016 at 10:00 am ET to discuss results of first quarter 2016. 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 1-855-546-9555 at least 15 minutes prior to the start of the meeting. Those wishing to access the call from outside North America should dial 1-412-455-6094. 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 1-855-859-2056 in North America and at 1-404-537-3406 outside North America. The password for the replay is 93548993.


3


About Forestar Group
Forestar is a residential and mixed-use real estate development company. At first quarter-end 2016, we own directly or through ventures interests in 57 residential and mixed-use projects comprised of approximately 7,000 acres of real estate located in 11 states and 15 markets. We also own approximately 590,000 net acres of oil and gas fee minerals located in Texas, Louisiana, Georgia and Alabama. In addition, we own interests in various other assets that have been identified as non-core that the company will exit opportunistically over time. Our non-core assets include our investment in oil and gas working interests, about 87,000 acres of timberland and undeveloped land, and commercial and income producing properties which consist of one hotel, five multifamily projects and two multifamily sites. Forestar operates in three business segments: real estate, oil and gas and other natural resources. 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 but not limited to: general economic, market, or business conditions; market demand for our non-core assets; 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 rates or 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.

4


FORESTAR GROUP INC.
(UNAUDITED)
Business Segments
 
First Quarter
 
2016
 
2015
 
(In thousands)
Revenues:
 
 
 
Real estate
$
36,098

 
$
32,830

Oil and gas
5,352

 
13,185

Other natural resources
438

 
1,790

Total revenues
$
41,888

 
$
47,805

Segment earnings (loss):
 
 
 
Real estate
$
20,224

 
$
9,066

Oil and gas
(12,441
)
 
(2,941
)
Other natural resources
(581
)
 
(391
)
Total segment earnings (loss)
7,202

 
5,734

Items not allocated to segments:
 
 
 
General and administrative expense
(4,973
)
 
(6,020
)
Share-based and long-term incentive compensation expense
(1,544
)
 
(3,458
)
Interest expense
(7,639
)
 
(8,821
)
Other corporate non-operating income
(48
)
 
48

Income (loss) before taxes
(7,002
)
 
(12,517
)
Income tax (expense) benefit
2,626

 
4,359

Net income (loss) attributable to Forestar Group Inc.
$
(4,376
)
 
$
(8,158
)
 
 
 
 
Net income (loss) per common share:
 
 
 
Diluted
$
(0.13
)
 
$
(0.24
)
 
 
 
 
Weighted average common shares outstanding (in millions):
 
 
 
Diluted (a)
34.3

 
34.2


 
 
First Quarter
 
Year-End
Supplemental Financial Information:
 
2016
 
2015
 
 
(In thousands)
Cash and cash equivalents
 
$
142,646

 
$
96,442

 
 
 
 
 
Senior secured notes
 
216,495

 
224,647

Convertible senior notes, net of discount
 
105,798

 
104,719

Tangible equity unit notes, net of discount
 
6,552

 
8,666

Other debt (c)
 
43,914

 
43,483

Total debt (d)
 
$
372,759

 
$
381,515

Net debt
 
$
230,113

 
$
285,073

 _____________________
(a) 
Weighted average diluted shares outstanding during first quarter 2016 and 2015 excludes 7.9 million shares associated with tangible equity units issued during fourth quarter 2013. The actual number of shares to be issued in December 2016 will be between 6.5 million - 7.9 million shares based on the market value of our stock.
(c) 
Other debt for first quarter-end 2016 and 2015 excludes unconsolidated venture debt of $99.9 million and $123.5 million and outstanding letters of credit of approximately $15.8 million and $15.5 million. Other debt for first quarter-end 2016 consists principally of $39.3 million in senior secured loans for Radisson Hotel & Suites and Eleven multifamily property. On April 18, 2016, we sold Eleven for $60.2 million. The proceeds were used to payoff the related senior secured loan of $23.9 million. On May 4, 2016, we sold Radisson Hotel & Suites for $130.0 million. The proceeds were used to payoff the related senior secured loan of $15.4 million.
(d) 
At first quarter-end 2016 and year-end 2015, $7,953,000 and $8,267,000 of unamortized deferred financing fees are deducted from our outstanding debt.


