Forestar Group Inc · NYSE:FOR
Forestar — FY2013 Earnings Presentation
45 slides from Forestar's earnings presentation, Feb 13, 2014
Slide 1: Fourth Quarter & Full Year 2013 Financial Results
Fourth Quarter & Full Year 2013 Financial Results February 13, 2014 Building Momentum By Accelerating Value Realization, Optimizing Transparency and Growing Net Asset Value
Slide 2: Notice To Investors
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,”
Slide 3: Increased Real Estate Sales Driving Improved Operating Results (Full Year)
Increased Real Estate Sales Driving Improved Operating Results 3 Note: 2013 weighted average diluted shares outstanding were 36.8 million ($ in Millions, except per share data) Full Year 2013 Full Year 2012 Net Income $29.3 $12.9 Earnings Per Share $0.80 $0.36 Segment Earnings: Real Estate $68.4 $53
Slide 4: Increased Real Estate Sales Driving Improved Operating Results (Q4)
Increased Real Estate Sales Driving Improved Operating Results 4 • Fourth quarter 2012 results include after-tax expenses of approximately ($0.4 million), or ($0.01) per share, associated with the acquisition of CREDO Petroleum Corporation Note: Fourth Quarter 2013 weighted average diluted shares ou
Slide 5: Maintaining Financial Strength While Executing Growth Strategy
Maintaining Financial Strength While Executing Growth Strategy Execution of Strategic Initiatives Positions Forestar with Strong Balance Sheet, Ample Liquidity and Assets Well Positioned to Generate Earnings and Cash Flow Going Forward 1 Fair value of convertible notes as of YE 2013 is $100 million;
Slide 6: Real Estate Fourth Quarter & Full Year 2013 Highlights
Real Estate Fourth Quarter & Full Year 2013 Highlights Building Momentum By Accelerating Real Estate Sales and Building a Solid Multifamily Pipeline 6
Slide 7: Real Estate – Results Reflect Improving Demand (FY 2013)
$53.6 $26.8 $15.5 $2.2 ($25.3) ($2.6) ($1.8) $68.4 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 FY 2012 Residential & Commercial Sales Income Producing Properties Opex Gain on Sale of Assets Undeveloped Land Sales Asset Impairments FY 2013 FY 2013 Sales Highlights • Residential Lots – 1,883 lots • Up
Slide 8: Real Estate – Results Reflect Improving Demand (Q4 2013)
($6.8) ($1.8) $21.7 $31.0 $1.1 ($17.5) $27.7 $0 $10 $20 $30 $40 $50 $60 Q4 2012 Residential & Commercial Sales Opex Income Producing Properties Undeveloped Land Sales Asset Impairments Q4 2013 Q4 2013 Sales Highlights • Residential Lots – 530 lots • Up 38% vs Q4 2012 • Margins up over 18% vs Q4 2012
Slide 9: Real Estate Capitalizing on Housing Recovery
9 * Actual results may vary A n n u al Lo t Sal e s 500 1,000 1,500 2,000 Q4 1 0 Q1 1 1 Q2 1 1 Q3 1 1 Q4 1 1 Q1 1 2 Q2 1 2 Q3 1 2 Q4 1 2 Q1 1 3 Q2 1 3 Q 3 1 3 Q4 1 3 R esi d en tial Lo ts Developed Lots Lots Under Development 2006 Peak Sales = 3,600 lots Residential Lots Under Option Contracts Q4 20
Slide 10: Texas Markets Driving Lot Sales and Margins
Texas Markets Driving Lot Sales and Margins FOR Well Positioned With Lot Inventory in Texas Markets 10 Active Residential Projects Q4 13 Lot Sales Vacant Dev. Lots Lots Under Dev. Remaining Lots to be Developed 41 451 1,465 757 12,408 Forestar Texas Lot Sales & Inventory - YE 2013 • Texas – 90% of F
Slide 11: Building Solid Pipeline of Multifamily Development Opportunities
Building Solid Pipeline of Multifamily Development Opportunities (Proforma) Proforma Project Cash Flows Proforma Forestar Cash Flows Project Market % Complete Units FOR Ownership Total Development Cost Expected Project NOI FOR Equity FOR Total Cash Cash Multiple* Eleven Austin 90% 257 25% $40 – 45 $
Slide 12: Real Estate Acquisitions and Investment in Development
