Forestar Group Inc. (“Forestar”) (NYSE: FOR), a leading national
residential lot developer, today reported financial results for its
first quarter ended December 31, 2022.
Fiscal 2023 First Quarter Highlights All comparisons are
year-over-year
- Net income attributable to Forestar totaled $20.8 million or
$0.42 per diluted share
- Pre-tax income of $27.9 million, with a pre-tax profit margin
of 12.9%
- Consolidated revenues of $216.7 million on 2,263 lots sold
- Owned and controlled 82,300 lots
- Return on equity of 13.9% for the trailing twelve months ended
December 31, 2022, an improvement of 70 basis points
- Book value per share increased 15% to $24.50
- Net debt to total capital ratio improved 520 basis points to
28.7%
Daniel Bartok, CEO, said, “The Forestar team delivered a solid
first quarter despite the demand for new single-family housing and
finished lots continuing to moderate due to the significant
increase in mortgage interest rates. For the first quarter of
fiscal 2023, our gross profit margin increased 390 basis points
year-over-year to 21.9%, and our pre-tax profit margin was
12.9%.
“The housing market is going through a period of transition, but
we proactively planned for a slower environment by reducing our
land acquisition over the past 18 months. At quarter end, we had
over $580 million of liquidity, providing us with significant
financial and operational flexibility. We plan to leverage our
platform and balance sheet to take advantage of market
opportunities to continue to build shareholder value. Our team has
managed through market cycles before, and we are well-positioned to
navigate these challenging market conditions.”
Financial Results Net income attributable to Forestar for
the first quarter of fiscal 2023 decreased 49% to $20.8 million, or
$0.42 per diluted share, compared to $40.5 million, or $0.81 per
diluted share, in the same quarter of fiscal 2022. Pre-tax income
for the quarter decreased 48% to $27.9 million from $53.5 million
in the same quarter of fiscal 2022. Revenues for the quarter
decreased 47% to $216.7 million from $407.6 million in the same
quarter of fiscal 2022.
The Company’s return on equity improved 70 basis points from a
year ago to 13.9% for the trailing twelve months ended December 31,
2022. Return on equity is calculated as net income attributable to
Forestar for the trailing twelve months divided by average
stockholders’ equity, where average stockholders’ equity is the sum
of ending stockholders’ equity balances of the trailing five
quarters divided by five.
Operational Results Lots sold during the first quarter
decreased 50% to 2,263 lots compared to 4,516 lots in the same
quarter of fiscal 2022. During the first quarter of fiscal 2023,
Forestar sold 169 lots to customers other than D.R. Horton, Inc.
(“D.R. Horton”), compared to 502 lots in the prior year
quarter.
The Company’s lot position at December 31, 2022 decreased 9%
from September 30, 2022 to 82,300 lots, of which 61,500 were owned
and 20,800 were controlled through land and lot purchase contracts.
Lots owned at December 31, 2022 included 7,600 that were fully
developed. Of the Company’s owned lot position at December 31,
2022, 18,400 lots, or 30%, were under contract to be sold,
representing approximately $1.5 billion of future revenue. Another
18,000 lots, or 29%, of the Company’s owned lots were subject to a
right of first offer to D.R. Horton based on executed purchase and
sale agreements at December 31, 2022.
Capital Structure, Leverage and Liquidity Forestar ended
the quarter with $216.4 million of unrestricted cash and $366.2
million of available borrowing capacity on its senior unsecured
revolving credit facility for total liquidity of $582.6 million.
Debt at December 31, 2022 totaled $706.4 million, with no senior
note maturities until fiscal 2026. The Company’s net debt to total
capital ratio at the end of the quarter was 28.7%. Net debt to
total capital consists of debt net of unrestricted cash divided by
stockholders’ equity plus debt net of unrestricted cash.
Outlook Donald J. Tomnitz, Chairman of the Board, said,
“We are pleased that our first quarter results demonstrated
Forestar’s ability to deliver strong profitability and returns
through challenging market conditions, and we will continue to
strive to maximize returns by balancing our pace of sales and lot
pricing. While we cannot control the macroeconomic backdrop or
directly influence the demand for housing, we can and will stay
focused on strengthening our platform and increasing operational
efficiencies to drive future growth.
“While we are not providing annual guidance at this time due to
uncertainty in the market, we expect to continue consolidating
market share in the fragmented and under-capitalized U.S.
residential lot development industry. Our strong balance sheet and
ample liquidity provide us with significant financial and
operational flexibility, and we plan to maintain our disciplined
approach when investing capital to enhance the long-term value of
Forestar.”
Conference Call and Webcast Details The Company will host
a conference call today (Tuesday, January 24) at 5:00 p.m. Eastern
Time. The dial-in number is 888-506-0062, the entry code is 560400
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 52 markets
and 20 states. Based in Arlington, Texas, the Company delivered
more than 15,400 residential lots during the twelve-month period
ended December 31, 2022. Forestar 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 at quarter end,
we had over $580 million of liquidity, providing us with
significant financial and operational flexibility; we plan to
leverage our platform and balance sheet to take advantage of market
opportunities to continue to build shareholder value and we are
well-positioned to navigate these challenging market conditions.