5


FORESTAR GROUP INC.
REAL ESTATE SEGMENT
PERFORMANCE METRICS
 
First Quarter
 
2016
 
2015
REAL ESTATE
 
 
 
Owned, Consolidated & Equity Method Ventures:
 
 
 
Residential Lots Sold
284

 
289

Revenue per Lot Sold
$
70,337

 
$
76,233

Commercial Acres Sold
8

 
33

Revenue per Commercial Acre Sold
$
331,033

 
$
314,438

Undeveloped Acres Sold
1,972

 
731

Revenue per Acre Sold
$
2,892

 
$
2,758

Owned & Consolidated Ventures:
 
 
 
Residential Lots Sold
248

 
242

Revenue per Lot Sold
$
68,696

 
$
73,064

Commercial Acres Sold
8

 
4

Revenue per Commercial Acre Sold
$
331,033

 
$
329,863

Undeveloped Acres Sold
1,972

 
731

Revenue per Acre Sold
$
2,892

 
$
2,758

Ventures Accounted For Using the Equity Method:
 
 
 
Residential Lots Sold
36

 
47

Revenue per Lot Sold
$
81,643

 
$
92,551

Commercial Acres Sold
—

 
29

Revenue per Commercial Acre Sold
$
—

 
$
312,237

Undeveloped Acres Sold
—

 
—

Revenue per Acre Sold
$
—

 
$
—



FIRST QUARTER 2016
REAL ESTATE PIPELINE
Real Estate
 
 
Entitled Acres
 
Developed & Under Development Acres
 
Total Acres (a)
Residential
 
 
 
 
 
 
 
Owned
 
 
3,942
 
571
 


Ventures
 
 
1,070
 
162
 
5,745

Commercial
 
 
 
 
 
 
 
Owned
 
 
561
 
276
 


Ventures
 
 
204
 
100
 
1,141

Total Acres
 
 
5,777
 
1,109
 
6,886

 
 
 
 
 
 
 
 
Estimated Residential Lots
 
10,251
 
2,578
 
12,829

 _____________________
(a) 
Excludes acres associated with commercial and income producing properties and units associated with venture projects that develops and sell homes.


6


FORESTAR GROUP INC.
PROJECTS IN ENTITLEMENT

A summary of our real estate projects in the entitlement process (a) at first quarter-end 2016 follows:
Project
County
 
Market
 
Project Acres (b)
California
 
 
 
 
 
Hidden Creek Estates
Los Angeles
 
Los Angeles
 
700

Terrace at Hidden Hills
Los Angeles
 
Los Angeles
 
30

Texas
 
 
 
 
 
Lake Houston
Harris/Liberty
 
Houston
 
3,700

Total
 
 
 
 
4,430

 _____________________
(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 are approximate and the actual number of acres entitled may vary.

TIMBERLAND AND UNDEVELOPED LAND

A summary of our non-core timberland and undeveloped land at first quarter-end 2016 follows:
 
 
Acres
Timberland
 
 
Alabama
 
1,900

Georgia
 
45,500

Texas
 
14,300

Higher and Better Use Timberland
 
 
Georgia
 
19,800

Entitled Undeveloped Land
 
 
Georgia
 
5,100

Total
 
86,600





7


FORESTAR GROUP INC.
REAL ESTATE PROJECTS

A summary of activity within our projects in the development process, which includes entitled, developed and under development real estate projects, at first quarter-end 2016 follows:
 
 
 
 
 
 
Residential Lots/Units
 
Commercial Acres
Project
 
County
 
Interest
Owned (a)
 
Lots/Units Sold
Since
Inception
 
Lots/Units
Remaining
 
Acres Sold
Since
Inception
 
Acres
   Remaining

Texas
 
 
 
 
 
 
 
 
 
 
 
 
Austin
 
 
 
 
 
 
 
 
 
 
 
