Phillip J. Weber has served as our Chief Executive Officer since September 2015. He has served as Chairman of the Real Estate Investment Committee since May 2013 and previously served as Executive Vice President - Water Resources from May 2013 to September 2015 and as Executive Vice President - Real Estate from 2009 to May 2013. Prior to joining Forestar, he served the Federal National Mortgage Association (Fannie Mae) as Senior Vice President - Multifamily from 2006 to October 2009, as Chief of Staff to the CEO from 2004 to 2006, as Chief of Staff to non-Executive Chairman of the Board and Corporate Secretary from 2005 to 2006, and as Senior Vice President, Corporate Development in 2005.

Charles D. Jehl has served as our Chief Financial Officer and Treasurer since September 2015. He previously served as our Executive Vice President - Oil and Gas from February 2015 to September 2015, as Executive Vice President - Oil and Gas Business Administration from 2013 to February 2015, and as Chief Accounting Officer from 2006 to 2013. Mr. Jehl served as Chief Operations Officer and Chief Financial Officer of Guaranty Insurance Services, Inc. from 2005 to 2006, and as Senior Vice President and Controller from 2000 to 2005. From 1989 to 1999, Mr. Jehl held various financial management positions within Temple-Inland’s financial services segment. Mr. Jehl is also a Certified Public Accountant.

David M. Grimm has served as our Chief Administrative Officer since 2007, in addition to holding the offices of General Counsel and Secretary since 2006. Mr. Grimm served Temple-Inland Inc. as Group General Counsel from 2005 to 2006, Associate General Counsel from 2003 to 2005, and held various other legal positions from 1992 to 2003. Prior to joining Temple-Inland Inc., he was an attorney in private practice in Dallas, Texas. Mr. Grimm is also a Certified Public Accountant. Mr. Grimm will retire from the Company effective March 31, 2017.

Michael J. Quinley has served as our President - Community Development since September 2015. He previously served as our Executive Vice President - Real Estate, East Region from 2011 to September 2015, as Executive Vice President - Eastern Region Real Estate Investments & Development from 2010 to 2011, and as Executive Vice President - Eastern Region Developments & Investments from 2008 to 2010. He has more than 30 years of prior real estate experience, including as CEO of Patrick Malloy Communities, as Senior Executive Vice President of Cousins Properties Incorporated and as Senior Vice President and CFO of Peachtree Corners Inc., all based in Atlanta.



~~Item 1A.~~	~~Risk Factors.~~

Item 1A. Risk Factors.

~~General~~

Risks Related to our Concentrated Ownership

So long as D.R. Horton controls us, our other stockholders will have limited ability to influence matters requiring stockholder approval, and D.R. Horton's interest may conflict with the interests of other current or potential holders of our securities.

D.R. Horton beneficially owns approximately 65% of our common stock. As a result, until such time as D.R. Horton and its controlled affiliates hold shares representing less than a majority of the votes entitled to be cast by our stockholders at a stockholder meeting, D.R. Horton generally has the ability to control the outcome of any matter submitted for the vote of our stockholders, except in certain circumstances set forth in our certificate of incorporation or bylaws. In addition, under the terms of our certificate of incorporation and the Stockholder's Agreement with D.R. Horton, so long as D.R. Horton or its affiliates own 35% or more of our voting securities, we may not take certain actions without D.R. Horton's approval, including certain actions with respect to equity issuances, indebtedness, acquisitions, fundamental changes in our business and executive hiring, termination and compensation.

For so long as D.R. Horton and its controlled affiliates hold shares of our common stock representing at least 20% of the votes entitled to be cast by our stockholders at a stockholder meeting, D.R. Horton is able to designate a certain number of the members of our Board of Directors. Currently, D.R. Horton has the right to designate four out of five members of our Board, subject to a requirement that we and D.R. Horton use reasonable best efforts to cause at least three directors to qualify as “independent directors,” as such term is defined in the New York Stock Exchange (NYSE) listing rules, and applicable law. The directors designated by D.R. Horton have the authority to make decisions affecting our capital structure, including the issuance of additional capital stock or options, the incurrence of additional indebtedness, the implementation of stock repurchase programs and the declaration of dividends. The interests of D.R. Horton may be materially different than the interests of our other stakeholders.

The interests of D.R. Horton may not coincide with the interests of our current or potential stockholders. D.R. Horton's ability, subject to the limitations in the Stockholder's Agreement and our certificate of incorporation and bylaws, to control matters submitted to our stockholders for approval limits the ability of other stockholders to influence corporate matters, which may cause us to take actions that our other stockholders do not view as beneficial to them. In such circumstances, the market price of our common stock could be adversely affected, and our ability to access the capital markets may also be adversely affected. In addition, the existence of a controlling stockholder may have the effect of making it more difficult for a third party to acquire us, or may discourage a third party from seeking to acquire us. A third party would be required to negotiate any such transaction with D.R. Horton, and the interests of D.R. Horton with respect to such transaction may be different from the interests of our other stockholders.

Subject to limitations in the Stockholder's Agreement and our certificate of incorporation that limit D.R. Horton's ability to take advantage of certain corporate opportunities that are presented directly to our officers or directors in their capacity as such, D.R. Horton is not restricted from competing with us or otherwise taking for itself or its other affiliates certain corporate opportunities that may be attractive to us.

Any inability to resolve favorably any disputes that may arise between us and D.R. Horton may result in a significant reduction of our revenues and earnings.

Disputes may arise between D.R. Horton and us in a number of areas, including:

•business combinations involving us;

•sales or dispositions by D.R. Horton of all or any portion of its ownership interest in us;

•performance under the Master Supply Agreement between D.R. Horton and us;

•arrangements with third parties that are exclusionary to D.R. Horton or us; and

•business opportunities that may be attractive to both D.R. Horton and us.

We may not be able to resolve any potential conflicts, and even if we do, the resolution may be less favorable than if we were dealing with an unaffiliated party.

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New agreements may be entered into between us and D.R. Horton, and agreements we enter into with D.R. Horton may be amended upon agreement between the parties. Because we are controlled by D.R. Horton, we may not have the leverage to negotiate these agreements, or amendments thereto if required, on terms as favorable to us as those that we would negotiate with an unaffiliated third party.

D.R. Horton's ability to control our Board may make it difficult for us to recruit independent directors.

So long as D.R. Horton and its controlled affiliates hold shares of our common stock representing at least 20% of the votes entitled to be cast by our stockholders at a stockholders' meeting, D.R. Horton is able to designate a certain number of the members of our Board. Our Nominating and Governance Committee has the right to designate the remaining number of individuals to the Board, and in any event not less than one. Currently, D.R. Horton has the right to designate four out of five members of our Board. Further, the interests of D.R. Horton and our other stockholders may diverge. Under these circumstances, persons who might otherwise accept an invitation to join our Board may decline.

We qualify as a "controlled company" within the meaning of the NYSE rules and, as a result, may elect to rely on exemptions from certain corporate governance requirements that provide protection to stockholders of companies that are not "controlled companies."

So long as D.R. Horton owns more than 50% of the total voting power of our common stock, we qualify as a "controlled company" under the NYSE corporate governance standards. As a controlled company, we may under the NYSE rules elect to be exempt from obligations to comply with certain NYSE corporate governance requirements, including the requirements:

•that a majority of our Board consist of independent directors;

•that we have a nominating and governance committee that is composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities;

•that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities; and

•that an annual performance evaluation of the nominating and governance committee and compensation committee be performed.

We have not elected to utilize the “controlled company” exemptions at this time. However, if we elect to use the "controlled company" exemptions, our stockholders will not have the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements.

We may not realize potential benefits of the strategic relationship with D.R. Horton, including the transactions contemplated by the Master Supply Agreement with D.R. Horton.

The Master Supply Agreement establishes a strategic relationship between us and D.R. Horton for the supply of developed lots. Under the Master Supply Agreement, we will, and D.R. Horton may, present lot development opportunities to each other, subject to certain exceptions. The parties may collaborate with respect to such opportunities and, if they elect to develop such opportunities, D.R. Horton has a right of first offer or right to purchase some or all of the lots developed by us, as set forth in the Master Supply Agreement, on market terms as determined by the parties. There are numerous uncertainties associated with our relationship with D.R. Horton, including the risk that the parties will be unable to negotiate mutually acceptable terms for lot development opportunities and the fact that D.R. Horton is not obligated to present its lot development opportunities to us. As a result, we may not realize potential growth or other benefits from the strategic relationship with D.R. Horton, which may affect our financial condition or results of operations.

D.R. Horton's control of us or the strategic relationship between D.R. Horton and us may negatively affect our business relationships with other builder customers.

So long as D.R. Horton controls us or the strategic relationship between D.R. Horton and us remains in place, our business relationships with other builder customers may be negatively affected, including the risk that such other builder customers may believe that we will favor D.R. Horton over our other customers. In addition, we have in the past relied on builder referrals as a source for land development opportunities, and there is a risk that builders may refer such opportunities to land developers other than us as a result of our close alignment with D.R. Horton.

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Risks Related to our Operations

~~Both~~

Public health issues such as a major epidemic or pandemic could adversely affect our business or financial results.

The U.S. and other countries have experienced, and may experience in the future, outbreaks of contagious diseases that affect public health and public perception of health risk. In December 2019, C-19 emerged in the Wuhan region of China and has subsequently spread worldwide. The World Health Organization has declared C-19 a pandemic, resulting in federal, state and local governments and private entities mandating various restrictions requiring closure of non-essential businesses for a period of time. In almost all municipalities across the U.S. where we operate, residential construction has been deemed an essential business as part of critical infrastructure and we have continued our lot development operations in those markets where allowed in order to supply homebuilders with finished lots for residential construction. We have implemented operational protocols to comply with social distancing and other health and safety standards as required by federal, state and local government agencies, taking into consideration guidelines of the Centers for Disease Control and Prevention and other public health authorities.

Our results of operations are affected by economic conditions, including macroeconomic conditions and levels of business confidence and consumer confidence. There is significant uncertainty regarding the extent to which and how long C-19 and its related effects will impact the U.S. economy, capital markets and the demand for our lots. The extent to which C-19 impacts our operational and financial performance will depend on future developments, including the duration and spread of the outbreak and the impact on our customers, trade partners and employees, all of which are highly uncertain and cannot be predicted. If C-19 has a significant negative impact on economic conditions over a prolonged period of time, our results of operations and financial condition could be adversely impacted.

The homebuilding and lot development industries are cyclical and affected by changes in economic, real estate or other conditions that could adversely affect our business or financial results.

The homebuilding and ~~mineral resources businesses~~lot development industries are cyclical and are significantly affected by changes in ~~nature.~~general and local economic and real estate conditions, such as:

~~The~~•employment levels;

•consumer confidence and spending;

•demand for residential lots;

•availability of financing for homebuyers;

•interest rates; and

•demographic trends.

Adverse changes in these general and local economic conditions or deterioration in the broader economy would cause a negative impact on our business and financial results and increase the risk for asset impairments and write-offs. Changes in these economic conditions may affect some of our regions or markets more than others. If adverse conditions affect our larger markets, they could have a proportionately greater impact on us than on some other real estate development companies.

In the past, the federal government’s fiscal and trade policies and economic stimulus actions have created uncertainty in the financial markets and caused volatility in interest rates, which impacted business and consumer behavior. Monetary policy actions affecting interest rates or fiscal policy actions and new legislation related to taxation, spending levels or borrowing limits, along with the related political debates, conflicts and compromises associated with such actions, may negatively impact the financial markets and consumer confidence. Such events could hurt the U.S. economy and the real estate market and in turn, could adversely affect the operating results of our ~~business segments reflect~~businesses.

Weather conditions and natural disasters, such as hurricanes, tornadoes, earthquakes, volcanic activity, droughts and floods, heavy or prolonged precipitation or wildfires, can harm our business. These can delay our development work, lot closings, adversely affect the ~~general cyclical pattern~~cost or availability of ~~each segment. While~~materials or labor or damage real estate under construction. The climates and geology of many of the ~~cycles~~states in which we operate, including California, Florida, Texas and other coastal areas that have experienced recent natural disasters, present increased risks of ~~each industry do not necessarily coincide, demand~~adverse weather or natural disasters.

Deployments of U.S. military personnel to foreign regions, terrorist attacks, other acts of violence or threats to national security and ~~prices~~any corresponding response by the United States or others, domestic or international instability or civil unrest may cause an economic slowdown in ~~each may drop substantially during~~ the ~~same period. Real estate development of residential lots is further influenced by new home construction activity,~~markets where we operate, which ~~can be volatile. Mineral resources may be further influenced by national and international commodity prices, principally for oil and gas. Cyclical downturns may materially and~~could adversely affect our ~~business, liquidity, financial condition~~business.

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If we experience any of the foregoing, homebuilders may be less willing or able to buy our residential lots. In the future, our pricing and ~~results of operations. All~~product strategies may also be limited by market conditions. We may be unable to change the mix of our ~~operations are impacted by both national~~product offerings, reduce the costs of the residential lots we develop, or satisfactorily address changing market conditions in other ways without adversely affecting our profits and ~~global economic conditions.~~returns. In addition, cancellations of lot sales contracts may increase if homebuilders do not honor their contracts due to any of the factors discussed above.

The real estate ~~and mineral resources industries are~~development industry is highly competitive and a number of entities with which we compete are larger and have greater resources or are smaller and have lower cost structures, and competitive conditions may adversely affect our results of operations.

The real estate ~~and mineral resources industries~~development industry in which we operate ~~are~~is highly competitive and are affected to varying degrees by supply and demand factors and economic conditions, including changes in interest rates, new housing starts, home repair and remodeling activities, credit availability, consumer confidence, unemployment, housing affordability, changes in commodity prices, and federal energy policies.

competitive. Competitive conditions in the real estate development industry may result in difficulties acquiring suitable land at acceptable prices, lower sales volumes and prices, increased development or construction costs and delays in ~~construction and leasing.~~construction. We compete with numerous regional and local developers for the acquisition ~~entitlement, and development~~ of land suitable for development. We also compete with national, regional and local ~~home builders~~homebuilders who develop real estate for their own use in homebuilding operations, many of which are larger and have greater resources ~~including greater marketing budgets.~~than we do or are smaller and have lower cost structures than we do. Any improvement in the cost structure or service of our competitors will increase the competition we face.

Our business, financial condition and results of operations may be negatively affected by any of these factors.

~~We may be unable to successfully divest our non-core assets at favorable prices or on our target schedule, which could adversely affect our results of operations or cash flows.~~

We have ~~announced~~changed our business strategy, and there can be no assurance that our current business strategy will be successful.

Our business strategy has changed substantially since our merger with D.R. Horton. In October 2017, we became a 75% owned subsidiary of D.R. Horton, the largest homebuilder in the country, and D.R. Horton currently owns approximately 65% of our outstanding common stock. Our business strategy is to leverage our strategic relationship with D.R. Horton and use our unique production-oriented lot manufacturing model to scale into a national footprint in the residential lot development industry. Although we believe that our strategy will grow our business and mitigate risks, there can be no assurance that our unique model will succeed as intended or that we ~~are focused~~will be able to execute on our ~~core community~~strategy effectively, because of risks described elsewhere in this "Risk Factors" section, the risk of concentrating our focus on the residential lot development industry, costs to support our business ~~and~~model that ~~we intend to exit non-core, non-residential housing assets. The sale of non-core real estate assets may be impacted by market conditions outside of our control, such as capitalization rates,~~are greater than anticipated market demand and job growth, property location and other existing or anticipated competitive properties, interest rates, availability of financing, and other factors that we do not control. Our ability to divest non-core assets, the timing for such divestments, and the prices we may ultimately receive may be impacted by the foregoing or other ~~factors.~~unforeseen issues or problems that arise.

We may have continuing liabilities relating to ~~non-core~~ assets that have been sold, which could adversely impact our results of operations.

In the course of selling ~~our non-core~~ assets we are typically required to make contractual representations and warranties and to provide contractual indemnities to the buyers. These contractual obligations typically survive the closing of the transactions for some period of time. If a buyer is successful in sustaining a claim against us we may incur additional expenses pertaining to an asset we no longer own, and we may also be obligated to defend and/or indemnify the buyer from certain third party claims. Such obligations could be material and they could adversely impact our results of operations.

Any significant reduction in our borrowing base under our senior secured credit facility as a result of the sale of non-core assets may reduce the credit that is available to us under the facility and impact our ability to fund our operations.

Our senior secured credit facility is secured by some of our assets, and the borrowing base available to us thereunder is derived substantially from valuations associated with the assets pledged. Historically, a substantial portion of the borrowing base was derived from valuations associated with non-core assets, many of which were sold in 2015 and 2016. A portion of the existing borrowing base is also supported by non-core assets that we may market for sale or sell in the near future. Although we have additional assets that have not been but could be pledged to support additional borrowing capacity under our senior secured credit facility, until such time as additional assets are pledged, the reduction of the borrowing base could negatively impact our ability to fund our operations and, as a result may have a material adverse effect on our financial position, results of operation and cash flow.

~~Restrictive covenants under our senior secured credit facility and indentures governing our 3.75% convertible senior notes may limit the manner in which we operate.~~

~~Our senior secured credit facility and indentures covering our 3.75% convertible senior notes contain various covenants and conditions that limit our ability to, among other things:~~

~~incur or guarantee additional debt;~~

~~pay dividends or make distributions to our stockholders;~~

~~repurchase or redeem capital stock or subordinated indebtedness;~~

~~make loans, investments or acquisitions;~~

~~incur restrictions on the ability of certain of our subsidiaries to pay dividends or to make other payments to us;~~

~~enter into transactions with affiliates;~~

~~create liens;~~

~~merge or consolidate with other companies or transfer all or substantially all of our assets; and~~

~~transfer or sell assets, including capital stock of subsidiaries.~~

As a result of these covenants, we are limited in the manner in which we conduct our business and we may be unable to engage in favorable business activities or finance future operations or capital needs.

~~Despite current indebtedness levels, we and our subsidiaries may be able to incur substantially more debt.~~

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. If new debt is added to our and our subsidiaries’ current debt levels, the related risks that we and they now face could intensify.

~~We may be unable to fully realize the benefits of our tax attributes if we experience an ownership change.~~

We have significant deferred tax assets that are generally available to offset future taxable income or income tax. If we experienced an “ownership change” under Section 382 of the Internal Revenue Code (“Section 382”), Section 382 would impose an annual limit on the amount of our future taxable income that may be reduced by our tax attributes, such as built in losses and other tax attributes (“Tax Benefits”), existing prior to the ownership change. In general, an ownership change would occur if our “5-percent shareholders” (as defined in Section 382) collectively increase their ownership in the Company by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. For these purposes, a 5-percent shareholder is generally any person or group of persons that at any time during the relevant three-year period has owned 5 percent or more of our outstanding common stock. Under Section 382, stock ownership is determined under complex attribution rules and generally includes shares held directly, indirectly (though intervening entities), and constructively (by certain related parties and certain unrelated parties acting as a group). On January 5, 2017, we adopted a Tax Benefits Preservation Plan in order to help protect our tax attributes, such as built-in losses and other tax attributes. Our Tax Benefits Preservation Plan is intended to provide a meaningful deterrent effect against acquisitions of our common stock that could cause the Company to experience an ownership change; however, the Tax Benefits Preservation Plan does not guarantee that the Company will not experience an ownership change. If an ownership change were to occur, our ability to use our Tax Benefits in the future would be limited, which would have a significant negative impact on our financial position and results of operations. The ratification of the extension of the Tax Benefits Preservation Plan to January 5, 2020 is subject to shareholder approval at the Company’s 2017 Annual Meeting. If our shareholders do not approve such extension, the Tax Benefits Preservation Plan will expire on January 5, 2018. Please read ~~Note 21 — Subsequent Events~~ ~~for additional information about the Tax Benefits Preservation Plan.~~

~~The market price of and trading volume of our shares of common stock may be volatile.~~

~~The market price of our shares of common stock has fluctuated substantially and may continue to fluctuate in response to many factors which are beyond our control, including:~~

~~fluctuations in our operating results, including results that vary from expectations of management, analysts and investors;~~

~~announcements of strategic developments, acquisitions, financings and other material events by us or our competitors;~~

~~the sale of a substantial number of shares of our common stock held by existing security holders in the public market; and~~

~~general conditions in the real estate and mineral resources industries.~~

The stock markets in general may experience extreme volatility that may be unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock, make it difficult to predict the market price of our common stock in the future and cause the value of our common stock to decline.

Provisions of Delaware law, our charter documents, the Tax Benefits Preservation Plan and the indentures governing the 3.75% convertible senior notes may impede or discourage a takeover, which could cause the market price of our common stock to decline.

We are a Delaware corporation, and the anti-takeover provisions of Delaware law impose various impediments to the ability of a third party to acquire control of us, even if a change in control would be beneficial to our existing stockholders. In

addition, our Tax Benefits Preservation Plan could be deemed to have an “anti-takeover” effect because, among other things, an Acquiring Person (as defined under the Tax Benefits Preservation Plan) may be diluted upon the occurrence of a triggering event. Our board of directors also has the power, without stockholder approval, to designate the terms of one or more series of preferred stock and issue shares of preferred stock. These and other impediments to third party acquisition or change of control could limit the price investors are willing to pay for shares of our common stock, which could in turn reduce the market price of our common stock. In addition, upon the occurrence of a fundamental change under the terms of the convertible senior notes, certain repurchase rights and early settlement rights would be triggered under the indentures governing the convertible senior notes. In such event, the increase of the conversion or early settlement rate, as applicable, in connection with certain make-whole fundamental change transactions under the terms of the convertible senior notes could discourage a potential acquirer.

Our activities are subject to environmental regulations and liabilities that could have a negative effect on our operating results.

Our operations are subject to federal, state and local laws and regulations related to the protection of the environment. Compliance with these provisions or the promulgation of new environmental laws and regulations may result in delays, may cause us to invest substantial funds to ensure compliance with applicable environmental regulations and can prohibit or severely restrict ~~timber harvesting,~~ real estate development ~~or mineral production~~ activity in environmentally sensitive regions or areas.

~~Our~~

Governmental regulations and environmental matters could increase the cost and limit the availability of property suitable for residential lot development and could adversely affect our business ~~may suffer if we lose key personnel.~~or financial results.

We ~~depend~~are subject to extensive and complex regulations that affect land acquisition, development and home construction, including zoning, density restrictions and building standards. These regulations often provide broad discretion to the administering governmental authorities as to the conditions we must meet prior to acquisition or development being approved, if approved at all. We are subject to determinations by these authorities as to the adequacy of water or sewage facilities, roads or other local services. New housing developments may also be subject to various assessments for schools, parks, streets and other public improvements. In addition, in many markets government authorities have implemented no growth or growth control initiatives. Any of these may limit, delay or increase the costs of acquisition of land for residential use and development or home construction.

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We are also subject to a ~~large extent on~~significant number and variety of local, state and federal laws and regulations concerning protection of health, safety, labor standards and the ~~services~~environment. The impact of ~~certain key management personnel.~~environmental laws varies depending upon the prior uses of the building site or adjoining properties and may be greater in areas with less supply where undeveloped land or desirable alternatives are less available. These ~~individuals have extensive experience~~matters may result in delays, may cause us to incur substantial compliance, remediation, mitigation and ~~expertise~~other costs, and can prohibit or severely restrict land acquisition and development activity in environmentally sensitive regions or areas. Government agencies also routinely initiate audits, reviews or investigations of our business practices to ensure compliance with these laws and regulations, which can cause us to incur costs or create other disruptions in our business ~~segments~~that can be significant.

Government restrictions, standards, or regulations intended to reduce greenhouse gas emissions or potential climate change impacts are likely to result in ~~which they work. The loss of any of these individuals could have a~~restrictions on land development in certain areas and may increase energy, transportation, or raw material adverse effect on our operations. We do not maintain key-man life insurance with respect to any of our employees. Our success will be dependent on our ability to continue to employ and retain skilled personnel in each of our business segments.

~~Risks Related to our Real Estate Operations~~

~~Reduced demand for new housing or commercial tracts in the markets where we operate could adversely impact our profitability.~~

The residential development industry is cyclical and is significantly affected by changes in general and local economic conditions, such as employment levels, availability of financing for home buyers, interest rates, consumer confidence and housing demand. Adverse changes in these conditions generally, or in the markets where we operate, could decrease demand for lots for new homes in these areas. Decline in housing demand could negatively affect our real estate development activities,costs, which could ~~result in a decrease in~~reduce our ~~revenues and earnings.~~

Furthermore, the market value of undeveloped land and lots held by us, including commercial tracts, can fluctuate significantly as a result of changing economic and real estate market conditions. If there are significant adverse changes in economic or real estate market conditions, we may have to hold land in inventory longer than planned. Inventory carrying costs can be significant and can result in losses or lower returnsprofit margins and adversely affect our ~~liquidity.~~results of operations. This is a particular concern in the western United States, where some of the most extensive and stringent environmental laws and residential building construction standards in the country have been enacted, and where we have business operations.

~~Development of real estate entails a lengthy, uncertain and costly entitlement process.~~

~~Approval~~We are also subject to ~~develop real property entails~~ an extensive ~~entitlement process involving multiple~~number of laws and ~~overlapping regulatory jurisdictions~~regulations because our common stock is publicly traded in the capital markets. These regulations govern our communications with our stockholders and ~~often requiring discretionary action~~the capital markets, our financial statement disclosures and our legal processes, and they also impact the work required to be performed by ~~local governments. This process is often political, uncertain~~our independent registered public accounting firm and our legal counsel. Changes in these laws and regulations, including the subsequent implementation of rules by the administering government authorities, may require ~~significant exactions in order~~us to ~~secure approvals. Real estate projects must generally comply with local land development regulations~~incur additional compliance costs, and such costs may ~~need to comply with state and federal regulations. The process to comply with these regulations is usually lengthy and costly, may not result in the approvals we seek, and can~~ be ~~expected to materially affect our real estate development activities, which may adversely affect our business, liquidity, financial condition and results of operations.~~significant.

Our real estate development operations ~~are currently concentrated in the major~~span several markets ~~of Texas,~~ and as a result, our financial results may be significantly influenced by the ~~Texas economy.~~local economies of those markets.

The local economic growth and strength of ~~Texas, where~~ the ~~majority of~~markets in which our real estate development activity is located are important factors in sustaining demand for our ~~real estate development activities. The decline in oil prices over the past several years may impact near-term job growth~~lots and ~~housing demand in Texas, particularly in Houston, where the energy industry has traditionally generated significant job growth. As a result, any~~land. Any adverse impact to the economic growth and health, or infrastructure development, of ~~Texas~~a local economy in which we develop real estate could materially adversely affect our business, liquidity, financial condition and results of operations.

Our real estate development operations are highly dependent upon national, regional and local ~~home builders.~~homebuilders.

We are highly dependent upon our relationships with national, regional, and local ~~home builders~~homebuilders to purchase lots in our residential developments. If ~~home builders~~homebuilders do not view our developments as desirable locations for homebuilding operations, or if ~~home builders~~homebuilders are limited in their ability to conduct operations due to economic conditions, our business, liquidity,

financial condition and results of operations will be adversely affected.

In addition, we enter into contracts to sell lots to ~~home builders.~~homebuilders. A ~~home builder~~homebuilder could decide to delay purchases of lots in one or more of our developments, subject to loss of earnest money, due to adverse real estate conditions wholly unrelated to our areas of operations, such as ~~the~~ corporate decisions regarding allocation of limited capital or human resources. As a result, we may sell fewer lots and may have lower sales revenues, which could have an adverse effect on our business, liquidity, financial condition and results of operations.

~~Our strategic partners may have interests that differ from ours and may take actions that~~

From time to time, we obtain performance bonds, the unavailability of which could adversely affect ~~us.~~our results of operations and cash flows.

~~We enter into strategic alliances~~

From time to time, we provide surety bonds to secure our performance or ~~venture relationships as part~~obligations under construction contracts, development agreements and other arrangements. At September 30, 2020, we had $236.9 million of outstanding surety bonds. Our ability to obtain surety bonds primarily depends upon our overall strategy for particular developments or regions. While these partners may bring development experience, industry expertise, financing capabilities, local credibility or other competitive attributes, they may also have economic or business interests or goals that are inconsistent with ours or that are influenced by factors unrelated to our business. We may also be subject to adverse business consequences if the market reputation orcredit rating, financial condition, ~~of a partner deteriorates, or if a partner takes actions inconsistent with our interest.~~

~~When we enter into a venture, we may rely on our venture partner to fund its share of capital commitments to~~past performance and other factors, including the venture and to otherwise fulfill its operating and financial obligations. Failure of a venture partner to timely satisfy its funding or other obligations to the venture could require us to elect whether to increase our financial or other operating supportcapacity of the ~~venture in order~~surety market and the underwriting practices of surety bond issuers. The ability to ~~preserve our investment, which may reduce our returns or cause us~~obtain surety bonds also can be impacted by the willingness of insurance companies to ~~incur losses, or to not fund such obligations, which may subject the venture~~issue performance bonds for construction and ~~us to adverse consequences or increase our financial exposure in the project.~~

~~Debt within some of our ventures may not be renewed or may be difficult or more expensive to replace.~~

As of December 31, 2016, our unconsolidated ventures had approximately $128.3 million of debt, of which $78.6 million was non-recourse to us. When debt within our ventures matures, some of our ventures may be unable to renew existing loans or secure replacement financing, or replacement financing may be more expensive.development activities. If ~~our ventures~~we are unable to ~~renew existing loans or secure replacement financing, we may~~obtain surety bonds when required, our results of operations and cash flows could be required to contribute additional equity or elect to loan or contribute funds to our ventures, which could increase our risk or increase our borrowings under our senior secured credit facility, or both. If our ventures secure replacement financing that is more expensive, our profits may be reduced.adversely affected.

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Delays or failures by governmental authorities to take expected actions could reduce our returns or cause us to incur losses on certain real estate development projects.

