Slide 1: Fourth Quarter and Full Year 2012 Financial Results
Fourth Quarter and Full Year 2012 Financial Results February 14, 2013 Building Momentum By Accelerating Value Realization, Optimizing Transparency and Growing Net Asset Value
Slide 2: Notice To Investors
Notice To Investors This release 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,” “for
Slide 3: Fourth Quarter and Full Year 2012 Financial Results
Fourth Quarter and Full Year 2012 Financial Results Building Momentum By Accelerating Value Realization, Optimizing Transparency and Growing Net Asset Value 3
Slide 4: Net Income Before Special Items Reflects Acceleration in Operating Results
Net Income (Loss) Before Special Items Reflects Acceleration in Operating Results ($ in Millions, except per share data) Full Year 2012 Full Year 2011 Net Income, in accordance with GAAP $12.9 $7.2 Earnings Per Share $0.36 $0.20 Special items per share: Credo acquisition expenses $0.12 $ - Loss on e
Slide 5: Improved Segment Operating Results, Full Year 2012
Accelerating Value Realization Drives Improved Segment Operating Results ($ in Millions) Full Year 2012 Full Year 2011 Segment Earnings (Loss): Real Estate $53.6 ($25.7) Mineral Resources 21.6 16.0 Fiber Resources 5.0 1.9 Total Segment Earnings (Loss) $80.2 ($7.8) 5 Note: See footnotes on slide 43 f
Slide 6: Improved Operating Results, 4th Quarter 2012
Accelerating Value Realization and Strategic and Disciplined Investments Drives Improved Operating Results ($ in Millions) 4th Quarter 2012 4th Quarter 2011 Net Income (Loss), in accordance with GAAP $10.0 ($22.9) Earnings (Loss) Per Share $0.28 ($0.65) Special items per share: Credo acquisition exp
Slide 7: Improved Segment Results, 4th Quarter 2012
Accelerating Value Realization and Strategic and Disciplined Investments Drives Improved Operating Results ($ in Millions) 4th Quarter 2012 4th Quarter 2011 Segment Earnings (Loss): Real Estate $21.6 ($25.0) Mineral Resources 5.7 3.7 Fiber Resources 2.3 0.1 Total Segment Earnings (Loss) $29.6 ($21.2
Slide 8: Maintaining Financial Strength While Executing Growth Strategy
Maintaining Financial Strength While Executing Growth Strategy * Other consolidated debt principally non-recourse to Forestar ($ in Millions) YE 2012 YE 2011 Credit Facility Borrowings $244 $130 Other Consolidated Debt* 50 92 Total Debt $294 $222 Total Debt / Total Capital 36% 30% Available Liquidit
Slide 9: Maintain Financial Strength and Ample Liquidity
Maintain Financial Strength and Ample Liquidity While Executing Growth Strategy • Maintain balance sheet strength • Reposition non-core real estate assets for reinvestment and debt reduction • Increase senior credit facility borrowing base through acquisitions and reserve additions to maximize liqui
Slide 10: Fourth Quarter & Full Year 2012 Operating Highlights
Fourth Quarter & Full Year 2012 Operating Highlights Building Momentum By Accelerating Value Realization, Optimizing Transparency and Growing Net Asset Value 10
Slide 11: Total Segment EBITDA
($20) $0 $20 $40 $60 $80 $100 $120 $140 2008 2009 2010 2011 2012 2013 Est. 2014 Est. 2015 Est. Total Segment EBITDA ($ in millions) EBITDA Average = $34 million Execution of Triple in FOR Initiatives Putting EBITDA Points on the Board EBITDA Average = $120 million Note: EBITDA = Total segment earnin
Slide 12: Full Year 2012 Highlights
Full Year 2012 Highlights Completed acquisition of CREDO Petroleum - $146MM equity purchase price Sold two stabilized multifamily communities for $97 million* Completed construction of Promesa multifamily community in Austin, TX Acquired two multifamily sites - Nashville, TN & Charlotte, NC Sold 1,3
Slide 13: Fourth Quarter 2012 Highlights
Fourth Quarter 2012 Highlights Provided additional transparency and disclosure at investor conference Repurchased almost 100,000 shares at an average price of $14.90 / share Venture sold Las Brisas community - $8.2 million in earnings to Forestar Completed construction of Promesa in Austin, TX Acqui
Slide 14: Mineral Resources Fourth Quarter and Full Year 2012 Highlights
Mineral Resources Fourth Quarter and Full Year 2012 Highlights Building Momentum By Driving Leasing and Exploration to Increase Production and Reserves 14
