Forestar Group Inc. ("Forestar") (NYSE: FOR), a leading national
residential lot developer, today reported financial results for its
second quarter ended March 31, 2021. Net income attributable to
Forestar for the second quarter of fiscal 2021 increased 196% to
$28.4 million, or $0.59 per diluted share, compared to $9.6
million, or $0.20 per diluted share, in the same quarter of fiscal
2020. Revenues for the second quarter of fiscal 2021 increased 80%
to $287.1 million from $159.1 million in the same quarter of fiscal
2020. Residential lots sold in the quarter increased 84% to 3,588
lots compared to 1,951 lots in the same quarter of fiscal 2020.
Net income attributable to Forestar for the six months ended
March 31, 2021 increased 91% to $50.4 million, or $1.04 per diluted
share, compared to $26.4 million, or $0.55 per diluted share, in
the same period of fiscal 2020. Revenues for the six months ended
March 31, 2021 increased 46% to $594.2 million from $406.4 million
in the same period of fiscal 2020. Residential lots sold in the
first six months of fiscal 2021 increased 64% to 7,155 lots
compared to 4,373 lots in the same period of fiscal 2020.
The Company's lot position at March 31, 2021 increased 62% from
March 31, 2020 to 84,500 lots, of which 58,700 were owned and
25,800 were controlled through land and lot purchase contracts. Of
the Company's owned lot position, 37,100 lots, or 63%, were under
contract to sell or subject to a right of first offer to D.R.
Horton, Inc. ("D.R. Horton") at March 31, 2021. Lots owned at March
31, 2021 included 4,800 that are fully developed, of which
approximately 1,000 are related to lot banking. At March 31, 2021,
the Company had 700 lots under contract to sell to builders other
than D.R. Horton, and during the quarter ended March 31, 2021,
Forestar sold 230 lots to builders other than D.R. Horton, up from
45 lots in the prior year quarter. During the six months ended
March 31, 2021, Forestar sold 408 lots to builders other than D.R.
Horton, up from 77 lots in the prior year period.
During the quarter ended March 31, 2021, the Company issued 1.0
million shares of common stock under its at-the-market equity
offering program for proceeds of $23.3 million, net of commissions
and other issuance costs.
The Company ended the second quarter with $167.2 million of
unrestricted cash and $334.0 million of available borrowing
capacity on its senior unsecured revolving credit facility for
total liquidity of $501.2 million. Debt at March 31, 2021 totaled
$654.6 million, and the Company's net debt to total capital ratio
was 34.1%. Net debt to total capital consists of debt net of
unrestricted cash divided by stockholders’ equity plus debt net of
unrestricted cash.
On April 7, 2021, the Company priced $400 million principal
amount of 3.85% senior notes that will mature on May 15, 2026. The
senior notes offering is expected to close on April 21, 2021. A
portion of the proceeds from the offering will be used to redeem
the $350 million principal amount of 8.0% senior notes due April
15, 2024 in full, and the remainder of the proceeds will be used
for general corporate purposes. After the Company redeems its 8.0%
senior notes, the Company expects to recognize a loss on
extinguishment of debt of $18.1 million in the third quarter of
fiscal 2021, which represents the call premium and write-off of
unamortized debt issuance costs related to the notes. Also, in
April 2021, the Company's senior unsecured revolving credit
facility was amended to extend its maturity date from October 2022
to April 2025 and to increase the facility size to $410 million
with an uncommitted accordion feature that could increase the size
of the facility to $600 million, subject to certain conditions and
availability of additional bank commitments.
Donald J. Tomnitz, Chairman of the Board, said, "The Forestar
team delivered a strong second quarter, with 3,588 lots sold and
$287.1 million in revenue. Housing market conditions remain
favorable across the country, and we now expect to deliver between
14,500 and 15,000 lots in fiscal 2021 as we continue to consolidate
market share in the fragmented and under-capitalized U.S. lot
development industry.
"Forestar's return-focused business model is centered on our
high inventory turnover, lower risk lot manufacturing strategy. We
are well positioned to execute our growth plan due to our low net
leverage and strong liquidity, our low overhead model and our
strategic relationship with D.R. Horton, the nation’s largest
homebuilder. With 84,500 lots owned and controlled at March 31,
2021, we expect continued robust growth and increasing
profitability and returns in the coming years."
