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| EX-99.1 - PRESS RELEASE - Forestar Group Inc. | d393204dex991.htm |
| 8-K - FORM 8-K - Forestar Group Inc. | d393204d8k.htm |
 Second Quarter 2012
Financial Results
August 8, 2012
Exhibit 99.2
Accelerating Value Realization, Growing Through Strategic Investments and Delivering the
Greatest Value from Every Acre |
 Notice to Investors
2
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 the timing to consummate the proposed merger, the risk that a condition to
closing of the proposed merger may not be satisfied; our ability to achieve the
synergies and value creation contemplated by the proposed merger; 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 presentation. This
presentation includes Non-GAAP financial measures. The required reconciliation to GAAP financial
measures can be found on our website at www.forestargroup.com.
|
 Second Quarter 2012
Financial Results
3
3
Accelerating Value Realization, Growing Through Strategic Investments and Delivering the
Greatest Value from Every Acre |
 Accelerating Value Realization Drives Improved
Second Quarter 2012 Financial Results
($ in Millions, except per share data)
2nd
Quarter
2012
2nd
Quarter
2011
Net Income (Loss)
$0.8
($3.9)
Earnings (Loss) Per Share
$0.02
($0.11)
Segment Earnings:
Mineral Resources
$3.9
$3.1
Real Estate
7.7
1.0
Fiber Resources
0.6
0.7
Total Segment Earnings
$12.2
$4.8
Second Quarter 2012 Weighted Average Diluted Shares Outstanding were 35.4
million •
Q2 2012 results include after-tax expenses of $1.6 million, or $0.05 per share related to
pending acquisition of CREDO Petroleum •
Q2 2011 results include after-tax expenses of $1.8 million, or $0.05 per share related to
withdrawn private debt offerings 4 |
 Continuing to Strengthen Balance Sheet and Liquidity
5
($ in millions)
2nd Quarter
2012
2nd Quarter
2011
Cash and Cash Equivalents
$45
$6
Total Debt
$202
$261
Total Debt / Total Capital
28%
34%
Liquidity
*
$189
$115
2012 Significant Transactions:
($ in millions)
Timing
Cash
Debt
Reduction
Palisades West –
sale of 25% interest
Q1 2012
$32
--
Light Farms -
sale of 800 acres
Q2 2012
25
($31)
Multifamily ventures
-
reimbursements
Q2 2012
11
--
Total
$68
($31)
*
Liquidity = cash + available revolver |
 Second Quarter 2012
Operating Highlights
6
Accelerating Value Realization By Increasing Oil Production and Residential Lot Sales and
Growing Net Asset Value by Capitalizing on Strategic Growth and Investment
Opportunities |
 Building
Momentum
-
Second
Quarter Highlights
Oil production up over 120% vs. Q2 2011
Seven
additional
wells
completed
–
541
total
producing
wells
Closed
venture
for
development
in
downtown
Austin
-
Eleven
Closed
venture
for
development
in
Denver
Tech
Center
-
360°
Sold
427
residential
lots
-
up
over
50%
vs.
Q2
2011
1,435 lots under option contracts
Sold over 105,000 tons of fiber
99% of available land leased for recreation
Announced
definitive
agreement
to
acquire
CREDO
Petroleum
Sold
800
acres
for
$56
mm
($3.4
mm
gain)
-
Light
Farms
ventur
$1.1 mm earnings from loan secured by real estate in Houston
7
Note: Wells owned by third-party lessee / operator
SINGLE-FAMILY
TIMBERLAND MULTIFAMILY
FORESTAR MINERALS,
O
IL
&
GAS |
 Second Quarter 2012
Minerals –
Oil & Gas Highlights
Building
Momentum
By
Driving
Leasing
and
Exploration
to
Increase
Production
and
Reserves
8 |
 Increased Oil Production Driving Higher Royalties
Segment Earnings Reconciliation
Q2 2011 vs. Q2 2012
9
($ in millions)
Note: Wells owned by third-party lessee / operator
* Increased costs principally related to additional staffing and
production taxes
Mineral Resources
$3.1
$2.5
($0.3)
($1.4)
*
$3.9
$0.0
$2.0
$4.0
$6.0
Q2 2011
Royalties Leasing, Delay Cost of Sales &
Net of Equity
Interests
Rentals &
Other
Operating
Expenses
Q2 2012
Q2 2012 Highlights
•
Oil production up over 120% vs.