Slide 15: Increased Oil Production Driving Improved Earnings
$16.0 $21.6 $6.8 $2.7 ($3.9) $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 2011 Oil & Gas Production Leasing & Delay Rentals Operating Expenses 2012 Segment Earnings Increased Oil Production Driving Improved Earnings $3.7 $2.5 $1.0 ($1.5) $5.7 $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 Q4 2011 Oil & Gas Production Le
Slide 16: Drilling & Production Growth Accelerating
Drilling & Production Growth Accelerating 16 Note: Includes Forestar’s share of equity method ventures 496 541 936 400 500 600 700 800 900 1,000 0 5 10 15 20 25 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Total Wells Wells Drilled Gross Total Wells Gross Wells Drilled Growth in Drilling Activity
Slide 17: Forestar Preliminary Oil & Gas Reserves
Forestar Preliminary Oil & Gas Reserves 17 2.4 3.0 1.9 5.6* FY 2010 FY 2011 FY 2012 MMBOE Forestar Proven Reserves (MMBOE) FOR Reserves Credo Reserves 25% 36% 57% 75% 64% 43% FY 2010 FY 2011 FY 2012 Natural Gas (BOE) Oil Forestar Proven Reserves % Oil (MMBOE) Note: Based upon preliminary YE 2012 oil
Slide 18: Bakken / Three Forks Drilling Activity Accelerating Production and Reserve Growth
Bakken / Three Forks Drilling Activity Accelerating Production and Reserve Growth Bakken / Three Forks Leasehold Interests Net Mineral Acres ~6,000 Average working interest 8.0% Potential Units 50 Total Potential Gross Wells 400 Avg. Well EUR* Assumption >500 Mboe Year-end 2012 Gross Wells Producing
Slide 19: Bakken / Three Forks Production and Type Curves
Bakken / Three Forks Production and Type Curves 19 Cumulative Mbo Produced 0 50,000 100,000 150,000 200,000 250,000 300,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 EUR Well Level IRR (Mbo) 600 57% 500 40% 400 24% Average Type Curve Credo acq
Slide 20: Kansas and Nebraska Scalable Exploration Model
Kansas and Nebraska Represent Scalable Exploration Model with Solid Returns •122,000 net acres of leasehold interest •Acquired leasehold interest in 21,000 net mineral acres in Q4 2012 •Target formation: Lansing - Kansas City • Drilling costs: ~$500,000 / well •Attractive exploration success rate: ~
Slide 21: 2012 Mineral Activity
2012 Mineral Activity Note: Wells owned by third-party lessee / operator Leasing: 8,910 acres leased ~$600 / acre Seismic Agreements: 127,000 acres of 3-D seismic received to generate prospects Lease Structure Benefits: Drilling requirements Horizontal and vertical Pugh clause Working interest optio
Slide 22: 2013 Capital Investment - Drilling Program
2013 Capital Investment - Drilling Program Type State Formation Operation Wells Capital Exploration & Development North Dakota Bakken / Three Forks Non-Operated 54 $43.7 Kansas & Nebraska Lansing – Kansas City Operated & Non- Operated 82 14.5 Texas, Louisiana & Other Cleveland / Rodessa / Glenrose /
Slide 23: Well Positioned For Meaningful Production and Reserve Growth
0 20 40 60 80 100 120 2012 2013 2014 Annual Capital Investment Annual Cash Flow 23 Well Positioned For Meaningful Production and Reserve Growth Annual Oil Production 23 Forestar Oil & Gas Highlights • 752,000 net mineral acres* • > 936 gross wells** • 394 working interest • 542 royalty interest • >
Slide 24: Fiber Resources Fourth Quarter and Full Year 2012 Highlights
Fiber Resources Fourth Quarter and Full Year 2012 Highlights Building Momentum Through Sustainable Harvests and Maximizing Recreational Lease Activity 24
Slide 25: Increased Harvest Activity Driving Improved Results
Increased Harvest Activity Driving Improved Results $0.1 $0.2 ($0.1) $2.3 $2.1 $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 Q4 2011 Fiber Sales Rec Leases & Other Revenues Operating Expenses Q4 2012 Segment Earnings Q4 2012 Highlights • Sold over 162,000 tons of fiber, up over 225% vs. Q4 2011 • Average fiber
Slide 26: Real Estate Fourth Quarter and Full Year 2012 Highlights
Real Estate Fourth Quarter and Full Year 2012 Highlights Building Momentum By Accelerating Lot Sales and Growing Net Asset Value through Strategic and Disciplined Investments 26
Slide 27: Real Estate – Accelerating Results