 
Arrowhead Ranch
 
Hays
 
100
%
 
2

 
379

 
—

 
11

The Colony
 
Bastrop
 
100
%
 
461

 
1,423

 
22

 
31

Double Horn Creek
 
Burnet
 
100
%
 
96

 
3

 
—

 
—

Entrada (b)
 
Travis
 
50
%
 
—

 
821

 
—

 
—

Hunter’s Crossing
 
Bastrop
 
100
%
 
510

 
—

 
54

 
49

La Conterra
 
Williamson
 
100
%
 
202

 
—

 
3

 
55

Westside at Buttercup Creek
 
Williamson
 
100
%
 
1,496

 
1

 
66

 
—

 
 
 
 
 
 
2,767

 
2,627


145


146

Corpus Christi
 
 
 
 
 
 
 
 
 
 
 
 
Caracol
 
Calhoun
 
75
%
 
13

 
61

 
—

 
14

Padre Island (b)
 
Nueces
 
50
%
 
—

 
—

 
—

 
15

Tortuga Dunes
 
Nueces
 
75
%
 
—

 
134

 
—

 
4

 
 
 
 
 
 
13

 
195

 
—

 
33

Dallas-Ft. Worth
 
 
 
 
 
 
 
 
 
 
 
 
Bar C Ranch
 
Tarrant
 
100
%
 
384

 
721

 
—

 
—

Keller
 
Tarrant
 
100
%
 
—

 
—

 
1

 
—

Lakes of Prosper
 
Collin
 
100
%
 
157

 
130

 
4

 
—

Lantana
 
Denton
 
100
%
 
1,262

 
502

 
14

 
—

Maxwell Creek
 
Collin
 
100
%
 
959

 
42

 
10

 
—

Parkside
 
Collin
 
100
%
 
33

 
167

 
—

 
—

The Preserve at Pecan Creek
 
Denton
 
100
%
 
604

 
178

 
—

 
7

River's Edge
 
Denton
 
100
%
 
—

 
202

 
—

 
—

Stoney Creek
 
Dallas
 
100
%
 
271

 
425

 
—

 
—

Summer Creek Ranch
 
Tarrant
 
100
%
 
983

 
268

 
35

 
44

Timber Creek
 
Collin
 
88
%
 
—

 
601

 
—

 
—

Village Park
 
Collin
 
100
%
 
567

 
—

 
3

 
2

 
 
 
 
 
 
5,220

 
3,236

 
67

 
53

Houston
 
 
 
 
 
 
 
 
 
 
 
 
Barrington Kingwood
 
Harris
 
100
%
 
176

 
4

 
—

 
—

City Park
 
Harris
 
75
%
 
1,312

 
156

 
58

 
107

Harper’s Preserve (b)
 
Montgomery
 
50
%
 
513

 
1,215

 
30

 
49

Imperial Forest
 
Harris
 
100
%
 
45

 
383

 
—

 
—

Long Meadow Farms (b)
 
Fort Bend
 
38
%
 
1,568

 
229

 
190

 
115

Southern Trails (b)
 
Brazoria
 
80
%
 
925

 
71

 
1

 
—

Spring Lakes
 
Harris
 
100
%
 
348

 
—

 
25

 
4

Summer Lakes
 
Fort Bend
 
100
%
 
739

 
330

 
56

 
—

Summer Park
 
Fort Bend
 
100
%
 
102

 
97

 
34

 
62

Willow Creek Farms II
 
Waller/Fort Bend
 
90
%
 
90

 
175

 
—

 
—

 
 
 
 
 
 
5,818

 
2,660

 
394

 
337

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

8


 
 
 
 
 
 
Residential Lots/Units
 
Commercial Acres
Project
 
County
 
Interest
Owned (a)
 
Lots/Units Sold
Since
Inception
 
Lots/Units
Remaining
 
Acres Sold
Since
Inception
 
Acres
   Remaining
San Antonio
 
 
 
 
 
 
 
 
 
 
 
