Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - Forestar Group Inc. | exh991forreleasefy16.htm |
| 8-K - 8-K - Forestar Group Inc. | earningsfy168-k.htm |
Information on Execution of Key
Initiatives and
Fourth Quarter and Full Year 2016
Financial Results
March 2, 2017
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; 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.
2
Key Initiatives
Reducing Costs Across the Entire
Organization
• Actions taken to eliminate nearly $60MM in annual SG&A to date*
• Additional 34% reduction in force planned in March 2017
• Following reduction in force will have reduced headcount by over
70% compared to 2014 peak
• Implemented zero based budgeting
Reviewing Entire Portfolio of Assets
• Executed $482MM in non-core asset sales in 2016**
• Undeveloped land sales (~73,000 acres) - $138MM
• Radisson Hotel - $129MM
• 5 multifamily assets - $119MM
• Oil and gas working interests - $77MM
• Non-core Community Development - $19MM
• Sold 1,940 residential lots in 2016
• Sold mineral assets for $85.6MM in 2017**
Reviewing Capital Structure
• Reduced outstanding debt by $278MM in 2016 and $323MM since
Q3 2015
• Reduced annual interest expense by approximately $23MM going
forward
• $266MM cash at YE 2016 and $331MM at February 28, 2017
2016 – A Transformative Year
3
Exceptional Progress Made In 2016
* Expect full cost savings realization once all non-core assets are sold.
** Reflects pre-tax net proceeds
Overview of Assets
CORE
Water
45% non-participating
royalty interest in
groundwater rights on 1.4
million surface acres
Groundwater leases on
20,000 surface acres in
Central Texas – Under
Contract*
Multifamily
Westlake site in Austin –
Under Contract*
Acklen venture in Nashville
completed – 85.6%
occupied / 89.1% leased –
listed for sale 2/21/17
HiLine venture in Littleton
completed – 81.6%
occupied / 83.9% leased
Elan 99 venture in Houston
completed – 65.0%
occupied / 71.9% leased
Timberland and
Undeveloped Land
11,000 acres in Georgia
8,000 acres in Texas –
Under Contract*
(2 transactions)
Community
Development
50 entitled, developed or
under development projects
in 10 states and 14 markets
~ 4,600 acres
Two communities in
entitlement (CA) – 730 total
acres
NON-CORE – 9 REMAINING ASSETS
4
* Contracts may provide termination rights to buyers so closings cannot be assured.
Fourth Quarter and Full Year 2016 Results
5
($ in Millions, except per share data)
Revenues * $64.5 $105.4 $197.3 $218.6
Net Income (Loss) – Continuing
Operations $43.2 $33.3 $75.5 ($26.9)
Net Income (Loss) Per Share –
Continuing Operations $1.02 $0.79 $1.78 ($0.79)
Net Income (Loss) $43.7 ($6.2) $58.6 ($213.0)
Net Income (Loss) Per Share $1.03 ($0.14) $1.38 ($6.22)
Note: Q4 2016 & FY 2016 weighted average diluted shares outstanding were 42.3 million compared with 42.4 million in Q4 2015 and 34.3
million in FY 2015
* Excludes oil & gas working interests which are now classified as discontinued operations
Q4 2016 Q4 2015
Full Year
2016
Full Year
2015
• Q4 2016 results include pre-tax gains of $48.9 million related to the sale of over 58,300 acres of non-core bulk timberland and undeveloped land.
• Q4 2015 results include pre-tax non-cash impairment charges and changes in deferred tax asset valuation allowance of approximately ($34.8) million
principally related to proved properties and unproved leasehold interest impairments related to discontinued operations.
• Full year 2016 results include pre-tax gains of approximately $153.1 million related to the sale of non-core assets, including discontinued operations, which
was partially offset by non-cash impairment charges of ($56.5) million related to six non-core community development projects and two multifamily sites.
• Full year 2015 results include pre-tax charges of approximately ($264.1) million related to impairment of proved properties and unproved leasehold interests
associated with non-core oil and gas assets, a deferred tax asset valuation allowance, and severance related charges.