($8.9) ($0.9) ($25.0) $44.5 $7.3 $4.6 $21.6 ($30.0) ($20.0) ($10.0) $0.0 $10.0 $20.0 $30.0 $40.0 Q4 2011 Asset Impairment Reduction Residential & Commercial Sales Income Producing Properties Undeveloped Land Sales Opex Q4 2012 Real Estate – Accelerating Results Q4 2012 Highlights • Sold 384 resident
Slide 28: 2011-2012 Strategic and Disciplined Investments Generating Near-Term Earnings
2011 - 2012 Strategic and Disciplined Investments Generating Near-Term Earnings and Cash Flow 28 28 ($ in millions) Full Year 2012 Community Investment Acquisition Date Ownership Market Original Invest. Cash Flow Earnings Galo Tract Q1 2011 100% San Antonio $7.9 $1.6 $1.4 Discovery Spring Trails* Q2
Slide 29: Texas Markets Represent Over 70% of Our Investment in Real Estate
Note: MSA performance based on Employment, Gross Metropolitan Product (GMP) and House Price Index Source: Brookings Institute- December 2012 Salt Lake City 1 - $1 Oakland 1 - $9 Strongest Quartile Weakest Quartile Los Angeles 2 - $15 Kansas City 1 - $3 Tampa 3 - $3 Atlanta 33 - $87 San Antonio 4 - $
Slide 30: Residential Lot Sales Building Momentum
30 Note: Includes ventures 804 $0 $10,000 $20,000 $30,000 $40,000 $50,000 2008 2009 2010 2011 2012 Avg. Lot Margin Forestar Lot Sales U.S. Single-Family Starts Avg. Lot Margin 1,365 Annual Lot Sales 1,117 642 1,060 500 1,000 1,500 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q112 Q212 Q312 Q412 Residential Lots De
Slide 31: Accelerating Value Realization of Stabilized Multifamily Communities
Accelerating Value Realization of Stabilized Multifamily Communities 2012 Multifamily Sales Key Metrics ($ in millions) Development Cost $87 FOR Equity $31 Project Debt $55 Net Operating Income (NOI)* $5.7 Sales Price @ 5.9% cap rate $97 Forestar Cash From Sales $40 Forestar Equity 31 Net Cash Flows
Slide 32: Increasing Multifamily Pipeline Through Charlotte Site Acquisition
Increasing Multifamily Pipeline Through Acquisition of Attractive Development Site in Charlotte Charlotte site acquired for ~$6 million Located just outside downtown core, close to premier South End entertainment area Close to major employers and directly across street from largest hospital Product:
Slide 33: Building Solid Pipeline of Development Properties
Building Solid Pipeline of Development Properties (Proforma) Proforma Project Cash Flows Proforma Forestar Cash Flows Project Date Sale Price Cost Cash From Sale Total Debt FOR Equity FOR Total Cash Cash Multiple* WHOLLY-OWNED Promesa - Austin 2013 $40 – 45 ($33) $7 – 12 $20 $13 $23 1.8x VENTURES El
Slide 34: Triple in FOR Initiatives
Fourth Quarter and Full Year 2012 Triple in FOR Initiatives Building Momentum By Accelerating Value Realization, Optimizing Transparency and Growing Net Asset Value 34
Slide 35: Our Focus: Triple In FOR Initiatives
Our Focus: Triple In FOR Initiatives 2012 Activity Focus on Accelerating Value Realization Triple Residential Lot Sales • Lot sales up over 22% vs. 2011 •Oil production up over 144% vs. 2011 • Total segment earnings up over $80 million vs. 2011 • Sold two stabilized multifamily projects, generating
Slide 36: Optimizing Transparency & Disclosure
Optimizing Transparency & Disclosure Initiative Accomplishments Optimize Transparency & Disclosure Quarterly conference calls and webcasts New corporate web site Q2 2012 Excel based quarterly financials and key performance metrics available for download on website Additional historical segment data
Slide 37: Accelerating Value Realization Through Increased Oil Production
Accelerating Value Realization Through Increased Oil Production 0 250,000 500,000 750,000 1,000,000 2010 2011 2012 2013 Est Triple In FOR Avg. Oil Production (Bbls) Forestar’s Share of Total Oil Production 2010 – 2013 Est. Minerals Resources Initiatives Establish operating platform: Acquired Credo P
Slide 38: Accelerating Value Realization Through Increased Residential Lot Sales
642 1,365 2008 2009 2010 2011 2012 2013 Est. Triple in FOR Avg. Forestar Lot Sales Avg. Lot Margin Accelerating Value Realization Through Increased Residential Lot Sales U.S. Single-Family Starts Residential Lot Sales & Average Margin Community Development Initiatives Continue increasing lot sales a
Slide 39: Total Segment EBITDA