Q2 2011
•
Royalties up 60% or $2.5 million
vs. Q2 2011
•
Received over $400,000 in delay rentals
•
7 additional wells
completed; 541 total
producing wells |
 Growth in
Drilling Activity Well Count
Q1 2011 –
Q2 2012
10
Forestar’s Share of
Annual Oil Production
2008 –
2012
Strategy Execution Driving Increased Oil Production
* Excludes any benefit from Credo acquisition
475
500
525
550
0
50,000
100,000
150,000
200,000
250,000
Note: Includes ventures; wells owned and operated by third party lessees / operators |
 Target
Formations 2011-2012 Well Completions
East Texas & Louisiana*
11
Acres
Leased
Available
for
Lease
Held
by
Production
Acres
with
Option
New Oil Wells
New
Gas
Wells
Exploration and Drilling Activity Focused on
Multiple Basins and Formations
* Map excludes 6 wells located in Barnett Shale in North Texas and
9 wells in Colorado |
 Second Quarter 2012
Fiber Resources Highlights
12
Building Momentum Through Sustainable Harvests and Maximizing Recreational Lease Activity
|
 Stable Fiber Resources Results
Segment Earnings Reconciliation
Q2 2011 vs. Q2 2012
Q2 2012 Highlights
Sold over 105,700 tons of fiber
Higher fiber sales principally reflect timing
of harvests
99% of land leased for recreation
$8.84/acre average price for rec leases
Fiber Sales
Q2 2011 –
Q2 2012
($ in millions)
Fiber Resources
$0.7
($0.2)
($0.2)
($0.1)
$0.6
$0.0
$0.5
$1.0
Q2 2011
Fiber
Sales
Rec
Leases
Termination
of timber
lease
Costs
Q2 2012
83,400
105,700
$10.21
11.66
Fiber Sales (Tons)
Average Price / Ton
$
$0.4
13 |
 Second Quarter 2012
Real Estate Highlights
Building
Momentum
By
Increasing
Residential
Lot
Sales
and
Capitalizing
on
Growth
Opportunities
14 |
 Impending Shortage of Quality Lots Driving
Demand In Good Locations
15
Note: Includes ventures
Forestar
Residential Lot Sales
U.S. Housing Markets
Vacant Developed Lot Classification
Source: MetroStudy Top 40 U.S. Housing Markets
Class
Starts / Month
A
+4
B
3 –
4
C
2 –
3
D
1 –
2
F
< 1 |
 Accelerating Value Realization Driving Improved
Second Quarter Results
Q2 2012 Highlights
Segment Earnings Reconciliation
Q2 2011 vs. Q2 2012
16
($ in millions)
Note: Includes Ventures
Real Estate
*Includes $1.1 million in earnings from loan secured by Discovery at Springs Trails project in
Houston Light Farms venture sold 800 acres for $56
million
-
$3.4
million
gain
on
sale
Sold 427 residential lots, up over 50% vs.
Q2 2011
109 remaining lots sold at River Plantation
for $19,700 per lot
Sold 933 acres of undeveloped land for $2.6
million ($2,800 / acre) |
 Increased Lot Sales and Strong Backlog Reflect Benefit
Of Our Market Position and Lower Inventories in Texas
Residential Lot Sales
Q1 2011 –
Q2 2012
Residential Lots Under Option Contract
Q2 2011 –
Q2 2012
Note: Includes ventures
River Plantation –
Tampa, FL
Life of Project Economics:
($ in millions
)
Total
Revenues $30.1
Total
Costs
(23.3)
Project Cash flow
$6.8
17
*
Q2 2012 avg. lot price is $53,300/lot excluding sale of remaining
109 lots at River Plantation in Tampa for $19,700/lot
|
 Barrington Kingwood
Acquired 180 developed lots (Q3 2011) for $9 million
Includes $4 million in reimbursement rights
Q2 2012 Sales Activity:
11
lots
sold
-
$102,500
/
lot
$46,900 / lot avg. margin
Gross Profit -
$515,600
Discovery at Spring Trails:
Acquired non-performing bank loan for $21mm in Q2 2011
Secured by first lien on Discovery at Spring Trails community
Previous
owner
investment
-
$49mm
Equity $17mm
Debt $32mm
Q2 2012 Earnings = $1.1 million
Houston, Texas
Campus
18
Real Estate Investments Generating Cash Flow & Earnings
These acquisitions generated $1.6 million in earnings in 2nd Quarter 2012
|
 Timely
Developing
a
Low
Capital
-
High
Return
Multifamily Business
19
Multifamily Projects
Ownership
Units
June 2012
Occupancy
NOI
*
Cap Rates
Stabilized Multifamily Assets
Broadstone –
Houston, TX
100%
401
98%
$3.3 million
5.5% -
6.5%
Las Brisas –
Austin, TX
59%
414
95%
$2.4 million
6.0% -
7.0%
Under Construction
Promesa –
Austin, TX
100%
289
39%
**
--
Eleven –
Austin, TX
25%
257
--
--
360°
–
Denver, CO
20%
304
--
--
*
Based upon annualized YTD Q2 2012 results
**
Represents leased units
Business model is to leverage our existing sites and investments
with capital from our partners to create and realize value
|
 Promesa –Leasing Activity Building Momentum
289-unit Class A multifamily property located
in Northwest Austin
First units delivered in April 2012;
approximately 80% complete
39% leased
$29 million total investment at Q2 2012; total