 
Cibolo Canyons
 
Bexar
 
100
%
 
1,026

 
743

 
130

 
56

Oak Creek Estates
 
Comal
 
100
%
 
287

 
267

 
13

 
—

Olympia Hills
 
Bexar
 
100
%
 
742

 
12

 
10

 
—

Stonewall Estates (b)
 
Bexar
 
50
%
 
375

 
15

 
—

 
—

 
 
 
 
 
 
2,430

 
1,037

 
153

 
56

Total Texas
 
 
 
 
 
16,248

 
9,755

 
759

 
625

Colorado
 
 
 
 
 
 
 
 
 
 
 
 
Denver
 
 
 
 
 
 
 
 
 
 
 
 
Buffalo Highlands
 
Weld
 
100
%
 
—

 
164

 
—

 
—

Johnstown Farms
 
Weld
 
100
%
 
281

 
313

 
2

 
3

Pinery West
 
Douglas
 
100
%
 
86

 
—

 
20

 
106

Stonebraker
 
Weld
 
100
%
 
—

 
603

 
—

 
—

 
 
 
 
 
 
367

 
1,080

 
22

 
109

Georgia
 
 
 
 
 
 
 
 
 
 
 
 
Atlanta
 
 
 
 
 
 
 
 
 
 
 
 
Harris Place
 
Paulding
 
100
%
 
22

 
5

 
—

 
—

Montebello (b) (c)
 
Forsyth
 
90
%
 
—

 
220

 
—

 
—

Seven Hills
 
Paulding
 
100
%
 
870

 
210

 
26

 
113

West Oaks
 
Cobb
 
100
%
 
—

 
56

 
—

 
—

 
 
 
 
 
 
892

 
491

 
26

 
113

North & South Carolina
 
 
 
 
 
 
 
 
 
 
 
 
Charlotte
 
 
 
 
 
 
 
 
 
 
 
 
Ansley Park
 
Lancaster
 
100
%
 
—

 
304

 
—

 
—

Habersham
 
York
 
100
%
 
41

 
146

 
—

 
6

Walden
 
Mecklenburg
 
100
%
 
—

 
387

 
—

 
—

 
 
 
 
 
 
41

 
837

 
—

 
6

Raleigh
 
 
 
 
 
 
 
 
 
 
 
 
Beaver Creek (b)
 
Wake
 
90
%
 
6

 
187

 
—

 
—

 
 
 
 
 
 
6

 
187

 
—

 
—

 
 
 
 
 
 
47

 
1,024

 
—

 
6

Tennessee
 
 
 
 
 
 
 
 
 
 
 
 
Nashville
 
 
 
 
 
 
 
 
 
 
 
 
Beckwith Crossing
 
Wilson
 
100
%
 
12

 
87

 
—

 
—

Morgan Farms
 
Williamson
 
100
%
 
108

 
65

 
—

 
—

Vickery Park
 
Williamson
 
100
%
 
—

 
197

 
—

 
—

Weatherford Estates
 
Williamson
 
100
%
 
8

 
9

 
—

 
—

 
 
 
 
 
 
128

 
358

 
—

 
—

Wisconsin
 
 
 
 
 
 
 
 
 
 
 
 
Madison
 
 
 
 
 
 
 
 
 
 
 
 
Juniper Ridge/Hawks Woods (b) (c)
 
Dane
 
90
%
 
—

 
215

 
—

 
—

Meadow Crossing II (b) (c)
 
Dane
 
90
%
 
—

 
172

 
—

 
—

 
 
 
 
 
 
—

 
387

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

9


 
 
 
 
 
 
Residential Lots/Units
 
Commercial Acres
Project
 
County
 
Interest
Owned (a)
 
Lots/Units Sold
Since
Inception
 
Lots/Units
Remaining
 
Acres Sold
Since
Inception
 
Acres
   Remaining
Arizona, California, Missouri, Utah
 
 
 
 
 
 
 
 
 
 
 
 
Tucson
 
 
 
 
 
 
 
 
 
 
 
 
Boulder Pass (b) (c)
 
Pima
 
50
%
 
—

 
88

 
—

 
—

Dove Mountain
 
Pima
 
100
%
 
—

 
98

 
—

 
—

Oakland
 
 
 
