Forestar Group Inc. (FOR) Q1 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Quarter 1 2013 Forestar Group Earnings Conference Call. My name is Patrick, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Ms. Anna Torma, Senior Vice President of Corporate Affairs. Please proceed.

Thanks, and good morning. I would like to welcome each of you who have joined us by conference call or webcast this morning to discuss Forestar's first quarter 2013 results. I'm Anna Torma, Senior Vice President, Corporate Affairs. And joining me on the call today is Jim DeCosmo, President and CEO; and Chris Nines, Chief Financial Officer. This call is being webcast. And copies of the earnings release and presentation slides are now available on the Investor Relations section of our website at forestargroup.com. Before we get started, let me remind you to please review the warning statements in our press release and our slides, as we will make forward-looking statements during the presentation. In addition, this presentation includes non-GAAP financial measures. The required reconciliation to GAAP financial measures can be found at the back of our earnings release and slides or on our website. Now let me turn the call over to Chris for a review of our financial results.

Thanks, Anna. And welcome, everyone joining us on the call this morning. Let me begin by highlighting our first quarter financial results. In first quarter 2013, Forestar reported net income of approximately $4 million or $0.11 per share compared with net income of $2.8 million or $0.08 per share in 2012. This first slide provides a high-level reconciliation between our first quarter 2013 and first quarter 2012 financial results. Real estate segment results improved approximately $7.9 million or $0.14 per share, which principally reflects a 56% increase in residential lot sales activity. Other natural resources segment earnings increased by $2.1 million or $0.04 per share primarily due to higher fiber sales and pricing. The most significant negative variance was share-based compensation expense, which negatively impacted earnings by $5.2 million or $0.09 per share, as compared with first quarter 2012, which was driven by a 26% increase in our share price in first quarter 2013 and the fair value accounting for cash-settled awards. In addition, oil and gas earnings were down approximately $2 million or $0.03 per share principally due to lower volumes of higher-margin oil royalties, reduced delay rental revenues and increased costs associated with building out our oil and gas team. And finally, interest expense, taxes and other costs were impacted principally from the issuance of the convertible notes during the first quarter 2013, which I will discuss in greater detail in just a moment. Now let me highlight the changes to our segment financial reporting. We have realigned our business segment reporting to better reflect the operating strategy of our business. The primary change is the movement of our water resources operating results from our mineral resources segment and aggregating those with fiber activity to form the other natural resources segment. Our real estate segment has had no change from previous reporting. Our mineral resources segment has been renamed oil and gas to better reflect the strategy and operations of the segment. This change should provide greater transparency into future oil and gas segment results. We remain focused on building on the strong foundations that have been established in both the real estate and oil and gas businesses, and we will continue to work to create greater transparency and disclosure into our water interests. In the appendix to this earnings presentation, we have included recasted segment results for the 4 quarters and full year 2012 to reflect the changes in the business segments. Now let me turn to segment results for the quarter. In first quarter 2013, total segment earnings were approximately $25.8 million, almost 45% higher than $17.8 million in first quarter 2012, reflecting an acceleration of real estate segment operating results and the benefits of our Triple in FOR strategic initiatives. Real estate reported segment earnings of $19.4 million in first quarter 2013 compared with earnings of $11.6 million in first quarter 2012. First quarter real estate segment earnings include pretax earnings of $10.9 million from the sale of our Promesa multifamily community, while first quarter 2012 real estate segment earnings include a gain of $11.7 million associated with the sale of our 25% partnership interest in a commercial office project in Austin. The primary driver of the improvement of real estate segment results is an increase in residential lot sales and margin. The oil and gas segment reported total segment earnings of $5.1 million in first quarter 2013, compared with $7.1 million in first quarter 2012, principally due to lower oil royalties, reduced delay rental payments and additional operating expenses. Other natural resources reported total segment earnings of $1.3 million in first quarter 2013 compared with a loss of $0.9 million in first quarter 2012. This improvement was primarily due to higher fiber volumes and prices. Now let me turn to our balance sheet and our focus on maintaining financial strength and flexibility while continuing to execute our growth strategies. In first quarter 2013, we continued to strengthen our balance sheet and liquidity through the issuance of $125 million in convertible notes. These 7-year notes were issued at a rate of 3.75% and will mature in March 2020. Notes were issued with a 37.5% conversion premium or $24.49 per share. Because it is our intent to settle the principal amount of the convertible notes in cash at maturity, there is no dilution until the stock trades above $24.49 per share. At the end of the first quarter, we had approximately $329 million in total debt outstanding, which includes $31 million in consolidated project debt, most of which is non-recourse to Forestar. Our total debt-to-total capital ratio is about 37%, up only slightly from yearend. However, our available liquidity stood at approximately $275 million, well above yearend 2012, providing significant financial flexibility and the necessary funding for our 2013 oil and gas capital expenditure plan, real estate development activity and opportunistic real estate acquisitions. We remain very focused and committed to maintaining our balance sheet strength. Now let me turn the call over to Jim for additional operating highlights from the quarter.