For certain projects, we rely on governmental ~~utility and special improvement~~ districts to issue bonds to reimburse us for qualified expenses, such as road and utility infrastructure costs. Bonds ~~must be~~are often supported by assessments of district tax revenues, usually from ad valorem taxes. Slowing new home sales, decreasing real estate ~~prices~~values or difficult credit markets for bond sales can reduce or delay district bond sale revenues and tax or assessment receipts, causing such districts to delay reimbursement of our qualified expenses. Failure to receive timely reimbursement for qualified expenses could adversely affect our cash flows and reduce our returns or cause us to incur losses on certain real estate development projects.

Failure to succeed in new markets may limit our growth.

We may from time to time commence development activity or make acquisitions outside of our existing market areas if appropriate opportunities arise. Our historical experience in existing markets does not ensure that we will be able to operate successfully in new markets. We may be exposed to a variety of risks if we choose to enter new markets, including, among others:

•an inability to accurately evaluate local housing market conditions and local economies;

•an inability to obtain land for development or to identify appropriate acquisition opportunities;

•an inability to hire and retain key personnel;

•an inability to successfully integrate operations; and

•lack of familiarity with local governmental and permitting procedures.

~~Risks Related~~We plan to ~~our Mineral Resources Operations~~

~~We do not operate any properties, and have limited control over the activities on properties we do not operate.~~

The properties in which we have an interest are operated by other companies and involve third-party working interest owners. As a result, we have limited ability to influence or control the operation or future development of such properties, including compliance with environmental, safety and other regulations, or the amount ofraise additional capital ~~expenditures that we will be required to fund with respect to such properties. Decisions by other parties may significantly influence the revenues we receive from our mineral resources.~~

~~Volatile oil and natural gas prices could adversely affect our cash flows and results of operations.~~

~~Our cash flows and results of operations are dependent in part on oil and natural gas prices, which can be volatile. Any substantial or extended decline~~ in the ~~price of oil~~future, and ~~natural gas could have a negative impact on our business operations and future revenues. Moreover, oil and natural gas prices depend on factors we cannot control,~~ such ~~as: changes in foreign and~~

domestic supply and demand for oil and natural gas; actions by the Organization of Petroleum Exporting Countries; weather; political conditions in other oil-producing countries, including the possibility of insurgency or war in such areas; prices of foreign exports; domestic and international drilling activity; price and availability of alternate fuel sources; the value of the U.S. dollar relative to other major currencies; the level and effect of trading in commodity markets, the effect of worldwide energy conservation measures, and governmental regulations.

The ability to sell and deliver oil and natural gas produced from wells on our mineral interests could be materially and adversely affected if adequate gathering, processing, compression and transportation services are not obtained.

The sale of oil and natural gas produced from wells on our mineral interests depends on a number of factors beyond our control, including the availability, proximity and capacity of, and costs associated with, gathering, processing, compression and transportation facilities owned by third parties. These facilities may be temporarily unavailable due to market conditions, mechanical reasons or other factors or conditions, andcapital may not be available when needed or at all.

We have a $380 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to us$570 million, subject to certain conditions and availability of additional bank commitments. The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the revolving credit commitment. The maturity date of the facility is October 2, 2022. We also have outstanding $350 million principal amount of 8.0% senior notes due 2024 and $300 million principal amount of 5.0% senior notes due 2028, both of which may be redeemed prior to maturity, subject to certain limitations and premiums defined in the indenture agreements. The notes represent senior unsecured obligations that rank equally in right of payment to all existing and future senior unsecured indebtedness and are guaranteed by each of our subsidiaries to the extent such subsidiaries guarantee our revolving credit facility.

We have an effective shelf registration statement filed with the SEC in September 2018, registering $500 million of equity securities. As of September 30, 2020, $394.3 million remained available for issuance under the shelf registration statement, $100 million of which is reserved for sales under our at-the-market equity offering program. We plan to raise additional capital, in the form of additional debt or equity, in the future to have sufficient capital resources and liquidity to fund our business needs and future growth plans and repay existing indebtedness. Our ability to raise additional capital will depend on, among other things, conditions in the capital markets at that time, which are outside of our control, and our financial condition, operating performance and growth prospects. Economic conditions may increase our cost of funding and limit access to certain customary sources of capital or make such capital only available on unfavorable terms. We may not be able to obtain capital on acceptable terms ~~we consider acceptable, if~~or at all. Any ~~significant change~~occurrence that may limit our access to the capital markets, such as a decline in ~~market~~the confidence of debt purchasers or counterparties participating in the capital markets or other conditions affecting these facilities or the availability of these facilities, including due to our failure or inability to obtain access to these facilities on terms acceptable to us or at all, could materially anddisruption in capital markets, may adversely affect our ~~business~~capital costs and our ability to raise capital and, in turn, our liquidity. Further, we may need to raise capital in the future when other real estate-related companies are also seeking to raise capital and would then have to compete with those companies for investors. An inability to raise additional capital on acceptable terms when needed could have a material adverse effect on our business, financial condition and results of operations.

~~Our reserves~~

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Risks Related to our Indebtedness

We have significant amounts of consolidated debt and ~~production will decline from their current levels.~~

~~The rate of production from oil~~may incur additional debt; our debt obligations and ~~natural gas properties generally declines as reserves are produced. Our reserves will decline as they are produced which~~our ability to comply with related covenants, restrictions or limitations could ~~materially and~~ adversely affect our ~~future cash flow~~financial condition.

As of September 30, 2020, our consolidated debt was $641.1 million, including $350 million principal amount of 8.0% senior notes due 2024 and ~~results~~$300 million principal amount of ~~operations.~~

~~A portion of~~5.0% senior notes due 2028. Our revolving credit facility and the indentures governing the senior notes impose restrictions on our ~~oil~~ and ~~natural gas production may be subject~~our restricted subsidiaries’ ability to ~~interruptions that could have a material~~incur secured and ~~adverse effect on us.~~

~~A portion of oil~~unsecured debt, but still permit us and ~~natural gas production from~~ our ~~minerals may be interrupted, or shut in, from time~~restricted subsidiaries to time for various reasons, including as a result of accidents, weather conditions, loss of gathering, processing, compression or transportation facility access or field labor issues, or intentionally as a result of market conditions such as oil and natural gas prices that we deem uneconomic. Ifincur a substantial amount of ~~production is interrupted,~~future secured and unsecured debt, and do not restrict the incurrence of future secured and unsecured debt by our unrestricted subsidiaries. The indentures governing the senior notes allow us to incur a substantial amount of additional debt.

Possible Consequences

The amount and the maturities of our debt could have important consequences. For example, they could:

•require us to dedicate a substantial portion of our cash flow from operations to payment of our debt and ~~in turn,~~reduce our ~~results of operations could be materially and adversely affected.~~

~~Weather and climate may have a significant and adverse impact on us.~~

~~Demand for natural gas is,~~ability to ~~a significant degree, dependent on weather and climate, which impacts, among other things, the price we receive for the commodities produced from wells on our mineral interests and, in turn,~~use our cash flow ~~and results of operations. For example, relatively warm temperatures during a winter season generally result~~for other operating or investing purposes;

•limit our flexibility to adjust to changes in ~~relatively lower demand~~our business or economic conditions; and

•limit our ability to obtain future financing for ~~natural gas (as less natural gas is used to heat residences and businesses) and, as a result, relatively lower prices for natural gas production.~~working capital, capital expenditures, acquisitions, debt service requirements or other requirements.

Our estimated proved reserves are based on many assumptions that may prove to be inaccurate. Any material inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves.

The process of estimating oil and natural gas reserves is complex involving decisions and assumptions in evaluating the available geological, geophysical, engineering and economic data. Accordingly, these estimates are imprecise. Actual future production, oil and natural gas prices, revenues, taxes and quantities of recoverable oil and natural gas reserves might vary from those estimated. Any variance could materially affect the estimated quantities and present value of proved developed reserves. In addition, our debt and the restrictions imposed by the instruments governing those obligations expose us to additional risks, including:

Dependence on Future Performance

Our ability to meet our debt service and other obligations, including our obligations under the senior notes and the financial covenants under our revolving credit facility, will depend, in part, upon our future financial performance. Our future results are subject to the risks and uncertainties described in this "Risk Factors" section. Our revenues and earnings vary with the level of general economic activity in the markets we ~~may adjust estimates of proved reserves to reflect production history, development, prevailing oil and natural gas prices~~serve. Our business is also affected by financial, political, business and other factors, many of which are beyond our control. The factors that affect our ability to generate cash can also affect our ability to raise additional funds for these purposes through the sale of debt or equity, the refinancing of debt or the sale of assets. Changes in prevailing interest rates may affect the cost of our debt service obligations, because borrowings under our revolving credit facility bear interest at floating rates.

Changes in Debt Ratings

There can be no assurance that we will be able to maintain the credit ratings on our senior unsecured debt. Any lowering of our debt ratings could make accessing the capital markets or obtaining additional credit from banks more difficult and/or more expensive.

Change of Control Purchase Option and Change of Control Default.

Upon the occurrence of a change of control triggering event, as defined in the indentures governing our senior notes, we will be required to offer to repurchase such notes at 101% of their principal amount, together with all accrued and unpaid interest, if any. Moreover, a change of control, as defined in our revolving credit facility, would constitute an event of default under our revolving credit facility that could result in the acceleration of the repayment of any borrowings outstanding under our revolving credit facility, a requirement to cash collateralize all letters of credit outstanding thereunder and the termination of the commitments thereunder. If the maturity of our revolving credit facility and/or other indebtedness together having an aggregate principal amount outstanding of $40 million or more is accelerated, an event of default would result under the indentures governing the senior notes, entitling the trustee for the notes or holders of at least 25% in aggregate principal amount of the then outstanding notes to declare all such notes to be due and payable immediately. If purchase offers were required under the indentures for the senior notes, repayment of the borrowings under our revolving credit facility were required, or if the notes were accelerated, we can give no assurance that we would have sufficient funds to pay the required amounts.

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Our debt agreements contain a number of restrictive covenants which will limit our ability to finance future operations, acquisitions or capital needs or engage in other business activities that may be in our interest.

The ~~standardized measure~~covenants in the indentures governing our senior notes and the credit agreement governing our revolving credit facility impose, and the terms of any future indebtedness may impose, operating and other restrictions on us and our subsidiaries. Such restrictions affect or will affect, and in many respects limit or prohibit, among other things, our ability and the ability of certain of our subsidiaries to:

•incur additional indebtedness;

•create liens;

•pay dividends and make other distributions in respect of our equity securities;

•redeem or repurchase our equity securities;

•make certain investments or certain other restricted payments;

•sell certain kinds of assets;

•enter into certain types of transactions with affiliates; and

•effect mergers or consolidations.

In addition, our revolving credit facility contains financial covenants requiring the maintenance of a minimum level of tangible net ~~cash flows from our proved reserves is not necessarily~~worth, a minimum level of liquidity, a maximum allowable leverage ratio and a borrowing base restriction based on the ~~same as the current market~~book value of our ~~estimated reserves. Any~~real estate assets and unrestricted cash.

The restrictions contained in the indentures and the credit agreements could (1) limit our ability to plan for or react to market or economic conditions or meet capital needs or otherwise restrict our activities or business plans and (2) adversely affect our ability to finance our operations, acquisitions, investments or strategic alliances or other capital needs or to engage in other business activities that would be in our interest.

A breach of any of these covenants could result in a default under all or certain of our debt instruments. If an event of default occurs, such creditors could elect to:

•declare all amounts outstanding, together with accrued and unpaid interest, to be immediately due and payable;

•require us to apply all of our available cash to repay such amounts; or

•prevent us from making debt service payments on certain of our debt instruments.

General Risk Factors

The market price of and trading volume of our shares of common stock may be volatile.

The market price of our shares of common stock has fluctuated substantially and may continue to fluctuate in response to many factors which are beyond our control, including:

•fluctuations in our operating results, including results that vary from expectations of management, analysts and investors;

•announcements of strategic developments, acquisitions, financings and other material ~~inaccuracies~~events by us or our competitors;

•the sale of a substantial number of shares of our common stock held by existing security holders in ~~reserve estimates or underlying assumptions will materially~~the public market; and

•general conditions in the real estate industry.

The stock markets in general may experience extreme volatility that may be unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the ~~quantities~~trading price of our common stock, make it difficult to predict the market price of our common stock in the future and ~~present~~cause the value of our ~~reserves.~~common stock to decline.

~~As required by SEC~~

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Our business may suffer if we lose key personnel.

We depend to a large extent on the services of certain key management personnel. These individuals have extensive experience and expertise in our business. The loss of any of these individuals could have a material adverse effect on our operations. We do not maintain key-person life insurance with respect to any of our employees. Our success may be dependent on our ability to continue to employ and retain skilled personnel.

Information technology failures, data security breaches and the failure to satisfy privacy and data protection laws and regulations ~~we base the estimated discounted future net cash flows from~~could harm our ~~proved reserves on prices~~business.

We use information technology and ~~costs in effect at the time~~other computer resources to carry out important operational and marketing activities and to maintain our business records. These information technology systems are dependent upon global communications providers, web browsers, third-party software and data storage providers and other aspects of the ~~estimate. However, actual future net cash flows from our properties will be affected by numerous factors not subject~~Internet infrastructure that have experienced security breaches, cyber-attacks, significant systems failures and service outages in the past. Our normal business activities involve collecting and storing information specific to our ~~control.~~

~~The timing of production will affect the timing of actual future net cash flows from proved reserves,~~customers, employees, vendors and thus their actual present value. In addition, the 10% discount factor we use when calculating discounted future net cash flow, which is required by the SEC, may not be the most appropriate discount factor based on interest rates in effect from time to timesuppliers and ~~risks associated with us or the oil~~maintaining operational and ~~natural gas industry in general. Any material inaccuracies in our reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves.~~

~~A significant portion of our Louisiana owned net mineral acres are subject to prescription of non-use under Louisiana law.~~

A significant portion of our Louisiana owned net mineral acres were severed from surface ownership and retained by creation of one or more mineral servitudes shortly before our 2007 spin-off. Under Louisiana law, a mineral servitude that is not producing minerals or which has not been the subject of good-faith drilling operations will cease to burden the property upon the tenth anniversary of the date of its creation. Upon such event, the mineral rights effectively will revert to the surface owner and we will no longer own the right to lease, explore for or produce minerals from such acreage. The total number of net acres subject to prescription can fluctuate based on oil and gas development and production activities. Some or all of approximately 70,000 of our Louisiana net acres may revert to the surface owner unless drilling operations or production activities commences prior to October 2017.

~~Risks Related to our Other Operations~~

Our water interests may require governmental permits, the consent of third parties and/or completion of significant transportation infrastructure prior to commercialization, all of which are dependent on the actions of others.

Many jurisdictions require governmental permits to withdraw and transport water for commercial uses, the granting of which may be subject to discretionary determinations by such jurisdictions regarding necessity. In addition, we do not own the executory rightsfinancial information related to our ~~non-participating royalty interest,~~business, both in an office setting and remote locations as needed. A material breach in the security of our information technology systems or other data security controls could include the theft or release of this information. A data security breach, a significant and extended disruption in the functioning of our information technology systems or a breach of any of our data security controls could disrupt our business operations, damage our reputation and cause us to lose customers, adversely impact our sales and revenue and require us to incur significant expense to address and remediate or otherwise resolve these kinds of issues. The unintended or unauthorized disclosure of personal identifying and confidential information as a result ~~third-party consent from~~of a security breach could also lead to litigation or other proceedings against us by the ~~executor rights owner(s) would~~affected individuals or business partners, or by regulators. The outcome of such proceedings, which could include penalties or fines, could have a significant negative impact on our business.

We may also be required ~~prior~~ to ~~production. The process~~incur significant costs to protect against damages caused by information technology failures, security breaches, and the failure to satisfy privacy and data protection laws and regulations in the future as legal requirements continue to increase. Certain regulators, including various state governments, have recently enacted or enhanced data privacy regulations, such as the California Consumer Privacy Act, and others are considering establishing similar or stronger protections. These regulations impose certain obligations for handling specified personal information in our systems, and for apprising individuals of the information we have collected about them. We have incurred costs in an effort to comply with these requirements, and our costs may increase significantly if new requirements are enacted and based on how individuals exercise their rights. Any noncompliance could result in our incurring substantial penalties and reputational damage, and also could result in litigation.

We provide employee awareness training of cybersecurity threats and routinely utilize information technology security experts to assist us in our evaluations of the effectiveness of the security of our information technology systems, and we regularly enhance our security measures to protect our systems and data. Our increased use of remote work environments and virtual platforms in response to C-19 may also increase our risk of cyber-attack or data security breaches. We use various encryption, tokenization and authentication technologies to mitigate cybersecurity risks and have increased our monitoring capabilities to enhance early detection and rapid response to potential cyber threats. However, because the techniques used to obtain ~~permits can be lengthy,~~unauthorized access, disable or degrade systems change frequently and ~~governmental jurisdictions or third parties from whom~~often are not recognized until launched against a target, we ~~seek permits or consent may not provide the approvals we seek. We~~ may be unable to ~~secure buyers at commercially economic prices for water~~anticipate these techniques or to implement adequate preventative measures. Consequently, we cannot provide assurances that wea security breach, cyber-attack, data theft or other significant systems or security failures will not occur in the future, and such occurrences could have a ~~right to extract~~material and ~~transport, and transportation infrastructure across property not owned~~adverse effect on our consolidated results of operations or ~~controlled by us is required for transport~~financial position.

Table of water prior to commercial use. Such infrastructure can require significant capital and may also require the consent of third parties. We may not have cost effective means to transport water from property we own, lease or manage to buyers. As a result, we may lose some or all of our investment in water assets, or our returns may be diminished.Contents



~~Item 1B.~~	~~Unresolved Staff Comments.~~

Item 1B. Unresolved Staff Comments.

None.



~~Item 2.~~	~~Properties.~~

Item 2. Properties.

Our principal executive ~~offices are~~office is leased and is located in ~~Austin, Texas, where we lease approximately 22,000 square feet.~~ Arlington, Texas. We also lease office space in ~~Atlanta, Georgia; Dallas, Texas; Denver, Colorado; and Houston, Texas. We believe these offices are suitable for conducting~~other locations to support our ~~business.~~

For a description of our properties in our real estate, mineral resources and other segments, see “Business — Real Estate”, “Business — Mineral Resources” and “Business — Other”, respectively, in Part I, Item 1 of this Annual Report on Form 10-K.business operations.



~~Item 3.~~	~~Legal Proceedings.~~

Item 3. Legal Proceedings.

We are involved ~~directly or through ventures~~ in various legal proceedings that arise from time to time in the ordinary course of ~~doing~~our business. We believe we have established adequate reserves for any probable losses and that the outcome of any of the proceedings should not have a material adverse effect on our financial position or long-term results of operations or cash flows. It is possible, however, that charges related to these matters could be significant to our results of operations or cash flow in any single accounting period.



~~Item 4.~~	~~Mine Safety Disclosures.~~

Item 4. Mine Safety Disclosures.

Not Applicable.

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PART II



~~Item 5.~~	~~Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.~~

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock is traded on the New York Stock ~~Exchange. The high~~Exchange (NYSE) under the trading symbol "FOR." As of November 12, 2020, the closing price of our common stock on the NYSE was $18.30, and ~~low sales prices in each quarter in 2016 and 2015 were:~~

2016 2015
Price Range Price Range
High Low High Low
First Quarter $ 13.04
$ 8.40
$ 15.91
$ 13.27
Second Quarter $ 13.74
$ 11.23
$ 16.29
$ 13.16
Third Quarter $ 12.80
$ 11.33
$ 13.67
$ 11.98
Fourth Quarter $ 13.65
$ 10.75
$ 14.59
$ 10.58
For the Year $ 13.74
$ 8.40
$ 16.29
$ 10.58

~~Shareholders~~

~~Our stock transfer records indicated that as of February 27, 2017,~~ there were approximately ~~3,144~~1,443 holders of ~~record of our common stock.~~record.

Dividend Policy

We currently intend to retain any future earnings to support our business. The declaration and payment of any future dividends will be at the discretion of our Board of Directors after taking into account various factors, including without limitation, our financial condition, earnings, capital requirements of our business, the terms of any credit agreements or indentures to which we may be a party at the time, legal requirements, industry practice, and other factors that our Board of Directors deems relevant.

~~Issuer Purchases~~

Table of ~~Equity Securities~~ ^(a)

Contents

Period
Total
Number of
Shares
Purchased ^(b)

Average
Price Paid
per Share

Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plan or
Programs

Maximum
Number of
Shares That
May Yet be
Purchased
Under the
Plans or
Programs
Month 10 (10/1/2016 — 10/31/2016) —
$ —
—
3,222,692
Month 11 (11/1/2016 — 11/30/2016) 56
$ 11.10
—
3,222,692
Month 12 (12/1/2016 — 12/31/2016) —
$ —
—
3,222,692
Total 56
$ 11.10
—

~~_____________________~~

^(a)

On February 11, 2009, we announced that our Board of Directors authorized the repurchase of up to 7,000,000 shares of our common stock. We have purchased 3,777,308 shares under this authorization, which has no expiration date. We have no repurchase plans or programs that expired during the period covered by the table above and no repurchase plans or programs that we intend to terminate prior to expiration or under which we no longer intend to make further purchases.


^(b)	~~Includes shares withheld to pay taxes in connection with vesting of restricted stock awards and exercises of stock options.~~

Stock Performance Graph

The following graph illustrates the cumulative total stockholder return of an initial investment of $100 on December 31, 2015 in Forestar common stock for the period from December 31, 2015 through September 30, 2020, compared to the same investment in the Russell 2000 Index and our peer group. Our ~~2016~~ peer group consists of the following real estate companies: The St. Joe Company, Tejon Ranch Co, Five Points Holding, LLC (Class A), and ~~oil and gas companies:~~ Alexander & Baldwin, Inc.~~, AV Homes~~ Consolidated-Tomoka Land Co. (now CTO Realty Growth, Inc., Approach Resources, Inc., Cousins Properties Incorporated, Contango Oil and Gas Co., Goodrich Petroleum Corp., Matador Resources Co., Petroquest Energy Inc., Post Properties, Inc., Potlatch Corporation, PS Business Parks, Inc., Resolute Energy Corp., The St. Joe Company, and Tejon Ranch Co. Magnum Hunter Resources Corp. and Penn Virginia Corp are omitted) was removed from ~~our~~the peer group ~~because they have ceased trading.~~

presented in fiscal 2019 as it is no longer substantially in the same line of business as the Company. Pursuant to SEC rules, returns of each of the companies in the Peer Index are weighted according to the respective company’s stock market capitalization at the beginning of each period for which a return is indicated.

Shareholder returns over the indicated period are based on historical data and should not be considered indicative of future shareholder returns. The graph and related disclosure in no way reflect our forecast of future financial performance.


	Year Ended December 31,						Nine Months Ended September 30, 2018		Year Ended September 30,
	2015		2016		2017				2019		2020
Forestar Group Inc.	$	100.00	$	121.57	$	201.09	$	193.78	$	167.09	$	161.79
Russell 2000 Index	100.00		121.31		139.08		155.10		141.31		141.86
Peer Group	100.00		118.44		111.22		89.94		85.79		60.04

This performance graph shall not be deemed to be incorporated by reference into our SEC filings and should not constitute soliciting material or otherwise be considered filed under the Securities Act of 1933, as amended (Securities Act) or the Exchange Act.

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~~Item 6.~~	~~Selected Financial Data.~~

Item 6. Selected Financial Data.

For the Year
2016 2015 2014 2013 2012
(In thousands, except per share amount)
Revenues:
Real estate $ 190,273
$ 202,830
$ 213,112
$ 248,011
$ 120,115
Mineral resources 5,076
9,094
15,690
21,419
34,086
Other 1,965
6,652
9,362
10,721
8,256
Total revenues $ 197,314
$ 218,576
$ 238,164
$ 280,151
$ 162,457
Segment earnings (loss):
Real estate ^(a)
$ 121,420
$ 67,678
$ 96,906
$ 68,454
$ 53,582
Mineral resources 3,327
4,230
9,116
14,815
29,190
Other (4,625 ) (608 ) 5,499
6,507
29
Total segment earnings 120,122
71,300
111,521
89,776
82,801
Items not allocated to segments:
General and administrative expense ^(b)
(18,274 ) (24,802 ) (21,229 ) (20,597 ) (25,176 )
Share-based compensation expense (4,425 ) (4,474 ) (3,417 ) (16,809 ) (14,929 )
Gain on sale of assets ^(c)
48,891
—
—
—
16
Interest expense (19,985 ) (34,066 ) (30,286 ) (20,004 ) (19,363 )
Loss on extinguishment of debt, net ^(d)
(35,864 ) —
—
—
—
Other corporate non-operating income 350
256
453
119
191
Income from continuing operations before taxes attributable to Forestar Group, Inc. 90,815
8,214
57,042
32,485
23,540
Income tax expense ^(e)
(15,302 ) (35,131 ) (20,850 ) (5,780 ) (9,016 )
Net income (loss) from continuing operations attributable to Forestar Group Inc. 75,513
(26,917 ) 36,192
26,705
14,524
Income (loss) from discontinued operations, net of taxes ^(f)
(16,865 ) (186,130 ) (19,609 ) 2,616
(1,582 )
Net income (loss) attributable to Forestar Group Inc. $ 58,648
$ (213,047 ) $ 16,583
$ 29,321
$ 12,942
Net income (loss) per diluted share:
Continuing operations $ 1.78
$ (0.79 ) $ 0.83
$ 0.73
$ 0.41
Discontinued operations $ (0.40 ) $ (5.43 ) $ (0.45 ) $ 0.07
$ (0.05 )
Net income (loss) per diluted share $ 1.38
$ (6.22 ) $ 0.38
$ 0.80
$ 0.36
Average diluted shares outstanding ^(g)
42,334
34,266
43,596
36,813
35,482
At year-end:
Assets $ 733,208
$ 972,246
$ 1,247,606
$ 1,168,027
$ 917,869
Debt 110,358
381,515
422,151
353,282
293,498
Noncontrolling interest 1,467
2,515
2,540
5,552
4,059
Forestar Group Inc. shareholders’ equity 560,651
501,600
707,202
709,845
529,488
Ratio of total debt to total capitalization 16 % 43 % 37 % 33 % 35 %

~~_____________________~~

^(a)

Real estate segment earnings (loss) includes gain on sale of assets of $117,856,000 in 2016, $1,585,000 in 2015, $25,981,000 in 2014 and $25,273,000 in 2012. Segment earnings also includes non-cash impairments of $56,453,000 in 2016, $1,044,000 in 2015, $399,000 in 2014 and $1,790,000 in 2013. Real estate segment earnings (loss) also include the effects of net (income) loss attributable to noncontrolling interests.


^(b)	~~General administrative expense includes severance-related charges of $3,314,000 in 2015 and $6,323,000 in costs associated with our acquisition of Credo in 2012.~~


^(c)	~~Gain on sale of assets in 2016 represents gains in accordance with our key initiatives to divest non-core timberland and undeveloped land.~~


^(d)	~~Loss on extinguishment of debt, net is related to retirement of $225,245,000 of our 8.5% Senior Secured Notes due 2022 and $5,000,000 of our 3.75% of Convertible Senior Notes due 2020 in 2016.~~


^(e)	In 2015, income tax expense includes an expense of $97,068,000 for valuation allowance on a portion of our deferred tax asset that was determined to be more likely than not to be unrealizable. In 2013, income tax expense includes a benefit

The following selected financial data are derived from ~~recognition~~our consolidated financial statements and should be read in conjunction with Item 7, “Management’s Discussion and Analysis of ~~$6,326,000~~Financial Condition and Results of ~~previously unrecognized tax benefits upon lapse~~Operations,” Item 1A, “Risk Factors,” Item 8, “Financial Statements and Supplementary Data,” and all other financial data contained in this annual report on Form 10-K. These historical results are not necessarily indicative of the ~~statute~~results to be expected in the future.


	Year Ended September 30,				Nine Months Ended September 30, 2018		Year Ended December 31,
	2020		2019				2017		2016
	(In millions, except per share amounts)
Consolidated Operating Data:
Revenues	$	931.8	$	428.3	$	78.3	$	114.3	$	197.3
Cost of sales (1)	813.7		362.7		49.5		112.6		175.1
Selling, general and administrative expense (2)	45.7		28.9		19.4		75.3		48.5
Equity in earnings of unconsolidated ventures	(0.7)		(0.5)		(4.8)		(17.8)		(6.1)
Gain on sale of assets (3)	(0.1)		(3.0)		(27.8)		(113.4)		(166.7)
Interest expense	—		—		3.7		8.5		20.0
Loss on extinguishment of debt (4)	—		—		—		0.6		35.9
Interest and other income	(4.9)		(5.5)		(6.4)		(3.6)		(1.7)
Income from continuing operations before taxes	78.1		45.7		44.7		52.1		92.3
Income tax expense (benefit) (5)	16.4		9.4		(25.3)		45.8		15.3
Net income from continuing operations	61.7		36.3		70.0		6.3		77.0
Income (loss) from discontinued operations, net of taxes (6)	—		—		—		46.0		(16.8)
Net income	61.7		36.3		70.0		52.3		60.2
Net income attributable to noncontrolling interests	0.9		3.3		1.2		2.0		1.6
Net income attributable to Forestar Group Inc.	$	60.8	$	33.0	$	68.8	$	50.3	$	58.6
Net Income (Loss) per Basic Share:
Continuing operations	$	1.26	$	0.79	$	1.64	$	0.10	$	1.80
Discontinued operations	$	—	$	—	$	—	$	1.09	$	(0.40)
Net income per basic share	$	1.26	$	0.79	$	1.64	$	1.19	$	1.40
Net Income (Loss) per Diluted Share:
Continuing operations	$	1.26	$	0.79	$	1.64	$	0.10	$	1.78
Discontinued operations	$	—	$	—	$	—	$	1.09	$	(0.40)
Net income per diluted share	$	1.26	$	0.79	$	1.64	$	1.19	$	1.38

	September 30,						December 31,
	2020		2019		2018		2017		2016
	(In millions)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	394.3	$	382.8	$	318.8	$	323.0	$	266.1
Restricted cash	—		—		16.2		40.0		0.3
Real estate	1,309.7		1,028.9		498.0		130.4		293.0
Total assets	1,739.9		1,455.7		893.1		761.9		733.2
Debt	641.1		460.5		111.7		108.4		110.4
Forestar Group Inc. stockholders' equity	870.9		808.3		673.3		604.2		560.7

Table of ~~limitations for~~Contents

_____________________

(1)Cost of sales in fiscal 2017 included impairment charges of $37.9 million associated with the mineral resources reporting unit goodwill and $5.8 million primarily related to our central Texas water assets.