COVID-19
During March 2020, the impacts of the COVID-19 pandemic (C-19)
and the related widespread reductions in economic activity began to
temporarily affect the Company’s business operations and the demand
for its residential lots. However, residential construction is
designated an essential business as part of critical infrastructure
in almost all municipalities across the U.S. where Forestar
operates. The Company implemented operational protocols to comply
with social distancing and other health and safety standards as
required by federal, state and local government agencies, taking
into consideration guidelines of the Centers for Disease Control
and Prevention and other public health authorities.
The Company believes it is well positioned to effectively
operate through changing economic conditions due to its low net
leverage and strong liquidity, low overhead model and strategic
relationship with D.R. Horton.
Conference Call and Webcast Details
The Company will host a conference call today (Tuesday, April
20) at 5:00 p.m. Eastern Time. The dial-in number is 877-407-9205,
and the call will also be webcast from the Company’s website at
investor.forestar.com.
About Forestar Group Inc.
Forestar Group Inc. is a residential lot development company
with operations in 54 markets and 22 states and delivered 13,155
residential lots during the twelve-month period ended March 31,
2021. The Company is a majority-owned subsidiary of D.R. Horton,
the largest homebuilder by volume in the United States since
2002.
Forward-Looking Statements
Portions of this document may constitute “forward-looking
statements” as defined by the Private Securities Litigation Reform
Act of 1995. Although Forestar believes any such statements are
based on reasonable assumptions, there is no assurance that actual
outcomes will not be materially different. All forward-looking
statements are based upon information available to Forestar on the
date this release was issued. Forestar does not undertake any
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. Forward-looking statements in this release include
that the senior notes offering is expected to close on April 21,
2021; a portion of the proceeds will be used to redeem the $350
million principal amount of 8.0% senior notes due April 15, 2024 in
full, and the remainder of the proceeds will be used for general
corporate purposes; and after the Company redeems its 8.0% senior
notes, the Company expects to recognize a loss on extinguishment of
debt of $18.1 million in the third quarter of fiscal 2021, which
represents the call premium and write-off of unamortized debt
issuance costs related to the notes. The forward-looking statements
also include that we now expect to deliver between 14,500 and
15,000 lots in fiscal 2021 as we continue to consolidate market
share in the fragmented and under-capitalized U.S. lot development
industry; we are well positioned to execute our growth plan due to
our low net leverage and strong liquidity, our low overhead model
and our strategic relationship with D.R. Horton, the nation’s
largest homebuilder; with 84,500 lots owned and controlled at March
31, 2021, we expect continued robust growth and increasing
profitability and returns in the coming years; and all commentary
in the C-19 section.
Factors that may cause the actual results to be materially
different from the future results expressed by the forward-looking
statements include, but are not limited to: the effect of D.R.
Horton's controlling level of ownership on us and the holders of
our securities; our ability to realize the potential benefits of
the strategic relationship with D.R. Horton; the effect of our
strategic relationship with D.R. Horton on our ability to maintain
relationships with our customers; the impact of C-19 on the economy
and our business; the cyclical nature of the homebuilding and lot
development industries and changes in economic, real estate and
other conditions; competitive conditions in our industry; changes
in our business strategy and our ability to achieve our strategic
initiatives; continuing liabilities related to assets that have
been sold; the impact of governmental policies, laws or regulations
and actions or restrictions of regulatory agencies; the cost and
availability of property suitable for residential lot development;
general economic, market or business conditions where our real
estate activities are concentrated; our dependence on relationships
with national, regional and local homebuilders; our ability to
obtain or the availability of surety bonds to secure our
performance related to construction and development activities and
the pricing of bonds; obtaining reimbursements and other payments
from governmental districts and other agencies and timing of such
payments; our ability to succeed in new markets; the conditions of
the capital markets and our ability to raise capital to fund
expected growth; our ability to manage and service our debt and
comply with our debt covenants, restrictions and limitations; the
volatility of the market price and trading volume of our common
stock; our ability to hire and retain key personnel; and the
strength of our information technology systems and the risk of
cybersecurity breaches and our ability to satisfy privacy and data
protection laws and regulations. Additional information about
issues that could lead to material changes in performance is
contained in Forestar's annual report on Form 10-K and its most
recent quarterly report on Form 10-Q, both of which are filed with
the Securities and Exchange Commission.
FORESTAR GROUP INC.