Thanks, Chris. And as always, welcome to everybody who's joined us on the call and the webcast this morning. I'm encouraged by our results and also believe the momentum we've generated will help fuel Forestar's performance going forward. Let's review just a few of the highlights for the first quarter, as compared to Q1 of '12. First, 446 lots sold is a nice step-up, with a healthy backlog of 1,800 lots on a contract at the end of the quarter. Second, the sale of Promesa contributed $10.9 million in earnings. Third, oil and gas production is up 113%, and that's reflective of our acquisition of Credo Petroleum. As planned, drilling activity is up and is expected to drive reserve additions and production in coming quarters. And last, fiber sales were up over 162,000 tons. We're off to a solid start in 2013, and I believe we're on track to deliver our Triple in FOR strategic initiatives. So let's take a closer look at our real estate segment and the current market conditions. The housing market is in recovery. Single-family starts were up 29% in March from year-ago levels, but that's still well below the historic average of about 1.1 million. Including multifamily starts, we exceeded 1 million -- did 1 million start level for the first time since mid-2008. I think it's also important that you keep in mind that the U.S. has averaged 1.5 million total housing starts a year for the past 50 years. As I've said on a number of occasions, demand is ultimately driven by job growth and household formation. To the extent our markets continue to generate positive job growth and maintain healthy levels of inventory, I don't see any reason why we shouldn't continue to benefit from the housing recovery. So let's take a look at a few of the housing supply-and-demand metrics for Texas. First, Texas new home supply, which is presented on the left. Despite the relatively low sales rate for new homes, the months of supply in Texas currently stands at 2 months. That's the low end of equilibrium. A primary driver here is a very low absolute inventory of new homes. Second, housing demand is ultimately driven by jobs. Texas continues to be a leader in job growth. In the last year, private employment is up 3.5% versus 1.9% for the U.S. Texas added 310,000 jobs in the private sector last year. That accounts for 15% of the total private jobs created in all 50 states. Actual unemployment stands at 6.3% in Texas versus the national average of 7.6%. As you would expect, a majority of the jobs are created in the 4 major metros of Texas where we have over 1,000 lots in development, 1,331 finished lots and almost 11,000 to be developed. Our strategy is simply to generate the greatest value from every acre. Recognizing where to invest, i.e. location, and at the right time is core to our strategy. The location of our communities and the mix of the housing products enable us to capitalize on the housing recovery. Now let's review the real estate segment results for the first quarter. In Q1 2013, real estate segment results were $19.4 million. That's up $7.8 million compared to the first quarter of last year. Residential lot sales accounted for the majority of the improvement, with additional contribution from undeveloped land sales and lower operating expenses. Also contributing to the quarter was the sale of our multifamily project, Promesa. Now let's take a quick look at our lot sales trends. Residential lot sales in the first quarter increased to 446 lots. That's up 56% from the first quarter of last year. In addition, our backlog of lots under contract has increased to almost 1,800 lots. That's a level we haven't seen since the downturn began. As you can see on the chart, quarters can be a little lumpy and that a few of the contracts call for fairly large take-downs and are often scheduled around the beginning or at the end of the quarter. Based on what we see today, we'd expect lot closings in the second quarter to be in the 300 range and in the 1,900 to 2,000 range for the year, which would be up over 40% year-over-year. We're often asked about same-store sales, in this case, comparing communities where we had lot sales in the first quarter of 2012 and this year. In these communities, lot sales were up 18%, with gross margins moving up from 39% to 41% quarter-over-quarter. That's a very healthy gross margin. Given our average lot sales, price and margin held up well throughout the downturn. Our focus has been on delivering lots and increasing the velocity of sales. In today's new home market, having quality communities in good locations, with the ability to deliver lots, continues to be a distinct competitive advantage. During the first quarter, we sold Promesa. That's our wholly-owned multifamily community in Austin which was located on the last site in one of our development projects that we call Ribelin Ranch. The time from the start of construction to sale was only about 24 months. That's about 12 months faster than a normal time to construct and stabilize a property. Total sales consideration was about $41 million, generating $10.9 million in earnings and returns well above our cost of capital. Based on our estimates