(2)Selling, general and administrative expense in fiscal 2017 included merger related transaction costs of $37.2 million.

(3)Gains on sales of assets in the nine months ended September 30, 2018 and in fiscal 2017 and 2016 represent gains recognized on the sale of non-core assets.

(4)Loss on extinguishment of debt in fiscal 2017 and 2016 is related to the early retirement of a ~~previously reserved~~total of $230.5 million principal amount of our 8.50% senior notes and $6.1 million principal amount of our convertible senior notes.

(5)Income tax ~~position.~~

^(f)

Income (loss) from discontinued operations includes non-cash impairment charges of $612,000 in 2016, $163,029,000 in 2015, $32,665,000 in 2014 and $473,000 in 2013 related to proved properties and unproved leasehold interests related to our non-core oil and gas working interests. Income (loss) from discontinued operations also includes losses of $13,664,000 in 2016 and $706,000 in 2015 and gains of $8,526,000 in 2014 associated with sale of working interest oil and gas properties.


^(g)	Our 2015 weighted average diluted shares outstanding excludes dilutive effect of equity awards and 7,857,000 shares issuable upon settlement of the prepaid stock purchase contract component of our 6.00% tangible equity units, due to our net loss attributable to Forestar Group Inc.

benefit in the nine months ended September 30, 2018 reflects the release of our federal valuation allowance and a portion of our state valuation allowance. Income tax expense in fiscal 2017 was impacted by nondeductible merger transaction costs and goodwill impairment.

(6)Income from discontinued operations in fiscal 2017 reflects an income tax benefit of $46.0 million. Loss from discontinued operations in fiscal 2016 included an impairment charge of $0.6 million related to non-core oil and gas working interests and a loss of $13.7 million associated with the sale of working interest oil and gas properties.

Table of Contents

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

~~Caution Concerning Forward-Looking Statements~~

Our Operations

We are a residential lot development company with operations in 49 markets in 21 states as of September 30, 2020. In October 2017, we became a majority-owned subsidiary of D.R. Horton. Our alignment with and support from D.R. Horton has allowed us to grow our business into a national, well-capitalized residential lot developer selling lots to D.R. Horton and other homebuilders. As our controlling shareholder, D.R. Horton has significant influence in guiding our strategic direction and operations. Our strategy is focused on making investments in land acquisition and development to expand our residential lot development business across a geographically diversified national platform and consolidating market share in the fragmented U.S. lot development industry. We are primarily investing in short duration, phased development projects that generate returns similar to production-oriented homebuilders. This ~~Annual Report on~~strategy is a unique, lower-risk business model that we expect will produce more consistent returns than other public and private land developers. We also make short-term investments in finished lots (lot banking) and undeveloped land with the intent to sell these assets within a short time period, primarily to D.R. Horton, utilizing available capital prior to its deployment into longer term lot development projects.

Change in Fiscal Year

Following our merger with D.R. Horton, we changed our fiscal year-end from December 31 to September 30, effective January 1, 2018. This change aligned our fiscal year-end reporting calendar with D.R. Horton. Our results of operations, cash flows, and all transactions impacting stockholders' equity presented in this Form 10-K are for the fiscal years ended September 30, 2020 and 2019 and for the nine months ended September 30, 2018, unless otherwise noted. This Form 10-K also includes an unaudited statement of operations for the comparable stub period of January 1, 2017 to September 30, 2017. See Note 17.

COVID-19

During the latter part of March 2020, the impacts of C-19 and the related widespread reductions in economic activity began to temporarily affect our business operations and the demand for our residential lots. However, residential construction is designated an essential business as part of critical infrastructure in almost all municipalities across the U.S. where we operate. We have implemented operational protocols to comply with social distancing and other ~~materials we have filed or may file with the Securities~~health and ~~Exchange Commission contain “forward-looking statements” within the meaning~~safety standards as required by federal, state and local government agencies, taking into consideration guidelines of the ~~federal securities laws. These forward-looking statements are identified by~~Centers for Disease Control and Prevention and other public health authorities.

Our lot sales pace declined throughout late March and April as homebuilders slowed their ~~use~~purchases of ~~terms~~lots to adjust to expected lower levels of home sales orders as a result of the pandemic. However, as economic activity and ~~phrases such~~housing market conditions began to improve, our lot sales pace increased during the last half of our fiscal year. Although our lot sales pace has improved, we remain cautious as ~~“believe,” “anticipate,” “could,” “estimate,” “likely,” “intend,” “may,” “plan,” “expect,”~~to the impact C-19 may have on our operations and similar expressions, including references to assumptions. These statements reflect our current views with respect to future events and are subject to risk and uncertainties. We note that a variety of factors and uncertainties could cause our actual results to differ significantly fromon the ~~results discussed~~overall economy in the ~~forward-looking statements. Factors and uncertainties that might cause such differences include, but are not limited to:~~

~~general economic, market or business conditions in Texas or Georgia, where our real estate activities are concentrated, or on a national or global scale;~~

~~our ability to achieve some or all of our key initiatives;~~

~~the opportunities (or lack thereof) that may be presented to us and that we may pursue;~~

~~our ability to hire and retain key personnel;~~

~~future residential or commercial entitlements, development approvals and the ability to obtain such approvals;~~

~~obtaining approvals of reimbursements and other payments from special improvement districts and timing of such payments;~~

accuracy of estimates and other assumptions related to investment in and development of real estate, the expected timing and pricing of land and lot sales and related cost of real estate sales, impairment of long-lived assets, income taxes, share-based compensation;

~~the levels of resale housing inventory in our mixed-use development projects and the regions in which they are located;~~

~~fluctuations in costs and expenses, including impacts from shortages in materials or labor;~~

~~demand for new housing, which can be affected by a number of factors including the availability of mortgage credit, job growth, fluctuations in commodity prices;~~

~~demand for multifamily communities, which can be affected by a number of factors including local markets and economic conditions;~~

~~competitive actions by other companies;~~

~~changes in governmental policies, laws or regulations and actions or restrictions of regulatory agencies;~~

~~fluctuations in oil and gas commodity prices;~~

~~demand by oil and gas operators to lease our minerals, which may be influenced by government regulation of exploration and production activities including hydraulic fracturing;~~

~~our ability to make interest and principal payments on our debt and satisfy the other covenants contained in our senior secured credit facility, indentures and other debt agreements;~~

~~our partners’ ability to fund their capital commitments and otherwise fulfill their operating and financial obligations;~~

~~inability to obtain permits for, or changes in laws, governmental policies or regulations affecting, water withdrawal or usage; and~~

~~the final resolutions or outcomes with respect to our contingent and other liabilities related to our business.~~

Other factors, including the risk factors described in Item 1A of this Annual Report on Form 10-K, may also cause actual results to differ materially from those projected by our forward-looking statements. New factors emerge from time to time and itfuture. There is ~~not possible for us to predict all such factors, nor can we assess the impact of any such factor on our business or~~significant uncertainty regarding the extent to which ~~any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement.~~

~~Any forward-looking statement speaks only as of the date on which such statement is made,~~ and except as required by law, we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.

~~Key Initiatives~~

~~Reducing costs across our entire organization,~~

~~Reviewing entire portfolio of assets (complete non-core asset sales); and~~

~~Reviewing capital structure (allocate capital to maximize shareholder value).~~

~~Discontinued Operations / Segment Name Changes~~

At year-end 2016 we have divested substantially all of our oil and gas working interest properties. As a result of this significant change in our operations, we have reported the results of operations and financial position of these assets as discontinued operations for all periods presented. In addition, we changed the name of the oil and gas segment to mineral resources to reflect the strategic shift from oil and gas working interest investments to owned mineral interests. We also changed the name of the other natural resources segment to other. The discussion of our results of operations is based on the results from our continuing operations unless otherwise indicated.

~~Results of Operations for the Years Ended 2016,~~ ~~2015~~ ~~and~~ ~~2014~~

~~A summary of our consolidated results by business segment follows:~~

For the Year
2016 2015 2014
(In thousands)
Revenues:
Real estate $ 190,273
$ 202,830
$ 213,112
Mineral resources 5,076
9,094
15,690
Other 1,965
6,652
9,362
Total revenues $ 197,314
$ 218,576
$ 238,164
Segment earnings (loss):
Real estate $ 121,420
$ 67,678
$ 96,906
Mineral resources 3,327
4,230
9,116
Other (4,625 ) (608 ) 5,499
Total segment earnings (loss) 120,122
71,300
111,521
Items not allocated to segments:
General and administrative expense (18,274 ) (24,802 ) (21,229 )
Share-based and long-term incentive compensation expense (4,425 ) (4,474 ) (3,417 )
Gain on sale of assets 48,891
—
—
Interest expense (19,985 ) (34,066 ) (30,286 )
Loss on extinguishment of debt, net (35,864 ) —
—
Other corporate non-operating income 350
256
453
Income from continuing operations before taxes attributable to Forestar Group Inc. 90,815
8,214
57,042
Income tax expense (15,302 ) (35,131 ) (20,850 )
Net income (loss) from continuing operations attributable to Forestar Group Inc. $ 75,513
$ (26,917 ) $ 36,192

~~Significant aspects of our results of operations follow:~~

~~2016~~

Real estate segment earnings benefited from combined gains of $117,856,000 which generated combined net proceeds before debt repayment of $247,506,000 as a result of executing our key initiative to opportunistically divest non-core assets. These gains were partially offset by non-cash impairment charges of $56,453,000 related to six non-core community development projects and two multifamily sites. These impairments were a result of our key initiative to review our entire portfolio of assets which resulted in business plan changes, inclusive of cash tax savings consideration, to market these properties for sale. In addition, earnings benefited from increased residential lot sales activity and higher undeveloped land sales from our retail sales program.

Mineral resources segment earnings decreased due to lower oil and gas prices and production volumes associated with royalty interests and reduced lease bonus and delay rental payments received from our owned mineral interests.

Other segment earnings was negatively impacted due to a $3,874,000 non-cash impairment charge of goodwill related to our central Texas water assets as a result of entering into an agreement to sell these assets.

~~General and administrative expense decreased as result of our key initiative to reduce costs across our entire organization.~~

Gain on sale of assets of $48,891,000 represents the sale of over 58,300 acres of timberland and undeveloped land in Georgia and Alabama in three separate transactions for $104,172,000 in accordance with our key initiative to divest non-core assets.

~~Interest expense decreased primarily due to reducing our debt outstanding by $277,790,000 in 2016 and $323,303,000 since third quarter 2015.~~

Loss on extinguishment of debt of $35,864,000 is related to debt retirement of portions of our 8.50% Senior Secured Notes due 2022 and 3.75% Convertible Senior Notes due 2020, which includes write-off of unamortized debt issuance costs of $5,489,000 and $1,301,000 in other costs related to tender offer advisory services.

~~2015~~

Real estate segment earnings declined principally due to gain on sale of assets of $25,981,000 in 2014 compared with $1,585,000 in 2015, lower undeveloped land sales and decreased residential lot sales activity. Segment earnings were positively impacted by higher commercial and residential tract sales and sale of Midtown Cedar Hill, a 354-unit multifamily property near Dallas for $42,880,000, which generated segment earnings of $9,265,000.

Mineral resources segment earnings decreased principally due to lower oil prices, as well as lower oil and gas production volumes associated with royalty interests and reduced lease bonus and delay rental payments received from our owned mineral interests.

Other segment earnings declined principally due to gains of $3,531,000 in 2014 related to partial terminations of a timber lease related to land sold from a consolidated venture near Atlanta, Georgia and due to lower fiber volumes.

General and administrative expense increased principally as a result of severance-related charges of $3,314,000 related to departures of our former Chief Executive Officer (CEO) and Chief Financial Officer (CFO).

~~Interest expense increased primarily due to higher average borrowing rates and increased average debt outstanding.~~

~~2014~~

Real estate segment earnings benefited from increased undeveloped land sales generating earnings of $29,895,000, a $10,476,000 gain associated with a non-monetary exchange of leasehold timber rights for 5,400 acres of undeveloped land with a partner in a consolidated venture, a $7,610,000 gain associated with the acquisition of our partner's interest in the Eleven multifamily venture, higher residential lot sales activity and a $6,577,000 gain associated with $46,500,000 of bond proceeds we received from the Cibolo Canyons Special Improvement District.

Mineral resources segment earnings decreased principally due to lower oil and gas production volumes associated with royalty interests and reduced lease bonus and delay rental payments received from our owned mineral interests.

Other segment earnings declined principally due to lower fiber volumes, which were partially offset by gains of $3,531,000 primarily related to partial terminations of a timber lease related to land sold from a consolidated venture near Atlanta, Georgia.

~~Share-based compensation decreased principally as result of a 28% decrease in our stock price since year-end 2013~~how long C-19 and its related effects will impact ~~on cash-settled awards.~~

~~Interest expense increased primarily due to higher average borrowing rates and increased debt outstanding.~~

~~Current Market Conditions~~

~~Sales of new~~the U.S. single-family homes according to U.S Census Bureau Department of Commerce declined 0.4% on a year over year basis as of December 31, 2016 and 10.4% below prior month's rate in December 2016, suggesting that the 40 basis point rise in mortgage rates and the return of winter weather affected December 2016 sales. Consumer confidence as measured by The Conference Board increased in December 2016 to its highest level since August 2001, registering 113.7 up from 109.4 in November 2016. The elevated monthly reading was attributed in part to increases in consumers' outlook for business conditions over the next six-months and more positive outlooks for the labor market and rising incomes. Builder confidence as measured by the NAHB/Wells Fargo Housing Market Index ended 2016 on a high note, jumping seven points to its highest reading since July 2005, largely attributable to a post-election bounce. On a monthly basis, housing starts increased significantly in December 2016 due to volatile multifamily activity, while housing permit activity, viewed as a precursor to starts increased 1.9% year over year basis ending December 2016. Home prices as measured by S&P Corelogic Case-Shiller Home Price index hit a new high in November 2016 after rising at approximately a 5.5% annual rate over the last two-and-a half years. As of the November 2016 reading, average home prices for the metropolitan statistical areas (MSAs) within the two composite indices were back to their winter 2007 levels. As of year-end 2016, finished vacant supply of new homes and vacant developed lot supply in MSAs in which Forestar's single family activity is located remained extremely tight, registering below the two month and 24 month equilibrium levels.

~~Oil and gas revenues are influenced by prices of, and global and domestic supply~~economy, capital markets and demand for ~~oil~~our lots. The extent to which C-19 impacts our operational and ~~gas. These commodities as determined by both regional and global markets~~financial performance will depend on ~~numerous factors beyond our control,~~future developments, including ~~seasonality,~~ the ~~condition~~duration and spread of the domestic and global economies, political conditions in other oil and gas producing countries, the extent of domestic production and imports of oil and gas, the proximity and capacity of gas pipelines and other transportation facilities, supply and demand for oil and gasC-19 and the ~~effects~~impact on our customers, trade partners and employees, all of ~~federal, state~~which are highly uncertain and ~~local regulation. The oil~~cannot be predicted. If economic and ~~gas industry also competes with other industries~~housing market conditions are adversely affected for a prolonged period, we may be required to evaluate our real estate for potential impairment. These evaluations could result in ~~supplying the energy and fuel requirements of industrial, commercial and individual consumers. The price of crude oil decreased~~impairment charges which could be significant.

We believe we are well positioned to effectively operate during the first half of 2016 as compared with the first half in 2015. Prices increased during the second half of 2016 as compared to the first half of 2016 as the number of U.S. crude oil rigs and inventories declined in the last half of 2015 and into early 2016. Natural gas prices decreased in 2016 compared with 2015, primarilychanging economic conditions due to domestic oversupply driven by lack of a normal winter withdrawal cycle in the winter of 2015-2016. West Texas Intermediate (WTI) oil prices averaged $43.33 per Bbl in 2016, nearly 11% lower than in 2015our low net leverage and ~~$48.66 per Bbl in 2015, nearly 48% lower than in 2014.~~strong liquidity position, our low overhead model and our strategic relationship with D.R. Horton.

Business ~~Segments~~Segment

We manage our operations through ~~three business segments:~~

~~Real estate,~~

~~Mineral resources, and~~

~~Other.~~

We evaluate performance based on segment earnings (loss) before unallocated items and income taxes. Segment earnings (loss) consist of operating income (loss), equity in earnings of unconsolidated ventures’, gain on sale of assets, interest income on loans secured by real estate and net (income) loss attributable to noncontrolling interests. Items not allocated to our business segments consist of general and administrative expenses, share-based and long-term compensation, gain on sale of strategic timberland and undeveloped land, interest expense, loss on extinguishment of debt and other corporate non-operating income and expense. The accounting policies of the segments are the same as those described in the accounting policy note to the consolidated financial statements.

We operate in cyclical industries. Our operations are affected to varying degrees by supply and demand factors and economic conditions including changes in interest rates, availability of mortgage credit, consumer and home builder sentiment, new housing starts, real estate values, employment levels, changes in the market prices for oil, gas and timber, and the overall strength or weakness of the U.S. economy.

~~Real Estate~~

~~We own directly or through ventures interests in 50 residential and mixed-use projects comprised of approximately 4,600 acres of real estate located in 10 states and 14 markets. Our~~ real estate segment ~~secures entitlements~~which is our core business and generates substantially all of our revenues. The real estate segment primarily acquires land and develops infrastructure ~~on our lands, primarily~~ for single-family residential communities and mixed-use communities. We own approximately 11,000 acres of non-core timberland and undeveloped land in Georgia and approximately 8,000 acres in Texas. We own and manage our projects either directly or through ventures. Our real estate segmentgenerates revenues ~~are principally derived~~ from ~~the~~ sales of residential single-family ~~lots and tracts, undeveloped land and commercial real estate, and in 2014 and 2015 from the operation of several income producing properties, primarily a hotel and multifamily properties.~~

~~A summary of our real estate results follows:~~

For the Year
2016 2015 2014
(In thousands)
Revenues $ 190,273
$ 202,830
$ 213,112
Cost of sales (163,095 ) (113,891 ) (123,764 )
Operating expenses (29,229 ) (40,502 ) (34,121 )
(2,051 ) 48,437
55,227
Interest income on loan secured by real estate 1,368
2,750
8,135
Gain on sale of assets 117,856
1,585
25,981
Equity in earnings of unconsolidated ventures 5,778
15,582
8,068
Less: Net income attributable to noncontrolling interests (1,531 ) (676 ) (505 )
Segment earnings $ 121,420
$ 67,678
$ 96,906

~~Revenues in our owned and consolidated ventures consist of:~~

For the Year
2016 2015 2014
(In thousands)
Residential real estate $ 121,196
$ 87,771
$ 119,308
Commercial real estate 11,151
5,390
2,717
Undeveloped land 35,873
22,851
46,554
Commercial and income producing properties 13,738
82,808
41,440
Other 8,315
4,010
3,093
$ 190,273
$ 202,830
$ 213,112

~~Residential real estate revenues principally consist of the sale of single-family~~finished lots to local, regional and national ~~home builders. In 2016, residential~~homebuilders. We have other business activities for which the related assets and operating results are immaterial, and therefore, are included in our real estate ~~revenues increased primarily due~~segment.

Table of Contents

Results of Operations

The following tables and related discussion set forth key operating and financial data as of and for the fiscal years ended September 30, 2020 and 2019. For similar operating and financial data and discussion of our results for the fiscal year ended September 30, 2019 compared to ~~higher~~our results for the nine months ended September 30, 2018, refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II of our annual report on Form 10-K for the fiscal year ended September 30, 2019, which was filed with the SEC on November 21, 2019.

Operating Results

Components of pre-tax income were as follows:


	Year Ended September 30,
	2020		2019
	(In millions)
Revenues	$	931.8	$	428.3
Cost of sales	813.7		362.7
Selling, general and administrative expense	45.7		28.9
Equity in earnings of unconsolidated ventures	(0.7)		(0.5)
Gain on sale of assets	(0.1)		(3.0)
Interest and other income	(4.9)		(5.5)
Income before income taxes	$	78.1	$	45.7

Lot Sales

Residential lots sold consist of:


	Year Ended September 30,
	2020		2019
Development projects	7,316		2,610
Lot banking projects	3,057		1,522
	10,373		4,132

Average sales price per lot (a)	$	84,600	$	84,200

_______________

(a) Excludes any impact from change in contract liabilities.

Revenues

Revenues consist of:


	Year Ended September 30,
	2020		2019
	(In millions)
Residential lot sales:
Development projects	$	616.3	$	218.8
Lot banking projects	261.7		128.9
Decrease in contract liabilities	2.3		4.0
	880.3		351.7
Residential tract sales	48.6		55.8
Commercial tract sales	2.5		18.5
Other	0.4		2.3
	$	931.8	$	428.3

Table of Contents

Residential lots sold and residential lot sales ~~activity but were partially offset by lower average sale prices per lot~~revenues have increased as ~~a result of selling 235 bulk lots from four non-core community development projects. Excluding these non-core sales,~~we have grown our business primarily through our strategic relationship with D.R. Horton. In fiscal 2020, we sold ~~1,427~~10,164 residential lots ~~from~~to D.R. Horton for $859.7 million compared to 3,728 residential lots sold to D.R. Horton for $311.7 million in fiscal 2019. At September 30, 2020, our lot position consisted of 60,500 residential lots, of which approximately 42,400 were owned and ~~consolidated projects at an average price~~18,100 were controlled through purchase contracts. Of our total owned residential lots, approximately 14,000 are under contract to sell to D.R. Horton. Additionally, D.R. Horton has the right of ~~$71,300 per lot. In addition,~~first offer on approximately 16,400 of these lots based on executed purchase and sale agreements. At September 30, 2020, lots owned included approximately 5,000 lots that are fully developed, of which approximately 1,400 are related to lot banking. At September 30, 2020, we had approximately 400 lots under contract to sell to builders other than D.R. Horton.

Residential tract sales in ~~2016, we sold 1,539~~fiscal 2020 consist of 594 residential tract acres sold to third parties for ~~$8,728,000 generating earnings of $847,000. In 2015, residential real estate revenues decreased primarily due to lower lot sales activity due to construction~~$23.0 million and ~~inspection delays associated with abnormally wet weather conditions. Also, in 2015, we sold 1,062~~143 residential tract acres sold to D.R. Horton for ~~$11,223,000 generating earnings of $5,489,000, compared with 936 acres of residential tracts for $7,996,000 generating earnings of $2,988,000 in 2014.~~

The timing of commercial real estate revenues can vary depending on the demand, mix, project life-cycle, size and location of the project. In 2016, the increase in commercial real estate revenues is primarily due to selling 286 commercial acres from four non-core community development projects, of which 264 acres were sold from our San Joaquin River project in Antioch, California for $7,330,000 which provided approximately $37,400,000 in income tax losses to offset tax gains from other sales. In 2015, our commercial$25.6 million. Residential tract sales ~~revenue increased principally due~~in fiscal 2019 primarily consist of 63 residential tract acres sold to ~~higher average~~a third party for $44.2 million and 290 residential tract acres sold to D.R. Horton for $10.9 million.

Commercial tract sales ~~price~~generally relate to the sale of tracts ~~sold. In 2015, we sold 31~~to commercial ~~acres for $5,542,000 from our owned~~developers that specialize in the construction and ~~consolidated projects, generating earnings~~operation of ~~$3,345,000, compared with 21 commercial acres for $1,889,000, generating earnings of $444,000 in 2014.~~

Undeveloped land revenues represent land sold from our retail sales program. In 2016, we sold 14,438 acres of undeveloped land for $2,485 per acre, generating approximately $28,098,000 in earnings. In 2015, we sold 9,645 acres of undeveloped land for $2,369 per acre, generating approximately $16,542,000 in earnings, compared with 21,345 acres sold for $2,181 per acre, generating earnings of $29,895,000 in 2014.

~~Commercial and~~ income producing properties ~~revenues include revenues from sale~~such as apartments, retail centers, or office buildings. Commercial tract sales in fiscal 2020 consist of ~~multifamily properties which we developed as~~8 commercial tract acres sold to a ~~merchant builder and operate until~~third party for $2.5 million. Commercial tract sales in fiscal 2019 primarily consist of 49 commercial tract acres sold ~~from hotel room sales and other guest services, rental revenues from our operating multifamily properties and reimbursement~~by a consolidated venture for costs paid to subcontractors plus development and construction fees from certain multifamily projects. In 2016, commercial and income producing properties revenues decreased as result of selling the Radisson Hotel & Suites, a 413 guest room hotel located in Austin, in second quarter 2016 and Eleven, a multifamily property in Austin, in first quarter 2016, and the impact of selling Midtown Cedar Hill, a multifamily property near Dallas in fourth quarter 2015 for $42,880,000. Commercial and income producing properties revenue in 2015 includes $6,238,000 in construction revenues associated with one multifamily fixed fee contract as general contractor which was substantially completed at year-end 2015, compared with $12,282,000 in 2014. The decrease in construction revenues in 2015 is primarily due to the completion of the Eleven project in second quarter 2014. In 2015, rental revenues from our multifamily operating properties were $8,380,000 compared with $1,550,000 in 2014, primarily due to the substantial completion of the Eleven multifamily project at the end of second quarter 2014 and acquiring our partner's interest in the multifamily venture in third quarter 2014.$17.7 million.

Other revenues primarily result from sale of stream and impervious cover credits. In 2016, we sold 24 acres of impervious cover credits to home builders for $3,232,000, generating earnings of $2,787,000 and 138,000 mitigation banking credits for $3,265,000, generating earnings of $2,137,000.

~~Units sold consist of:~~

For the Year
2016 2015 2014
Owned and consolidated ventures:
Residential lots sold 1,662
972
1,999
Revenue per lot sold $ 66,694
$ 76,594
$ 55,597
Commercial acres sold 294
31
21
Revenue per commercial acre sold $ 37,312
$ 182,184
$ 89,681
Undeveloped acres sold 14,438
9,645
21,345
Revenue per acre sold $ 2,485
$ 2,369
$ 2,181
Ventures accounted for using the equity method:
Residential lots sold 278
500
344
Revenue per lot sold $ 76,866
$ 78,288
$ 72,906
Commercial acres sold 4
32
11
Revenue per commercial acre sold $ 527,152
$ 309,224
$ 589,574
Undeveloped acres sold 476
4,217
792
Revenue per acre sold $ 1,567
$ 2,129
$ 2,391

Cost of sales in 2016 included non-cash impairment charges of $56,453,000 associated with six non-core community development projects and two multifamily sites, of which four non-core community development projects and one multifamily site were sold in 2016 and one multifamily site was under contract to be sold at year-end 2016 and is expected to close in 2017. The non-cash impairments were a result of our key initiative to review our entire portfolio of assets which resulted in business plan changes, inclusive of cash tax savings considerations, to market these properties for sale. In 2015, cost of sales includes $7,781,000 related to multifamily construction contracts we incurredfiscal 2020 increased as ~~general contractor and paid to subcontractors associated with our development of a multifamily venture property near Denver~~ compared to ~~$17,393,000~~fiscal 2019 primarily due to the increase in ~~2014, associated with two multifamily venture properties. Included in multifamily construction contract costs are charges~~the number of ~~$1,531,000 in 2015 reflecting estimated cost increases associated with our fixed fee contracts as general contractor for these two multifamily venture properties compared to $5,107,000 in 2014.~~lots sold. Cost of sales ~~in 2015 includes $33,375,000 in carrying value~~ related to ~~Midtown Cedar Hill multifamily property we developed~~residential and commercial tract sales in fiscal 2020 and 2019 was $40.6 million and $50.8 million, respectively.

Selling, General and Administrative (SG&A) Expense and Other Income Statement Items

SG&A expense in fiscal 2020 was $45.7 million compared to $28.9 million in fiscal 2019. SG&A expense as ~~a merchant builder and sold. In addition, cost of sales includes non-cash impairment charges of $1,044,000 in 2015 and $399,000 in 2014.~~

~~Operating expenses consist of:~~

For the Year
2016 2015 2014
(In thousands)
Employee compensation and benefits $ 8,384
$ 8,989
$ 10,327
Property taxes 5,996
9,031
6,919
Professional services 5,134
5,749
5,749
Depreciation and amortization 976
7,605
3,741
Other 8,739
9,128
7,385
$ 29,229
$ 40,502
$ 34,121

The decrease in operating expenses for 2016 is principally related to decrease in depreciation and amortization and property taxes associated with first quarter 2016 sale of Eleven multifamily project and fourth quarter 2015 sale of Midtown Cedar Hill multifamily project. The increase in operating expenses for 2015 when compared with 2014 was primarily due to increase in depreciation and amortization associated with the acquisition of Eleven multifamily project in which we previously held a 25 percent equity interest and completion of Midtown Cedar Hill multifamily project in 2015.

Interest income principally represents interest received on reimbursements from utility and improvement districts. Interest income in year 2014 principally represents earnings from a loan secured by a mixed-use real estate community in Houston that was paid in full in first quarter 2015.