($20) $0 $20 $40 $60 $80 $100 $120 $140 2008 2009 2010 2011 2012 2013 Est. 2014 Est. 2015 Est. Total Segment EBITDA ($ in millions) EBITDA Average = $34 million Execution of Triple in FOR Initiatives Putting EBITDA Points on the Board EBITDA Average = $120 million Note: EBITDA = Total segment earnin
Slide 40: For questions, please contact
For questions, please contact: Building Momentum By Accelerating Value Realization, Optimizing Transparency and Growing Net Asset Value 40 Anna Torma SVP Corporate Affairs Forestar Group Inc. 6300 Bee Cave Road Building Two, Suite 500 Austin, TX 78746 512-433-5312 annatorma@forestargroup.com
Slide 41: Fourth Quarter and FY 2012 Appendix
Fourth Quarter and FY 2012 Appendix - Financial Footnotes - Segment KPI’s - Oil & Gas Reserves - Reconciliation of Non-GAAP Financial Measures Building Momentum By Accelerating Value Realization, Optimizing Transparency and Growing Net Asset Value 41
Slide 42: Net Income Before Special Items Reflects Acceleration in Operating Results
Net Income (Loss) Before Special Items Reflects Acceleration in Operating Results ($ in Millions, except per share data) FY 2012 FY 2011 Net Income, in accordance with GAAP $12.9 $7.2 Earnings Per Share $0.36 $0.20 Special items per share: Credo acquisition expenses $0.12 $ - Loss on extinguishment
Slide 43: Improved Segment Operating Results, Full Year 2012
Accelerating Value Realization Drives Improved Segment Operating Results ($ in Millions) Full Year 2012 Full Year 2011 Segment Earnings (Loss): Real Estate $53.6 ($25.7) Mineral Resources 21.6 16.0 Fiber Resources 5.0 1.9 Total Segment Earnings (Loss) $80.2 ($7.8) • FY 2012 real estate segment resul
Slide 44: Improved Operating Results, 4th Quarter 2012
Accelerating Value Realization and Strategic and Disciplined Investments Drives Improved Operating Results ($ in Millions) 4th Quarter 2012 4th Quarter 2011 Net Income (Loss), in accordance with GAAP $10.0 ($22.9) Earnings (Loss) Per Share $0.28 ($0.65) Special items per share: Credo acquisition exp
Slide 45: Improved Segment Results, 4th Quarter 2012
Accelerating Value Realization and Strategic and Disciplined Investments Drives Improved Operating Results ($ in Millions) 4th Quarter 2012 4th Quarter 2011 Segment Earnings (Loss): Real Estate $21.6 ($25.0) Mineral Resources 5.7 3.7 Fiber Resources 2.3 0.1 Total Segment Earnings (Loss) $29.6 ($21.2
Slide 46: Mineral Resources Segment KPIs
Q4 2012 Q4 2011 FY 2012 FY 2011 Leasing Activity Net Fee Acres Leased 5,000 320 8,900 8,100 Avg. Bonus / Acre $300 $60 $600 $280 Total Oil and Gas Interests* Oil Produced (Barrels) 171,500 49,700 371,300 151,900 Average Price / Barrel $80.36 $102.19 $85.09 $96.84 Natural Gas Produced (MMCF) 689.9 37
Slide 47: Real Estate Segment KPIs
Q4 2012 Q4 2011 FY 2012 FY 2011 Residential Lot Sales Lots Sold 384 309 1,365 1,117 Average Price / Lot $58,100 $43,300 $52,000 $47,400 Gross Profit / Lot $23,500 $15,200 $19,500 $17,500 Commercial Tract Sales Acres Sold 40 2 95 26 Average Price / Acre $208,300 $547,200 $130,800 $193,700 Land Sales
Slide 48: Fiber Resources Segment KPIs
48 Q4 2012 Q4 2011 FY 2012 FY 2011 Fiber Sales Pulpwood Tons Sold 105,000 44,100 370,200 266,200 Average Pulpwood Price / Ton $10.65 $9.31 $9.83 $8.69 Sawtimber Tons Sold 57,000 5,600 123,700 56,800 Average Sawtimber Price / Ton $23.98 $22.17 $21.77 $16.13 Total Tons Sold 162,000 49,700 493,900 323,
Slide 49: Reconciliation of Non-GAAP Financial Measures: Net Income and EPS
49 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) Forestar’s Net Income and Earnings Per Share (EPS) excluding special items for the years ended December 31, 2012 and 2011 are non-GAAP financial measures within the meaning of Regulation G of the Securities and Exchange Commission. Non-GAA
Slide 50: Reconciliation of Non-GAAP Financial Measures: Total Segment EBITDA
50 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) Forestar’s Total Segment EBITDA for the years ended December 31, 2012, 2011, 2010, 2009 and 2008 are non-GAAP financial measures within the meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP financial measures are
Slide 51: For questions, please contact
For questions, please contact: Building Momentum By Accelerating Value Realization, Optimizing Transparency and Growing Net Asset Value 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 51