investment at completion = $34 million
Targeting stabilization in Q2 2013
20
Austin multifamily occupancy rates >96% |
 Eleven –
Multifamily Venture with Canyon-Johnson
21
21
257-unit Class A multifamily property
Designed for certification under Austin Energy
Green Building program
Construction commenced in June, first units
expected Q3 2013
$3.7 million reimbursement of prior
investment with 25% ownership + fees &
promoted interests |
 Eleven
-
Preferred Location in Strong Market
22
22
Located adjacent to downtown Austin
Austin multifamily market remains strong:
Occupancy rates: 95.6%
Annual Rent Growth: 6.1%
Job Growth: 3.3%
Close proximity to 30,000 jobs in
downtown Austin, 24,000 jobs and over
50,000 students at University of Texas,
and 69,000 State of Texas employees
High visibility
Convenient access to cultural and
entertainment offerings
Eleven Site Location
Preferred Location
: |
 304-unit Class A multifamily property
Designed to obtain Energy Star certification
Construction commenced in July with first units
expected Q3 2013
$7.2 million reimbursement of prior investment with
20% ownership + fees and promoted interests
360°
–
Multifamily Venture with Guggenheim Real Estate
23 |
 Denver Tech Center submarket
Multifamily market remains strong:
Occupancy rates: 95.4%
Rent Growth: 5.7%
Job Growth: 2.0%
Close proximity to 30 million sq.ft.
of office space and 150,000
employees
Convenient access to I-25 and
Arapahoe Light Rail station
Near Denver cultural and
entertainment venues
360°-
Excellent Location in Strong Multifamily Market
24
Preferred Location
|
 Second Quarter 2012
Strategic Initiatives
25
Accelerating Value Realization, Optimizing Transparency and Raising NAV Through Disciplined
Investments |
 Our
Focus: Triple In FOR 26
Initiatives
Q2 -
2012 Activity
F
ocus
on
Accelerating
Value
Realization
Triple Residential Lot Sales
•
Lot sales up over 50% from Q2 2011 levels
•
Oil production up over 120% from Q2 2011
•
Total segment earnings up over 150% from Q2 2011
Triple Oil & Gas Production (Mcfe)
Triple Total Segment Earnings
O
ptimize
Transparency
&
Disclosure
Expand Reported Oil and Gas Resource Potential
•
Acquisition of CREDO Petroleum expands Forestar’s
ability to report oil and gas reserve categories
Additional Transparency on Water Interests
Report Corporate Sustainability Results
R
aise
NAV
Through
Strategic
and
Disciplined
Investments
Growth Opportunities which Prove Up Net Asset Value and
Exceed Return Requirements
•
Announced definitive agreement to acquire CREDO
Petroleum
•
Closed
multifamily
venture
Eleven
-
Austin,
TX
•
Closed multifamily venture 360
°
-
Denver, CO
•
$1.1 million in earnings from loan secured by
Discovery at Spring Trails project in Houston
Accelerate
Participation
in
Oil
&
Gas
Working
Interests
Develop Low-Capital, High-Return Multifamily Business |
 Credo: Compelling Combination Value Drivers
Combination creates meaningful scale through production and reserve growth, additional
ownership and operations in strategic basins and improves transparency and disclosures
Value Drivers
2011 Metrics
*
CRED
FOR Combined Increased Scale /
Doubles Production
and Reserves
Meaningful
Ownership
and Operations in
Prolific Basins
Disclosure
Benefits
Additional transparency on Forestar minerals
FOR
YE
2011
reserves
98%
PDP’s
–
Yet
to
report
PUD’s
($ in millions)
Production (BOE)
301,000
422,200
723,200
Reserves (MMBOE)
4.1
3.0
7.1
% Oil
48%
35%
42%
PV-10
**
$62
$81
$143
Undiscounted Future Net Cash Flows
**
$116
$134
$250
Net Mineral Acreage
***
125,000
594,000
719,000
Basins
4
5
8
States
9
7
14
*
Note: Based on Credo Form 10-K for the year ended 10/31/11 and Forestar Form 10-K for
the year ended 12/31/11, before income taxes 27
***
Note: Includes both fee and leasehold interests; Forestar acres as of Q2 2012 **
Represent Non-GAAP financial measures. Forestar’s required reconciliation to
GAAP financial measures can be found on our website at
www.forestargroup.com,
and Credo’s required reconciliation is in its Form 10-K for the year ended
10/31/11. |
 Accelerating Value Realization
Increasing oil production and proven reserves
Growing lot sales and increasing market share
Realizing value from stabilized commercial assets
Capitalizing on growth opportunities and investments to generate
near-term cash flow and earnings
Building Momentum By Accelerating Value Realization, Optimizing Transparency and Growing
NAV 28 |
 Anna Torma
SVP Corporate Affairs
Forestar Group Inc.