 
 
 
 
 
 
 
 
 
San Joaquin River
 
Contra Costa/Sacramento
 
100
%
 
—

 
—

 
—

 
288

Kansas City
 
 
 
 
 
 
 
 
 
 
 
 
Somerbrook
 
Clay
 
100
%
 
173

 
222

 
—

 
—

Salt Lake City
 
 
 
 
 
 
 
 
 
 
 
 
Suncrest (b) (d)
 
Salt Lake
 
90
%
 
—

 
181

 
—

 
—

 
 
 
 
 
 
173

 
589

 
—

 
288

Total
 
 
 
 
 
17,855

 
13,684

 
807

 
1,141

____________________
(a) 
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 or accounted for using the equity method.
(b) 
Projects in ventures that we account for using equity method
(c) 
Venture project that develops and sells homes.
(d)
Venture project that develops and sells lots and homes.
A summary of our significant non-core commercial and multifamily properties, excluding two multifamily sites, at first quarter-end 2016 follows:
Project
 
Market
 
Interest
    Owned (a)
 
Type
 
Acres
 
Description
Radisson Hotel & Suites (b)
 
Austin
 
100
%
 
Hotel
 
2

 
413 guest rooms and suites
Dillon (c)
 
Charlotte
 
100
%
 
Multifamily
 
3

 
379-unit luxury apartment
Eleven (d)
 
Austin
 
100
%
 
Multifamily
 
3

 
257-unit luxury apartment
Elan 99 (e)
 
Houston
 
90
%
 
Multifamily
 
17

 
360-unit luxury apartment
Acklen (e)
 
Nashville
 
30
%
 
Multifamily
 
4

 
320-unit luxury apartment
HiLine (e)
 
Denver
 
25
%
 
Multifamily
 
18

 
385-unit luxury apartment
 _____________________
(a) 
Interest owned reflects our total interest in the project, whether owned directly or indirectly.
(b) 
Sold on May 4, 2016 for $130.0 million.
(c) 
Under contract to be sold and the transaction is expected to close in second quarter 2016.
(d) 
Sold on April 18, 2016 for $60.2 million.
(e) 
Construction in progress.












10

Information on Execution of Key Initiatives and First Quarter 2016 Financial Results May 11, 2016 Exhibit 99.2

 
Notice to Investors This presentation 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 but not limited to: general economic, market, or business conditions; market demand for our non-core assets;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 rates or 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 presentation to reflect the occurrence of events after the date of this presentation. This presentation includes Non-GAAP financial measures. The required reconciliation to GAAP financial measures can be found as an exhibit to this presentation and on our website at www.forestargroup.com. 2

 
Executing Non-Core Asset Sales 3 NON - CORE ASSETS Oil & Gas Working Interests Radisson Hotel Sold Kansas / Nebraska assets for $21.0 MM in Q1/16 Sold for $130.0 MM in Q2/16 Sold portion of Bakken / Three Forks assets for $9.5 MM in Q1/16 – over 900 net acres and 9 producing wells Sold remaining Bakken/Three Forks assets for $50.0 MM in Q2/16 – nearly 8,100 net acres and over 130 producing wells Multifamily Sold 360° venture interest and received a development fee for a total of $15.1 MM in Q1/16 Sold Music Row site for $15.0 MM in Q1/16 Sold Eleven for $60.2 MM in Q2/16 Executed agreement for sale of Dillon site in Q2/16 Marketing Downtown Edge site Developing plans to exit remaining multifamily assets Undeveloped Land Sold 1,972 acres Q1/16 for $5.7 MM Retained LandVest for opportunistic exit of approximately 72,000 acres, primarily in Georgia Opportunistically exiting remaining 14,600 acres, primarily in Texas