and projected NOI, we believe the property traded for a subpar cap rate. Once we stated marketing, Promesa produced a strong response from the buyer universe. I think there were 2 fundamental drivers: number one, a good location with barriers to entry; but more important, and number two, the quality of the property and the project, from design all the way through to completion. The multifamily team did a very nice job from the start to finish, and I'm very pleased with the outcome. We recently approved another investment for a multifamily project. The next start will be a project in the Dallas metro and will be named Midtown Cedar Hill. We acquired the 13.5 acre site late in 2011 for about $3 million. The site is located about 15 miles southwest of Dallas' central business district, with a direct commute to the major employment centers. It's within walking distance to Cedar Hills municipal center, offices, retail, entertainment, and a real bonus is there's a nearby greenbelt and a state park. Occupancy levels in Dallas-Fort Worth and the Cedar Hill area are near 94%, still experiencing good rent growth, and there's very little product in the Cedar Hill pipeline. Like Promesa, we plan to develop this 354-unit Class A project on balance sheet. With an additional $7 million in equity, we expect to generate about a 2x cash multiple. Given the location of Cedar Hill and the capability of our team, this is expected to be a solid investment and return. Like all Forestar properties, Midtown Cedar Hill will be of high quality and it will provide a lifestyle specifically designed for the region. In addition to Cedar Hill, we have 2 other projects currently under construction: Eleven, located in Austin; and 360, located in Denver. Eleven is now over 40% complete and began pre-leasing at the beginning of April. I had the opportunity to tour the property recently, and it's a fabulous product that's been thoughtfully integrated into the fabric and the culture of Austin, much like the plan for Cedar Hill. The urban location and the elevation provide a spectacular view of downtown Austin. We've also received good initial response to our pre-leasing and marketing campaign. Plans are for the first tenant to move in, in the third quarter, with stabilization and sale in 2014. Our 360 project, located in Denver, should begin pre-leasing in June, with stabilization and sale in 2015. Pro forma Forestar cash flows for these 2 properties and from Cedar Hill are estimated at approximately $43 million. In addition, we currently have 2 development sites in the pipeline: one in Nashville and one in Charlotte. We anticipate both these projects to be included in ventures and start construction later this year. Let me sum up our real estate business for you. The greatest value from every acre is realized when we deliver the right product in the right location at the right time with the right level of investment. The execution from our strategy and initiatives is illustrated in the chart. Across the board, every dimension in real estate contributes to the acceleration of value realization. We're on the right track and committed to delivering our Triple in FOR initiatives. Let's shift to oil and gas. First quarter 2013 oil and gas segment earnings were $5.1 million, about $2 million below the first quarter of last year. The decline is partly due to lower oil production from royalty interest, lower delay rental payments and an increase in DD&A and exploration expenses associated with our increased investments. Below segment earnings is an EBITDAX reconciliation. EBITDAX is a common metric that's used by the oil and gas companies to provide additional transparency in an ongoing operating profitability. And as Anna said, there's an EBITDAX reconciliation in the appendix. You can see in the chart that, year-over-year, EBITDAX is up about $2.6 million. Oil production was up over 113% compared with the same quarter last year. 67% of the oil production came from working interest investments. That's a fundamental shift from a year ago when production was driven primarily by own royalty interest. We expect our 2013 oil and gas capital investments to drive production and reserves higher as we go forward. For the quarter, 22 wells were completed. In the Bakken, 13 wells were in the process of being drilled and/or completed. And 20 wells will be drilled or completed in the Lansing-Kansas City. Let's take a closer look at the activities in the Bakken. Drilling in the Bakken continues to accelerate as many operators are moving from drilling one-off wells to whole leases. Their pad drilling were up to 10 wells may be drilled from one location. Pad drilling enables the operators to reduce well costs and enhance EURs while also extending the play into the lower benches of Three Forks formation. Many operators expect to reduce well costs from an average of about $10 million to $9 million per well while ramping up EURs from 500,000 to 600,000. And some operators are targeting as high as 700,000 BOEs per well. And the end of the first quarter, 12 wells had been added to production, with 13 wells either drilling or awaiting on completion. At