Consolidated Balance
Sheets
(Unaudited)
March 31, 2021
September 30,
2020
(In millions, except share
data)
ASSETS
Cash and cash equivalents
$
167.2
$
394.3
Real estate
1,698.6
1,309.7
Investment in unconsolidated ventures
0.9
3.6
Income taxes receivable
—
6.3
Property and equipment, net
2.0
1.1
Other assets
30.2
24.9
Total assets
$
1,898.9
$
1,739.9
LIABILITIES
Accounts payable
$
39.8
$
29.2
Earnest money on sales contracts
140.2
98.3
Deferred tax liability, net
7.4
5.7
Accrued expenses and other liabilities
112.4
93.8
Debt
654.6
641.1
Total liabilities
954.4
868.1
EQUITY
Common stock, par value $1.00 per share,
200,000,000 authorized shares, 49,124,801 and 48,061,921 shares
issued and outstanding at March 31, 2021 and September 30, 2020,
respectively
49.1
48.1
Additional paid-in capital
625.3
603.9
Retained earnings
269.3
218.9
Stockholders' equity
943.7
870.9
Noncontrolling interests
0.8
0.9
Total equity
944.5
871.8
Total liabilities and equity
$
1,898.9
$
1,739.9
FORESTAR GROUP INC.
Consolidated Statements of
Operations
(Unaudited)
Three Months Ended
March 31,
Six Months Ended
March 31,
2021
2020
2021
2020
(In millions, except per share
amounts)
Revenues
$
287.1
$
159.1
$
594.2
$
406.4
Cost of sales
233.8
136.6
496.7
353.2
Selling, general and administrative
expense
16.3
11.2
31.8
21.7
Equity in earnings of unconsolidated
ventures
(0.1
)
(0.3
)
(0.3
)
(0.8
)
Gain on sale of assets
—
(0.3
)
—
(0.1
)
Interest and other income
(0.5
)
(1.8
)
(0.8
)
(3.4
)
Income before income taxes
37.6
13.7
66.8
35.8
Income tax expense
9.2
3.3
16.3
8.7
Net income
28.4
10.4
50.5
27.1
Net income attributable to noncontrolling
interests
—
0.8
0.1
0.7
Net income attributable to Forestar Group
Inc.
$
28.4
$
9.6
$
50.4
$
26.4
Basic net income per common share
attributable to Forestar Group Inc.
$
0.59
$
0.20
$
1.04
$
0.55
Weighted average number of common
shares
48.4
48.0
48.3
48.0
Diluted net income per common share
attributable to Forestar Group Inc.
$
0.59
$
0.20
$
1.04
$
0.55
Adjusted weighted average number of common
shares
48.5
48.1
48.4
48.1
FORESTAR GROUP INC.
Revenues, Residential Lots
Sold and Lot Position
(Unaudited)
REVENUES
Three Months Ended March
31,
Six Months Ended March
31,
2021
2020
2021
2020
(In millions)
Residential lot sales:
Development projects
$
251.1
$
98.6
$
522.2
$
216.2
Lot banking projects
29.3
57.0
64.9
157.9
(Increase) decrease in contract
liabilities
(0.2
)
0.8
—
(0.6
)
280.2
156.4
587.1
373.5
Tract sales and other
6.9
2.7
7.1
32.9
$
287.1
$
159.1
$
594.2
$
406.4
RESIDENTIAL LOTS SOLD
Three Months Ended March
31,
Six Months Ended March
31,
2021
2020
2021
2020
Development projects
3,174
1,272
6,276
2,678
Lot banking projects
414
679
879
1,695
3,588
1,951
7,155
4,373
Average sales price per lot (1)
$
78,100
$
79,700
$
82,100
$
85,600
LOT POSITION
March 31, 2021
September 30,
2020
Lots owned
58,700
(2)
42,400
(3)
Lots controlled under land and lot
purchase contracts
25,800
18,100
Total lots owned and controlled
84,500
60,500
____________
(1)
Excludes any impact from change in
contract liabilities.
(2)
Lots owned at March 31, 2021 included
approximately 20,400 under contract to sell to D.R. Horton and
16,700 of which D.R. Horton had a right of first offer to
purchase.
(3)
Lots owned at September 30, 2020
included approximately 14,000 under contract to sell to D.R. Horton
and 16,400 of which D.R. Horton had a right of first offer to
purchase.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210420005332/en/
Investor Relations: Jessica Hansen, 817-390-8195
InvestorRelations@forestar.com
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