 
Executing Cost Reduction Initiatives 4 0 10 20 30 40 50 60 70 80 90 100 2015 2016E Target Annual SG&A Costs Corporate G&A Segment Operating Costs Project Level Expenses $39 million SG&A costs in 2016 and target are estimates and actual results may vary depending on the timing of asset sales. $87 million $ in M illi on s $56 million • Reduced SG&A by 24% compared with Q1 2015 • Over $30 million in annual savings expected in 2016 • Significant reduction in workforce – down over 50% compared to 2014 peak once initiatives are fully implemented • Retirement of $8.6 million senior secured notes in Q1 2016 will also reduce annual interest expense by $0.7 million

 
First Quarter 2016 Results • 1st quarter 2016 real estate segment results include $10.8 million gain associated with sale of our interest in 360°multifamily venture including development fee and $4.0 million gain associated with sale of our wholly-owned Music Row multifamily site • 1st quarter 2016 oil and gas segment results include a net loss of $11.0 million related to sale of nearly 191,000 net leasehold acres and 185 gross (66 net) producing oil and gas wells primarily in Nebraska, Kansas, Oklahoma and North Dakota • 1st quarter 2015 oil and gas segment results include $2.8 million in restructuring costs principally associated with the termination of the office lease in Fort Worth, severance costs associated with staff reductions, and retention bonus accruals 5 ($ in Millions, except per share data) 1st Quarter 2016 1st Quarter 2015 Revenue $41.9 $47.8 Net Income (Loss) ($4.4) ($8.2) Net Income (Loss) Per Share ($0.13) ($0.24) Segment Earnings (Loss) Real Estate $20.2 $9.1 Oil and Gas (12.4) (2.9) Other Natural Resources (0.6) (0.4) Total Segment Earnings $7.2 $5.8

 
Real Estate Segment - Earnings Reconciliation Q1 2016 $0.5 ($3.0) $9.1 $13.6 $3.6 $0.8 ($2.1) ($1.5) ($0.8) $20.2 $0 $10 $20 $30 Q1 2015 Gain on Asset Sales Multifamily Undeveloped Land Sales Multifamily and Income Producing Properties Impairments Lot Sales Residential & Commercial Tract Sales Opex Interest Income Q1 2016 Segment Earnings Reconciliation Q1 2015 vs. Q1 2016 ($ in millions) Q1 2016 Sales Activity / Highlights • Sold 360° multifamily venture interest and received development fee for a total of $15.1 million, generating $10.8 million in earnings • Sold Music Row multifamily site for $15.0 million, generating a $4.0 million gain • Undeveloped Land sales –1,972 acres • Average $2,890 per acre • Residential Lot sales – 284 lots • > $70,300 average price per lot • $25,300 gross profit per lot, down from Q1 2015 principally due to mix • Commercial Tract sales – 8 acres • > $331,000 per acre • $1.4 million in one-time severance costs - Opex 6 Note: Includes ventures

 
Stable Market Demand in Most of our Key Markets 7Note: Includes venturesSource: Bureau of Labor Statistics March 2016 vs. March 2015 Austin 4.2% Dallas / Fort Worth 3.8% Houston 0.3% San Antonio 2.8% Atlanta 3.1% Charlotte 2.7% Nashville 3.6% U.S. Average 2.0% Job Growth vs. National Average 0 500 1,000 1,500 2,000 Q 11 2 Q 21 2 Q 31 2 Q 41 2 Q 11 3 Q 21 3 Q 31 3 Q 41 3 Q 11 4 Q 21 4 Q 31 4 Q 41 4 Q 11 5 Q 21 5 Q 31 5 Q 41 5 Q 11 6 Re sid en tia l L ot s Developed Lots Lots Under Development Forestar: > 1,380 Lots Under Option Contract • Job growth in our key markets holding well above U.S. average (excluding Houston) • Full year planned lot sales at or ahead of target in all of our markets We continue to target 2016 residential lot sales of 1,600 – 1,800 lots