quarter end, a total of 46 wells were producing, and we expect to have 78 in production by yearend. That's over double the number compared to yearend 2012. Our 2013 plan continues to call for 54 wells to be drilled, with a potential of up to 400 over time. Based on the rate of drilling, we expect to see production pick up in the back half of 2013 and into 2014. Using our underwriting assumptions, 54 Bakken/Three Forks wells should yield over 2 million BOEs in future production and over $120 million net cash flow. Now let's moves south to another important region, Kansas and Nebraska. Given our success in the central uplift, we leased an additional 28,000 acres in the first quarter, which brings the total to 152,000 net leased total acres in the region. Our 2013 plan remains to participate in about 82 wells, a majority of which we'll operate. In first quarter, we added 7 wells and realized over a 50% success rate, even better than the historic 40% rate. On a risk-adjusted basis, we're generating returns in the 100% range. One of the benefits of our Kansas/Nebraska operations is that we've got a good, solid pipeline of drilling sites in front of us. In fact, at its current pace, we have several years of sites identified for drilling. Shifting gears to an update on our 2013 drilling and CapEx program. During the first quarter, we invested $7.1 million in the Bakken/Three Forks, $3.7 million in Lansing-Kansas City and $1.2 million in various plays in Texas and Louisiana. In total, we invested $12 million in 32 wells and expect the pace of drilling investment to pick up throughout this year. Even though the drilling completion plan is weighted toward the back end of this year, we still expect to see a pickup in production in the latter half. After 6 months of operations, the transformation from a minerals management strategy to a low-cost power terminal and gas business is meeting our expectations. As the chart illustrates, on a BOE basis, we expect a significant step-up in 2013 production. This is a tribute of our investments but even more so to our team's ability to recognize good prospects and locations and deliver the greatest value from every acre. Shifting gears to other natural resources. In the first quarter, fiber sales were up $2.1 million from the first quarter of last year. During the quarter, we sold over 190,000 tons of fiber. That's up over 162,000 tons from the previous year, with the variance primarily due to the timing of harvest. For the year, we expect volume to be in the 500,000- to 600,000-ton range. Our average stumpage price in the quarter was up over 35% from a year ago, and that's driven primarily by a higher mix of sawlog prices and then, to a lesser extent, higher stumpage prices. In addition, our timberlands were recently recertified under the Sustainable Forestry Initiatives. Kudos goes out to the team for stewarding our timber resources and for making a significant contribution in the first quarter. In the last section of the call, I want to update you on the execution of our Triple in FOR strategic initiatives. We're absolutely committed to proving-up and growing our net asset value. Top priority: deliver our Triple in FOR strategic initiatives. Number One, accelerating value realization. Our first quarter 2013 earnings are up 45% from the first quarter of '12, driven by a step-up in both lots sales and oil production. In addition, we sold Promesa well ahead of time, which enhanced return and without sacrificing value. Number two, optimize transparency and disclosure. Our new reporting segments better reflect the operating strategy of our business and provide greater transparency into the performance of our oil and gas business. And number three, raising our net asset value. In the first quarter, we invested about $29 million of capital in real estate and in oil and gas. A majority of the real estate investments were for the development of lots, which generated gross margins in excess of 37% in 2012. Less than half the capital invested was in oil and gas, primarily for drilling completion of oil and gas wells which are expected to return well above our 20% rate-of-return hurdle. Despite lackluster GDP growth and an anemic new norm in the U.S. economy, I'm proud to be a part of Forestar. We're focused on those parts of our business that we can affect, and I'm looking forward to the days ahead. We've made good progress toward delivering our Triple in FOR segment EBITDA targets. In the first quarter, we generated about $31 million in total segment EBITDA, that's almost equivalent to our yearly average from 2008 through 2011. In closing, I'm encouraged by our progress and the momentum we've generated in Forestar. Our management team and employees have done a nice job and get all the credit of our success to date. But I'd also say that I believe we're still early in the game. We're headed in the right direction, but I know our team, I know what they're capable of, and we can always do better. Once again, I want to thank you for joining us on the call and the webcast this morning, as well as your interest in Forestar. So I'd now like to open up the call for questions.