In 2016, gain on sale of assets includes a gain of $95,336,000 related to sale of Radisson Hotel & Suites, a gain of $9,116,000 related to sale of Eleven, a gain of $1,223,000 associated with sale of Dillon, a gain of $10,363,000 related to sale of our interest in 360^0,, a gain of $3,968,000 associated with sale of Music Row, a loss of $3,870,000 related to selling the Downtown Edge multifamily site, a gain of $1,219,000 associated with the reduction of a surety bond supporting the 2014 Cibolo Canyons Special Improvement District (CCSID) bond offering and $501,000 of excess hotel occupancy and sales and use tax revenues from CCSID. The surety bond has a balance of $6,631,000 at year-end 2016. The surety bond will decrease as CCSID makes annual ad valorem tax rebate payments to San Antonio Real Estate (SARE) owner of the Resort, which obligation is scheduled to be retired in full by 2020.

In 2015, gain on sale of assets includes a gain of $1,160,000 associated with the reduction of a surety bond in connection with the CCSID bond offering in 2014 and $425,000 of excess hotel occupancy and sales and use tax pledged revenues from CCSID after their payments to the debt service fund.

In 2014, gain on sale of assets principally includes a gain of $10,476,000 associated with a non-monetary exchange of leasehold timber rights on approximately 10,300 acres for 5,400 acres of undeveloped land with a partner in a consolidated venture, a gain of $7,610,000 related to acquiring our partner's interest in the Eleven multifamily venture, a gain of $6,577,000 related to bond proceeds received from Cibolo Canyons Special Improvement District (CCSID) at our Cibolo Canyons project near San Antonio, and a gain of $1,318,000 associated with the sale of a land purchase option contract.

Decreases in equity earnings from our unconsolidated ventures in 2016 compared with 2015 is primarily due to lower residential, commercial and undeveloped sales activity. Increase in equity earnings from our unconsolidated ventures in 2015 compared with 2014 is primarily due to increased lot sales activity associated with two projects in Houston and increased undeveloped land sales from a venture in Atlanta.

We underwrite real estate development projects based on a variety of assumptions incorporated into our development plans, including the timing and pricing of sales and leasing and costs to complete development. Our development plans are periodically reviewed in comparison to our return projections and expectations, and we may revise our plans as business conditions warrant. If as a result of changes to our development plans the anticipated future net cash flows are reduced such that our basis in a project is not fully recoverable, we may be required to recognize a non-cash impairment charge for such project. See Part I, Item 1. ~~Business~~ ~~for information about our net investment in owned and consolidated real estate by geographic location at year-end 2016.~~

~~Mineral resources~~

~~In 2016, we determined that our owned mineral assets were non-core and that we would explore opportunistically divesting these assets.~~

At year-end 2016, we classified our non-core mineral assets as held for sale. On February 17, 2017, we sold substantially all of our remaining oil and gas assets for a total purchase price of $85,600,000, of which $75,000,000 was received at closing. The balance of the purchase price is being held in a third-party escrow account pending completion of (a) title review, and (b) transfer of certain mineral interests owned by a venture in which the Company is a member. In first quarter 2017, we expect to recognize a gain on sale of approximately $82,400,000, of which $10,600,000 will be deferred until verification of accepted title for non-producing fee minerals in Texas and Louisiana, transfer of certain mineral interests owned by a venture in which we are a member and release of the escrowed funds. In addition, the Company expects to incur a non-cash charge of $37,900,000 related to oil and gas enterprise goodwill that is impaired due to the sale of substantially all of the Company's remaining oil and gas assets.

Our mineral resources segment is focused on maximizing the value from our owned oil and gas mineral interests through promoting exploration, development and production activities by increasing acreage leased, lease rates, and royalty interests.

~~A summary of our mineral resources results follows:~~

For the Year
2016 2015 2014
(In thousands)
Revenues $ 5,076
$ 9,094
$ 15,690
Cost of mineral resources (763 ) (2,998 ) (3,790 )
Operating expenses (1,159 ) (2,141 ) (3,370 )
3,154
3,955
8,530
Equity in earnings of unconsolidated ventures 173
275
586
Segment earnings (loss) $ 3,327
$ 4,230
$ 9,116

~~Revenues consist of:~~

For the Year
2016 2015 2014
(In thousands)
Oil royalties ^(a)
$ 2,905
$ 5,739
$ 10,923
Gas royalties 1,304
2,138
3,402
Other (principally lease bonus and delay rentals) 867
1,217
1,365
$ 5,076
$ 9,094
$ 15,690

~~_____________________~~


^(a)	~~Oil royalties includes revenues from oil, condensate and natural gas liquids (NGLs).~~

~~Oil and gas produced and average unit prices related to our royalty interests follows:~~

For the Year
2016 2015 2014
Consolidated entities:
Oil production (barrels) 70,700
106,800
101,900
Average oil price per barrel $ 39.74
$ 50.48
$ 97.55
NGL production (barrels) 8,000
21,500
23,800
Average NGL price per barrel $ 11.84
$ 16.32
$ 41.39
Total oil production (barrels), including NGLs 78,700
128,300
125,700
Average total oil price per barrel, including NGLs $ 36.91
$ 44.76
$ 86.91
Gas production (millions of cubic feet) 633.3
771.9
831.0
Average price per thousand cubic feet $ 2.06
$ 2.77
$ 4.09
Our share of ventures accounted for using the equity method:
Gas production (millions of cubic feet) 143.5
168.3
199.6
Average price per thousand cubic feet $ 1.97
$ 2.54
$ 3.94
Total consolidated and our share of equity method ventures:
Oil production (barrels) 70,700
106,800
101,900
Average oil price per barrel $ 39.74
$ 50.48
$ 97.55
NGL production (barrels) 8,000
21,500
23,800
Average NGL price per barrel $ 11.84
$ 16.32
$ 41.39
Total oil production (barrels), including NGLs 78,700
128,300
125,700
Average total oil price per barrel, including NGLs $ 36.91
$ 44.76
$ 86.91
Gas production (millions of cubic feet) 776.8
940.2
1,030.6
Average price per thousand cubic feet $ 2.04
$ 2.73
$ 4.06
Total BOE (barrel of oil equivalent)^(a)
208,200
284,900
297,400
Average price per barrel of oil equivalent $ 21.58
$ 29.15
$ 50.80

~~_____________________~~


^(a)	~~Gas is converted to barrels of oil equivalent (BOE) using six Mcf to one barrel of oil.~~

~~In 2016 and 2015, oil and gas production revenues decreased principally as a result of lower realized oil and gas prices and lower production volumes from our royalty interests.~~

In 2016, other revenues principally represents $402,000 in lease bonuses received from leasing approximately 2,100 net mineral owned acres for for an average of $191 per acre compared with $996,000 in lease bonuses received from leasing approximately 3,300 net mineral owned acres for an average of $300 per acre in 2015 and $1,244,000 in lease bonus payments in 2014 from leasing approximately 3,900 owned mineral acres for an average of $320 per acre.

~~Cost of mineral resources consists of:~~

For the Year
2016 2015 2014
(In thousands)
Depletion and amortization $ 85
$ 209
$ 498
Exploration costs 103
153
1,689
Production costs 568
814
1,151
Non-cash impairment of proved oil and gas properties —
1,802
—
Other 7
20
452
$ 763
$ 2,998
$ 3,790

~~Cost of mineral resources principally represents our share of oil and gas production severance taxes, which are calculated based on~~ a percentage of ~~oil~~revenues was 4.9% and ~~gas produced. Cost of mineral resources~~6.7% in ~~2015 included non-cash impairment charges of $1,802,000 associated with proved oil~~fiscal 2020 and ~~gas properties on owned mineral interests.~~

~~Operating expenses principally consist~~2019, respectively. Our SG&A expense primarily consists of employee compensation and ~~benefits, professional services, property taxes~~related costs. Our business operations employed 143 and ~~rent expense. The decrease in operating expenses year over year is primarily due to our key initiative to reduce costs across our entire organization.~~78 employees at September 30, 2020 and 2019, respectively.

Equity in earnings of unconsolidated ventures ~~includes~~at September 30, 2020 and 2019 reflects our share of ~~royalty revenue from producing wells~~earnings in four ventures that we account for using the ~~Barnett Shale gas formation.~~equity method.

Interest and other income primarily represents interest earned on our cash deposits.

~~Other~~

Income Taxes

Our ~~other segment, all of which is non-core, manages~~income tax expense was $16.4 million and $9.4 million in fiscal 2020 and 2019, respectively, and our ~~timber holdings, recreational leases and water resource initiatives. We have approximately 19,000 acres of timberland and undeveloped land we own directly, primarily~~effective tax rate was 21% in ~~Georgia and Texas, which was classified as assets held~~both years. Our effective tax rate for sale at year-end 2016. Other segment revenues are principally derived from sales of wood fiber from our land and leases for recreational uses. We have water interests in 1.5 million acres, including a 45 percent nonparticipating royalty interest in groundwater produced or withdrawn for commercial purposes or sold from 1.4 million acres in Texas, Louisiana, Georgia and Alabama, and 20,000 acres of groundwater leases in central Texas, which were classified as assets held for sale at year-end 2016.

~~A summary of our other results follows:~~

For the Year
2016 2015 2014
(In thousands)
Revenues $ 1,965
$ 6,652
$ 9,362
Cost of sales (5,075 ) (3,081 ) (3,006 )
Operating expenses (1,687 ) (4,330 ) (4,419 )
(4,797 ) (759 ) 1,937
Gain on sale and partial termination of timber lease —
—
3,531
Equity in earnings of unconsolidated ventures 172
151
31
Segment earnings (loss) $ (4,625 ) $ (608 ) $ 5,499

~~Revenues consist of:~~

For the Year
2016 2015 2014
(In thousands)
Fiber $ 897
$ 5,011
$ 7,050
Water 49
489
1,100
Recreational leases and other 1,019
1,152
1,212
$ 1,965
$ 6,652
$ 9,362

~~Fiber sold consists of:~~

For the Year
2016 2015 2014
Pulpwood tons sold 23,400
149,700
209,900
Average pulpwood price per ton $ 7.20
$ 9.71
$ 10.62
Sawtimber tons sold 35,000
77,000
120,000
Average sawtimber price per ton $ 16.74
$ 20.86
$ 22.47
Total tons sold 58,400
226,700
329,900
Average stumpage price per ton ^(a)
$ 12.91
$ 13.50
$ 14.93

~~_____________________~~


^(a)	~~Average stumpage price per ton is based on gross revenues less cut and haul costs.~~

~~Fiber revenues decreased in 2016 when compared with 2015 and 2014 due to deferral of timber harvest activity in support of our key initiative to divest our non-core timberland and undeveloped land.~~

Water revenues for 2016 are related to groundwater royalties from our 45 percent nonparticipating royalty interests in groundwater produced or withdrawn for commercial purposes. Water revenues for 2015 and 2014 are associated with a groundwater reservation agreement with Hays County, Texas, which commenced in 2013 and was terminated in 2015.

~~Information about our recreational leases follows:~~

For the Year
2016 2015 2014
Average recreational acres leased 75,300
98,300
110,500
Average price per leased acre $ 9.98
$ 9.17
$ 9.13

Cost of sales principally includes non-cash cost of timber cut and sold and delay rental payments paid to others related to groundwater leases in central Texas. The increase in cost of sales for 2016 is due to a $3,874,000 goodwill non-cash impairment charge related to our water interests in groundwater leases in central Texas as result of entering into an agreement to sell these assets which is expected to close in 2017. Excluding the non-cash impairment charge in 2016, cost of sales decreased due to deferral of timber harvest activity.

Operating expenses principally consist of employee compensation and benefits and professional services. The decrease in operating expenses in 2016 when compared with 2015 and 2014 is primarily due to our key initiative to reduce costs across the entire organization and corresponding reduction in our workforce. Operating expenses associated with our water resources initiatives were $921,000 in 2016, $2,162,000 in 2015 and $2,437,000 in 2014.

~~Gain on sale and partial termination of timber lease in 2014~~fiscal 2020 includes a ~~$3,366,000 gain associated with partial terminations~~tax benefit of ~~a timber lease~~$2.3 million related to the ~~remaining 2,700 acres~~net operating loss (NOL) carryback provisions of ~~undeveloped land sold from~~the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which allow the Company to carryback a ~~consolidated venture near Atlanta, Georgia.~~

~~Items Not Allocated~~portion of its fiscal 2018 NOL. The carryback provisions result in the recognition of previously unrecognized tax benefits and the revaluation of deferred tax assets due to ~~Segments~~

~~Items not allocated to segments consist of:~~

For the Year
2016 2015 2014
(In thousands)
General and administrative expense $ (18,274 ) $ (24,802 ) $ (21,229 )
Share-based and long-term incentive compensation expense (4,425 ) (4,474 ) (3,417 )
Gain on sale of assets 48,891
—
—
Interest expense (19,985 ) (34,066 ) (30,286 )
Loss on extinguishment of debt, net (35,864 ) —
—
Other corporate non-operating income 350
256
453
$ (29,307 ) $ (63,086 ) $ (54,479 )

~~Unallocated items represent~~the utilization of NOLs at a higher tax rate in the carryback period. Our effective tax rate for both years includes an expense for state income taxes and nondeductible expenses ~~managed on~~and a company-wide basis and include general and administrative expenses, share-based and long-term incentive compensation, gain on sale of strategic timberland and undeveloped land, interest expense, loss on extinguishment of debt and other corporate non-operating income and expense. General and administrative expenses principally consist of costs and expensesbenefit related to ~~accounting and finance,~~noncontrolling interests.

At September 30, 2020, we had deferred tax ~~legal, human resources, internal audit, information technology and our board~~liabilities, net of ~~directors. These functions support all~~deferred tax assets, of ~~our business segments and are~~$4.2 million. The deferred tax assets were offset by a valuation allowance of $1.5 million, resulting in a net deferred tax liability of $5.7 million. At September 30, 2019, deferred tax assets, net of deferred tax liabilities, were $20.7 million, partially offset by a valuation allowance of $3.3 million. The valuation allowance for both years was recorded because it is more likely than not ~~allocated.~~

~~General and administrative expense~~

~~General and administrative expenses consist of:~~

For the Year
2016 2015 2014
(In thousands)
Employee compensation and benefits $ 9,063
$ 11,729
$ 8,948
Professional and consulting services 4,541
6,056
4,647
Facility costs 744
889
928
Insurance costs 704
682
1,115
Depreciation and amortization 404
595
638
Other 2,818
4,851
4,953
$ 18,274
$ 24,802
$ 21,229

The decrease in general and administrative expense in 2016 when compared with 2015 is primarily due to our key initiative to reduce costs across our entire organization. In 2015, employee compensation and benefits include $3,314,000 of severance charges related to the departure of our former CEO and CFO under employment and separation agreements.

~~Share-based compensation and Long-term incentive compensation expense~~

~~Our share-based compensation expense principally fluctuates due to~~that a portion of our ~~awards being cash-settled and as a result~~state deferred tax assets, primarily NOL carryforwards, will not be realized because we are ~~affected by changes~~no longer operating in some states or the NOL carryforward periods are too brief to realize the related deferred tax asset. The current year decrease in the ~~market price~~valuation allowance is primarily attributable to the write-off of ~~our common stock.~~

~~In 2016 and 2015, we granted $620,000 and $587,000 of long-term incentive compensation in the form of~~state deferred ~~cash compensation. The 2016 deferred cash awards vest annually over two years, and the 2015 deferred cash awards vest after three years. Both awards provide~~tax assets for ~~accelerated vesting upon retirement, disability, death, or if there is a change in control. Expense associated with deferred cash awards is recognized ratably over the vesting period.~~

~~Gain on sale of assets~~

In 2016, we sold over 58,300 acres of timber and timberland in Georgia and Alabama for $104,172,000 in three transactions generating combined net proceeds of $103,238,000. These transactions resulted in a combined gain on sale of assets of $48,891,000.

~~Interest expense~~

~~The decrease in interest expense in 2016 is due~~NOLs, which are not expected to ~~reducing our debt outstanding by $277,790,000 in 2016 and $323,303,000 since third quarter-end 2015.~~

~~Loss on extinguishment of debt, net~~

~~In 2016, we retired portions of our 8.5% Senior Secured Notes due 2022 and 3.75% Convertible Senior Notes due 2020~~be utilized, resulting in ~~a net loss on debt extinguishment of $35,864,000, which includes write-off of unamortized debt issuance costs of $5,489,000~~no impact to state tax expense. We will continue to evaluate both the positive and ~~$1,301,000~~negative evidence in ~~other costs related to tender offer advisory services.~~

~~Income taxes~~

~~Our effective tax rate from continuing operations was 17 percent in 2016, 395 percent in 2015 and 36 percent in 2014. Our 2016 effective tax rate differs from~~determining the statutory rate of 35 percent primarily due to a 19 percent benefit from a valuation allowance decrease due to a decrease in our deferred tax assets. Our 2015 effective tax rate is attributable almost entirely to a 348 percent detriment from the recording ofneed for a valuation allowance on our deferred tax ~~asset.~~

~~Our 2016, 2015 and 2014~~assets. Any reversal of the valuation allowance in future periods will impact our effective tax ~~rates include the effect~~rate.

Table of ~~state income taxes, nondeductible items and benefits from noncontrolling interests.~~Contents

~~At year-end 2016 and 2015, we have provided a valuation allowance for~~

In October 2017, D.R. Horton acquired 75% of our ~~deferred tax asset of $73,405,000 and $97,068,000 respectively for the portion~~common stock, resulting in an ownership change under Section 382 of the ~~deferred tax asset that we have determined is more likely than not to be unrealizable.~~

In determining our valuation allowance, we assessed available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax asset. A significant piece of objective evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2016, principally driven by impairments of oil and gas and real estate properties. Such evidenceInternal Revenue Code. Section 382 limits our ability to ~~consider other subjective evidence, such~~use certain tax attributes and built-in losses and deductions in a given year. Our federal tax attributes or built-in losses and deductions that were limited in 2018 or 2019 have been fully utilized.

We had no unrecognized tax benefits at September 30, 2020 as a result of the recognition of $1.6 million of previously unrecognized tax benefits during fiscal 2020. All of the $1.6 million of recognized tax benefits affected our ~~projected future taxable income.~~effective tax rate and were attributable to the NOL carryback provisions of the CARES Act, allowing previously uncertain tax attributes to be recognized.

~~The amount~~

Table of ~~deferred tax asset considered realizable could be adjusted if negative evidence in the form of cumulative losses is no longer present~~Contents

Liquidity and ~~additional weight is given to subjective evidence, such as our projected future taxable income.~~

Capital Resources

Liquidity

Our strategic relationship with D.R. Horton has provided us with an opportunity for substantial growth. Since our merger with D.R. Horton, we have funded our growth with available cash, borrowings under our revolving credit facility and ~~Liquidity~~

~~Sources~~the issuance of senior unsecured notes and ~~Uses of Cash~~

~~The consolidated statements~~common stock. At September 30, 2020, we had $394.3 million of cash ~~flows for 2016, 2015~~ and ~~2014 reflects~~ cash ~~flows from both continuing~~equivalents and ~~discontinued operations.~~$344.0 million of available borrowing capacity on our revolving credit facility. We have no senior note maturities until fiscal 2024. We believe we are well positioned to effectively operate ~~in cyclical industries~~during changing economic conditions because of our low net leverage and strong liquidity position, our low overhead model and our strategic relationship with D.R. Horton.

At September 30, 2020, our ratio of debt to total capital (debt divided by stockholders’ equity plus debt) was 42.4% compared to 36.3% at September 30, 2019. Our ratio of net debt to total capital (debt net of unrestricted cash ~~flows fluctuate accordingly. Our principal sources~~divided by stockholders’ equity plus debt net of ~~cash are proceeds from~~unrestricted cash) was 22.1% compared to 8.8% at September 30, 2019. Over the ~~sale~~long term, we intend to maintain our ratio of ~~real estate and timber,~~net debt to total capital at or below 40%. We believe that the ratio of net debt to total capital is useful in understanding the leverage employed in our operations.

We believe that our existing cash ~~flow from mineral~~ resources and ~~income producing properties, borrowings and reimbursements from utility and improvement districts.~~revolving credit facility will provide sufficient liquidity to fund our near-term working capital needs. Our principal cash requirements are for the acquisition and development of real estate, either directly or indirectly through ventures, taxes, interest and compensation. Operating cash flows are affected by the timing of the payment of real estate development expenditures and the collection of proceeds from the eventual sale of the real estate, the timing of which can vary substantially dependingability to achieve our long-term growth objectives will depend on ~~many factors~~

including the size of the project, state and local permitting requirements and availability of utilities and by the timing of oil and gas leasing and production activities. Working capital varies based on a variety of factors, including the timing of sales of real estate and timber, oil and gas leasing and production activities, collection of receivables, reimbursement from utility and improvement districts and the payment of payables and expenses.

our ability to obtain financing in sufficient amounts. We regularly evaluate alternatives for managing our capital structure and liquidity profile in consideration of expected cash flows, growth and operating capital requirements and capital market conditions. We may, at any time, be considering or ~~be in discussions with respect to~~preparing for the purchase or sale of our ~~common stock,~~ debt securities, ~~convertible securities~~the sale of our common stock or a combination thereof. However, due to the current economic uncertainties related to C-19, we may be limited in accessing the capital markets or the cost of accessing these markets could become more expensive.

~~Cash Flows from Operating Activities~~

~~Cash flows from~~Bank Credit Facility

We have a $380 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $570 million, subject to certain conditions and availability of additional bank commitments. The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the revolving credit commitment. Borrowings under the revolving credit facility are subject to a borrowing base calculation based on the book value of our real estate ~~acquisition~~assets and ~~development activities, retail undeveloped land sales, commercial~~unrestricted cash. Letters of credit issued under the facility reduce the available borrowing capacity. At September 30, 2020, there were no borrowings outstanding and ~~income producing properties, timber sales, income from oil~~$36.0 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $344.0 million. The maturity date of the facility is October 2, 2022, which can be extended by up to one year on up to two additional occasions, subject to the approval of lenders holding a majority of the commitments.

The revolving credit facility includes customary affirmative and ~~gas properties, recreational leases~~negative covenants, events of default and ~~reimbursements from utility~~financial covenants. The financial covenants require a minimum level of tangible net worth, a minimum level of liquidity and ~~improvement districts~~a maximum allowable leverage ratio. These covenants are ~~classified~~measured as ~~operating cash flows.~~defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity. At September 30, 2020, we were in compliance with all of the covenants, limitations and restrictions of our revolving credit facility.

Senior Notes

In ~~2016,~~February 2020, we issued $300 million principal amount of 5.0% senior notes pursuant to Rule 144A and Regulation S under the Securities Act. The notes mature March 1, 2028 with interest payable semi-annually and represent senior unsecured obligations that rank equally in right of payment to all existing and future senior unsecured indebtedness. The notes may be redeemed prior to maturity, subject to certain limitations and premiums defined in the indenture agreement. On or after March 1, 2023, the notes may be redeemed at 102.5% of their principal amount plus any accrued and unpaid interest. In accordance with the indenture, the redemption price decreases annually thereafter and the notes can be redeemed at par on or after March 1, 2026 through maturity. The notes are guaranteed by each of our subsidiaries to the extent such subsidiaries guarantee our revolving credit facility. The annual effective interest rate of the notes after giving effect to the amortization of financing costs is 5.2%.

Table of Contents

We also have $350 million principal amount of 8.0% senior notes outstanding. The notes mature April 15, 2024 with interest payable semi-annually and represent senior unsecured obligations that rank equally in right of payment to all existing and future senior unsecured indebtedness. The notes may be redeemed prior to maturity, subject to certain limitations and premiums defined in the indenture agreement. On or after April 15, 2021, the notes may be redeemed at 104% of their principal amount plus any accrued and unpaid interest. In accordance with the indenture, the redemption price decreases annually thereafter and the notes can be redeemed at par on or after April 15, 2023 through maturity. The notes are guaranteed by each of our subsidiaries to the extent such subsidiaries guarantee our revolving credit facility. The annual effective interest rate of the notes after giving effect to the amortization of financing costs is 8.5%.

In March 2020, we repaid $118.9 million principal amount of our 3.75% convertible senior notes in cash at maturity.

The indentures governing the senior notes require that, upon the occurrence of both a change of control and a rating decline (each as defined in the indentures), we offer to purchase the notes at 101% of their principal amount. If we or our restricted subsidiaries dispose of assets, under certain circumstances, we will be required to either invest the net cash ~~provided by~~proceeds from such asset sales in our business within a specified period of time, repay certain senior secured debt or debt of our non-guarantor subsidiaries, or make an offer to purchase a principal amount of the notes equal to the excess net cash proceeds at a purchase price of 100% of their principal amount. The indentures contain covenants that, among other things, restrict the ability of us and our restricted subsidiaries to pay dividends or distributions, repurchase equity, prepay subordinated debt and make certain investments; incur additional debt or issue mandatorily redeemable equity; incur liens on assets; merge or consolidate with another company or sell or otherwise dispose of all or substantially all of our assets; enter into transactions with affiliates; and allow to exist certain restrictions on the ability of subsidiaries to pay dividends or make other payments. At September 30, 2020, we were in compliance with all of the limitations and restrictions associated with our senior note obligations.

Effective April 30, 2020, our Board of Directors authorized the repurchase of up to $30 million of our debt securities. The authorization has no expiration date. All of the $30 million authorization was remaining at September 30, 2020.

Issuance of Common Stock

We have an effective shelf registration statement filed with the SEC in September 2018 registering $500 million of equity securities. As of September 30, 2020, $394.3 million remained available for issuance under the shelf registration statement, $100 million of which is reserved for sales under our at-the-market equity offering program discussed below.

In August 2020, we entered into an equity distribution agreement to issue and sell, from time to time, up to $100 million in aggregate offering price of our common stock through an at-the-market equity offering program. As of September 30, 2020, no shares had been issued under the at-the-market equity offering program.

Operating Cash Flow Activities

In fiscal 2020, net cash used in operating activities was ~~$66,877,000.~~$168.4 million compared to $391.2 million in fiscal 2019. The ~~increase~~cash used in ~~net cash provided by~~ operating activities ~~when compared with 2015 is primarily due~~in both years reflects our strategy of continuing to ~~lower real estate acquisition and~~grow our land development expenditures of $81,179,000, proceeds of $34,748,000 from retail undeveloped land sales activity and higher lot sales from owned and consolidated ventures, including proceeds of $19,335,000 from sale of non-core community development projects.operations.

Investing Cash Flow Activities

In 2015, net cash provided by operating activities was $35,126,000. The decrease in net cash provided by operating activities year over year is primarily the result of lower residential lot sales activity, decrease in reimbursement from utilities and improvement districts and decrease in undeveloped land sales. In addition, oil and gas operating cash flows were negatively impacted as a result of 48 percent decline in realized oil and gas prices on a barrel of oil equivalent basis. However, the sale of Midtown Cedar Hill for $42,880,000 in fourth quarter 2015 generated positive operating cash flow of $42,640,000. These cash flows were partially offset by real estate development and acquisition expenditures of $107,998,000.

In 2014, net cash provided by operating activities was $107,082,000 principally due to $66,047,000 of reimbursements from utilities and improvement districts. In addition, increased residential lot sales and undeveloped land sales activity contributed to our net cash from operations, which are partially offset by $114,694,000 of real estate development and acquisition expenditures exceeding $84,665,000 of real estate cost of sales.

~~Cash Flows from Investing Activities~~

Capital contributions to and capital distributions from unconsolidated ventures, costs incurred to acquire, develop and construct multifamily projects that will be held as commercial properties upon stabilization as investment property, business acquisitions and investment in oil and gas properties and equipment are classified as investing activities. In addition, proceeds from the sale of property and equipment, software costs and expenditures related to reforestation activities are also classified as investing activities.

~~In 2016,~~fiscal 2020, net cash provided by investing activities was ~~$420,743,000.~~$5.0 million compared to $0.8 million used in investing activities in fiscal 2019. The ~~increase in net~~ cash provided by investing activities ~~year over~~in the current year is primarily ~~due to $427,849,000 in net proceeds~~the result of distributions received from ~~the execution of~~ our key initiative to opportunistically divest non-core assets. Non-core asset sales includes $128,764,000 from sale of Radisson Hotel & Suites, $103,238,000 from sale of over 58,300 acres of strategic timberland and undeveloped land, $77,105,000 from sale of certain oil and gas working interest properties, $59,719,000 from sale of Eleven, $25,428,000 from sale of Dillon, $14,703,000 from sale of Music Row, $13,917,000 from sale our interest in 360⁰ ~~and $4,975,000 from sale of the Downtown Edge multifamily site.~~unconsolidated ventures.

Financing Cash Flow Activities

In 2015, net cash used for investing activities was $60,328,000 principally due to our investment of $49,717,000 in oil and gas working interest properties associated with previously committed capital investments related to exploration and production operations and a net investment in unconsolidated ventures of $14,181,000. In addition, we invested $14,690,000 in property and equipment, software and reforestation, of which $5,953,000 is related to capital expenditures for the Radisson Hotel & Suites hotel in Austin, which we sold in 2016. These are partially offset by proceeds from sale of assets of $18,260,000 principally related to sale of certain oil and gas properties.

In 2014, net cash used for investing activities was $129,731,000 principally due to our investment of $101,145,000 in oil and gas properties and equipment associated with our exploration and production operations and purchase of our partner's interest in a 257-unit multifamily property in Austin for $20,155,000, net of cash. In addition, we invested $16,398,000 in property and equipment, software and reforestation, of which $8,780,000 is related to capital expenditures on our 413 guest room hotel in Austin and $4,981,000 is related to water production well development, and a net investment in unconsolidated ventures of $12,895,000. These are partially offset by proceeds from sale of assets of $21,962,000 principally related to sale of certain oil and gas properties in North Dakota and Oklahoma.