 
8

 
9 Appendix

 
Real Estate Segment KPI’s Q1 2016* Q1 2015 Residential Lot Sales Lots Sold 284 289 Average Price / Lot $70,300 $76,200 Gross Profit / Lot $25,300 $37,500 Commercial Tract Sales Acres Sold 8 33 Average Price / Acre $331,000 $314,400 Land Sales Acres Sold 1,972 731 Average Price / Acre $2,890 $2,800 Segment Revenues ($ in Millions) $36.1 $32.8 Segment Earnings ($ in Millions) $20.2 $9.1 *Q1 2016 real estate segment results include $10.8 million gain associated with sale of our interest in 360 multifamily venture including development fee and $4.0 million gain associated with sale of our wholly-owned Music Row multifamily site. Note: Includes ventures 10

 
Oil and Gas Segment KPI’s Q1 2016** Q1 2015*** Fee Leasing Activity Net Fee Acres Leased 366 800 Avg. Bonus / Acre $202 $349 Royalty Interests* Oil Produced (Barrels) 23,800 35,500 Average Price / Barrel $29.36 $50.48 Natural Gas Produced (MMCF) 206.1 259.8 Average Price / MCF $1.96 $3.45 Total BOE 58,200 78,900 Average Price / BOE $18.95 $34.13 Total Royalty and Working Interests* Oil Produced (Barrels)**** 185,600 293,600 Average Price / Barrel**** $24.36 $38.50 Natural Gas Produced (MMCF) 419.7 520.4 Average Price / MCF $1.94 $3.18 Total BOE 255,600 380,400 Average Price / BOE $20.89 $34.07 Segment Revenues ($ in millions) $5.4 $13.2 Segment Loss ($ in millions) ($12.4) ($2.9) * Includes our share of venture production: 37 MMcf in Q1 2016, 42 MMcf in Q1 2015 ** First quarter 2016 oil and gas segment results include a net loss of $11.0 million related to sale of nearly 191,000 net leasehold acres and 185 gross (66 net) producing oil and gas wells primarily in Nebraska, Kansas, Oklahoma and North Dakota. ***First quarter 2015 oil and gas segment results include $2.8 million in restructuring costs, retention bonus awards and employee severance costs and $1.2 million in gains associated with sale of approximately 290 net acres of oil and gas leasehold interests in North Dakota. ****Includes NGL’s 11

 
Other Natural Resources Segment KPI’s Q1 2016 Q1 2015 Fiber Sales Pulpwood Tons Sold 5,300 27,500 Average Pulpwood Price / Ton $8.73 $8.63 Sawtimber Tons Sold 3,200 20,100 Average Sawtimber Price / Ton $21.02 $21.50 Total Tons Sold* 8,500 47,600 Average Price / Ton $13.30 $14.07 Recreational Leases Average Acres Leased 87,400 109,700 Average Lease Rate / Acre $9.36 $8.66 Segment Revenues ($ in Millions) $0.4 $1.8 Segment Loss ($ in Millions) ** ($0.6) ($0.4) **Segment results include costs of $0.6 million in Q1 2016 and $1.0 million in Q1 2015 associated with the development of our water initiatives 12* Limited harvest activity in first quarter 2016 as a result of exploring opportunistic exit of timberland and undeveloped land

 
Reconciliation of Non-GAAP Financial Measures (Unaudited) Forestar’s Segment EBITDA is a non-GAAP financial measure 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 Segment EBITDA 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. First Quarter ($ in millions) 2016 2015 Real Estate Segment Earnings in accordance with GAAP $20.2 $9.1 Depreciation, Depletion & Amortization 0.9 1.7 Real Estate Segment EBITDA $21.1 $10.8 Oil & Gas Segment Loss in accordance with GAAP ($12.4) ($2.9) Depreciation, Depletion & Amortization 1.8 7.4 Oil and Gas Segment EBITDA ($10.6) $4.5 Other Natural Resources Segment Loss in accordance with GAAP ($0.6) ($0.4) Depreciation, Depletion & Amortization 0.1 0.1 Other Natural Resources Segment EBITDA ($0.5) ($0.3) Total Segment Total Segment Earnings (Loss) in accordance with GAAP $7.2 ($5.8) Depreciation, Depletion & Amortization 2.8 9.2 Total Segment EBITDA $10.0 $15.0 13

 
14

 

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