Forestar (US:FOR)2024-07-22 19:04PART I — FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section provides the unaudited consolidated financial statements for the quarter ended June 30, 2024, prepared in accordance with U.S. GAAP - The unaudited financial statements include all necessary adjustments for a fair presentation of interim period results, as per management's opinion153 - These financial statements should be read in conjunction with the audited financial statements from the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2023153 Consolidated Balance Sheets As of June 30, 2024, total assets increased to $2,675.0 million, driven by real estate, with total liabilities at $1,162.1 million and equity at $1,512.9 million Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2024 | September 30, 2023 | | :--- | :--- | :--- | | Total Assets | $2,675.0 | $2,470.7 | | Cash and cash equivalents | $359.2 | $616.0 | | Real estate | $2,238.7 | $1,790.3 | | Total Liabilities | $1,162.1 | $1,100.8 | | Debt | $706.1 | $695.0 | | Total Equity | $1,512.9 | $1,369.9 | Consolidated Statements of Operations For the nine months ended June 30, 2024, net income rose to $121.8 million on $958.0 million revenue, though the third quarter saw a decline in both metrics Statement of Operations Summary (in millions, except per share data) | Metric | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $958.0 | $887.1 | $318.4 | $368.9 | | Income before income taxes | $161.6 | $126.2 | $51.6 | $62.4 | | Net income | $121.8 | $94.5 | $38.7 | $46.8 | | Diluted net income per share | $2.40 | $1.89 | $0.76 | $0.93 | Consolidated Statements of Total Equity Total equity increased to $1,512.9 million by June 30, 2024, primarily driven by $121.9 million in net income and common stock issuance proceeds Changes in Total Equity (in millions) | Description | Amount | | :--- | :--- | | Balance at September 30, 2023 | $1,369.9 | | Net income (9 months) | $121.9 | | Issuance of common stock | $19.7 | | Other adjustments | ($0.5) | | Balance at June 30, 2024 | $1,512.9 | Consolidated Statements of Cash Flows Net cash used in operating activities was $277.6 million for the nine months ended June 30, 2024, primarily due to increased real estate investments, leading to a $256.8 million decrease in cash Cash Flow Summary (Nine Months Ended June 30, in millions) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(277.6) | $136.2 | | Net cash provided by investing activities | $3.7 | $0.8 | | Net cash provided by (used in) financing activities | $17.1 | $(0.8) | | (Decrease) increase in cash | $(256.8) | $136.2 | | Cash at end of period | $359.2 | $401.0 | Notes to Consolidated Financial Statements These notes detail accounting policies, segment operations as a single real estate entity, D.R. Horton's 62% majority ownership, and the $706.1 million debt structure, including an undrawn $410 million credit facility - As of June 30, 2024, D.R. Horton owned approximately 62% of the Company's outstanding common stock, classifying it as a related party under GAAP35137 - The company operates as a single real estate segment, focused on acquiring land, installing infrastructure, and selling residential lots to homebuilders156178 Debt Composition as of June 30, 2024 (in millions) | Debt Instrument | Carrying Amount | | :--- | :--- | | 3.85% senior notes due 2026 | $398.2 | | 5.0% senior notes due 2028 | $298.0 | | Other note payable | $9.9 | | Total Debt | $706.1 | - The company maintains a $410 million senior unsecured revolving credit facility, with no outstanding borrowings and $385.2 million of available capacity as of June 30, 20242075 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strong demand for residential lots, driving an 8% revenue increase for the nine-month period, expanding lot position to 102,100, and maintaining strong liquidity, despite quarterly impacts from reduced inventory - Demand for residential lots, especially at affordable price points, remained strong, contributing to an 8% revenue increase for the nine months ended June 30, 202465 - The company's total lot position expanded to 102,100 lots by June 30, 2024, comprising 57,900 owned and 44,200 controlled lots64240 - The company is well-positioned to consolidate market share, supported by low net leverage, strong liquidity, a diverse lot portfolio, and its strategic relationship with D.R. Horton212 Results of Operations Nine-month revenues increased to $958.0 million, driven by a 7% rise in lots sold and higher average sales prices, with D.R. Horton sales as a primary contributor, while SG&A expenses also increased Residential Lots Sold | Period | Lots Sold | Average Sales Price | | :--- | :--- | :--- | | Nine Months Ended June 30, 2024 | 9,694 | $96,300 | | Nine Months Ended June 30, 2023 | 9,054 | $87,300 | | Three Months Ended June 30, 2024 | 3,255 | $94,000 | | Three Months Ended June 30, 2023 | 3,812 | $87,700 | Lot Sales Revenue by Customer (Nine Months Ended June 30, in millions) | Customer | 2024 | 2023 | | :--- | :--- | :--- | | D.R. Horton | $846.6 | $677.4 | | Other Customers | $86.7 | $112.9 | | Total | $933.3 | $790.3 | - SG&A expense increased to $86.5 million for the nine months ended June 30, 2024, from $71.3 million in the prior year, primarily due to increased headcount supporting business growth238 - No impairment charges were recorded in the three and nine months ended June 30, 2024, contrasting with $19.4 million in the nine months ended June 30, 202370 Liquidity and Capital Resources The company maintains strong liquidity with $359.2 million cash and $385.2 million available credit, a net debt to total capital ratio of 18.7%, and raised $19.7 million from common stock issuance - As of June 30, 2024, the company held $359.2 million in cash and cash equivalents, with $385.2 million available on its revolving credit facility99 - The ratio of net debt to total capital stood at 18.7% as of June 30, 2024241 - Net cash used in operating activities totaled $277.6 million for the nine months ended June 30, 2024, primarily due to increased real estate investment227135 - The company issued 546,174 shares of common stock under its at-the-market program, generating $19.7 million in net proceeds during the nine months ended June 30, 2024167228246 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate exposure on its debt, managed through a mix of fixed and variable-rate instruments, with predominantly fixed-rate debt and no outstanding variable-rate borrowings as of June 30, 2024 - The company's primary market risk is interest rate risk, which is managed through a combination of fixed and variable-rate debt84252 - As of June 30, 2024, fixed-rate debt totaled $709.9 million, with no outstanding borrowings on the $410 million variable-rate revolving credit facility116 Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the reporting period253 - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2024117 PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is involved in ordinary course legal proceedings, for which management believes adequate reserves are established, expecting no material adverse effect on financial position or long-term results - The company is involved in various legal proceedings arising in the ordinary course of business86118 - Management believes adequate reserves are established, and the outcome of these proceedings is not expected to materially affect the company's financial position, long-term results, or cash flows86170 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including CEO and CFO certifications under Sarbanes-Oxley Act Sections 302 and 906, and Inline XBRL documents - The report includes CEO and CFO certifications as required by Sections 302 and 906 of the Sarbanes-Oxley Act255 - Interactive Data Files, including XBRL Instance Document and various Linkbase Documents, are electronically submitted with the report255 SIGNATURE The quarterly report concludes with the formal signature of James D. Allen, Executive Vice President and Chief Financial Officer, dated July 22, 2024 - The report was formally signed by James D. Allen, Executive Vice President and Chief Financial Officer, on behalf of Forestar Group Inc113124 - The signature date for the report is July 22, 2024113