Fourth Quarter and Full Year 2016 Segment Results
6
($ in Millions, except per share data)
Segment Earnings (Loss) *
Real Estate $12.9 $37.9 $121.4 $67.7
Mineral Resources* 0.7 1.0 3.3 4.2
Other (3.7) (0.1) (4.6) (0.6)
Total Segment Earnings $9.9 $38.8 $120.1 $71.3
* Excludes oil & gas working interests which are now classified as discontinued operations
Q4 2016 Q4 2015
Full Year
2016
Full Year
2015
• FY 2016 real estate segment results include gain on sale of assets of $117.9 million, principally due to a $95.3 million gain associated with the sale of the
Radisson Hotel & Suites and $20.8 million in gains associated with the sale of five multifamily assets, which was partially offset by non-cash impairment
charges of ($56.5) million.
• Q4 and FY 2016 other segment results include a $3.9 million goodwill non-cash impairment charge related to our water interests in groundwater leases in
central Texas as result of entering into an agreement to sell these assets.
• Q4 2015 earnings benefitted from higher retail undeveloped land sales.
• Q4 and FY 2015 real estate earnings include $9.3 million from the sale of Midtown Cedar Hill, a 354-unit multifamily property we developed near Dallas.
Real Estate Segment - Earnings Reconciliation Q4 2016
$0.3
…
$37.9
$6.6
$1.2 $0.4
($11.0)
($11.4)
($3.9) $(1.1)
$12.9
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
Q4 2015 Opex Mitigation
Banking
Lot Sales Impairment Multifamily
Properties
Undeveloped
Land Sales
Residential &
Commercial
Tract Sales
Gain on Asset
Sales
Interest Income Q4 2016
($6.1)
Segment Earnings Reconciliation
Q4 2015 vs. Q4 2016
($ in millions)
Q4 2016 Sales Activity / Highlights*
• Sold 835 residential lots
• Core Residential lot sales – 600 lots
• ~ $78,900 average price per lot
• $29,300 gross profit per lot
• Non-Core sales – Community Development
• Residential lot sales – 235 lots
• Residential tract sales – 1,481 acres
• Commercial tract sales – 178 acres
• Sold $3.3 million in impervious cover and
stream credits
7
*Includes ventures
Real Estate Segment - Earnings Reconciliation FY 2016
$3.1
$67.7
$116.3
$12.1
$11.3
($15.0)
($55.4)
($7.6) $(1.4)
$121.4
$0
$50
$100
$150
$200
$250
FY 2015 Gain on Asset
Sales
Undeveloped
Land Sales
Opex Mitigation
Banking
Impairment Multifamily
Properties
Lot Sales Residential &
Commercial
Tract Sales
Interest Income FY 2016
($9.7)
Segment Earnings Reconciliation
FY 2015 vs. FY 2016
($ in millions)
FY 2016 Sales Activity / Highlights*
• Sold 1,940 residential lots
• Core Residential lot sales – 1,705 lots
• ~ $72,200 average price per lot
• $26,500 gross profit per lot
• Non-Core sales – Community Development
• Residential lot sales – 235 lots
• Residential tract sales – 1,481 acres
• Commercial tract sales – 286 acres
• Sold Radisson Hotel & Suites for $130.0 million, generating
$95.3 million gain
• Sold 360º multifamily venture interest for a total of $15.1
million, generating $10.8 million in earnings
• Sold Eleven multifamily community for $60.2 million,
generating $9.1 million gain
• Sold Music Row multifamily site for $15.0 million,
generating a $4.0 million gain
• Sold Dillion multifamily site for $26.0 million, generating
$1.2 million gain
• Sold ~ 14,900 acres of undeveloped land, generating $28.1
million in earnings
• Average price ~ $2,450 per acre
• Sold $6.5 million in impervious cover and stream credits
• Incurred $56.5 million in non-cash impairments
8
*Includes ventures
Lot Sales and Lots Under Contract
9
0
500
1,000
1,500
2,000
2,500
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
Q
21
6
Q
31
6
Q
41
6
Re
sid
en
tia
l L
ot
s
Developed Lots Lots Under Development
> 2,100 Lots Under Option Contract*
Includes ventures
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Bulk Lot Sales Lot Sales
Average Lot Margin Average Lot Margin Excl. Bulk Sales
Annual Lot Sales and Average Lot Margin
* Includes about 500 future lots under contract but not yet
under development and not depicted on the graph
For questions, please contact:
Charles D. Jehl
Chief Financial Officer
Forestar Group Inc.
6300 Bee Cave Road
Building Two, Suite 500
Austin, TX 78746
512-433-5229
chuckjehl@forestargroup.com
Appendix
0
10
20
30
40
50
60
70
80
90
100
2015 2016 2017E Target
Annual SG&A Costs
Corporate G&A Segment Operating Costs Project Level Expenses
Cost Reductions
SG&A costs in 2017 and target are estimates and actual results may vary depending on the timing of completion of non-core asset sales.
