Forestar (FOR) - 2024 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION This section provides the company's unaudited financial information, including statements, notes, management's discussion, market risk disclosures, and controls Item 1. Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements for the quarter ended December 31, 2023, detailing balance sheets, operations, equity, and cash flows with explanatory notes Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of December 31, 2023, and September 30, 2023 Consolidated Balance Sheet Highlights (In millions) | Account | Dec 31, 2023 | Sep 30, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $458.9 | $616.0 | | Real estate | $2,009.8 | $1,790.3 | | Total Assets | $2,533.8 | $2,470.7 | | Debt | $705.3 | $695.0 | | Total Liabilities | $1,125.0 | $1,100.8 | | Total Equity | $1,408.8 | $1,369.9 | - Total assets increased to $2.53 billion as of December 31, 2023, primarily driven by a $219.5 million increase in real estate holdings compared to September 30, 2023[10] Consolidated Statements of Operations This section details the company's financial performance for the quarter, including revenues, income, and earnings per share Quarterly Statement of Operations Highlights (In millions, except per share data) | Metric | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | | :--- | :--- | :--- | | Revenues | $305.9 | $216.7 | | Income before income taxes | $51.2 | $27.9 | | Net Income | $38.2 | $20.8 | | Diluted EPS | $0.76 | $0.42 | - Revenues for the quarter increased by 41.2% year-over-year, leading to an 83.7% increase in net income and diluted EPS[13] Consolidated Statements of Total Equity This section outlines changes in the company's total equity, primarily driven by net income, for the quarter ended December 31, 2023 - Total equity increased from $1,369.9 million at September 30, 2023, to $1,408.8 million at December 31, 2023[17] - The primary driver for the increase in equity during the quarter was the net income of $38.2 million[17] Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities for the quarter Quarterly Cash Flow Summary (In millions) | Activity | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($156.7) | ($49.8) | | Net cash (used in) provided by investing activities | ($0.2) | $1.5 | | Net cash used in financing activities | ($0.2) | ($0.1) | | Decrease in cash | ($157.1) | ($48.4) | | Cash at end of period | $458.9 | $216.4 | - The significant use of cash in operating activities was primarily due to a $209.8 million increase in real estate investments, reflecting the company's growth strategy[21] Notes to Consolidated Financial Statements This section provides detailed explanations of accounting policies, significant transactions, and related party disclosures supporting the financial statements - As of December 31, 2023, D.R. Horton, a related party, owned approximately 63% of the Company's outstanding common stock[26] - During the quarter, the company invested $228.0 million in acquiring residential real estate and $226.5 million in development[31] - Residential lot sales to D.R. Horton were $272.8 million from 2,834 lots in Q1 FY2024, a substantial increase from $187.1 million from 2,094 lots in the prior year period[60] - Total debt stood at $705.3 million, primarily composed of senior notes due in 2026 and 2028. The company had $385.7 million of available capacity under its revolving credit facility[39][40] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's strong operational performance, revenue growth, improved profitability, and expanding land position, highlighting robust demand and liquidity - Demand for residential lots remained strong, particularly at affordable price points, leading to a 39% increase in lot sales compared to the prior year period[75] Key Operating Metrics (Q1 FY2024 vs Q1 FY2023) | Metric | Q1 FY2024 | Q1 FY2023 | | :--- | :--- | :--- | | Revenues | $305.9M | $216.7M | | Income before taxes | $51.2M | $27.9M | | Lots Sold | 3,150 | 2,263 | | Average Sales Price/Lot | $96,400 | $90,100 | Land and Lot Position | Metric | Dec 31, 2023 | Sep 30, 2023 | | :--- | :--- | :--- | | Lots owned | 55,400 | 52,400 | | Lots controlled | 27,000 | 26,800 | | Total lots owned and controlled | 82,400 | 79,200 | - The company maintained a strong liquidity position with $458.9 million in cash and $385.7 million available on its revolving credit facility. The ratio of net debt to total capital was a low 14.9% at quarter-end[89][90] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to market risks, primarily interest rate fluctuations, and its strategy of using fixed-rate debt to mitigate these risks - The company's main market risk is interest rate risk on its debt[110] - As of December 31, 2023, debt consisted of $700 million in fixed-rate senior notes and a $9.9 million fixed-rate note payable. There were no outstanding borrowings under the variable-rate revolving credit facility[111] Item 4. Controls and Procedures Management confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control over financial reporting - Based on an evaluation by the CEO and CFO, the company's disclosure controls and procedures were deemed effective as of the end of the period covered by the report[112] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[113] PART II — OTHER INFORMATION This section covers additional information including legal proceedings, insider trading arrangements, and a list of exhibits filed with the report Item 1. Legal Proceedings The company is involved in various legal proceedings in the ordinary course of business, with management anticipating no material adverse financial impact - The company is involved in various legal proceedings arising from the ordinary course of business and believes it has adequate reserves for any probable losses[115] Item 5. Other Information This section reports on insider trading plans, confirming no directors or Section 16 officers adopted or terminated Rule 10b5-1 arrangements during the quarter - During the quarter ended December 31, 2023, no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements[116] Item 6. Exhibits This section lists all exhibits accompanying the Form 10-Q, including agreements, certifications, and interactive data files - The exhibits filed with this report include a Separation Agreement, a Consulting Agreement, and certifications from the CEO and CFO pursuant to the Sarbanes-Oxley Act of 2002[118]