Real Estate Acquisitions and Investment in Development Generating Earnings & Cash Flow 12 2 Real Estate Acquisition Activity Proforma Returns ($ in millions) Capital Communities Markets Lots/Units Cash Multiple Cash Flow 2013 Acquisitions Single-Family $18.4 5 5 1,346 2.6x $47.8 Multifamily 18.5 2 2
Slide 13: Core Real Estate Business Strengthening
Note: Includes consolidated ventures, but excludes mitigation. Forestar Real Estate Revenues (Excluding Timberland & Multifamily Revenues) Core Real Estate Business Strengthening 13 Capitalizing on housing recovery by driving lot sales and margin Accelerating value realization through residential tr
Slide 14: Other Natural Resources Fourth Quarter & Full Year 2013 Highlights
Other Natural Resources Fourth Quarter & Full Year 2013 Highlights Building Momentum Through Sustainable Harvests and Maximizing Recreational Lease Activity 14
Slide 15: Timber Markets Remain Favorable
Timber Markets Remain Favorable $0.8 $0.6 ($1.0) $3.7 $3.3 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 Q4 2012 Gain on Termination of Timber Lease Operating Expenses Fiber Sales Q4 2013 Se gm en t Ea rn in gs Q4 2013 Highlights • $3.8 million gain on termination of timber lease in connection with sale of 2,400 ac
Slide 16: Oil and Gas Fourth Quarter & Full Year 2013 Highlights
Oil and Gas Fourth Quarter & Full Year 2013 Highlights Building Momentum By Driving Leasing and Exploration to Increase Production and Reserves 16
Slide 17: Focused on Value Creation Through Increased Investments (FY)
Focused on Value Creation Through Increased Investments $26.6 ($6.0) ($1.7) $18.9 -$2.0 $2.0 $6.0 $10.0 $14.0 $18.0 $22.0 $26.0 $30.0 FY 2012 Operating Expenses Oil & Gas Profit Margin FY 2013 Se gme n t Ea rn ing s FY 2013 Highlights • Oil production up nearly 88% vs. 2012 • 83 new gross productive
Slide 18: Focused on Value Creation Through Increased Investments (Q4)
Focused on Value Creation Through Increased Investments $7.1 ($4.5) ($1.6) $1.0 $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 Q4 2012 Oil & Gas Profit Margin Operating Expenses Q4 2013 Se gme n t Ea rn ing s Q4 2013 Highlights • Oil production up nearly 14% vs. Q4 2012 • 13 new gross productive wells • Assigned in
Slide 19: Production Growth Driven by Bakken / Three Forks
0 500 1,000 1,500 2,000 2011 2012 2013 B o e / D a y North Dakota Kansas/Nebraska Texas/Louisiana/Other Production Growth Driven by Bakken / Three Forks 19 19 Total Daily Production – Working Interests 0 500 1,000 1,500 2,000 2,500 3,000 2011 2012 2013 Boe / D ay Working Interests Royalty Total Dail
Slide 20: Bakken / Three Forks Drilling Activity
20 20 0 200 400 600 800 1,000 1,200 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014E Bakken/Three Forks Production (Boe/Day) 0 50 100 150 200 2010 2011 2012 2013 2014E P ro d u ci n g W e lls Bakken/Three Forks Producing Wells Actual Wells Planned Wells +44 +25 +7 +4 +85 * Producing or capable of production
Slide 21: Kansas / Nebraska Drilling Activity
0 20 40 60 80 100 120 140 160 2012 2013 2014E P ro d u ci n g W e lls +36 +52*** Kansas / Nebraska Drilling Activity Accelerating Production and Value Growth 21 21 +19 Kansas / Nebraska Production (Boe/Day) 0 100 200 300 400 500 600 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014E B O E /Da y Kansas / Nebra
Slide 22: Delivering Proved Reserve Growth
Delivering Proved Reserve Growth 22 2.4 3.0 5.6 8.5 2010 2011 2012 2013 * Excludes Probable and Possible reserves Note: MMBOE = million barrels of oil equivalent 25% 36% 57% 69% 75% 64% 43% 2010 2011 2012 2013 Oil & Liquids Natural Gas (BOE) 31% Year-End Proved Reserves By Product Oil and Liquids Ac
Slide 23: Reserve Growth Driven by Bakken / Three Forks
