AUSTIN, Texas--(BUSINESS WIRE)--Forestar Group Inc. (NYSE: FOR) reported second quarter 2016 net income of approximately $9.6 million, or $0.23 per share outstanding, compared with second quarter 2015 net loss of approximately ($34.5) million, or ($0.81) per share outstanding. Second quarter 2016 earnings from continuing operations were approximately $11.7 million, or $0.28 per share outstanding, compared with second quarter 2015 earnings from continuing operations of approximately $2.5 million, or $0.06 per share outstanding.
Solid Core Community Development Results
“Builder demand for residential lots in our key communities remains steady. In the second quarter of 2016, Forestar sold 489 residential lots for over $66,600 per lot. Forestar has over 1,680 lots currently under option contracts with builders,” said Phil Weber, Chief Executive Officer of Forestar.
Significant Progress: Strengthened Balance Sheet, Reduced Costs and Completed Non-Core Asset Sales
“We made significant progress during second quarter 2016 toward transforming Forestar. Key highlights include reducing outstanding debt by $260.9 million and reducing annual interest expense by approximately $19.7 million going forward. As a result of the cash tender offer on our 8.50% Senior Secured Notes, we received consent from holders of the Notes to eliminate or modify certain covenants, events of default and other provisions contained in the indenture governing the Notes, and to release the subsidiary guarantees and collateral securing the remaining Notes. We have also identified an additional $6 million in annual run-rate cost reductions, lowering our target annual SG&A to an estimated $33 million, which is expected to be achieved once the previously announced non-core asset sales are completed,” said Mr. Weber.
“Significant non-core asset sales were completed in second quarter 2016. Key highlights include the sale of the Radisson Hotel & Suites which generated net proceeds of $113.4 million after debt repayment, the sale of Eleven multifamily community which generated net proceeds of $35.8 million after debt repayment, and the sale of Dillon multifamily community site which generated net proceeds of $25.4 million. Additionally, in second quarter 2016, Forestar sold its remaining Bakken / Three Forks oil and gas assets which generated $46.5 million in net proceeds. With the completion of this sale, Forestar has exited substantially all of our oil and gas working interest assets and is reporting the results of operations and financial position of all working interest assets as discontinued operations. Forestar also recorded $48.8 million in non-cash impairment charges related to five non-core community development projects and one multifamily site. We plan to exit these communities over time, reducing annual carry costs and generating tax losses to offset tax gains from other non-core asset sales. We remain focused on executing our key initiatives and delivering value for shareholders,” said Mr. Weber.
Transforming Capital Structure
“Since undertaking our key initiatives we have made significant progress in transforming our capital structure and reducing interest expense. We have generated $366 million in pre-tax proceeds from non-core asset sales since third quarter-end 2015, and have used $349 million in proceeds to reduce outstanding debt. Our total debt to total capital ratio at the end of second quarter 2016 was 18% compared with 46% at the end of third quarter 2015. With the execution of non-core asset sales and corresponding reduction in debt, we have strengthened our balance sheet and created financial flexibility,” said Chuck Jehl, Chief Financial Officer.
Business Segments
Forestar manages its operations through three business segments: real estate, mineral resources and other. In second quarter 2016, we changed the name of our oil and gas segment to mineral resources to reflect the strategic shift from oil and gas working interest investments to owned mineral interests.
About Forestar Group
Forestar is a residential and mixed-use real estate development company. At second quarter-end 2016, we own directly or through ventures interests in 56 residential and mixed-use projects comprised of approximately 7,000 acres of real estate located in 11 states and 15 markets. The company also owns approximately 590,000 net acres of oil and gas fee minerals located in Texas, Louisiana, Georgia and Alabama. The company has water interests in 1.5 million acres which include a 45 percent nonparticipating royalty interest in groundwater produced or withdrawn for commercial purposes or sold from 1.4 million acres in Texas, Louisiana, Georgia and Alabama, and 20,000 acres of groundwater leases in central Texas. The company's non-core assets include about 81,000 acres of timberland and undeveloped land, and commercial and income producing properties which consist of three multifamily projects and two multifamily sites. Forestar operates in three business segments: real estate, mineral resources and other. Forestar’s address on the World Wide Web iswww.forestargroup.com.