Forward-looking statement also include we will continue to strive
to maximize returns by balancing our pace of sales and lot pricing;
we can and will stay focused on strengthening our platform and
increasing operational efficiencies to drive future growth; we
expect to continue consolidating market share in the fragmented and
under-capitalized U.S. residential lot development industry; our
strong balance sheet and ample liquidity provide us with
significant financial and operational flexibility; and we plan to
maintain our disciplined approach when investing capital to enhance
the long-term value of Forestar.
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 COVID-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; the impacts of weather conditions and natural
disasters; health and safety incidents relating to our operations;
supply shortages and other risks of acquiring land, construction
materials and skilled labor; competitive conditions in our
industry; 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; the impact of
significant inflation, higher interest rates or deflation; 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 or will be
filed with the Securities and Exchange Commission.
FORESTAR GROUP INC.
Consolidated Balance
Sheets
(Unaudited)
December 31,
September 30,
2022
2022
(In millions, except share
data)
ASSETS
Cash and cash equivalents
$
216.4
$
264.8
Real estate
2,067.7
2,022.4
Investment in unconsolidated ventures
0.5
0.5
Property and equipment, net
5.6
5.7
Other assets
50.9
49.6
Total assets
$
2,341.1
$
2,343.0
LIABILITIES
Accounts payable
$
73.0
$
72.2
Accrued development costs
98.0
122.3
Earnest money on sales contracts
147.8
136.2
Deferred tax liability, net
34.7
36.9
Accrued expenses and other liabilities
60.6
70.1
Debt
706.4
706.0
Total liabilities
1,120.5
1,143.7
EQUITY
Common stock, par value $1.00 per share,
200,000,000 authorized shares, 49,772,555 and 49,761,480 shares
issued and outstanding at December 31, 2022 and September 30, 2022,
respectively
49.8
49.8
Additional paid-in capital
641.1
640.6
Retained earnings
528.7
507.9
Stockholders' equity
1,219.6
1,198.3
Noncontrolling interests
1.0
1.0
Total equity
1,220.6
1,199.3
Total liabilities and equity
$
2,341.1
$
2,343.0
FORESTAR GROUP INC.
Consolidated Statements of
Operations
(Unaudited)
Three Months Ended
December 31,
2022
2021
(In millions, except per share
amounts)
Revenues
$
216.7
$
407.6
Cost of sales
169.2
334.2
Selling, general and administrative
expense
22.9
21.5
Equity in earnings of unconsolidated
ventures
—
(1.1
)
Gain on sale of assets
(1.6
)
(0.5
)
Interest and other income
(1.7
)
—
Income before income taxes
27.9
53.5
Income tax expense
7.1
13.0
Net income
20.8
40.5
Net income attributable to noncontrolling
interests
—
—
Net income attributable to Forestar Group
Inc.
$
20.8
$
40.5
Basic net income per common share
attributable to Forestar Group Inc.
$
0.42
$
0.81
Weighted average number of common
shares
49.9
49.7
Diluted net income per common share
attributable to Forestar Group Inc.
$
0.42
$
0.81
Adjusted weighted average number of common
shares
49.9
49.7
FORESTAR GROUP INC.
Revenues, Residential Lots
Sold and Lot Position
REVENUES
Three Months Ended December
31,
2022
2021
(In millions)
Residential lot sales:
Development projects
$
204.0
$
393.0
Lot banking projects
—
9.0
Decrease in contract liabilities
2.7
2.1
206.7
404.1
Deferred development projects
6.7
—
213.4
404.1
Tract sales and other
3.3
3.5
Total revenues
$
216.7
$
407.6
RESIDENTIAL LOTS SOLD
Three Months Ended December
31,
2022
2021
Development projects
2,263
4,381
Lot banking projects
—
135
2,263
4,516
Average sales price per lot (1)
$
90,100
$
89,000
LOT POSITION
December 31,
September 30,
2022
2022
Lots owned
61,500
61,800
Lots controlled under land and lot
purchase contracts
20,800
28,300
Total lots owned and controlled
82,300
90,100
Owned lots under contract to sell to D.R.
Horton
17,000
17,800
Owned lots under contract to customers
other than D.R. Horton
1,400
1,400
Total owned lots under contract
18,400
19,200
Owned lots subject to right of first offer
with D.R. Horton based on executed purchase and sale agreements
18,000
18,900
Owned lots fully developed
7,600
5,500
_____________
(1) Excludes any impact from change in
contract liabilities.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230124005358/en/
Katie Smith, 817-769-1860 Director of Finance & Investor
Relations InvestorRelations@forestar.com
Forestar (NYSE:FOR)
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