Reserve Growth Driven by Bakken / Three Forks 23 Proven Reserves (MMBoe) Reserve Growth (MMBOE) Production Replaced (MMBOE) Net Reserve Increase (MMBOE) % Oil* ($ in millions) Investment 2013 8.5 4.0 1.1 2.9 69% $99 2012 5.6 3.3 0.7 2.6 57% 173** 2011 3.0 1.0 0.4 0.6 36% 4 2010 2.4 0.7 0.4 0.3 25% -
Slide 24: Accelerating Value Through Proved Reserve Growth
$56 $77 $133 $222 $317 $0 $50 $100 $150 $200 $250 $300 $350 2009 2010 2011 2012 2013 Accelerating Value Through Proved Reserve Growth Note: Includes ventures $34 $45 $82 $138 $183 $0 $40 $80 $120 $160 $200 2009 2010 2011 2012 2013 PV-10* ($ in millions) ($ in millions) Future Net Cash Flows * 24 *PV
Slide 25: 2014 Capital Investment Plan
2014 Capital Investment Plan Generating Production and Reserve Growth By Accelerating Investment 25 Total Oil & Gas 2014 Capital Investment: ~ $175 - $200 million Drilling & Completion 73% Land Acquisition 22% Seismic 5% North Dakota 47% Kansas / Nebraska 27% Other 26% Capital Allocation by Activity
Slide 26: Accelerating Value Realization and Growing Net Asset Value
Accelerating Value Realization and Growing Net Asset Value Building Momentum By Accelerating Value Realization and Growing Net Asset Value Capitalizing on investments to accelerate earnings and cash flow Increasing oil production and proven reserves Expected investment returns above cost of capital
Slide 27: Strategic Initiatives Update
Strategic Initiatives Update February 13, 2014 Building Momentum By Accelerating Value Realization, Optimizing Transparency and Growing Net Asset Value 27
Slide 28: Triple in FOR Initiatives Focus on Accelerating Value Realization
Triple in FOR Initiatives Focus on Accelerating Value Realization Optimize Transparency & Disclosure Raise NAV Through Strategic and Disciplined Investments 28 Triple Residential Lot Sales Triple Oil and Gas Production 0 500 1,000 1,500 2,000 2,500 2008-2011 Average 2012 2013 Lo ts S o ld Triple in
Slide 29: Establishing New Strategic Initiatives Growing Long-Term Shareholder Value
Establishing New Strategic Initiatives Growing Long-Term Shareholder Value Growing Through Strategic and Disciplined Investment 2014 Capital Investment = ~$400MM 2013 Capital Investment = ~$200MM Increasing Returns 2016 Target ROA =10.0% 2013 ROA = 6.1% 2008 – 2011 Avg. ROA = (0.1%)* 29 * Excludes g
Slide 30: Growing Through Disciplined Investment
Growing Growing Through Disciplined Investment $29 $38 2008-2011 Average 2013 2016 Target Growing Oil and Gas Segment EBITDA $72 2008-2011 Average 2013 2016 Target ($1) Growing Real Estate Segment EBITDA 30 • Real estate acquisition and development • Oil and gas exploration and development • Strateg
Slide 31: Focusing on Increasing Returns
FORWARD Focusing on Increasing Returns $36 $117 2008-2011 Average 2013 2016 Target Accelerating Total Segment EBITDA (0.1%) 6.1% 2008-2011 Average 2013 2016 Target Increasing Return on Assets 31 2016 Targets: • Total Segment EBITDA of $200 million • Return on Assets of 10.0% • Reposition $100 Millio
Slide 32: Delivering Shareholder Value Through Execution of Strategic Initiatives
Delivering Shareholder Value Through Execution of Strategic Initiatives Delivering Value Through Execution of Strategic Initiatives 2009 Strategic Initiatives • Monetize 175,000 acres of timberland and reduce debt $150 million 2012 Triple in FOR • Triple total segment EBITDA, oil and gas production
Slide 33: For questions, please contact
Fourth Quarter & Full Year 2013 Financial Results February 13, 2014 For questions, please contact: 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 33
Slide 34: Fourth Quarter and Full Year 2013 Appendix