~~Cash Flows from Financing Activities~~

In 2016, net cash used for financing activities was $318,264,000 principally due to retirement of $225,245,000 of our 8.5% senior secured notes, $5,000,000 of our 3.75% convertible senior notes, $9,000,000 of payments related to amortizing notes associated with our tangible equity units which are paid in full and our payment in full of $39,336,000 in loans secured by Radisson Hotel & Suites and Eleven multifamily property, which we sold in 2016. In addition, we purchased 283,976 shares of common stock for $3,537,000.

In 2015, net cash used for financing activities was $48,483,000 principally due to our payment in full of a $24,166,000 loan secured by Midtown Cedar Hill, retirement of $19,440,000 of our 8.50% senior secured notes and $9,000,000 of payments related to amortizing notes associated with our tangible equity units.

~~In 2014,~~fiscal 2020, net cash provided by financing activities was ~~$469,000 principally due to net~~$174.9 million, consisting primarily of proceeds ~~of $241,947,000~~ from the issuance of ~~8.5%~~$300 million principal amount of 5.0% senior ~~secured~~ notes, partially offset by ~~debt payments~~the repayment of $225,481,000, of which $200,000,000 is related to retirement of the term loan associated with our senior secured credit facility, $9,450,000 is related to payments of our amortizing notes associated with our tangible equity units, $2,878,000 is related to debt outstanding for our Lantana partnerships and the remaining associated with payment of other indebtedness. In addition, we purchased 1,491,187 shares of our common stock for $24,595,000.

~~Real Estate Acquisition and Development Activities~~

~~We secure entitlements and develop infrastructure, primarily for single family residential and mixed-use communities.~~

We categorize real estate development and acquisition expenditures as operating activities on the statement of cash flows. These development and acquisition expenditures include costs for development of residential lots and mixed-used communities.

~~A summary of our real estate acquisition and development expenditures is shown below:~~

2016 2015 2014
(In thousands)
Community Development Market
Acquisitions:
Ansley Park Charlotte —
5,339
—
Beckwith Crossing Nashville —
—
1,294
Dove Mountain Tucson —
5,861
—
Cielo Denver 3,783

Imperial Forest Houston —
—
5,343
Morgan Farms Nashville —
—
146
Moss Creek Charlotte 1,178

River's Edge Dallas —
—
1,277
Scales Farmstead Nashville 1,139
3,345
—
Walden Charlotte —
12,100
—
Weatherford Estates Nashville —
—
855
West Oaks Atlanta —
1,657
—
Woodtrace Houston —
1,424
8,622
Development:
Owned projects Various 62,919
63,401
50,506
Consolidated venture projects Various 9,794
10,534
3,905

Multifamily
Acquisitions and Development:
Pre-acquisition projects Various (397 ) 1,616
910
Midtown Dallas —
1,860
25,034
Acklen ^(a)
Nashville —
—
(7,191 )
HiLine ^(a)
Denver —
—
(9,372 )
Dillon Charlotte —
—
2,905
Music Row Nashville —
—
6,757
Downtown Edge Austin —
—
11,286
West Austin Austin —
—
8,456

Undeveloped Land/Mitigation
Acquisitions:
Crescent Hills San Antonio —
—
1,829
Development:
Owned projects Various 2,763
851
2,132
Total $ 81,179
$ 107,988
$ 114,694

~~_____________________~~


^(a)	~~Includes reimbursements received from the ventures for land and pre-development costs previously incurred.~~

~~Liquidity~~

~~Senior Credit Facility~~

In 2016, we reduced the revolving commitment provided by our senior secured credit facility, which matures on May 15, 2017 (with two one year extension options), from $300,000,000 to $125,000,000, none of which was drawn at year-end 2016. The revolving line of credit may be prepaid at any time without penalty. The revolving line of credit includes a $100,000,000 sublimit for letters of credit, of which $14,850,000 is outstanding at year-end 2016. Total borrowings under our senior secured credit facility (including the face$118.9 million principal amount of ~~letters of credit) may not exceed a borrowing base formula.~~

~~At year-end 2016, net unused borrowing capacity under~~ our ~~senior secured credit facility is calculated as follows:~~

Senior
Credit Facility
(In thousands)
Borrowing base availability $ 86,112
Less: borrowings —
Less: letters of credit (14,850 )
Net unused borrowing capacity $ 71,262

Our net unused borrowing capacity for the year 2016 ranged from a high of $284,426,000 to a low of $71,262,000. Certain non-core assets support the borrowing base under our senior secured credit facility so we expect our borrowing capacity to continue to be reduced as certain non-core assets are sold. This facility is used primarily to fund our operating cash needs, which fluctuate due to timing of residential and commercial real estate sales, undeveloped land sales, oil and gas leasing, exploration and production activities and mineral lease bonus payments received, timber sales, reimbursements from utility and improvement districts, payment of payables and expenses and capital expenditures.

Our debt agreements contain financial covenants customary for such agreements including minimum levels of interest coverage and limitations on leverage. At year-end 2016, we were in compliance with the financial covenants of these agreements.

~~The following table details our compliance with the financial covenants calculated as provided in the senior secured credit facility:~~



~~Financial Covenant~~	~~Requirement~~	~~Year-End~~ ~~2016~~
~~Interest Coverage Ratio~~ ^(a)	~~≥ 2.50:1.0~~	~~12.01~~
~~Total Leverage Ratio~~ ^(b)	~~≤ 50%~~	~~29.2%~~
~~Tangible Net Worth~~ ^(c)	~~≥ $426.3 million~~	~~$545.2 million~~

~~_____________________~~


^(a)	Calculated as EBITDA (earnings before interest, taxes, depreciation, depletion and amortization), plus non-cash compensation expense, plus other non-cash expenses, divided by interest expense excluding loan fees. This covenant is applied at the end of each quarter on a rolling four quarter basis.

^(b)

Calculated as total funded debt divided by adjusted asset value. Total funded debt includes indebtedness for borrowed funds, secured liabilities, reimbursement obligations with respect to letters of credit or similar instruments, and our pro-rata share of joint venture debt outstanding. Adjusted asset value is defined as the sum of unrestricted cash and cash equivalents, timberlands, high value timberlands, raw entitled lands, entitled land under development, minerals business, Credo asset value, special improvement district receipts (SIDR) reimbursements value and other real estate owned at book value without regard to any indebtedness and our pro rata share of joint ventures’ book value without regard to any indebtedness. This covenant is applied at the end of each quarter.

^(c)

Calculated as the amount by which consolidated total assets (excluding Credo acquisition goodwill over $50,000,000) exceed consolidated total liabilities. At year-end 2016, the requirement is $426,312,000 computed as: $379,044,000 plus 85 percent of the aggregate net proceeds received by us from any equity offering, plus 75 percent of all positive net income, on a cumulative basis since third quarter-end 2015. This covenant is applied at the end of each quarter.

To make additional discretionary investments, acquisitions, or distributions, we must maintain available liquidity equal to 10 percent of the aggregate commitments in place. At year-end 2016 the minimum liquidity requirement was $12,500,000, compared with $332,927,000 in actual available liquidity based on the unused borrowing capacity under our senior secured credit facility plus unrestricted cash and cash equivalents. The failure to maintain such minimum liquidity does not constitute a default or event of default of our senior secured credit facility.

Discretionary investments in community development may be restricted in the event that the revenue/capital expenditure ratio is less than or equal to 1.0x. As of year-end 2016, the revenue/capital expenditure ratio was 2.4x. Revenue is defined as total gross revenues (excluding revenues attributed to certain oil and gas operations and multifamily properties), plus our pro rata share of the operating revenues from unconsolidated ventures. Capital expenditures are defined as consolidated development and acquisition expenditures (excluding investments related to certain oil and gas operations and multifamily properties), plus our pro rata share of unconsolidated ventures’ development and acquisition expenditures.

We may elect to make distributions to stockholders so long as the total leverage ratio is less than 40 percent, the interest coverage ratio is greater than 3.0:1.0 and available liquidity is not less than $125,000,000, all of which were satisfied at year-end 2016. Regardless of whether the foregoing conditions are satisfied, we may make distributions in an aggregate amount not to exceed $50,000,000 to be funded from up to 65% of the net proceeds from sales of multifamily properties and non-core assets, such as the Radisson Hotel & Suites in Austin, and any oil and gas properties.

~~3.75% Convertible Senior Notes due 2020~~

~~In 2013, we issued $125,000,000 aggregate principal amount of~~ 3.75% convertible senior notes ~~due 2020 (Convertible Notes). Interest on~~at maturity. In fiscal 2019, net cash provided by financing activities was $439.8 million, consisting primarily of proceeds from the ~~Convertible Notes is payable semiannually at a rate~~issuance of 3.75 percent per annum and they mature on March 1, 2020. The Convertible Notes have an initial conversion rate of 40.8351 per $1,000 principal amount. The initial conversion rate is subject to adjustment upon the occurrence of certain events. Prior to November 1, 2019, the Convertible Notes are convertible only upon certain circumstances, and thereafter are convertible at any time prior to the close of business

~~on the second scheduled trading day prior to maturity. If converted, holders will receive cash, shares of our common stock or a combination thereof at our election. We intend to settle the~~$350 million principal amount of 8.0% senior notes and the ~~Convertible Notes in cash upon conversion, with any excess conversion value to be settled in shares~~issuance of ~~our~~ common ~~stock. In 2016, we purchased $5,000,000~~stock for net proceeds of ~~Convertible Notes at 93.25% of face value in open market transactions for $4,662,500~~$100.7 million, while amounts drawn and ~~we allocated $4,452,000 to extinguish the debt and $211,000 to reacquire the equity component within the convertible notes based~~repaid on the ~~fair value~~revolving credit facility totaled $85 million each.

Table of the debt component. We recognized a $110,000 loss on extinguishment of debt based on the difference between the fair value of the debt component prior to conversion and the carrying value of the debt component. Total loss on extinguishment of debt including write-off of debt issuance costs allocated to the repurchased notes was $183,000. The aggregate principal outstanding at year-end 2016, net of discount and unamortized financing fees, was $104,673,000.Contents

~~8.50% Senior Secured Notes due 2022~~

In 2014, we issued $250,000,000 aggregate principal of 8.50% Senior Secured Notes due 2022 (Notes). The Notes will mature on June 1, 2022 and interest on the Notes is payable semiannually at a rate of 8.5 percent per annum in arrears. In 2016, we completed a cash tender offer for our Notes, pursuant to which we purchased $215,495,000 principal amount (representing approximately 97.6% outstanding) of the Notes. Total consideration paid was $245,604,000, which included $29,091,000 in premium at 113.5% and $1,018,000 in accrued and unpaid interest. In addition, we received consent from holders of the Notes to eliminate or modify certain covenants, events of default and other provisions contained in the indenture governing the Notes, and to release the subsidiary guarantees and collateral securing the Notes. We also purchased $9,750,000 principal amount of the Notes between 99% and 99.95% of face value principal amount of the Notes in open market transactions. The 2016 tender offer and open market purchases resulted in a $35,681,000 loss on extinguishment of debt, which includes the premium paid to repurchase the Notes, write-off of unamortized debt issuance costs of $5,416,000 and $1,301,000 in other costs related to tender offer advisory services. In 2015, we purchased $19,440,000 principal amount of Notes at 97% of face value, resulting in a gain of $589,000 on the early extinguishment of the retired Notes, offset by the write-off of unamortized debt issuance costs of $506,000 allocated to the retired Notes. The aggregate principal outstanding at year-end 2016, net of unamortized financing fees, was $5,200,000.

~~6.00% Tangible Equity Units~~

In 2013, we issued $150,000,000 aggregate principal amount of 6.00% tangible equity units (Units). The total offering was 6,000,000 Units, including 600,000 exercised by the underwriters, each with a stated amount of $25.00. Each Unit is comprised of (i) a prepaid stock purchase contract to be settled by delivery of a number of shares of our common stock, par value $1.00 per share, to be determined pursuant to a purchase contract agreement, and (ii) a senior amortizing note due December 15, 2016 that has an initial principal amount of $4.2522, bears interest at a rate of 4.50% per annum and has a final installment payment date of December 15, 2016. On December 15, 2016, we made the final installment payment of principal and accrued interest and issued 7,857,000 shares upon settlement of the stock purchase contract based on the applicable market value, as defined in the purchase contract agreement associated with issuance of the Units.

~~Other Notes~~

~~In 2016, a secured promissory note of $15,400,000 was paid in full in connection with sale of the Radisson Hotel & Suites, a 413 guest room hotel located in Austin, for $130,000,000.~~

~~In 2016, other indebtedness decreased principally as result of selling Eleven, a 257-unit multifamily project in Austin, for $60,150,000 and paying in full the associated debt of $23,936,000.~~

Contractual Obligations and Off-Balance Sheet Arrangements

At ~~year-end 2016,~~September 30, 2020, contractual cash obligations consist of:

Payments Due or Expiring by Year
Total 2017 2018-19 2020-21 Thereafter
(In thousands)
Debt ^{(a) (b)}
$ 125,801
$ —
$ 486
$ 120,000
$ 5,315
Interest payments on debt 16,772
4,989
9,941
1,654
188
Purchase obligations 18,095
18,095
—
—
—
Operating leases 4,402
2,267
1,891
244
—
Performance bond ^(a)
6,631
6,631
—
—
—
Standby letter of credit ^(a)
6,846
6,846
—
—
—
Total $ 178,547
$ 38,828
$ 12,318
$ 121,898
$ 5,503


	Payments Due by Period
	Total		Less Than 1 Year		1 - 3 Years		> 3 - 5 Years		More Than 5 Years
	(In millions)
Debt — Principal (1)	$	650.0	$	—	$	—	$	350.0	$	300.0
Debt — Interest (1)	224.5		43.0		86.0		58.0		37.5
Operating leases (2)	4.0		1.2		1.8		1.0		—
Performance bond (3)	2.5		2.5		—		—		—
Standby letter of credit (3)	6.8		6.8		—		—		—
Total	$	887.8	$	53.5	$	87.8	$	409.0	$	337.5

~~_____________________~~


^(a)	~~Items included in our balance sheet.~~

_______________


^(b)	~~Gross debt excluding unamortized discount and financing fees.~~

~~Interest~~(1)Debt represents principal and interest payments due on ~~debt include~~our senior notes and our revolving credit facility. Because the balance of our revolving credit facility was zero at September 30, 2020, we did not assume any principal or interest payments related to our fixed rate debt and estimated interest payments related to our variable rate debt. Estimated interest payments on variable rate debt were calculated assuming that the outstanding balances and interest rates that existed at year-end 2016 remain constant through maturity.this facility in future periods.

Purchase obligations are defined as legally binding and enforceable agreements to purchase goods and services. Our purchase obligations include open commitments for land acquisition and development related to community development projects.

(2)Our operating leases are primarily for ~~facilities, equipment and groundwater.~~office space. We lease ~~approximately 22,000 square feet of~~ office space in ~~Austin~~Arlington, Texas as our corporate ~~headquarters. At year-end 2016, the remaining contractual obligation for our Austin office is $1,983,000. We~~headquarters and also lease office space in other locations into support of our business operations. The total remaining contractual obligations for these leases is $1,925,000. Also included are groundwater leases for about 20,000 acres in central Texas with remaining contractual obligations of $494,000.

(3)The performance bond and standby letter of credit were provided in support of a bond issuance by ~~CCSID. Please read~~ Cibolo Canyons ~~— San Antonio, Texas~~ ~~for additional information.~~

~~Off-Balance Sheet Arrangements~~

From time to time, we enter into off-balance sheet arrangements to facilitate our operating activities. At year-end 2016, our off-balance sheet unfunded arrangements, excluding contractual interest payments, purchase obligations, operating lease obligations and venture contributions included in the table of contractual obligations, consist of:

Payments Due or Expiring by Year
Total 2017 2018-19 2020-21 Thereafter
(In thousands)
Performance bonds $ 8,757
$ 8,197
$ 560
$ —
$ —
Standby letters of credit 8,005
7,366
639
—
—
Recourse obligations 543
362
100
81
—
Total $ 17,305
$ 15,925
$ 1,299
$ 81
$ —

In 2014, FMF Littleton LLC, an equity method venture in which we own a 25 percent interest, obtained a senior secured construction loan in the amount of $46,384,000 to develop a 385-unit multifamily project located in Littleton, Colorado. The outstanding balance was $44,446,000 at year-end 2016. We provided the lender with a guaranty of completion of the improvements; a guaranty for repayment of 25 percent of the principal balance and unpaid accrued interest; and a standard nonrecourse carve-out guaranty. The principal guaranty will reduce from 25 percent of principal to ten percent upon achievement of certain conditions.

In 2014, CREA FMF Nashville LLC, an equity method venture in which we own a 30 percent interest, obtained a senior secured construction loan in the amount of $51,950,000 to develop a 320-unit multifamily project located in Nashville, Tennessee. The outstanding balance at year-end 2016 was $37,446,000. We provided the lender with a guaranty of completion of the improvements; a guaranty for repayment of 25 percent of the principal balance and unpaid accrued interest; and a standard nonrecourse carve-out guaranty. The principal guaranty will reduce from 25 percent of principal to zero percent

~~upon achievement of certain conditions.~~

~~Cibolo Canyons — San Antonio, Texas~~

~~Cibolo Canyons consists of the JW Marriott~~^® San Antonio Hill Country Resort & Spa development owned by third parties and a mixed-use development we own. We have about $44,905,000 invested in Cibolo Canyons at year-end 2016, all of which is related to the mixed-use development.

~~Mixed-Use Development~~

The mixed-use development we own consists of 2,100 acres planned to include 1,791 residential lots and 155 commercial acres designated for multifamily and retail uses, of which 1,142 lots and 97 commercial acres have been sold through year-end 2016.

In 2007, we entered into an agreement with CCSID providing for reimbursement of certain infrastructure costs related to the mixed-use development. Reimbursements are subject to review and approval by CCSID and unreimbursed amounts accrue interest at 9.75 percent. CCSID’s funding for reimbursements is principally derived from its ad valorem tax collections and bond proceeds collateralized by ad valorem taxes, less debt service on these bonds and annual administrative and public service expenses.

Because the amount of each reimbursement is dependent on several factors, including timing of CCSID approval and CCSID having an adequate tax base to generate funds that can be used to reimburse us, there is uncertainty as to the amount and timing of reimbursements under this agreement. We expect to recover our investment from lot and tract sales and reimbursement of approved infrastructure costs from CCSID. We have not recognized income from interest due, but not collected. As these uncertainties are clarified, we will modify our accounting accordingly.

Through year-end 2016, we have submitted reimbursement approval for $54,376,000 of infrastructure costs, of which we have received reimbursements totaling $45,132,000, of which $10,430,000 was received in 2016. At year-end 2016, we have $9,244,000 in pending approved reimbursements, excluding interest.

~~Resort Hotel, Spa and Golf Development~~

~~In 2007, we entered into agreements to facilitate third-party construction and ownership of the JW Marriott~~^® ~~San Antonio Hill Country Resort & Spa, which includes a 1,002 room destination resort and two PGA Tour~~^® ~~Tournament Players Club~~^® ~~(TPC) golf courses.~~

In exchange for our commitment to the resort, the third-party owners assigned to us certain rights under an agreement between the third-party owners and CCSID. This agreement includes the right to receive from CCSID nine percent of hotel occupancy revenues and 1.5 percent of other resort sales revenues collected as taxes by the CCSID through 2034. The amount we receive will be net of annual ad valorem tax reimbursements by CCSID to the third-party owners of the resort through 2020. In addition, these payments will be net of debt service on bonds issued by CCSID collateralized by hotel occupancy tax (HOT) and other resort sales tax through 2034. The amounts we collect under this agreement are dependent on several factors including the amount of revenues generated by and ad valorem taxes imposed on the Resort and the amount of any applicable debt service incurred by CCSID. The amount we receive is net of annual ad valorem tax reimbursements by CCSID to the third-party owners of the resort through 2020. In addition, these payments will be net of debt service on bonds issued in 2014 by CCSID as discussed below which are collateralized by hotel occupancy tax (HOT) and other resort sales tax through 2034.

Special Improvement District (CCSID). In 2014, we received ~~$50,550,000~~$50.6 million from CCSID ~~under 2007 Economic Development Agreements (EDA)~~principally related to its issuance of ~~$48,900,000 HOT~~$48.9 million Hotel Occupancy Tax (HOT) and Sales and Use Tax Revenue ~~Bonds, resulting in recovery of our full Resort investment.~~Bonds. These bonds are obligations solely of CCSID and are payable from HOT and sales and use taxes levied ~~on the Resort~~ by CCSID. To facilitate the issuance of the bonds, we provided a ~~$6,846,000~~$6.8 million letter of credit to the bond trustee as security for certain debt service fund obligations in the event CCSID tax collections are not sufficient to support payment of the bonds in accordance with their terms. The letter of credit must be maintained until the earlier of redemption of the bonds or scheduled bond maturity in 2034. We also entered into an agreement with the owner of the JW Marriott San Antonio Hill Country Resort & Spa to assign its senior rights to us in exchange for consideration provided by us, including a ~~surety~~performance bond to be drawn if CCSID tax collections are not sufficient to support ad valorem tax rebates payable. The ~~surety bond has a balance of $6,631,000 at year-end 2016. The surety~~performance bond decreases as CCSID makes annual ad valorem tax rebate ~~payments, which obligation is scheduled~~payments. The performance bond and letter of credit are included in accrued expenses and other liabilities in our consolidated balance sheets.

In support of our residential lot development business, we issue letters of credit under our revolving credit facility and we have a surety bond program that provides financial assurance to beneficiaries related to the execution and performance of certain development obligations. In addition to the letter of credit and performance bond discussed above, at September 30, 2020 we had outstanding letters of credit of $29.2 million under the revolving credit facility and surety bonds of $234.4 million issued by third parties to secure performance under various contracts that are not included in our consolidated balance sheets. We expect that our performance obligations secured by these letters of credit and bonds will generally be ~~retired in full by 2020. All future receipts are expected to be recognized as gains~~completed in the ~~period collected.~~ordinary course of business and in accordance with the applicable contractual terms. When we complete our performance obligations, the related letters of credit and bonds are generally released shortly thereafter, leaving us with no continuing obligations. We ~~received $501,000~~have no material third-party guarantees.

Inflation

We may be adversely affected during periods of high inflation, primarily because of higher financing, land and labor costs. We attempt to offset cost increases in ~~2016.~~one component with savings in another, and we increase our land and lot sales prices when market conditions permit. However, during periods when market conditions are challenging, we may not be able to offset cost increases with higher selling prices.

~~Accounting Policies~~

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Critical Accounting ~~Estimates~~Policies

In preparing our financial statements, we follow generally accepted accounting principles, which in many cases require us to make assumptions, estimates, and judgments that affect the amounts reported. Our significant accounting policies are included in Note 1 to the Consolidated Financial Statements. Many of these principles are relatively straightforward. There are, however, a few accounting policies that are critical because they are important in determining our financial condition and results of operations and involve significant assumptions, estimates and judgments that are difficult to determine. We must make these assumptions, estimates and judgments currently about matters that are inherently uncertain, such as future economic conditions, operating results and valuations, as well as our intentions. As the difficulty of estimation increases, the level of precision decreases, meaning actual results can, and probably will, differ from those currently estimated. We base our assumptions, estimates and judgments on a combination of historical experiences and other factors that we believe are reasonable. We have reviewed the selection and disclosure of these critical accounting estimates with the Audit Committee of our ~~Audit Committee.~~Board of Directors.

~~At year-end 2016,~~

Revenue Recognition — Real estate revenue and related profit are generally recognized at the time of the closing of a sale, when title to and possession of the property are transferred to the buyer. Our performance obligation, to deliver the agreed-upon land or lots, is generally satisfied at closing. However, there may be instances in which we have ~~divested substantially all~~an unsatisfied remaining performance obligation at the time of ~~our oil~~closing. In these instances, we record contract liabilities and ~~gas working interest assets and have classified our owned mineral assets~~recognize those revenues over time as assets held for sale. Critical accounting estimates related to oil and gas properties such as accrued oil and gas revenue, impairment of oil and gas properties, oil and gas reserves and asset retirementthe performance obligations are ~~not material~~completed. Generally, our unsatisfied remaining performance obligations are expected to ~~our financial statements for year-end 2016 but are disclosed to provide our policies and impact on our financial condition and results~~have an original duration of ~~operations for the years ended 2015 and 2014.~~less than one year.

~~Investment in~~ Real Estate and Cost of Sales — Real ~~Estate Sales~~ ~~— In allocating~~estate includes the costs of direct land and lot acquisition, land development, capitalized interest, and direct overhead costs incurred during land development. All indirect overhead costs, such as compensation of management personnel and insurance costs are charged to selling, general and administrative expense as incurred.

Land and development costs are typically allocated to individual residential lots based on the relative sales value of the lot. Cost of sales includes applicable land and lot acquisition, land development and related costs (both incurred and estimated to be incurred) allocated to each residential lot in the project. Any changes to the estimated total development costs subsequent to the initial lot sales are generally allocated to the remaining lots.

We receive earnest money deposits from homebuilders for purchases of developed lots. These earnest money deposits are typically released to the homebuilders as lots are sold. Earnest money deposits from D.R. Horton are subject to mortgages that are secured by the real estate ~~owned~~under contract with D.R. Horton. These mortgages expire when the earnest money is released to D.R. Horton as lots are sold.

We have agreements with certain utility or improvement districts to convey water, sewer and other infrastructure-related assets we have constructed in connection with projects within their jurisdiction and receive reimbursements for the cost of these improvements. The amount of reimbursements for these improvements are defined by the district and are based on the allowable costs of the improvements. The transfer is consummated and we generally receive payment when the districts have a sufficient tax base to support funding of their bonds. The cost incurred by us in constructing these improvements, net of the amount expected to be collected in the future, is included in our land development budgets and in the determination of lot costs.

Each quarter, we review the performance and outlook for all of our real estate for indicators of potential impairment. We determine if impairment indicators exist by analyzing a variety of factors including, but not limited to, the following:

•gross margins on lots sold ~~we must estimate current~~in recent months;

•projected gross margins based on budgets;

•trends in gross margins, average selling prices or cost of sales; and ~~future real estate values. Our estimates~~

•lot sales absorption rates.

Table of future real estate values sometimes must extend over periods 15 to 20 years from today and are dependent on numerous assumptions including our intentions and future market and economic conditions. In addition, when we sell real estate from projects that areContents

~~not finished,~~If indicators of impairment are present, we ~~must estimate future development costs through completion. Differences between our estimates and actual results will affect future carrying values and operating results.~~

~~Impairment of Real Estate Long-Lived Assets~~ ~~— Measuring real estate assets for~~perform an impairment ~~requires estimating~~evaluation, which includes an analysis to determine if the ~~future~~ undiscounted cash flows ~~based on our intentions as~~estimated to ~~holding periods, and the residual value~~be generated by those assets are less than their carrying amounts. These estimates of ~~assets under review, primarily undeveloped land. If the carrying amount exceeds the estimated undiscounted future~~ cash flows are significantly impacted by specific factors including estimates of the amounts and timing of future revenues and estimates of the amount of land development costs which, in turn, may be impacted by the following local market conditions:

•supply and availability of land and lots;

•location and desirability of our land and lots;

•amount of land and lots we ~~will adjust~~own or control in a particular market or sub-market; and

•local economic and demographic trends.

For those assets deemed to be impaired, an impairment charge is recorded to cost of sales for the amount by which the carrying amount of the assets exceeds the fair value of the assets. Our determination of fair value is primarily based on discounting the estimated cash flows at a rate commensurate with the inherent risks associated with the assets and related estimated cash flow streams. When an impairment charge is determined, the charge is then allocated to each lot in the same manner as land and development costs are allocated to each lot.

There is significant uncertainty regarding the extent to which and how long C-19 and its related effects will impact the U.S. economy, capital markets and demand for our lots. The extent to which C-19 impacts our operational and financial performance will depend on future developments, including the duration and spread of C-19 and the impact on our customers, trade partners and employees, all of which are highly uncertain and cannot be predicted. If economic and housing market conditions are adversely affected for a prolonged period, we may be required to evaluate our real estate ~~long-lived assets~~for potential impairment. These evaluations could result in impairment charges that could be significant.

We rarely purchase land for resale. However, we may change our plans for land we own or land under development and decide to ~~fair value. Depending on~~sell the asset. When we determine that we will sell the asset, ~~under review, we use varying methods to determine~~the project is accounted for as land held for sale if certain criteria are met. We record land held for sale at the lesser of its carrying value or fair value less estimated costs to sell. In performing the impairment evaluation for land held for sale, we consider several factors including, but not limited to, recent offers received to purchase the property, prices for land in recent comparable sales transactions and market analysis studies, which include the estimated price a willing buyer would pay for the land. If the estimated fair value less costs to sell an asset is less than the current carrying value, the asset is written down to its estimated fair value less costs to sell.

The key assumptions relating to inventory valuations are impacted by local market and economic conditions, and are inherently uncertain. Although our quarterly assessments reflect management’s best estimates, due to uncertainties in the estimation process, actual results could differ from such estimates.

Pending Accounting Standards

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, “Financial Instruments - Credit Losses,” which replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information in determining credit loss estimates. The guidance is effective for us beginning October 1, 2020 and is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.

In December 2019, the FASB issued ASU 2019-12 related to simplifying the accounting for income taxes. The guidance is effective for us beginning October 1, 2021, although early adoption is permitted. We are currently evaluating the impact of this guidance, and it is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform,” which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (LIBOR) or by another reference rate expected to be discontinued. The guidance was effective beginning March 12, 2020 and can be applied prospectively through December 31, 2022. We will adopt this standard when LIBOR is discontinued and do not expect it to have a material impact on our consolidated financial statements and related disclosures.