$87 million
$
in
M
illi
on
s
$62 million
Other Corporate Costs
22%
Corporate Employee
Costs
24%
Project Level
Expenses
29%
Other Segment
Operating Costs
7%
Segment Employee
Costs
18%
$8 MM
$7 MM
$6 MM$5 MM
$2 MM
Action Taken to Eliminate Nearly $60 million in Annual SG&A Costs Since YE 2015
$28 million
Target SG&A Cost - $28 million
$38 million
12
Real Estate Segment KPI’s
Q4
2016
Q4
2015
FY
2016
FY
2015
Residential Lot Sales
Lots Sold 835 363 1,940 1,472
Average Price / Lot $67,594 $83,739 $68,152 $77,170
Gross Profit / Lot $21,493 $35,023 $23,446 $34,398
Commercial Tract Sales
Acres Sold 178 7 298 63
Average Price / Acre $7,442 $491,723 $44,623 $248,278
Undeveloped Retail Land Sales
Acres Sold 1,016 7,267 14,914 13,862
Average Price / Acre $2,395 $2,192 $2,455 $2,296
Segment Revenues ($ in Millions) $62.5 $102.6 $190.3 $202.8
Segment Earnings ($ in Millions) $12.9 $37.9 $121.4 $67.7
13
Includes ventures
Stable Market Demand in Key Markets
*Source: Bureau of Labor Statistics
December 2016 vs. December 2015
Austin 1.9%
Dallas / Fort Worth 3.3%
Houston 0.5%
San Antonio 1.9%
Atlanta 2.7%
Charlotte 1.7%
Nashville 3.1%
U.S. Average 1.6%
Job Growth vs. National Average*
Job growth in our key markets holding
well above U.S. average (excluding
Houston, which still has positive job
growth)
Finished Vacant Home Inventories at Equilibrium**
**Source: Metrostudy
• Equilibrium: Balanced supply and demand for
Finished Vacant housing for an MSA as measured
by months of supply.
• For Texas markets, equilibrium is 2.0 to 2.5
months of supply.
14
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
0
5,000
10,000
15,000
20,000
25,000
30,000
Finished Vacant Housing Inventory Months of Supply
4Q Forestar Texas Markets
Non-Core Community Development Projects Update
15
• Non-core asset
sales provide
tax losses to
offset tax gains
from other non-
core asset
sales
• Annual carry
costs reduced
by
approximately
$3 million for
assets sold
Community Location Status Interest
Owned*
Developed
Lots
Undeveloped
Lots
Commercial
Acres Sold
San Joaquin
River
Antioch Remaining
25 acres
100% --- --- 264
The Colony Austin Sold Dec
2016
100% 81 1,357 5
Caracol TX Coast Sold Dec
2016
75% 47 9 14
Tortuga
Dunes
TX Coast Sold Dec
2016
75% 95 39 3
Somerbrook Kansas
City
Sold Dec
2016
100% 12 210 ---
Buffalo
Highlands
Denver Marketing 100% --- 164 ---
Stonebraker Denver Marketing 100% --- 603 ---
235 2,382 286
* Interest owned reflects our total interest in the project, whether owned directly or indirectly, which may be different than our economic interest in the project.
Bulk Timberland and Undeveloped Land – “Sale Summary”
Purchase Price
• $104.2 MM purchase price
• Closed December 2016
• $1,786 average price per acre
Assets Sold
• Approximately 58,300 acres of timberland in Georgia and
Alabama
• Minerals underlying the timberland also conveyed
Structure • Three separate purchase and sale agreements
16
Mineral Interests – “Sale Summary”
Purchase Price
• $85.6 MM ($75MM received, $10.6MM in escrow for title)
• Closed February 17, 2017
Minerals
Owned
• 44,000 acres held by production
• 476,000 undeveloped acres
• 520,000 total net mineral acres
Target
Formations
• Haynesville, James Lime, Cotton Valley, Bossier, Austin Chalk,
Wilcox, Eaglebine, Frio
17
18
For questions, please contact:
Charles D. Jehl
Chief Financial Officer
Forestar Group Inc.
6300 Bee Cave Road
Building Two, Suite 500
Austin, TX 78746
512-433-5229
chuckjehl@forestargroup.com