[Operator Instructions] And gentlemen, your first question comes from the line of Mark Weintraub with Buckingham Research Group.

I was hoping to get a little bit of a sense as to whether any of the lands around Atlanta are beginning to have visibility where they might become development property initiatives. And I'm talking about the one that had once been called the Wolf Creeks, et cetera, of the world. So can -- I see the pipeline, where you're buying properties and you're turning them into multifamily, et cetera. How about some of the longer-held land that's had very low land bases where you've been going through the entitlement process?

Yes, Mark, what I would say is that the Atlanta market is doing better. As I've said on previous calls, it's coming off a pretty deep bottom. A couple of the indicators that I will share with you -- if -- I'll talk about undeveloped land and interest there as well as some of the active projects, development projects, we have. Relative to Seven Hills and some of the other development projects, interest in sales have picked up nicely. There's a significant amount of interest, which is good. The starts are picking up, sales are picking up, so we're encouraged by that. Another indicator would be the interest in the smaller retail undeveloped land sales. The amount of traffic and interest there has picked considerably so. For me, those are indicators that the markets begin to recover. Once again, as I said a number of times, Mark, one things that we're going to be very sensitive to is investing in development in Atlanta or anywhere else. If you look at cost of sales associated with lots or commercial tracts, roughly 2/3 of that cost is associated with development, and it's capital intensive. So what I want to make sure is that whatever capital that we deploy is going to the highest and best use and the greatest return. If that's Atlanta, great. If there's other opportunities, then that's where we will invest.

Okay. And then separately, any update on water initiatives? Any progress there?

Mark, the team has -- is -- remained fully engaged in securing withdrawal permits, as well as negotiating purchase and sale agreements with potential buyers. So I would say that there's progress. I don't have anything to report on the call this morning relative to actual permits in hand or sales agreements in hand, but I do believe we are making good progress.

Your next question comes from the line of Steve Chercover with DA Davidson. Steven Chercover - D.A. Davidson & Co., Research Division: First question. You've given us insights into your lot sales for the year. Do you have an early view into 2014? Or for modeling purposes, should we just kind of maintain a run rate until the U.S. hits kind of midcycle or 1.5 million starts?

Steve, my -- we have not put together a projection for 2014. But intuitively, as long as these markets continue to generate positive job growth and inventories stay in balance, then I expect that the lot sales would continue to increase into 2014. If you recall, there was a slide in previous releases and/or calls where we illustrated in our 2012 Triple in FOR initiatives that we target to average 22,000 lots per year over the time period from 2012 through 2015. So that's -- that would be my response. Steven Chercover - D.A. Davidson & Co., Research Division: And then congratulations on the fantastic job you did on Promesa, selling it, I guess, faster than average. Can you give us a sense of when the next one might gain traction or even which project it might be?

Yes. Thank you for the compliment, Steve, but all the credit goes to the multifamily team. They're the ones who make things happen. I'm -- I just reported the results. I would tell you that, sitting here this morning, most likely, the next sale would be for the project that we call Eleven here in Austin. As I said, it's a little over 40% complete and we started pre-leasing, so I would anticipate that would be the next project that would make it to market. Steven Chercover - D.A. Davidson & Co., Research Division: So that might be like a year from now. Would that be a reasonable time frame?

What I would tell you this morning, Steve, this is probably going to be some time, I'd say, in the first half of 2014. Steven Chercover - D.A. Davidson & Co., Research Division: Perfect. And then finally, share-based compensation was up sharply due to the share price. Is that really a front-end-loaded issue so we've seen the majority of it for the year?

Steve, of the share-based comp expense for the quarter, I think maybe 6 of the 10 was driven by the share price being up. But generally speaking, if you look at historical cost, Q1 usually is higher than the balance of the quarters in the year. Steven Chercover - D.A. Davidson & Co., Research Division: Yes, and I think that's my experience with the majority of my companies. It is you see most of it in Q1, so I just wanted to, I guess, for my own purposes, make sure that's not a run rate. Okay, that was all I had.