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Forward-Looking Statements

This Annual Report on Form 10-K and other materials we have filed or may file with the Securities and Exchange Commission contain “forward-looking statements” within the meaning of the federal securities laws. These forward-looking statements are identified by their use of terms and phrases such as ~~discounting expected~~“believe,” “anticipate,” “could,” “estimate,” “likely,” “intend,” “may,” “plan,” “expect,” and similar expressions, including references to assumptions. These statements reflect our current views with respect to future cash flows, determining resale values by market, or applying a capitalization rate to net operating income using prevailing rates in a given market. Changes in economic conditions, demand for real estate, and the projected net operating income for a specific property will inevitably change our estimates.

~~Accrued Oil and Gas Revenue~~ — We recognize revenue as oil and gas is produced and sold. There are a significant amount of oil and gas properties which we do not operate and, therefore, revenue is typically recorded in the month of production based on an estimate of our share of volumes produced and prices realized. We obtain the most current available production data from the operators and price indices for each well to estimate the accrual of revenue. Obtaining production data on a timely basis for some wells is not feasible; therefore we utilize past production receipts and estimated sales price information to estimate accrual of working interest revenue on all other non-operated wells each month. Revisions to such estimates are recorded as actual results become known.

~~Impairment of Oil and Gas Properties~~ ~~— We review our proved oil and gas properties for impairment whenever~~ events and circumstances indicate that a decline in the recoverability of their carrying value may have occurred. We estimate the expected undiscounted future cash flows of our oil and gas properties and compare such undiscounted future cash flows to the carrying amount of the oil and gas properties to determine if the carrying amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, we will adjust the carrying amount of the oil and gas properties to fair value. The factors used to determine fair value are subject to risks and uncertainties. We note that a variety of factors and uncertainties could cause our ~~judgment~~actual results to differ significantly from the results discussed in the forward-looking statements. Factors and ~~expertise and~~uncertainties that might cause such differences include, but are not limited to:

•the effect of D.R. Horton’s controlling level of ownership on us and the holders of our securities;

•our ability to ~~recent sales prices~~realize the potential benefits of ~~comparable properties,~~ the ~~present value~~strategic relationship with D.R. Horton;

•the effect of ~~future cash flows, net~~our strategic relationship with D.R. Horton on our ability to maintain relationships with our customers;

•the impact of ~~estimated operating~~C-19 on the economy and our business;

•the cyclical nature of the homebuilding and lot development industries and changes in economic, real estate and other conditions;

•competitive conditions in our industry;

•changes in our business strategy and our ability to achieve our strategic initiatives;

•continuing liabilities related to assets that have been sold;

•the impact of governmental policies, laws or regulations and actions or restrictions of regulatory agencies;

•the cost and availability of property suitable for residential lot development;

•general economic, market or business conditions where our real estate activities are concentrated;

•our dependence on relationships with national, regional and local homebuilders;

•our ability to obtain or the availability of surety bonds to secure our performance related to construction and development ~~costs using estimates~~activities and the pricing of ~~proved reserves, future commodity pricing, future production estimates, anticipated~~bonds;

•obtaining reimbursements and other payments from governmental districts and other agencies and timing of such payments;

•our ability to succeed in new markets;

•the conditions of the capital ~~expenditures,~~markets and ~~various discount rates commensurate~~our ability to raise capital to fund expected growth;

•our ability to manage and service our debt and comply with our debt covenants, restrictions and limitations;

•the volatility of the market price and trading volume of our common stock;

•our ability to hire and retain key personnel; and

•the strength of our information technology systems and the risk of cybersecurity breaches and ~~current market conditions associated with realizing~~our ability to satisfy privacy and data protection laws and regulations.

Other factors, including the ~~expected cash flows projected. Because~~risk factors described in Item 1A of ~~the uncertainty inherent in these~~this Annual Report on Form 10-K, may also cause actual results to differ materially from those projected by our forward-looking statements. New factors ~~we cannot predict when or if future impairment charges for proved properties will be recorded.~~

The assessment of unproved properties to determine any possible impairment requires significant judgment. We assess our unproved properties periodically for impairment on a property-by-property basis based on remaining lease terms, drilling results or future plans to develop acreage. Due to the uncertainty inherent in these factors, we cannot predict the amount of impairment charges that may be recorded in the future.

~~Oil and Gas Reserves —~~ The estimation of oil and gas reserves is a significant estimate which affects the amount of non-cash depletion expense we record as well as impairment analysis we perform. On an annual basis, we engage an independent petroleum engineering firm to assist us in preparing estimates of oil and gas reserves based on available geologic and seismic data, reservoir pressure data, core analysis reports, well logs, analogous reservoir performance history, production data and other available sources of engineering, geological and geophysical information. Oil and gas prices are volatile and largely affected by worldwide or domestic production and consumption and are outside our control.

~~Asset Retirement Obligations~~ — We make estimates of the future costs of the retirement obligations of our producing oil and gas properties. Estimating future costs involves significant assumptions and judgments regarding such factors as estimated costs of plugging and abandonment, timing of settlements, discount rates and inflation rates. Such cost estimates could be subject to significant revisions in subsequent years due to changes in regulatory requirements, technological advances and other factors which may be difficult to predict.

~~Impairment of Goodwill~~ — Measuring goodwill for impairment annually requires estimation of future cash flows and determination of fair values using many assumptions and inputs, including estimated future selling prices and volumes, estimated future costs to develop and explore, observable market inputs, weighted average cost of capital, estimated operating expenses and various other projected economic factors. Changes in economic and operating conditions can affect these assumptions and could result in additional interim testing and goodwill impairment charges in the future periods.

~~Share-Based Compensation~~ — We use the Black-Scholes option pricing model to determine the fair value of stock options. The determination of the fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the stock price as well as assumptions regarding a number of other variables. These variables include expected stock price volatility over the term of the awards, actual and projected employee stock

option exercise behaviors (term of option), risk-free interest rate and expected dividends. The expected life was based on the simplified method utilizing the midpoint between the vesting period and the contractual life of the awards. The expected stock price volatility was determined using a blend of historical and implied volatility. Pre-vesting forfeitures are estimated based upon the pool of participants and their expected activity and historical trends. We use Monte Carlo simulation pricing model to determine the fair value of market-leveraged stock units (MSU's) and stock option awards with market condition. A typical Monte Carlo exercise simulates a distribution of stock prices to yield an expected distribution of stock prices at the end of the performance period. The simulations are repeated many times in order to derive a probabilistic assessment of stock performance. The stock-paths are simulated using assumptions which include expected stock price volatility and risk-free interest rate.

~~Income Taxes~~ — In preparing our consolidated financial statements, significant judgment is required to estimate our income taxes. Our estimates are based on our interpretation of federal and state tax laws. We estimate our actual current tax due and assess temporary and permanent differences resulting from differing treatment of items for tax and accounting purposes. The temporary differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. If needed, we record a valuation allowance against our deferred tax assets. In addition, when we believe a tax position is supportable but the outcome uncertain, we include the item in our tax return but do not recognize the related benefit in our provision for taxes. Instead, we record a reserve for unrecognized tax benefits, which represents our expectation of the most likely outcome considering the technical merits and specific facts of the position. Changes to liabilities are only made when an event occurs that changes the most likely outcome, such as settlement with the relevant tax authority, expiration of statutes of limitations, changes in tax law, or recent court rulings. Adjustments to temporary differences, permanent differences or uncertain tax positions could materially impact our financial position, cash flow and results of operation.

~~Adopted and Pending Accounting Pronouncements~~

~~Please read~~ ~~Note 2 — New and Pending Accounting Pronouncements~~ ~~to the Consolidated Financial Statements.~~

~~Effects of Inflation~~

~~Inflation has had minimal effects on operating results the past three years.~~

~~Legal Proceedings~~

~~We are involved in various legal proceedings that arise~~emerge from time to time inand it is not possible for us to predict all such factors, nor can we assess the ~~ordinary course of doing business. We believe we have established adequate reserves for any probable losses, and we do not believe that the outcome~~impact of any ~~of these proceedings should have a material adverse effect~~such factor on our ~~financial position, long-term~~business or the extent to which any factor, or combination of factors, may cause results ~~of operations, or cash flow. It is possible, however, that charges related~~ to ~~these matters could be significant to results of operations or cash flows~~differ materially from those contained in any ~~one accounting period.~~forward-looking statement.

Any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by law, we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.

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~~Item 7A.~~	~~Quantitative and Qualitative Disclosures About Market Risk.~~

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

We ~~have no significant exposure~~are subject to interest rate risk on our senior debt and revolving credit facility. We monitor our exposure to changes in interest rates and utilize both fixed and variable rate debt. For fixed rate debt, changes in interest rates generally affect the fair value of the debt instrument, but not our earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not impact the fair value of the debt instrument, but may affect our future earnings and cash flows. Except in very limited circumstances, we do not have an obligation to prepay fixed-rate debt prior to maturity and, as ~~it relates~~a result, interest rate risk and changes in fair value would not have a significant impact on our cash flows related to our ~~variable-rate~~fixed-rate debt until such time as we are required to refinance, repurchase or repay such debt.

Our fixed rate debt consists of ~~$485,000 at year-end 2016, maturing in 2018.~~$350 million principal amount of 8.0% senior notes due April 2024 and $300 million principal amount of 5.0% senior notes due March 2028. Our variable rate debt consists of a $380 million senior unsecured revolving credit facility. At September 30, 2020, we had no borrowings outstanding under the revolving credit facility.

Foreign Currency Risk

We have no exposure to foreign currency fluctuations.

Commodity Price Risk

We have no significant exposure to commodity price fluctuations.

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~~Item 8.~~	~~Financial Statements and Supplementary Data.~~

~~Index to~~ Item 8. Financial Statements and Supplementary Data.



	~~Page~~
~~Management’s Annual Report on Internal Control over Financial Reporting~~	50
~~Report of Independent Registered Public Accounting Firm~~	51
~~Report of Independent Registered Public Accounting Firm~~	52
~~Audited Financial Statements~~
~~Consolidated Balance Sheets~~	53
~~Consolidated Statements of Income (Loss) And Comprehensive Income (Loss)~~	54
~~Consolidated Statements of Equity~~	55
~~Consolidated Statements of Cash Flows~~	56
~~Notes to the Consolidated Financial Statements~~	57
~~Financial Statement Schedule~~
~~Schedule III — Consolidated Real Estate and Accumulated Depreciation~~	90

MANAGEMENT’S ANNUAL REPORT ON

INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Forestar is responsible for establishing and maintaining adequate internal control over financial reporting. Management has designed our internal control over financial reporting to provide reasonable assurance that our published financial statements are fairly presented, in all material respects, in conformity with generally accepted accounting principles.

Management is required by paragraph (c) of Rule 13a-15 of the Securities Exchange Act of 1934, as amended, to assess the effectiveness of our internal control over financial reporting as of each year end. In making this assessment, management used the Internal Control — Integrated Framework (2013) by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Management conducted the required assessment of the effectiveness of our internal control over financial reporting as of ~~year-end.~~September 30, 2020. Based upon this assessment, management believes that our internal control over financial reporting is effective as of ~~year-end 2016.~~September 30, 2020.

Ernst & Young LLP, the independent registered public accounting firm that audited our financial statements included in this Form 10-K, has also audited our internal control over financial reporting. Their attestation report follows this report of management.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

~~The~~To the Shareholders and the Board of Directors ~~and Shareholders~~ of Forestar Group Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Forestar Group Inc.’s internal control over financial reporting as of ~~December 31, 2016,~~September 30, 2020, based on criteria established in Internal ~~Control-Integrated~~Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Forestar Group Inc.’s (the Company) maintained, in all material respects, effective internal control over financial reporting as of September 30, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2020 and 2019, the related consolidated statements of operations, equity, and cash flows, for each of the two years in the period ended September 30, 2020 and the nine month period ended September 30, 2018, and the related notes and our report dated November 19, 2020 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the ~~company’s~~Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the ~~Public Company Accounting Oversight Board (United States).~~PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Fort Worth, Texas

November 19, 2020

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Forestar Group Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Forestar Group Inc. (the Company) as of September 30, 2020 and 2019, the related consolidated statements of operations, equity, and cash flows for each of the two years in the period ended September 30, 2020 and the nine month period ended September 30, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, ~~Forestar Group Inc. maintained,~~the consolidated financial statements present fairly, in all material respects, ~~effective internal control over~~the financial ~~reporting as~~position of ~~December 31, 2016, based on~~ the ~~COSO criteria.~~Company at September 30, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended September 30, 2020 and the nine month period ended September 30, 2018, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Forestar Group Inc. as of December 31, 2016 and 2015, and the related consolidated statements of income (loss) and comprehensive income (loss), equity, and cash flows for each of the three years in the period ended December 31, 2016 of Forestar Group Inc. and our report dated March 3, 2017 expressed an unqualified opinion thereon.

~~/s/ Ernst & Young LLP~~

~~Austin, Texas~~

~~March 3, 2017~~

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

~~The Board of Directors and Shareholders of Forestar Group Inc.~~

We have audited the accompanying consolidated balance sheets of Forestar Group Inc. as of December 31, 2016 and 2015, and the related consolidated statements of income (loss) and comprehensive income (loss), equity, and cash flows for each of the three years in the period ended December 31, 2016. Our audits also included the financial statement schedule listed in the Index at Item 15 (a). These financial statements and schedule are the responsibility of the Company's ~~management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.~~

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Forestar Group Inc. at December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

~~We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Forestar Group Inc.’s~~ internal control over financial reporting as of ~~December 31, 2016,~~September 30, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated ~~March 3, 2017~~November 19, 2020 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

~~Austin,~~

We have served as the Company’s auditor since 2007.

Fort Worth, Texas

~~March 3, 2017~~November 19, 2020

Table of Contents

FORESTAR GROUP INC.

CONSOLIDATED BALANCE SHEETS


	September 30,
	2020		2019
	(In millions, except share data)
ASSETS
Cash and cash equivalents	$	394.3	$	382.8
Real estate	1,309.7		1,028.9
Investment in unconsolidated ventures	3.6		7.3
Income taxes receivable	6.3		3.2
Property and equipment, net	1.1		2.4
Deferred tax asset, net	0		17.4
Other assets	24.9		13.7
Total assets	$	1,739.9	$	1,455.7
LIABILITIES
Accounts payable	$	29.2	$	16.8
Earnest money on sales contracts	98.3		89.9
Deferred tax liability, net	5.7		0
Accrued expenses and other liabilities	93.8		79.6
Debt	641.1		460.5
Total liabilities	868.1		646.8
Commitments and contingencies (Note 14)
EQUITY
Common stock, par value $1.00 per share, 200,000,000 authorized shares, 48,061,921 and 47,997,366 shares issued and outstanding at September 30, 2020 and 2019, respectively	48.1		48.0
Additional paid-in capital	603.9		602.2
Retained earnings	218.9		158.1
Stockholders' equity	870.9		808.3
Noncontrolling interests	0.9		0.6
Total equity	871.8		808.9
Total liabilities and equity	$	1,739.9	$	1,455.7

At Year-End
2016 2015

(In thousands, except
share data)
ASSETS
Cash and cash equivalents $ 265,798
$ 96,442
Real estate, net 293,003
586,715
Assets of discontinued operations 14
104,967
Assets held for sale 30,377
—
Investment in unconsolidated ventures 77,611
82,453
Timber —
7,683
Receivables, net 8,931
19,025
Income taxes receivable 10,867
12,056
Prepaid expenses 2,000
3,116
Property and equipment, net 3,116
10,732
Deferred tax asset, net 323
—
Goodwill and other intangible assets 37,900
43,455
Other assets 3,268
5,602
TOTAL ASSETS $ 733,208
$ 972,246
LIABILITIES AND EQUITY
Accounts payable $ 4,804
$ 11,617
Accrued employee compensation and benefits 4,126
5,547
Accrued property taxes 2,008
4,529
Accrued interest 1,585
3,267
Deferred tax liability, net —
1,037
Earnest money deposits 10,511
10,214
Other accrued expenses 12,598
14,556
Liabilities of discontinued operations 5,295
11,192
Liabilities held for sale 103
—
Other liabilities 19,702
24,657
Debt, net 110,358
381,515
TOTAL LIABILITIES 171,090
468,131
COMMITMENTS AND CONTINGENCIES

EQUITY
Forestar Group Inc. shareholders’ equity:
Common stock, par value $1.00 per share, 200,000,000 authorized shares, 44,803,603 issued at December 31, 2016 and 36,946,603 issued at December 31, 2015 44,804
36,947
Additional paid-in capital 553,005
561,850
Retained earnings (Accumulated deficit) 12,602
(46,046 )
Treasury stock, at cost, 3,187,253 shares at December 31, 2016 and 3,203,768 shares at December 31, 2015 (49,760 ) (51,151 )
Total Forestar Group Inc. shareholders’ equity 560,651
501,600
Noncontrolling interests 1,467
2,515
TOTAL EQUITY 562,118
504,115
TOTAL LIABILITIES AND EQUITY $ 733,208
$ 972,246

~~Please read the~~

See accompanying notes to ~~the~~ consolidated financial statements.

Table of Contents

FORESTAR GROUP INC.

CONSOLIDATED STATEMENTS OF ~~INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)~~OPERATIONS

For the Year
2016 2015 2014
(In thousands, except per share amounts)
REVENUES
Real estate sales and other $ 176,535
$ 120,022
$ 171,672
Commercial and income producing properties 13,738
82,808
41,440
Real estate 190,273
202,830
213,112
Mineral resources 5,076
9,094
15,690
Other 1,965
6,652
9,362
197,314
218,576
238,164
COST AND EXPENSES
Cost of real estate sales and other (147,653 ) (52,640 ) (86,432 )
Cost of commercial and income producing properties (15,442 ) (61,251 ) (37,332 )
Cost of mineral resources (763 ) (2,998 ) (3,790 )
Cost of other (5,075 ) (3,081 ) (3,006 )
Other operating (33,177 ) (48,996 ) (44,326 )
General and administrative (21,597 ) (27,253 ) (22,230 )
(223,707 ) (196,219 ) (197,116 )
GAIN ON SALE OF ASSETS
166,747
1,585
29,512
OPERATING INCOME 140,354
23,942
70,560
Equity in earnings of unconsolidated ventures 6,123
16,008
8,685
Interest expense (19,985 ) (34,066 ) (30,286 )
Loss on extinguishment of debt, net (35,864 ) —
—
Other non-operating income 1,718
3,006
8,588
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES 92,346
8,890
57,547
Income tax expense (15,302 ) (35,131 ) (20,850 )
NET INCOME (LOSS) FROM CONTINUING OPERATIONS 77,044
(26,241 ) 36,697
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAXES (16,865 ) (186,130 ) (19,609 )
CONSOLIDATED NET INCOME (LOSS) 60,179
(212,371 ) 17,088
Less: Net (income) attributable to noncontrolling interests (1,531 ) (676 ) (505 )
NET INCOME (LOSS) ATTRIBUTABLE TO FORESTAR GROUP INC. $ 58,648
$ (213,047 ) $ 16,583
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 34,546
34,266
35,317
Diluted 42,334
34,266
43,596
NET INCOME (LOSS) PER BASIC SHARE
Continuing operations $ 1.80
$ (0.79 ) $ 0.84
Discontinued operations $ (0.40 ) $ (5.43 ) $ (0.46 )
NET INCOME (LOSS) PER BASIC SHARE $ 1.40
$ (6.22 ) $ 0.38
NET INCOME (LOSS) PER DILUTED SHARE
Continuing operations $ 1.78
$ (0.79 ) $ 0.83
Discontinued operations $ (0.40 ) $ (5.43 ) $ (0.45 )
NET INCOME (LOSS) PER DILUTED SHARE $ 1.38
$ (6.22 ) $ 0.38
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO FORESTAR GROUP INC. $ 58,648
$ (213,047 ) $ 16,583


	Year Ended September 30,				Nine Months Ended September 30, 2018
	2020		2019
	(In millions, except per share amounts)
Revenues	$	931.8	$	428.3	$	78.3
Cost of sales	813.7		362.7		49.5
Selling, general and administrative expense	45.7		28.9		19.4
Equity in earnings of unconsolidated ventures	(0.7)		(0.5)		(4.8)
Gain on sale of assets	(0.1)		(3.0)		(27.8)
Interest expense	0		0		3.7
Interest and other income	(4.9)		(5.5)		(6.4)
Income before income taxes	78.1		45.7		44.7
Income tax expense (benefit)	16.4		9.4		(25.3)
Net income	61.7		36.3		70.0
Net income attributable to noncontrolling interests	0.9		3.3		1.2
Net income attributable to Forestar Group Inc.	$	60.8	$	33.0	$	68.8

Basic net income per common share attributable to Forestar Group Inc.	$	1.26	$	0.79	$	1.64
Weighted average number of common shares	48.0		42.0		41.9

Diluted net income per common share attributable to Forestar Group Inc.	$	1.26	$	0.79	$	1.64
Adjusted weighted average number of common shares	48.1		42.0		42.0

~~Please read the~~

See accompanying notes to ~~the~~ consolidated financial statements.

Table of Contents

FORESTAR GROUP INC.

CONSOLIDATED STATEMENTS OF TOTAL EQUITY

Forestar Group Inc. Shareholders' Equity
Common Stock
Additional
Paid-in
Capital
Treasury Stock Retained Earnings (Accumulated Deficit)
Non-controlling
Interests
Total Shares Amount Shares Amount
(In thousands, except per share amounts)
Balance at December 31, 2013 $ 715,397
36,946,603
$ 36,947
$ 556,676
(2,199,666 ) $ (34,196 ) $ 150,418
$ 5,552
Net income 17,088
—
—
—
—
—
16,583
505
Distributions to noncontrolling interest (4,171 ) —
—
—
—
—
—
(4,171 )
Contributions from noncontrolling interest 2,585
—
—
—
—
—
—
2,585
Dissolution of noncontrolling interests 1,342
—
—
—
—
—
—
1,342
Purchase of noncontrolling interests, net (6,242 ) —
—
(2,969 ) —
—
—
(3,273 )
Issuances of common stock for vested share-settled units —
—
—
(2,567 ) 164,914
2,567
—
—
Issuances from exercises of pre-spin stock options, net of swaps 877
—
—
(43 ) 60,823
920
—
—
Issuances from exercises of stock options, net of swaps 329
—
—
(333 ) 45,062
662
—
—
Shares withheld for payroll taxes (1,043 ) —
—
(4 ) (55,238 ) (1,039 ) —
—
Shares repurchased (24,595 ) —
—
—
(1,491,187 ) (24,595 ) —
—
Forfeitures of restricted stock awards —
—
—
10
(9,986 ) (10 ) —
—
Share-based compensation 8,033
—
—
8,033
—
—
—
—
Tax benefit from exercise of restricted stock units and stock options and vested restricted stock 142
—
—
142
—
—
—
—
Balance at December 31, 2014 $ 709,742
36,946,603
$ 36,947
$ 558,945
(3,485,278 ) $ (55,691 ) $ 167,001
$ 2,540
Net income (loss) (212,371 ) —
—
—
—
—
(213,047 ) 676
Distributions to noncontrolling interest (701 ) —
—
—
—
—
—
(701 )
Issuances of common stock for vested share-settled units —
—
—
(5,362 ) 335,611
5,362
—
—
Issuances from exercises of pre-spin stock options, net of swaps 31
—
—
(33 ) 3,999
64
—
—
Shares withheld for payroll taxes (762 ) —
—
(1 ) (51,521 ) (761 ) —
—
Forfeitures of restricted stock awards —
—
—
125
(6,579 ) (125 ) —
—
Share-based compensation 8,576
—
—
8,576
—
—
—
—
Tax benefit from exercise of restricted stock units and stock options and vested restricted stock (400 ) —
—
(400 ) —
—
—
—
Balance at December 31, 2015 $ 504,115
36,946,603
$ 36,947
$ 561,850
(3,203,768 ) $ (51,151 ) $ (46,046 ) $ 2,515
Net income 60,179
—
—
—
—
—
58,648
1,531
Distributions to noncontrolling interests (2,579 ) —
—
—
—
—
—
(2,579 )
Issuances of common stock for vested share-settled units —
—
—
(4,570 ) 288,397
4,570
—
—
Issuances from exercises of stock options, net of swaps 328
—
—
(224 ) 35,406
552
—
—
Shares withheld for payroll taxes (222 ) —
—
(28 ) (23,312 ) (194 ) —
—
Shares repurchased (3,537 ) —
—
—
(283,976 ) (3,537 ) —
—
Share-based compensation 4,045
—
—
4,045
—
—
—
—
Settlement of tangible equity units —
7,857,000
7,857
(7,857 ) —
—
—
—
Reacquisition of equity component related to convertible debt (211 ) —
—
(211 ) —
—
—
—
Balance at December 31, 2016 $ 562,118
44,803,603
$ 44,804
$ 553,005
(3,187,253 ) $ (49,760 ) $ 12,602
$ 1,467


	Common Stock		Additional Paid-in Capital		Retained Earnings		Non-controlling Interests		Total Equity
	(In millions, except share amounts)
Balances at December 31, 2017 (41,938,936 shares)	$	41.9	$	506.0	$	56.3	$	1.4	$	605.6
Net income	0		0		68.8		1.2		70.0
Stock issued under employee benefit plans (467 shares)	0		0		0		0		0
Stock-based compensation expense	0		0.3		0		0		0.3
Distributions to noncontrolling interests	0		0		0		(1.4)		(1.4)
Balances at September 30, 2018 (41,939,403 shares)	$	41.9	$	506.3	$	125.1	$	1.2	$	674.5
Net income	0		0		33.0		3.3		36.3
Issuance of common stock (6,037,500 shares)	6.0		94.7		0		0		100.7
Stock issued under employee benefit plans (20,463 shares)	0.1		(0.1)		0		0		0
Stock-based compensation expense	0		1.3		0		0		1.3
Distributions to noncontrolling interests	0		0		0		(3.9)		(3.9)
Balances at September 30, 2019 (47,997,366 shares)	$	48.0	$	602.2	$	158.1	$	0.6	$	808.9
Net income	0		0		60.8		0.9		61.7
Stock issued under employee benefit plans (64,555 shares)	0.1		0		0		0		0.1
Cash paid for shares withheld for taxes	0		(0.3)		0		0		(0.3)
Stock-based compensation expense	0		2.0		0		0		2.0
Distributions to noncontrolling interests	0		0		0		(0.6)		(0.6)
Balances at September 30, 2020 (48,061,921 shares)	$	48.1	$	603.9	$	218.9	$	0.9	$	871.8

~~Please read the~~

See accompanying notes to ~~the~~ consolidated financial statements.

Table of Contents

FORESTAR GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended September 30,				Nine Months Ended September 30, 2018
	2020		2019
	(In millions)
OPERATING ACTIVITIES
Net income	$	61.7	$	36.3	$	70.0
Adjustments:
Depreciation and amortization	4.9		6.7		3.9
Deferred income taxes	23.1		9.5		(24.8)
Equity in earnings of unconsolidated ventures	(0.7)		(0.5)		(4.8)
Distributions of earnings of unconsolidated ventures	0		4.9		3.5
Stock-based compensation expense	2.0		1.3		0.3
Real estate and land option charges	0.9		1.3		0.3
Gain on sale of assets	(0.1)		(3.0)		(27.8)
Other	0.1		0.1		0.9
Changes in operating assets and liabilities:
Increase in real estate	(281.7)		(531.7)		(361.1)
(Increase) decrease in other assets	(3.4)		0.3		(1.6)
Increase in accounts payable and other accrued liabilities	24.0		41.9		18.4
Increase in earnest money deposits on sales contracts	3.9		40.5		37.5
(Increase) decrease in income taxes receivable	(3.1)		1.2		2.3
Net cash used in operating activities	(168.4)		(391.2)		(283.0)
INVESTING ACTIVITIES
Expenditures for property, equipment, software and other	(0.6)		(0.9)		(0.1)
Return of investment in unconsolidated ventures	4.3		0.1		0.8
Proceeds from sale of assets	1.3		0		258.3
Net cash provided by (used in) investing activities	5.0		(0.8)		259.0
FINANCING ACTIVITIES
Issuance of common stock	0		100.7		0
Proceeds from debt	300.0		435.0		0.2
Repayments of debt	(118.9)		(85.0)		(0.5)
Deferred financing fees	(5.3)		(6.9)		(2.3)
Distributions to noncontrolling interests, net	(0.6)		(3.9)		(1.4)
Cash paid for shares withheld for taxes	(0.3)		(0.1)		0
Net cash provided by (used in) financing activities	174.9		439.8		(4.0)
Net increase (decrease) in cash and cash equivalents	11.5		47.8		(28.0)
Cash and cash equivalents at beginning of period	382.8		335.0		363.0
Cash and cash equivalents at end of period	$	394.3	$	382.8	$	335.0
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized	$	0	$	0	$	0.9
Income taxes refunded, net	$	(3.1)	$	(1.7)	$	(3.4)

For the Year
2016 2015 2014
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income (loss) $ 60,179
$ (212,371 ) $ 17,088
Adjustments:
Depreciation, depletion and amortization 11,447
45,085
41,715
Change in deferred income taxes (1,360 ) 41,261
1,645
Equity in earnings of unconsolidated ventures (6,123 ) (16,008 ) (8,685 )
Distributions of earnings of unconsolidated ventures 7,719
12,741
5,721
Share-based compensation 4,037
4,246
3,417
Real estate cost of sales 98,412
87,733
84,665
Dry hole and unproved leasehold impairment costs —
67,639
29,528
Real estate development and acquisition expenditures, net (81,179 ) (107,988 ) (114,694 )
Reimbursements from utility and improvement districts 27,107
15,176
66,047
Asset impairments 60,939
108,184
15,934
Loss on debt extinguishment, net 35,864
—
—
Gain on sale of assets (153,083 ) (879 ) (38,038 )
Other 5,359
4,680
5,887
Changes in:
Notes and accounts receivables 13,214
(978 ) 10,704
Prepaid expenses and other (133 ) 3,026
2,180
Accounts payable and other accrued liabilities (16,711 ) (11,868 ) (4,653 )
Income taxes 1,189
(4,553 ) (11,379 )
Net cash provided by operating activities 66,877
35,126
107,082
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, equipment, software, reforestation and other (6,138 ) (14,690 ) (16,398 )
Oil and gas properties and equipment (579 ) (49,717 ) (101,145 )
Acquisition of partner's interest in unconsolidated multifamily venture, net of cash —
—
(20,155 )
Acquisition of oil and gas properties —
—
(1,100 )
Investment in unconsolidated ventures (6,089 ) (26,349 ) (14,692 )
Proceeds from sale of assets 427,849
18,260
21,962
Return of investment in unconsolidated ventures 5,700
12,168
1,797
Net cash provided by (used for) investing activities 420,743
(60,328 ) (129,731 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of senior secured notes, net —
—
241,947
Payments of debt (315,229 ) (58,220 ) (225,481 )
Additions to debt 3,184
11,463
22,593
Deferred financing fees —
(295 ) (3,217 )
Distributions to noncontrolling interests, net (2,579 ) (701 ) (3,146 )
Purchase of noncontrolling interests —
—
(7,971 )
Repurchases of common stock (3,537 ) —
(24,595 )
Other (103 ) (730 ) 339
Net cash (used for) provided by financing activities (318,264 ) (48,483 ) 469
Net increase (decrease) in cash and cash equivalents 169,356
(73,685 ) (22,180 )
Cash and cash equivalents at beginning of year 96,442
170,127
192,307
Cash and cash equivalents at year-end $ 265,798
$ 96,442
$ 170,127
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 14,790
$ 27,330
$ 22,936
Income taxes paid (refunds) $ 10,205
$ (4,077 ) $ 18,322
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION:
Capitalized interest $ 2,838
$ 2,938
$ 1,154
Noncontrolling interests $ —
$ —
$ 2,904

~~Please read the~~

See accompanying notes to ~~the~~ consolidated financial statements.