Fourth Quarter & Full Year 2013 Financial Results February 13, 2014 Fourth Quarter and Full Year 2013 Appendix - Segment KPI’s - Earnings Reconciliations - Reconciliation of Non-GAAP Financial Measures - Proved Reserves 34
Slide 35: Real Estate Segment KPI's
Q4 2013 Q4 2012 FY 2013 FY 2012 Residential Lot Sales Lots Sold 530 384 1,883 1,365 Average Price / Lot $66,000 $58,100 $58,300 $52,000 Gross Profit / Lot $27,700 $23,500 $25,000 $19,500 Commercial Tract Sales Acres Sold 115 40 171 95 Average Price / Acre $210,300 $208,300 $197,100 $130,800 Land Sal
Slide 36: Oil and Gas Segment KPI's
Q4 2013 Q4 2012 FY 2013 FY 2012 Fee Leasing Activity Net Fee Acres Leased 828 4,981 9,183 8,910 Avg. Bonus / Acre $306 $299 $271 $597 Total Oil and Gas Interests* Oil Produced (Barrels) 195,100 171,500 697,700 371,300 Average Price / Barrel $86.51 $80.36 $89.40 $85.09 Natural Gas Produced (MMCF) 518
Slide 37: Other Natural Resources Segment KPI's
37 Q4 2013 Q4 2012 FY 2013 FY 2012 Fiber Sales Pulpwood Tons Sold 60,800 105,000 375,200 370,200 Average Pulpwood Price / Ton $13.58 $10.65 $11.86 $9.83 Sawtimber Tons Sold 31,600 57,000 234,300 123,700 Average Sawtimber Price / Ton $21.26 $23.98 $22.31 $21.77 Total Tons Sold 92,400 162,000 609,500
Slide 38: FY 2013 Earnings Reconciliation
FY 2013 Earnings Reconciliation $12.9 $29.3 $5.7 $9.7 $4.2 $3.0 ($5.0) ($1.2) $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 2012 Real Estate Interest, Taxes & Other Expenses Other Natural Resources G&A Oil & Gas Share Based Comp 2013 ($ in millions) 38 $0.36 $0.26 $0.16 $0.11 ($0.14) ($0.03) $
Slide 39: Fourth Quarter 2013 Earnings Reconciliation
Fourth Quarter 2013 Earnings Reconciliation $10.0 $13.0 $1.9 $4.0 $1.3 $0.0 ($4.0) ($0.2) $0.0 $5.0 $10.0 $15.0 $20.0 Q4 2012 Real Estate Other Natural Resources Share Based Comp G&A Oil & Gas Interest, Taxes & Other Expenses Q4 2013 ($ in millions) 39 $0.28 $0.10 $0.05 $0.03 $0.00 ($0.11) ($0.02) $
Slide 40: Total Segment EBITDA Reconciliation
40 Forestar’s Total Segment EBITDA is a non-GAAP financial measure within the meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP financial measures are not in accordance with, or an alternative to, U.S. Generally Accepted Accounting Principles (GAAP). The company believes pr
Slide 41: Segment EBITDA Reconciliation
41 Forestar’s Segment EBITDA is a non-GAAP financial measure within the meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP financial measures are not in accordance with, or an alternative to, U.S. Generally Accepted Accounting Principles (GAAP). The company believes presenti
Slide 42: Oil and Gas Segment EBITDAX Reconciliation
42 Forestar’s Oil and Gas Segment EBITDAX is a non-GAAP financial measure within the meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP financial measures are not in accordance with, or an alternative to, U.S. Generally Accepted Accounting Principles (GAAP). The company beli
Slide 43: YE 2013 Net Proved Reserves
YE 2013 Net Proved Reserves ($ in millions) 2013 2012 2011 2012-2013 % Change 2011-2012 % Change Proved Developed Producing Reserves1 Oil and NGL Reserves MBBL 3,224.6 2,105.2 1,053.7 53% 100% Gas Reserves BCF 13.3 12.2 11.4 9% 7% Future Net Revenues* $222.6 $162.2 $132.7 37% 22% PV-10 3* $140.5 $10
Slide 44: Reconciliation of Non-GAAP Financial Measures
($ in 000’s) Est. YE 2013* Actual YE 2012* Actual YE 2011* Undiscounted future net cash flows before income taxes $316,550 $222,231 $133,729 Less: undiscounted future income taxes (78,977) (52,088) (41,835) Undiscounted future net cash flows after income taxes $237,573 $170,143 $91,894 Reconciliatio
Slide 45: For questions, please contact
Fourth Quarter & Full Year 2013 Financial Results February 13, 2014 For questions, please contact: 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 45