Your next question comes from the line of Eric Anderson with Hartford Financial. It appears that question has been withdrawn. Your next question comes from the line of Daniel Downes with BC Holdings.

Can you talk a little bit about your appetite for making acquisitions? I think a lot of the discussion so far has been on recent sales and creating value that way. But on the other side of the ledger, what is the activity level out there? And up to what size deal would you do? If you could spend a minute just talking about your capacity and whether you'd do a stock deal. I know there was one packaging company in particular, it's hired bankers to evaluate their land holdings which, to some of the outset, seems like it would be a nice fit for what you guys do.

We have always been opportunistic relative to investments, whether it's at the operating or a strategic level. And Daniel, I think you know that we acquired Credo Petroleum and we closed in the third quarter of last year. We made a number of sizable investments in real estate in buying out a significant number of properties and assets out of ventures. But on a go-forward basis, I would tell you we would maintain the same discipline and temperament. If we see an opportunity that creates a lot of value and is good for Forestar and shareholders and generates returns that meet our expectations, we would entertain that. Obviously, we'd -- we keep our eyes open. However, at this point in time, we're very focused on making sure that our cooperation is just performing and generating the results that we expect. Relative to your comment on some entities potentially offering properties to the market or are looking for transactions, I won't comment on that, other than to say that we look at things that makes sense and -- but we're very selective and judicial and disciplined in that review and that exercise. So those would be my comments.

[Operator Instructions] Your next question comes from the line of Albert Sebastian with Prospect Advisors.

Jim, question on the Triple in FOR initiatives. The goal of tripling total segment EBITDA, does that number include the costs associated with general and administrative expense and share-based compensation?

No. It's EBITDA at the operating level or at the segment level.

Okay. My question is, why doesn't it include that? Isn't that a cost to the company and a cost to shareholders? Shouldn't it reflect that as well?

Al, absolutely. We're just as focused on all expenses and all costs in Forestar. However, the engine in Forestar is your operations and your segment performance. We can obviously cut costs, and we've done that and we'll continue to do that and we'll continue to be judicious. But the lever relative to value creation and realization is in your operations and in your segments, and that's where the focus is.

Okay, okay, yes. I just -- my -- I just -- would just make a comment here. I think it should include that since that is -- and I don't know how others feel, but I -- given that it is...

Al? Al, let me say it this way: The focus on Triple in FOR is per-segment performance, it's on segment performance, which is the engine of the business. It doesn't mean that we discount or disregarded other cost. So it is not that those are not important or that they're not parts of the business that we focus on or pay attention to.

Okay. Yes, as I said I think I understand in terms of just from a reporting standpoint, but obviously, the value to the shareholder is after the payment of those expenses...

Right, I wouldn't argue that.

Okay. The other thing is, Jim, since that we are in the proxy season and we're being asked to vote on the proxy as shareholders: One thing going through the proxy vote this year and last year is, the compensation committee has cited specifically these value-creating events, which when I look at them, I think they're value-creating events as well, but has the compensation committee ever cited a value-destroying events?

A value-destroying event. Al, I don't know that the comp committee has identified a value-destroying event, but they have certainly exercised their discretion to make adjustments in compensation, particularly in incentive, based on the quality and the performance of the returns and the earnings.

Yes. It's just that I would think that, when you -- when we talk about it and the competition committee cites these value-creating events, and I look at them, and I think that they're -- I think they're value-creating events as well. I think you've made some very good and done some very good transactions. It's just that I would just think -- we're not sure if the value-creating transactions -- and in the future, wouldn't it show up and improve the operating results, therefore reflects -- will reflect a higher return on assets in sort of a -- that particular point in time, as shareholders will be able to conclude that -- those events actually did create value for the shareholders? And shouldn't it be recognized at that particular point in time?

Yes, Al, that's true and that's accurate. Keep in mind that the incentive reward associated with value creation is a very, very small part of the estimated value that had been created. It's just to recognize the actions and the investment and the performance associated with longer-term investments. This is a long-term business, and we want to recognize and reward those actions that are going to create long-term value. So there's a very small part of the plan associated with value creation, a majority of it is driven by the performance of the business, and that's ROA at the corporate level and then also segment performance. Okay. That was our last question. Thank you for your questions. Thank you for your interest in Forestar. And I hope that you have a wonderful day.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.