Table of Contents

FORESTAR GROUP ~~INC~~INC.

NOTES TO ~~THE~~ CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Summary of Significant Accounting Policies

Basis of Presentation

~~Our~~

The accompanying consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and include the accounts of Forestar Group Inc., (Forestar) and all of its 100% owned, majority-owned and controlled subsidiaries, ~~ventures and other entities in~~ which ~~we have a controlling interest. We account~~are collectively referred to as the Company unless the context otherwise requires. The Company accounts for ~~our~~its investment in other entities in which ~~we have~~it has significant influence over operations and financial policies using the equity ~~method (we recognize our share of the entities’ income or loss and any preferential returns and treat distributions as a reduction of our investment). We eliminate all material~~method. All intercompany accounts, transactions and ~~transactions.~~balances have been eliminated in consolidation. Noncontrolling interests in consolidated pass-through entities are recognized before income taxes. The transactions included in net income in the consolidated statements of operations are the same as those that would be presented in comprehensive income. Thus, the Company's net income equates to comprehensive income.

~~We prepare our~~

In October 2017, Forestar became a majority-owned subsidiary of D.R. Horton, Inc. (D.R. Horton) by virtue of a merger with a wholly-owned subsidiary of D.R. Horton. Immediately following the merger, D.R. Horton owned 75% of the Company's outstanding common stock. In connection with the merger, the Company entered into certain agreements with D.R. Horton including a Stockholder’s Agreement, a Master Supply Agreement and a Shared Services Agreement. D.R. Horton is considered a related party of Forestar under GAAP. At September 30, 2020, D.R. Horton owned approximately 65% of the Company's outstanding common stock.

Change in Fiscal Year

Following the merger with D.R. Horton, the Company changed its fiscal year-end from December 31 to September 30, effective January 1, 2018. This change aligned Forestar's fiscal year-end reporting calendar with D.R. Horton. The Company's results of operations, cash flows and all transactions impacting stockholders' equity presented in this Form 10-K are for the fiscal years ended September 30, 2020 and 2019 and for the nine months ended September 30, 2018 unless otherwise noted. This Form 10-K also includes an unaudited statement of operations for the comparable stub period of January 1, 2017 to September 30, 2017. See Note 17.

Use of Estimates

The preparation of financial statements in ~~accordance~~conformity with ~~generally accepted accounting principles in the United States, which require us~~GAAP requires management to make estimates and assumptions. These estimates and assumptions ~~about future events.~~affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results ~~can, and probably will,~~could differ materially from those ~~we currently estimate. Examples~~estimates.

Strategic Asset Sale

In February 2018, the Company entered into and closed on a Purchase and Sale Agreement with Starwood Land, L.P. (Starwood) to sell 24 legacy projects for $232.0 million which generated $217.5 million in net proceeds. This strategic asset sale included projects owned both directly and indirectly through ventures and consisted of ~~significant estimates include those related to allocating costs to real estate, measuring long-lived~~approximately 750 developed and under development lots, over 4,000 future undeveloped lots, 730 unentitled acres in California, an interest in 1 multi-family operating property and a multi-family development site.

Adoption of New Accounting Standard

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, “Leases,” which requires that lease assets and liabilities be recognized on the balance sheet and that key information about leasing arrangements be disclosed. The guidance was effective for ~~impairment, oil~~the Company beginning October 1, 2019 and ~~gas revenue accruals, capital expenditure and lease operating expense accruals associated with our oil and gas production activities, oil and gas reserves and depletion~~did not have a material impact on its consolidated financial position, results of ~~our oil and gas properties.~~

~~At year-end 2016, we have divested substantially all of our oil and gas working interest properties.~~operations or cash flows. As a result of the adoption of this ~~significant change~~standard on October 1, 2019, the Company recorded right of use assets of $2.7 million and lease liabilities of $2.9 million. Lease right of use assets are included in ~~our operations, we have reported the results of operations~~other assets and ~~financial position of these assets as discontinued operations within~~lease liabilities are included in accrued expenses and other liabilities in the consolidated ~~statements~~balance sheet.

Table of ~~income (loss)~~Contents

FORESTAR GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Revenue Recognition

Real estate revenue and ~~comprehensive income (loss) and consolidated balance sheets for all periods presented. In addition, in second quarter 2016, we changed~~related profit are generally recognized at the ~~name~~time of the ~~oil~~closing of a sale, when title to and ~~gas segment to mineral resources to reflect the strategic shift from oil and gas working interest investments to owned mineral interests. We also changed the name~~possession of the ~~other natural resources segment~~property are transferred to ~~other.~~the buyer. The Company’s performance obligation, to deliver the agreed-upon land or lots, is generally satisfied at closing. However, there may be instances in which the Company has an unsatisfied remaining performance obligation at the time of closing. In these instances, the Company records contract liabilities and recognizes those revenues over time as the performance obligations are completed. Generally, the Company's unsatisfied remaining performance obligations are expected to have an original duration of less than one year. See Note 4.

Cash and Cash Equivalents

Cash and cash equivalents include cash, ~~and~~ other short-term instruments with original maturities of three months or ~~less. At year-end~~ ~~2016~~less and ~~2015, restricted cash was~~ ~~$275,000~~proceeds from land and ~~$200,000~~ ~~and is included in other assets.~~

~~Cash Flows~~

~~The consolidated statements of cash flows for 2016, 2015 and 2014 reflect cash flows from both continuing and discontinued operations. Expenditures~~lot closings held for the Company’s benefit at title companies.

Real Estate and Cost of Sales

Real estate includes the costs of direct land and lot acquisition, land development, capitalized interest, and ~~development~~direct overhead costs incurred during land development. All indirect overhead costs, such as compensation of ~~single-family~~management personnel and ~~multifamily real estate that we intend~~insurance costs, are charged to develop for sale are classified as operating activities. Expenditures for the acquisition and development of properties to be held and operated, investment in oil and gas properties and equipment, and business acquisitions are classified as investing activities. Our accrued capital expenditures for unproved leasehold acquisitions and drilling and completion costs at year-end 2016 and 2015 were $834,000 and $7,033,000 and are included in liabilities of discontinued operations in our consolidated balance sheets. These oil and gas property additions will be reflected as cash used for investing activities in the period the accrued payables are settled.

~~Capitalized Software~~

We capitalize purchased software costs as well as the direct internal and external costs associated with software we develop for our own use. We amortize these capitalized costs using the straight-line method over estimated useful lives generally ranging from ~~three~~ to ~~five years. The carrying value of capitalized software was~~ ~~$52,000~~ ~~at year-end~~ ~~2016~~ ~~and~~ ~~$237,000~~ ~~at year-end~~ ~~2015~~ ~~and is included in other assets. The amortization of these capitalized costs was~~ ~~$155,000~~ in ~~2016~~, ~~$996,000~~ in ~~2015~~ ~~and~~ ~~$1,067,000~~ in ~~2014~~ ~~and is included in~~selling, general and administrative ~~and operating expenses.~~

~~Environmental and Asset Retirement Obligations~~

We recognize environmental remediation liabilities on an undiscounted basis when environmental assessments or remediation are probable and we can reasonably estimate the cost. We adjust these liabilities as further information is obtained or circumstances change. Our asset retirement obligations are related to the abandonment and site restoration requirements that result from the acquisition, construction and development of oil and gas working interest properties, which we have divested substantially all at year-end 2016. We record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. Accretion expense related to the asset retirement obligation and depletion expense related to capitalized asset retirement costs are included in cost of mineral resources and in discontinued operations on our consolidated statements of income (loss) and comprehensive income (loss). Our asset retirement obligations are recorded in liabilities held for sale at year-end 2016 and in other liabilities and liabilities of discontinued operations at year-end 2015.

~~The following summarizes the changes in asset retirement obligations:~~

Year-End
2016 2015
(In thousands)
Beginning balance $ 1,758
$ 1,807
Additions 6
65
Oil and gas working interest property dispositions (1,610 ) (119 )
Liabilities settled (107 ) (139 )
Accretion expense 56
144
$ 103
$ 1,758

~~Fair Value Measurements~~

Financial instruments for which we did not elect the fair value option include cash and cash equivalents, accounts and notes receivables, other assets, long-term debt, accounts payable and other liabilities. With the exception of long-term notes receivable and debt, the carrying amounts of these financial instruments approximate their fair values due to their short-term nature or variable interest rates.

~~Goodwill and Other Intangible Assets~~

We record goodwill when the purchase price of a business acquisition exceeds the estimated fair value of net identified tangible and intangible assets acquired. We do not amortize goodwill or other indefinite lived intangible assets. Instead, we measure these assets for impairment based on the estimated fair values at least annually or more frequently if impairment indicators exist. We perform the annual impairment measurement in the fourth quarter of each year. Intangible assets with finite useful lives are amortized over their estimated useful lives.

In 2016, we performed our annual goodwill impairment evaluation and concluded that goodwill related to our mineral interest assets was not impaired at year-end 2016 as the estimated fair value exceeded the carrying value. On February 17, 2017, we sold substantially all of the Company's remaining oil and gas assets for $85,600,000. Please read ~~Note 21—Subsequent Events~~ ~~for additional information about these items.~~

In addition, we performed our annual goodwill impairment evaluation and concluded that goodwill related to our central Texas water assets was impaired at year-end 2016 as the estimated fair value exceeded the carrying value. We recorded a $3,874,000 non-cash impairment charge as a result of entering into an agreement to sell these assets. At year-end 2016, our central Texas water assets are classified as held for sale.

~~Income Taxes~~

We provide deferred income taxes using current tax rates for temporary differences between the financial accounting carrying value of assets and liabilities and their tax accounting carrying values. We recognize and value income tax exposures for the various taxing jurisdictions where we operate based on laws, elections, commonly accepted tax positions, and management estimates. We include tax penalties and interest in income tax expense. We provide a valuation allowance for any deferred tax asset that is not likely to be recoverable in future periods.

When we believe a tax position is supportable but the outcome uncertain, we include the item in our tax return but do not recognize the related benefit in our provision for taxes. Instead, we record a reserve for unrecognized tax benefits, which represents our expectation of the most likely outcome considering the technical merits and specific facts of the position. Changes to liabilities are only made when an event occurs that changes the most likely outcome, such as settlement with the relevant tax authority, expiration of statutes of limitations, changes in tax law, or recent court rulings.

~~Owned Mineral Interests~~

When we lease our mineral interests to third-party exploration and production entities, we retain a royalty interest and may take an additional participation in production, including a working interest. At year-end 2016, mineral interests and any remaining oil and gas working interests are included in assets held for sale.

~~Oil and Gas Properties (Discontinued Operations)~~

We use the successful efforts method of accounting for our oil and gas producing activities. Costs to acquire mineral interests leased, costs to drill and complete development of oil and gas wells and related asset retirement costs are capitalized. Costs to drill exploratory wells are capitalized pending determination of whether the wells have proved reserves and if determined incapable of producing commercial quantities of oil and gas these costs are expensed as dry hole costs. At year-end 2016, we have no capitalized exploratory well costs pending determination of proved reserves. Exploration costs include dry

hole costs, geological and geophysical costs, expired unproved leasehold costs and seismic studies, and are expensed as incurred. Production costs incurred to maintain wells and related equipment are charged to expense as incurred.

Depreciation and depletion of producing oil and gas properties is calculated using the units-of-production method. Proved developed reserves are used to compute unit rates for unamortized tangible and intangible drilling and completion costs. Proved reserves are used to compute unit rates for unamortized acquisition of proved leasehold costs. Unit-of-production amortization rates are revised whenever there is an indication of the need for revision but at least once a year and those revisions are accounted for prospectively as changes in accounting estimates.

~~Impairment of Oil and Gas Properties~~

We evaluate our oil and gas properties, including facilities and equipment, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. We estimate the expected undiscounted future cash flows of our oil and gas properties and compare such undiscounted future cash flows to the carrying amount of the oil and gas properties to determine if the carrying amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, we will adjust the carrying amount of the oil and gas properties to fair value. The factors used to determine fair value are subject to our judgment and expertise and include, but are not limited to, recent sales prices of comparable properties, the present value of future cash flows, net of estimated operatingLand and development costs using estimates of proved reserves, future commodity pricing, future production estimates, anticipated capital expenditures, and various discount rates commensurate with the risk and current market conditions associated with realizing the expected cash flows projected. Because of the uncertainty inherent in these factors, we cannot predict when or if future impairment charges for proved properties will be recorded.

~~The assessment of unproved leasehold properties~~are typically allocated to ~~determine any possible impairment requires significant judgment. We assess our unproved leasehold properties periodically for impairment on a property-by-property basis~~individual residential lots based on remaining lease terms, drilling results or future plans to develop acreage. Impairment expense for proved and unproved oil and gas properties are included in cost of mineral resources and cost of oil and gas producing activities in discontinued operations.

~~Operating Leases~~

We occupy office space in various locations under operating leases. The lease agreements may contain rent escalation clauses, construction allowances and/or contingent rent provisions. We expense operating leases ratably over the shorter of the useful life or the lease term. For scheduled rent escalation clauses, we recognize the base rent expense on a straight-line basis and record the difference between the recognized rent expense and the amounts payable under the lease as deferred lease credits included in other liabilities in the consolidated balance sheets. Deferred lease credits are amortized over the lease term. For construction allowances, we record leasehold improvement assets included in property and equipment in the consolidated balance sheets amortized over the shorter of their economic lives or the lease term. The related deferred lease credits are amortized as a reduction of rent expense over the lease term.

~~Property and Equipment~~

We carry property and equipment at cost less accumulated depreciation. We capitalize the cost of significant additions and improvements, and we expense the cost of repairs and maintenance. We capitalize interest costs incurred on major construction projects. We depreciate these assets using the straight-line method over their estimated useful lives as follows:

Estimated Year-End
Useful Lives 2016 2015
(In thousands)
Buildings and building improvements 10 to 40 years $ 2,700
$ 4,044
Property and equipment 2 to 10 years 4,957
12,230
7,657
16,274
Less: accumulated depreciation (4,541 ) (5,542 )
$ 3,116
$ 10,732

~~Depreciation expense of property and equipment was $889,000 in~~ ~~2016~~, ~~$1,067,000~~ in ~~2015~~ ~~and~~ ~~$903,000~~ in ~~2014~~.

~~Real Estate~~

We carry real estate at the lower of cost or fair value less cost to sell. We capitalize interest costs once development begins, and we continue to capitalize throughout the development period. We also capitalize infrastructure, improvements, amenities, and other development costs incurred during the development period. We determine the cost of real estate sold using the relative sales value ~~method. When we sell real estate from projects that are not finished, we include~~of the lot. Cost of sales includes applicable land and lot acquisition, land development and related costs (both incurred and estimated to be incurred) allocated to each residential lot in the ~~cost of real estate~~

~~sold estimates of future~~project. Any changes to the estimated total development costs ~~through completion,~~subsequent to the initial lot sales are generally allocated ~~based on relative sales values. These estimates of future development costs are reevaluated at least annually, with any adjustments being allocated prospectively~~ to the remaining ~~units available for sale. We receive cash~~lots.

The Company receives earnest money deposits from ~~home builders~~homebuilders for purchases of ~~vacant~~ developed ~~lots from community development projects.~~lots. These earnest money deposits are typically released to the ~~home builders~~homebuilders as lots are ~~developed~~sold. Earnest money deposits from D.R. Horton are subject to mortgages which are secured by the real estate under contract with D.R. Horton. These mortgages expire when the earnest money is released to D.R. Horton as lots are sold. See Note 15 for related party transactions and ~~sold.~~balances.

~~Income producing properties are carried at cost less accumulated depreciation computed using the straight-line method over their estimated useful lives.~~

~~We have~~The Company has agreements with certain utility or improvement districts ~~principally in Texas, whereby we agree~~ to convey ~~to the districts~~ water, sewer and other infrastructure-related assets ~~we have~~it has constructed in connection with projects within their ~~jurisdiction.~~jurisdiction and receive reimbursements for the cost of these improvements. The reimbursement amounts for these ~~assets ranges from~~ 70 to ~~90 percent~~ ~~of allowable cost as~~improvements are defined by the ~~district.~~district and are based on the allowable costs of the improvements. The transfer is consummated and ~~we receive~~the Company generally receives payment when the districts have a sufficient tax base to support funding of their bonds. The cost ~~we incur~~incurred by the Company in constructing these ~~assets~~improvements, net of the amount expected to be collected in the future, is included in ~~capitalized~~the Company's land development ~~costs,~~budgets and ~~upon collection, we remove~~in the ~~assets from capitalized development~~determination of lot costs. ~~We provide an allowance to reflect our past experiences related to claimed allowable development costs.~~

~~Impairment of Real Estate Long-Lived Assets~~

~~We review~~The Company reviews real estate ~~long-lived~~ assets held for use for impairment when events or circumstances indicate that their carrying value may not be recoverable. Impairment exists if the carrying amount of the ~~long-lived~~ asset is not recoverable from the undiscounted cash flows expected from its use and eventual disposition. ~~We determine the~~The amount of the impairment loss is determined by comparing the carrying value of the ~~long-lived~~ asset to its estimated fair ~~value. In the absence of quoted market prices, we determine estimated fair~~ value, which is generally determined based on the present value of future ~~probability weighted~~ cash flows expected from the sale of the ~~long-lived~~ asset. ~~Non-cash impairment charges related to our owned and consolidated real~~Real estate ~~assets~~impairments are included in cost of sales in the consolidated statements of operations. See Note 3.

Capitalized Interest

The Company capitalizes interest costs throughout the development period (active real estate). Capitalized interest is charged to cost of sales as the related real estate ~~sales~~is sold to the buyer. During periods in which the Company’s active real estate is lower than its debt level, a portion of the interest incurred is reflected as interest expense in the period incurred. During fiscal 2020 and ~~other. In 2016, we~~2019, the Company’s active real estate exceeded its debt level, and all interest incurred was capitalized to real estate. See Note 5.

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FORESTAR GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. The cost of significant additions and improvements is capitalized and the cost of repairs and maintenance is expensed as incurred. Depreciation generally is recorded ~~$56,453,000~~using the straight-line method over the estimated useful life of the asset as follows:


	Estimated Useful Lives	September 30,
		2020		2019
		(In millions)
Leasehold improvements	5 to 10 years	$	1.2	$	0.9
Property and equipment	2 to 10 years	1.1		3.4
Total property and equipment		2.3		4.3
Accumulated depreciation		(1.2)		(1.9)
Property and equipment, net		$	1.1	$	2.4

Depreciation expense was $0.3 million, $0.3 million and $0.2 million in ~~non-cash impairment charges~~fiscal 2020, 2019 and the nine months ended September 30, 2018, respectively.

Income Taxes

The Company’s income tax expense is calculated using the asset and liability method, under which deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement amounts of assets and liabilities and their respective tax bases and attributable to net operating losses and tax credit carryforwards. When assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of its deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the generation of sufficient taxable income in future periods and in the jurisdictions in which those temporary differences become deductible. The Company records a valuation allowance when it determines it is more likely than not that a portion of the deferred tax assets will not be realized. The accounting for deferred taxes is based upon estimates of future results. Differences between the anticipated and actual outcomes of these future results could have a material impact on the Company’s consolidated results of operations or financial position. Also, changes in existing federal and state tax laws and tax rates could affect future tax results and the valuation of the Company’s deferred tax assets and liabilities.

Interest and penalties related to ~~six non-core community development projects and two multifamily sites.~~

~~Revenue~~

~~Real Estate~~

~~We recognize revenue from sales~~unrecognized tax benefits are recognized in the financial statements as a component of ~~real estate when a sale~~income tax expense. Significant judgment is ~~consummated, the buyer’s initial investment is adequate, any receivables are probable of collection, the usual risks and rewards of ownership have been transferred~~required to the buyer, and we do not have significant continuing involvement with the real estate sold. If we determine that the earnings process is not complete, we defer recognition of any gain until earned. We recognize revenue from hotel room sales and other guest services when rooms are occupied and other guest services have been rendered. We recognize rental revenues from our multifamily properties when earned in accordance with the terms of the respective leasesevaluate uncertain tax positions. The Company evaluates its uncertain tax positions on a ~~straight-line basis for~~quarterly basis. The evaluations are based upon a number of factors, including changes in facts or circumstances, changes in tax law, correspondence with tax authorities during the ~~period~~course of ~~occupancy.~~

We recognize construction revenues on multifamily projects that we develop as a general contractor. Construction revenues are recognized as costs are incurred plus fixed fee earned. We are reimbursed for costs paid to subcontractors plus we may earn a developmentaudits and ~~construction management fee on multifamily projects we develop, both~~effective settlement of ~~which are included~~audit issues. Changes in ~~commercial and~~the recognition or measurement of uncertain tax positions could result in increases or decreases in the Company’s income producing properties revenue. On multifamily projects where our fee is based on a fixed fee plus guaranteed maximum price contract, any cost overruns incurred during construction, as compared to the original budget, will reduce the net fee generated on these projects. Any excess cost overruns estimated over the net fee generated are recognizedtax expense in the period in which ~~they become evident. At year-end 2016, we were not a general contractor on any~~the change is made. See Note 11.

Stock-Based Compensation

The Company’s stockholders formally authorize shares of its common stock to be available for future grants of stock-based compensation awards. From time to time, the Compensation Committee of the ~~multifamily projects currently under construction~~Company’s Board of Directors authorizes the grant of stock-based compensation to its employees and ~~we do not anticipate~~directors from these available shares. At September 30, 2020, the outstanding stock-based compensation awards consist of restricted stock units. Grants of restricted stock units vest over a certain number of years as determined by the Compensation Committee of the Board of Directors. Restricted stock units outstanding at September 30, 2020 have a remaining vesting period of 1 to be5 years.

The compensation expense for stock-based awards is based on the fair value of the award and is recognized on a ~~general contractor on any new multifamily projects as we determined multifamily was non-core and we would not be making any new investments in this business.~~

~~We exclude from revenue amounts we collect from utility or improvement districts related to~~straight-line basis over the ~~conveyance~~remaining vesting period. The fair values of water, sewer and other infrastructure related assets. We also exclude from revenue amounts we collect for timber sold on land being developed. These proceeds reduce capitalized development costs. We exclude from revenue amounts we collect from customers that represent sales tax or other taxes thatrestricted stock units are based on the ~~sale. These amounts are included~~Company’s stock price at the date of grant. See Note 13.

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FORESTAR GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Fair Value Measurements

The FASB's authoritative guidance for fair value measurements establishes a three-level hierarchy based upon the inputs to the valuation model of an asset or liability. When available, the Company uses quoted market prices in ~~other accrued expenses until paid.~~

~~Oil and Gas Working Interest Revenues (Discontinued Operations)~~

We recognize revenue as oil and gas is produced and sold. There are a significant amount of oil and gas properties which we do not operate and, therefore, revenue is typically recorded in the month of production based on an estimate of our share of volumes produced and prices realized. We obtain the most current available production data from the operators and price indices for each wellactive markets to ~~estimate the accrual of revenue. Obtaining production data~~determine fair value. Non-financial assets measured at fair value on a ~~timely~~non-recurring basis principally include real estate assets which the Company reviews for ~~some wells~~indicators of impairment when events and circumstances indicate that the carrying value is not feasible; therefore we utilize past production receipts and estimated sales price information to estimate accrual of working interest revenue on all other non-operated wells each month. Revisions to such estimates are recorded as actual results becomerecoverable. See Note 9.

~~known. We review accounts receivable periodically and reduce the carrying amount by a valuation allowance that reflects our best estimate of the amount that may not be collectible.~~

A majority of our sales are made under contractual arrangements with terms that are considered to be usual and customary in the oil and gas industry. The contracts are for periods of up to five years with prices determined upon a percentage of pre-determined and published monthly index price. The terms of these contracts have not had an effect on how we recognize revenue.

~~Mineral Resources~~

We recognize revenue from mineral bonus payments when we have received an executed agreement with the exploration company transferring the rights to any oil or gas it may find and requiring drilling be done within a specified period, the payment has been collected, and we have no obligation to refund the payment. We recognize revenue from delay rentals received if drilling has not started within the specified period and when the payment has been collected. We recognize revenue from mineral royalties and non-working interests when the minerals have been delivered to the buyer, the value is determinable, and we are reasonably sure of collection.

~~Other~~

We recognize revenue from timber sales upon passage of title, which occurs at delivery; when the price is fixed and determinable; and we are reasonably sure of collection. We recognize revenue from recreational leases on the straight-line basis over the lease term. We recognize revenue from the sale of water rights or groundwater reservation agreements upon receipt of an executed agreement and payment has been collected and all conditions to the agreement have been met and we have no further performance obligations to meet. The water delivery revenues will be recognized as water is being delivered and metered at the delivery point.

~~Share-Based Compensation~~

We use the Black-Scholes option pricing model for stock options, Monte Carlo simulation pricing model for market-leveraged stock units and for stock options with market conditions, grant date fair value for equity-settled awards and period-end fair value for cash-settled awards. We expense share-based awards ratably over the vesting period or earlier based on retirement eligibility.

~~Timber~~

We carry timber at cost less the cost of timber cut. We expense the cost of timber cut based on the relationship of the timber carrying value to the estimated volume of recoverable timber multiplied by the amount of timber cut. We include the cost of timber cut in cost of other. We determine the estimated volume of recoverable timber using statistical information and other data related to growth rates and yields gathered from physical observations, models and other information gathering techniques. Changes in yields are generally due to adjustments in growth rates and similar matters and are accounted for prospectively as changes in estimates. We capitalize reforestation costs incurred in developing viable seedling plantations (up to ~~two years~~ from planting), such as site preparation, seedlings, planting, fertilization, insect and wildlife control, and herbicide application. We expense all other costs, such as property taxes and costs of forest management personnel, as incurred. Once the seedling plantation is viable, we expense all costs to maintain the viable plantations, such as fertilization, herbicide application, insect and wildlife control, and thinning, as incurred.

~~We own about 19,000 acres of non-core timberland and undeveloped land, in Georgia and Texas. The non-cash cost of timber cut and sold is $63,000 in 2016,~~ ~~$250,000~~ in ~~2015~~ ~~and~~ ~~$371,000~~ in ~~2014~~ ~~and is included in depreciation, depletion and amortization in our consolidated statements of cash flows.~~

~~Note 2 — New and~~ Pending ~~Accounting Pronouncements~~

~~Adoption of New~~ Accounting Standards

In ~~April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-03,~~ ~~Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,~~ as part of its initiative to reduce complexity in accounting standards. To simplify presentation of debt issuance costs, the amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. In August 2015,June 2016, the FASB issued ASU ~~2015-15,~~ ~~Interest-Imputation of Interest (Subtopic 835-30), Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements~~2016-13, “Financial Instruments - ~~Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update),~~ Credit Losses,” which allows an entity to defer and present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The updated standards are effective for

~~financial statements issued for annual and interim periods beginning after December 15, 2015. We adopted ASU 2015-03 in first quarter 2016 and prior period amounts have been reclassified to conform to~~replaces the current ~~period presentation. As~~incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of ~~December 31, 2015, $8,267,000~~a broader range of ~~debt issuance costs were reclassified~~reasonable and supportable information in determining credit loss estimates. The guidance is effective for the ~~consolidated balance sheets from other assets~~Company beginning October 1, 2020 and is not expected to ~~debt. The adoption did not~~have a material impact ~~our~~on its consolidated financial position, results of operations or cash flows. ~~As permitted under this guidance, we will continue to present debt issuance costs associated with revolving-debt agreements as other assets.~~

In ~~February 2015,~~December 2019, the FASB issued ASU ~~2015-02,~~ ~~Consolidation: Amendments~~2019-12 related to simplifying the ~~Consolidation Analysis (Topic 810), requiring entities to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model.~~accounting for income taxes. The revised consolidation model: (1) modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, (2) eliminates the presumption that a general partner should consolidate a limited partnership, (3) affects the consolidation analysis of reporting entities that are involved with VIEs, and (4) provides a scope exception from consolidation guidance ~~for reporting entities with interests in certain legal entities. The updated standard~~ is effective for ~~financial statements issued for annual and interim periods~~the Company beginning ~~after December 15, 2015.~~October 1, 2021, although early adoption is permitted. The ~~adoption~~Company is currently evaluating the impact of this guidance, ~~which was applied retrospectively, had no impact to our consolidated financial statements.~~

~~In January 2015, the FASB issued ASU 2015-01,~~ ~~Income Statement - Extraordinary~~ and ~~Unusual Items(Subtopic 225-20),~~ which eliminates the concept of extraordinary items from U.S. GAAP. The updated standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, provided that the guidance is applied from the beginning of the fiscal year of adoption. The adoption of this guidance had no impact on our financial statements and related disclosures.