6300 Bee Cave Road
Building Two, Suite 500
Austin, TX 78746
512-433-5312
annatorma@forestargroup.com
29 |
 Second Quarter 2012 Appendix
-
Segment KPI’s
30 |
 Q2
2012
Q2
2011
YTD
2012
YTD
2011
Leasing Activity
Net Acres Leased
-
-
2,532
805
7,366
Avg. Bonus / Acre
-
-
$187
$357
$289
Royalties
*
Oil Produced (Barrels)
61,600
27,900
130,700
59,900
Average Price / Barrel
$94.64
$102.23
$96.19
$91.69
Natural Gas Produced (MMCF)
420.4
373.5
872.7
840.3
Average Price / MCF
$2.31
$3.92
$2.79
$3.81
Total BOE
131,600
90,200
276,200
199,900
Average Price / BOE
$51.65
$47.88
$54.34
$43.46
Segment Revenues ($ in Millions)
$7.1
$4.6
$16.6
$11.9
Segment Earnings ($ in Millions)**
$3.9
$3.1
$9.8
$8.7
Producing Wells
*
(end of period)
541
501
541
501
31
MINERAL RESOURCES SEGMENT KPI'S * Includes our share of venture production:
82 MMCf & 172 MMcf in Q2 2012 and YTD Q2 2012; 128 MMCf and 286 MMcf in Q2 2011 and YTD Q2 2011
** Note: Segment results include costs associated with the development of our water initiatives:
$1.0 million in Q2 2012; $0.8 million in Q2 2011; $2.3 million in YTD Q2 2012 and $1.9
million in YTD Q2 2011
|
 Q2
2012
Q2
2011
YTD
2012
YTD
2011
Residential Lot Sales
Lots Sold
427
283
712
497
Average Price / Lot
$44,700
$52,400
$48,000
$50,600
Gross Profit / Lot
$14,800
$20,600
$17,200
$19,700
Commercial Tract Sales
Acres Sold
38
4
38
24
Average Price / Acre
$47,000
$185,300
$47,000
$157,900
Land Sales
Acres Sold
933
781
1,388
3,410
Average Price / Acre
$2,800
$3,300
$2,600
$2,500
Segment Revenues ($ in Millions)
$26.6
$19.6
$44.6
$40.8
Segment Earnings
(Loss) ($ in Millions)
$7.7
$1.0
$19.2
$3.6
**
Q2
2012
results
include
$3.4
million
gain
on
sale
of
800
acres
from
Light
Farm
venture.
***
YTD Q2 2012 results include $11.7 million gain on sale of 25% interest in
Palisades West Note: Includes ventures
**
***
*
Includes 109 residential lots sold at $19,700/lot to closeout River Plantation community in
Tampa, Florida *
32
REAL ESTATE
SEGMENT KPI'
S |
 Q2
2012
Q2
2011
YTD
2012
YTD
2011
Fiber Sales
Pulpwood Tons Sold
80,800
70,700
105,200
136,300
Average Pulpwood Price / Ton
$9.24
$9.22
$9.46
$9.20
Sawtimber Tons Sold
24,900
12,700
29,300
28,200
Average Sawtimber Price / Ton
$19.46
$15.69
$19.47
$16.40
Total Tons Sold
105,700
83,400
134,500
164,500
Average Price / Ton
$11.66
$10.21
$11.64
$10.44
Recreational Leases
Average Acres Leased
131,800
197,400
131,400
198,800
Average Lease Rate / Acre
$8.84
$8.96
$8.82
$8.93
Segment Revenues ($ in Millions)
$1.5
$1.3
$2.3
$2.7
Segment Earnings ($ in Millions)
$0.6
$0.7
$1.0
$1.3
*Includes $0.2 million gain on termination of timber lease
Note: Fiber resources segment earnings negatively impacted by sale of over 74,000 acres of
timberland during 2011 *
*
33
FIBER
RESOURCES SEGMENT KPI'S |
 Anna Torma
SVP Corporate Affairs
Forestar Group Inc.
6300 Bee Cave Road
Building Two, Suite 500
Austin, TX 78746
512-433-5312
annatorma@forestargroup.com
34 |