~~Pending Accounting Standards~~

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606), requiring an entity to recognize the amount of revenue to which~~ it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. Early adoption is not ~~permitted. The updated standard becomes effective for annual and interim periods beginning after December 15, 2017. The guidance permits two methods of adoption: retrospectively~~expected to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). We currently anticipate adopting the standard using the cumulative catch-up transition method. We anticipate this standard will not have a material impact on ~~our~~its consolidated financial ~~statements. While we are continuing to assess all potential impacts~~position, results of the standard, we expect revenue related to lot and tract sales to remain substantially unchanged. Due to the complexity of certain of our real estate sale transactions, the revenue recognition treatment required under the standard will be dependent on contract-specific terms, and may vary in some instances from recognition at the time of the sale closing.operations or cash flows.

In ~~February 2016,~~March 2020, the FASB issued ASU ~~2016-02,~~ ~~Leases (Topic 842).~~ ~~This ASU requires lessees~~2020-04, “Reference Rate Reform,” which provides optional expedients and exceptions for applying U.S. GAAP to put most leases on their balance sheets but recognize expenses on their income statements in a manner that is similar to today's accounting. This guidance also eliminates today's real estate-specific provisions for all entities. For lessors,contracts, hedging relationships, and other transactions affected by the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. This guidance is effective in 2019, and interim periods within that year. Early adoption is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. We are currently evaluating the effect the updated standard will have on our financial position and disclosures.

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, as part of its simplification initiative. The areas for simplification in this update involve several aspects~~discontinuation of the ~~accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity~~London Interbank Offered Rate (LIBOR) or ~~liabilities,~~by another reference rate expected to be discontinued. The guidance was effective beginning March 12, 2020 and ~~the classification on the statement of cash flows. The updated standard becomes effective for annual and interim periods beginning after~~can be applied prospectively through December 31, ~~2016. We are currently evaluating the effect that the updated~~2022. The Company will adopt this standard ~~will have on our earnings, financial position~~when LIBOR is discontinued and ~~disclosures, but we do~~does not expect it to have a material impact on ~~our~~its consolidated financial ~~statements.~~statements and related disclosures.

~~In August 2016,~~

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FORESTAR GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 2 — Segment Information

Since the ~~FASB issued ASU 2016-15,~~ ~~Statement~~beginning of ~~Cash Flows (Topic 230), in order~~fiscal 2019, the Company has managed its operations through its real estate segment, which is its core business and generates substantially all of its revenues. The real estate segment primarily acquires land and develops infrastructure for single-family residential communities, and its revenues generally come from sales of residential single-family finished lots to ~~address eight specific cash flow issues~~local, regional and national homebuilders. The Company has other business activities for which the related assets and operating results are immaterial, and therefore are included within the Company's real estate segment. As such, the operating results of the Company's real estate segment are consistent with ~~the objective~~its consolidated operating results and no separate disclosure is required as of ~~reducing~~and for the ~~existing diversity in practice. The updated standard is effective for financial statements issued for annual periods beginning after December 15, 2017 and interim periods within those~~ fiscal years ~~with early adoption permitted. We are currently evaluating~~ended September 30, 2020 and 2019.

During the ~~effect that~~nine months ended September 30, 2018, the ~~updated standard will have on our earnings, financial position~~Company managed its operations through its real estate segment and ~~disclosures, but we do~~other segment (previously referred to as other natural resources). Additionally, certain costs and assets were not ~~expect it to have a material effect on our consolidated financial statements.~~

~~In November, 2016, the FASB issued ASU 2016-18,~~ ~~Statement of Cash Flows (Topic 230).~~ ~~This ASU requires that a statement of cash flow explain the change during the period in the total of cash, cash equivalents, and amounts generally~~

described as restricted cash or restricted cash investments. This standard is effective for fiscal years beginning after December 15, 2017. The adoption of ASU 2016-18 will modify our current disclosures and reclassifications relatingallocated to the ~~consolidated statements~~Company’s segments. The accounting policies of ~~cash flows, but we do not expect it~~the segments are the same as those described throughout Note 1. Segment results for the nine months ended September 30, 2018 were as follows:


	Nine Months Ended September 30, 2018
	Real Estate		Other		Items Not Allocated		Consolidated
	(In millions)
Revenues	$	78.3	$	0	$	0	$	78.3
Cost of sales	48.9		0.6		0		49.5
Selling, general and administrative expense	7.1		0.3		12.0		19.4
Equity in earnings of unconsolidated ventures	(4.8)		0		0		(4.8)
Gain on sale of assets (1)	(18.6)		(9.2)		0		(27.8)
Interest expense	0		0		3.7		3.7
Interest and other income	(1.8)		0		(4.6)		(6.4)
Income before income taxes	47.5		8.3		(11.1)		44.7
Net income attributable to noncontrolling interests	1.2		0		0		1.2
Income before income taxes attributable to Forestar Group Inc.	$	46.3	$	8.3	$	(11.1)	$	43.5

______________

(1)Gain on sale of assets within the real estate segment consisted primarily of a gain of $14.6 million related to ~~have~~the sale of the Company's interest in a ~~material effect~~multi-family venture near Denver. Gain on ~~our consolidated financial statements.~~sale of assets within the other segment relates to the sale of non-core water interests in Texas, Louisiana, Georgia and Alabama.

Note 3 — Real Estate

Real estate consists of:


	September 30,
	2020		2019
	(In millions)
Developed and under development projects	$	1,304.3	$	1,011.8
Undeveloped land	5.4		17.1
	$	1,309.7	$	1,028.9

In fiscal 2020, the Company invested $550.8 million for the acquisition of residential real estate and $503.0 million for the development of residential real estate. At September 30, 2020 and 2019, undeveloped land primarily consists of undeveloped land which the Company has the contractual right to sell to D.R. Horton within approximately one year of its purchase or, if D.R. Horton elects, at an earlier date, at a sales price equal to the carrying value of the land at the time of sale plus additional consideration of 16% per annum.

Table of Contents

FORESTAR GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Year-End 2016 Year-End 2015
Carrying Value Accumulated Depreciation Net Carrying Value Carrying Value Accumulated Depreciation Net Carrying Value
(In thousands)
Entitled, developed and under development projects $ 263,859
$ —
$ 263,859
$ 352,141
$ —
$ 352,141
Undeveloped land (includes land in entitlement) 29,144
—
29,144
98,181
—
98,181
Commercial
Radisson Hotel & Suites ^(a)
—
—
—
62,889
(29,268 ) 33,621
Income producing properties
Eleven ^(a)
—
—
—
53,896
(2,861 ) 51,035
Dillon ^(a)
—
—
—
19,987
—
19,987
Music Row ^(a)
—
—
—
9,947
—
9,947
Downtown Edge ^(a)
—
—
—
12,706
—
12,706
West Austin ^(b)
—
—
—
9,097
—
9,097
$ 293,003
$ —
$ 293,003
$ 618,844
$ (32,129 ) $ 586,715

~~_________________________~~


^(a)	~~Sold in 2016.~~


^(b)	~~Classified as assets held for sale at year-end 2016.~~

~~In 2016, we recognized non-cash~~Each quarter the Company reviews the performance and outlook for all of its real estate for indicators of potential impairment ~~charges of $56,453,000 related to six non-core community development projects~~ and ~~two multifamily sites. These impairments were~~performs detailed impairment evaluations and analyses when necessary. As a result of ~~our key initiative to review our entire portfolio~~this process there were 0 real estate impairment charges recorded in fiscal 2020 and $0.8 million and $0.3 million of ~~assets which resulted in business plan changes, inclusive of cash tax savings considerations, to market these properties for sale, which resulted in adjustment of~~impairment charges were recorded during fiscal 2019 and the ~~carrying value to fair value.~~nine months ended September 30, 2018, respectively.

~~In 2016, we sold the Radisson Hotel & Suites, a 413 room hotel in Austin, for $130,000,000, generating $128,764,000 in net proceeds before paying in full the associated debt of $15,400,000~~

During fiscal 2020 and recognized a gain on sale of $95,336,000. We also sold Eleven, a wholly-owned 257-unit multifamily property in Austin, for $60,150,000, generating $59,719,000 in net proceeds before paying in full the associated debt of $23,936,000 and recognized a gain on sale of $9,116,000. In addition, we sold Dillon, a planned 379-unit multifamily property that was under construction in Charlotte, for $25,979,000, generating $25,428,000 in net proceeds and recognized a gain on sale of $1,223,000, and Music Row, a planned 230-unit multifamily property that was under construction in Nashville, for $15,025,000, generating $14,703,000 in net proceeds and recognized a gain on sale of $3,968,000 . We also sold Downtown Edge, a multifamily site in Austin, for $5,000,000, generating $4,975,000 in net proceeds and recognized a loss of $3,870,000.

In 2015, we sold Midtown Cedar Hill, a 354-unit multifamily property we developed near Cedar, Hill, Texas for $42,880,000, generating segment earnings of $9,265,000 and generating $42,639,000 in net proceeds before paying in full the associated debt of $24,166,000.

~~Depreciation expense~~2019, pre-acquisition cost write-offs related to ~~commercial~~land purchase contracts that the Company has terminated or expects to terminate were $0.9 million and ~~income producing properties was $816,000 in 2016, $6,810,000 in 2015 and $3,319,000 in 2014 and is included in other operating expense.~~

As a general contractor on guaranteed maximum price contracts associated with two multifamily venture properties, we recognized charges of $392,000 in 2016, $1,543,000 in 2015 and $5,111,000 in 2014 related to$0.2 million, respectively. There were no pre-acquisition cost ~~overruns.~~

~~Our estimated cost of assets for which we expect to be reimbursed by utility and improvement districts were $45,157,000 at year-end 2016 and~~ ~~$67,554,000~~ ~~at year-end~~ ~~2015, which included $14,749,000 at year-end 2016 and~~ ~~$22,302,000~~ ~~at year-end~~ ~~2015~~ related to our Cibolo Canyons project near San Antonio. In 2016, we collected $26,606,000 in reimbursements that were previously submitted to these districts. At year-end 2016, our inception to-date submitted and approved reimbursements for the

Cibolo Canyons project were $54,376,000, of which we have collected $45,132,000. These costs are principally for water, sewer and other infrastructure assets that we have incurred and submitted or will submit to utility or improvement districts for approval and reimbursement. We expect to be reimbursed by utility and improvement districts when these districts achieve adequate tax basis or otherwise have funds available to support payment.

In 2014, we received $50,550,000 from Cibolo Canyons special improvement district (CCSID) and recognized a gain of $6,577,000 related to its issuance of $48,900,000 Hotel Occupancy Tax (HOT) and Sales and Use Tax Revenue Bonds. These bonds are obligations solely of CCSID and are payable from HOT and sales and use taxes levied on the Resort by CCSID. To facilitate the issuance of the bonds, we provided a $6,846,000 letter of credit to the bond trustee as security for certain debt service fund obligationswrite-offs in the event CCSID tax collections are not sufficient to support payment of the bonds in accordance with their terms. The letter of credit must be maintained until the earlier of redemption of the bonds or scheduled bond maturity in 2034. We also entered into an agreement with the owner of the Resort to assign its senior rights to us in exchange for consideration provided by us, including a surety bond to be drawn if CCSID tax collections are not sufficient to support ad valorem tax rebates payable. The surety bond has a balance of $6,631,000 at year-end 2016. The deferred gains related to the letter of creditnine months ended September 30, 2018. Real estate impairments and ~~surety bond~~land option charges are included in other liabilities on our consolidated balance sheet. The surety bond decreases and gains are recognized as CCSID makes annual ad valorem tax rebate payments, which obligation is scheduled to be retired in full by 2020. All future receipts are expected to be recognized as gainscost of sales in the ~~period collected. We recorded gains~~consolidated statements of $1,219,000 and $1,160,000 in 2016 and 2015 associated with reduction of surety bond and gains of $501,000 and $425,000 in 2016 and 2015 associated with excess hotel occupancy and sales and use tax revenues from CCSID in 2015.operations.

Note 4 — Revenues

Revenues consist of:


	Year Ended September 30,				Nine Months Ended September 30, 2018
	2020		2019
	(In millions)
Residential lot sales	$	880.3	$	351.7	$	72.0
Residential tract sales	48.6		55.8		3.6
Commercial tract sales	2.5		18.5		2.0
Other	0.4		2.3		0.7
	$	931.8	$	428.3	$	78.3

Land and lot sales to D.R. Horton were $887.6 million, $326.6 million and $39.1 million in fiscal 2020, 2019 and the nine months ended September 30, 2018, respectively.

Note 5 — Capitalized Interest

The following table summarizes the Company’s interest costs incurred, capitalized and expensed in fiscal 2020, 2019 and the nine months ended September 30, 2018.


	Year Ended September 30,				Nine Months Ended September 30, 2018
	2020		2019
	(In millions)
Capitalized interest, beginning of period	$	23.7	$	3.2	$	0.5
Interest incurred	43.3		25.3		7.3
Interest expensed:
Directly to interest expense	0		0		(3.7)
Charged to cost of sales	(18.3)		(4.8)		(0.9)
Capitalized interest, end of period	$	48.7	$	23.7	$	3.2

Table of Contents

FORESTAR GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 6 — Investment in Unconsolidated Ventures

~~We participate~~

In the past, the Company has participated in real estate ventures for the purpose of acquiring and developing residential, ~~multifamily~~multi-family and mixed-use communities in which weit may or may not have a controlling financial interest. ~~U.S.~~ GAAP requires consolidation of ~~Variable Interest Entities~~variable interest entities (VIEs) in which an enterprise has a controlling financial interest and is the primary beneficiary. A controlling financial interest will have both of the following characteristics: (a) the power to direct the VIE activities that most significantly impact economic performance and (b) the obligation to absorb the VIE losses and right to receive benefits that are significant to the VIE. ~~We examine~~The Company examines specific criteria and ~~use~~uses judgment when determining whether a venture is a VIE and whether ~~we are~~it is the primary beneficiary. ~~We perform~~The Company performs this review initially at the time ~~we enter~~it enters into venture agreements and ~~reassess~~reassesses upon reconsideration events.

At ~~year-end 2016, we~~September 30, 2020, the Company had ownership interests in 164 ventures that weit accounted for using the equity ~~method, none of which are a VIE.~~

~~In 2016, we sold our interest in FMF Peakview LLC (360~~⁰~~), a 304-unit multifamily joint venture near Denver, generating $13,917,000 in net proceeds and recognized a gain of $10,363,000 which is included in gain on sale of assets.~~

method. Combined summarized balance sheet ~~information for our ventures accounted for using the equity method follows:~~

Venture Assets
Venture Borrowings ^(a)
Venture Equity Our Investment
At Year-End
2016 2015 2016 2015 2016 2015 2016 2015
(In thousands)
242, LLC ^(b)
$ 26,503
$ 26,687
$ 1,107
$ —
$ 23,136
$ 24,877
$ 10,934
$ 11,766
CL Ashton Woods, LP ^(c)
2,653
7,654
—
—
2,198
6,084
1,107
3,615
CL Realty, LLC 8,048
7,872
—
—
7,899
7,662
3,950
3,831
CREA FMF Nashville LLC ^(b)
56,081
57,820
37,446
50,845
17,091
4,291
4,923
3,820
Elan 99, LLC 49,652
34,192
36,238
14,587
13,100
15,838
11,790
14,255
FMF Littleton LLC 70,282
52,376
44,446
22,347
23,798
24,370
6,128
6,270
FMF Peakview LLC —
48,869
—
30,485
—
16,828
—
3,447
FOR/SR Forsyth LLC 10,672
6,500
1,568
—
8,990
6,500
8,091
5,850
HM Stonewall Estates, Ltd ^(c)
852
2,842
—
—
852
2,842
477
1,294
LM Land Holdings, LP ^(c)
25,538
31,984
3,477
7,728
20,945
22,751
9,685
9,664
MRECV DT Holdings LLC 4,155
4,215
—
—
4,144
4,215
3,729
3,807
MRECV Edelweiss LLC 3,484
2,237
—
—
3,484
2,237
3,358
2,029
MRECV Juniper Ridge LLC 4,156
3,006
—
—
4,156
3,006
3,741
2,730
MRECV Meadow Crossing II LLC 2,492
728
—
—
2,491
728
2,242
655
Miramonte Boulder Pass, LLC 10,738
12,627
4,006
5,869
5,265
5,474
5,330
5,349
Temco Associates, LLC 4,368
5,284
—
—
4,253
5,113
2,126
2,557
Other ventures (d) —
4,174
—
2,242
—
1,922
—
1,514
$ 279,674
$ 309,067
$ 128,288
$ 134,103
$ 141,802
$ 154,738
$ 77,611
$ 82,453

~~Combined summarized~~and income statement information for ~~our~~these unconsolidated ventures ~~accounted for using~~follows:


	September 30,
	2020		2019
	(In millions)
Assets:
Cash and cash equivalents	$	1.2	$	1.6
Real estate	6.1		13.6
Other assets	0.2		0.1
Total assets	$	7.5	$	15.3
Liabilities and Equity:
Accounts payable and other liabilities	$	0.2	$	0.3
Equity	7.3		15.0
Total liabilities and equity	$	7.5	$	15.3

Forestar's investment in unconsolidated ventures	$	3.6	$	7.3


	Year Ended September 30,				Nine Months Ended September 30, 2018
	2020		2019
	(In millions)
Revenues	$	3.5	$	1.9	$	22.2
Earnings	3.8		1.3		15.1
Forestar's equity in earnings of unconsolidated ventures	0.7		0.5		4.8

During fiscal 2020, 2019 and the ~~equity method follows:~~

Revenues Earnings (Loss) Our Share of Earnings (Loss)
For the Year
2016 2015 2014 2016 2015 2014 2016 2015 2014
(In thousands)
242, LLC ^(b)
$ 5,835
$ 20,995
$ 5,612
$ 1,259
$ 9,588
$ 2,951
$ 668
$ 4,919
$ 1,514
CL Ashton Woods, LP ^(c)
2,870
9,820
5,431
914
3,881
1,748
1,332
5,000
2,471
CL Realty, LLC 567
856
1,573
237
424
1,068
119
212
534
CREA FMF Nashville LLC ^{(b) (d)}
4,955
1,227
—
(1,420 ) (1,696 ) (163 ) 1,103
(1,696 ) (163 )
Elan 99, LLC 1,392
—
—
(2,739 ) (49 ) (87 ) (2,465 ) (44 ) (78 )
FMF Littleton LLC 3,116
120
—
(571 ) (367 ) (239 ) (143 ) (92 ) (60 )
FMF Peakview LLC 939
2,057
4
(248 ) (1,116 ) (410 ) (50 ) (223 ) (83 )
FOR/SR Forsyth LLC —
—

(65 ) —

(58 ) —

HM Stonewall Estates, Ltd. ^(c)
2,112
3,990
1,728
832
1,881
613
361
952
248
LM Land Holdings, LP ^(c)
10,001
10,956
21,980
7,288
8,251
15,520
2,458
3,342
4,827
MRECV DT Holdings LLC 495
—

477
167

429
—

MRECV Edelweiss LLC 416
—

409
151

368
137

MRECV Juniper Ridge LLC 379
—

380
106

342
—

MRECV Meadow Crossing II LLC 267
—
—
220
—
—
198
—
—
Miramonte Boulder Pass, LLC 4,923
—

(399 ) (250 )

(200 ) (125 )

PSW Communities, LP —
29,986
—
—
2,688
(86 ) —
1,169
(76 )
TEMCO Associates, LLC 1,344
9,485
2,155
440
2,358
494
220
1,179
247
Other ventures 6,519
36,237
3,960
2,105
33,303
3,879
1,441
1,278
(696 )
$ 46,130
$ 125,729
$ 42,443
$ 9,119
$ 59,320
$ 25,288
$ 6,123
$ 16,008
$ 8,685

~~_____________________~~


^(a)	~~Total includes current maturities of~~ ~~$89,756,000~~ ~~at year-end 2016, of which~~ ~~$78,557,000~~ ~~is non-recourse to us, and~~ ~~$39,590,000~~ ~~at year-end~~ ~~2015, of which~~ ~~$29,691,000~~ ~~is non-recourse to us.~~


^(b)	~~Includes unamortized deferred gains on real estate contributed by us to ventures. We recognize deferred gains as income as real estate is sold to third parties. Deferred gains of~~ ~~$1,457,000~~ ~~are reflected as a reduction to our investment in unconsolidated ventures at year-end 2016.~~

^(c)

~~Includes unrecognized basis difference of~~ ~~$259,000~~ which is reflected as an increase of our investment in unconsolidated ventures at year-end 2016. This difference between estimated fair value of the equity investment and our capital account within the respective ventures at closing will be accreted as income or expense over the life of the investment and included in our share of earnings (loss) from the respective ventures.


^(d)	~~Our share of venture earnings in 2016 includes reallocation of prior year cumulative losses incurred by the venture as a result of equity contribution by the venture partner in 2016.~~

~~In 2016, we invested~~ ~~$6,089,000~~nine months ended September 30, 2018, the Company made 0 further investments in these ventures and received ~~$13,419,000~~ ~~in distributions; in~~ ~~2015, we invested~~ ~~$26,349,000~~ ~~in these ventures~~$4.3 million, $5.0 million and ~~received~~ ~~$24,909,000~~ ~~in distributions; and in~~ ~~2014, we invested~~ ~~$14,692,000~~ ~~in these ventures and received~~ ~~$7,518,000~~$4.3 million, respectively, in distributions. Distributions include both return of investments and distributions of earnings.

~~We provide construction~~

In the nine months ended September 30, 2018, the Company's equity in earnings from one of its unconsolidated ventures in which it owns a 37.5% interest, LM Land Holdings, LP, accounted for over 10% of the Company's consolidated pre-tax income. At September 30, 2018, LM Land Holdings, LP had $21.6 million in venture assets, $0.4 million in accounts payable and ~~development services for some~~other liabilities, and $21.2 million in venture equity on its balance sheet. At September 30, 2018, the Company's investment in this venture was $8.9 million. In the nine months ended September 30, 2018, LM Land Holdings, LP recognized $17.4 million of revenues and generated $18.1 million in earnings, which includes $5.7 million of earnings related to the recognition of a deferred gain. The Company's share of these ~~ventures for which we receive fees. Fees for these services were $2,466,000 in 2016,~~ ~~$1,856,000~~ in ~~2015~~ ~~and~~ ~~$2,275,000~~ in ~~2014, and are included in real estate revenues.~~earnings was $6.4 million.

~~Note 5 — Goodwill and Other Intangible Assets~~

~~Carrying value of goodwill and other intangible assets follows:~~

Table of Contents

FORESTAR GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Year-End
2016 2015
(In thousands)
Goodwill $ 37,900
$ 41,774
Identified intangibles, net —
1,681
$ 37,900
$ 43,455

~~Goodwill related~~In the nine months ended September 30, 2018, the Company sold its ownership interest in 8 of its unconsolidated ventures to ~~our mineral interests was $37,900,000 at year-end 2016~~Starwood as part of a strategic asset sale (see Note 1); its interest in a residential venture in Atlanta, generating $11.0 million in net proceeds and ~~2015. Goodwill associated with our water resources initiatives was $0~~a gain of $2.0 million; and ~~$3,874,000~~ ~~at year-end 2016~~its interest in a multi-family venture near Denver, generating $19.2 million in net proceeds and ~~2015.~~ a gain of $14.6 million.

In ~~2016, we~~the nine months ended September 30, 2018, a venture in which the Company owns a 50% interest recognized a ~~goodwill~~ non-cash impairment charge of ~~$3,874,000~~$3.0 million related to ~~interests~~a golf course near Atlanta. The Company's share of this charge is included within equity in ~~groundwater leases~~earnings of unconsolidated ventures in ~~central Texas as result of entering into an agreement to sell these assets. Impairment charges are included in cost of other on our~~its consolidated statements of ~~income (loss) and comprehensive income (loss).~~operations.

~~Identified intangibles include $1,681,000 in indefinite lived groundwater leases associated with our water resources initiatives and is included in assets held for sale at year-end 2016.~~

~~Note 6—Held for Sale~~

At year-end 2016, assets held for sale includes approximately 19,000 acres of timberland and undeveloped land and the related timber, a multifamily site in Austin, our owned mineral interest assets and central Texas groundwater assets.

~~The major classes of assets and liabilities of the properties held for sale at year-end 2016 are as follows:~~

At Year-End
2016
Assets Held for Sale: (In thousands)
Real estate $ 19,931
Timber 1,682
Other intangible assets 1,681
Oil and gas properties and equipment, net 782
Property and equipment, net 6,301
$ 30,377

Liabilities Held for Sale:
Other liabilities 103
$ 103

Note7 — ~~Discontinued Operations~~Other Assets, Accrued Expenses and Other Liabilities

~~At year-end 2016, we have divested substantially all of our oil~~

The Company's other assets at September 30, 2020 and gas working interest properties. As a result of this significant change in our operations, we have reported the results of operations and financial position of these assets as discontinued operations within the consolidated statements of income (loss) and comprehensive income (loss) and consolidated balance sheets for all periods presented. In addition, in second quarter 2016, we changed the name of the oil and gas segment to mineral resources to reflect the strategic shift from oil and gas working interest investments to owned mineral interests.

~~Summarized results from discontinued operations~~2019 were as follows:


	September 30,
	2020		2019
	(In millions)
Receivables, net	$	0.4	$	1.1
Earnest money notes receivable on sales contracts	4.8		0
Lease right of use assets	3.6		0
Prepaid expenses	4.9		3.4
Land purchase contract deposits	5.5		5.1
Other assets	5.7		4.1
	$	24.9	$	13.7

For the Year
2016 2015 2014

Revenues $ 5,862
$ 43,845
$ 68,610
Cost of oil and gas producing activities (6,578 ) (221,402 ) (94,581 )
Other operating expenses (7,754 ) (10,363 ) (14,357 )
Loss from discontinued operations before income taxes $ (8,470 ) $ (187,920 ) $ (40,328 )
Gain (loss) on sale of assets before income taxes (13,664 ) (706 ) 8,526
Income tax benefit 5,269
2,496
12,193
Loss from discontinued operations, net of taxes $ (16,865 ) $ (186,130 ) $ (19,609 )

In 2016, we recorded a net loss of $13,664,000 on the sale of 199,263 net mineral acres leased from others and 379 gross (95 net) producing oil and gas working interest wells in Nebraska, Kansas, Oklahoma and North Dakota for total net proceeds of $80,374,000, which includes $3,269,000 in reimbursement of capital costs incurred on in-progress wells that were assumed by the buyer. Other operating expenses in 2016 include loss contingency charges of $2,990,000 related to litigation and $1,155,000 related to potential environmental liabilities to plug and abandon certain oil and gas wells in Wyoming. Please read ~~Note 14—Litigation and Environmental Contingencies~~ ~~for additional information about these items.~~

In 2015, we recorded a net loss of $706,000 on the sale of 109,000 net mineral acres leased from others and the disposition of 39 gross (7 net) producing oil and gas wells in Nebraska, Texas, Colorado, North Dakota and Oklahoma for total net proceeds of $17,800,000.

In 2014, we recorded a net gain of $8,526,000 on the sale of 650 net mineral acres leased from others and 124 gross (18 net) producing oil and gas working interest wells in Nebraska, Kansas, Oklahoma and North Dakota for total net proceeds of $17,660,000.

Cost of sales includes non-cash impairment charges of $612,000 in 2016, $163,029,000 in 2015 and $32,665,000 in 2014 related to our proved properties and unproved leasehold oil and gas working interests.

The ~~major classes of assets~~Company's accrued expenses and other liabilities ~~of discontinued operations~~ at ~~year-end 2016~~September 30, 2020 and ~~2015 are~~2019 were as follows:


	September 30,
	2020		2019
	(In millions)
Accrued employee compensation and benefits	$	6.2	$	5.6
Accrued property taxes	3.8		2.1
Lease liabilities	3.8		0
Accrued interest	14.0		13.5
Contract liabilities	0.2		2.5
Deferred income	9.3		9.3
State income taxes payable	0.5		0
Accrued development costs	35.3		35.4
Other accrued expenses	10.2		8.4
Other liabilities	10.5		2.8
	$	93.8	$	79.6

At Year-End
2016 2015
(In thousands)
Assets of Discontinued Operations:
Receivables, net of allowance for bad debt $ 6
$ 4,632
Oil and gas properties and equipment, net —
79,733
Goodwill and other intangible assets —
19,673
Prepaid expenses 8
96
Other assets —
833
$ 14
$ 104,967

Liabilities of Discontinued Operations:
Accounts payable $ 67
$ 342
Accrued property taxes —
259
Other accrued expenses 5,228
8,924
Other liabilities —
1,667
$ 5,295
$ 11,192

Table of Contents

~~Significant operating activities and investing activities of discontinued operations are as follows:~~

FORESTAR GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

For the Year
2016 2015 2014
(In thousands)
Operating activities:
Asset impairments $ 612
$ 105,337
$ 15,535
Dry hole and unproved leasehold impairment charges —
67,639
29,528
Loss (gain) on sale of assets 13,664
706
(8,526 )
Depreciation, depletion and amortization 2,202
28,391
28,758
$ 16,478
$ 202,073
$ 65,295

Investing activities:
Oil and gas properties and equipment $ (579 ) $ (49,717 ) $ (101,145 )
Acquisition of oil and gas properties —
—
(1,100 )
Proceeds from sales of assets 77,105
17,800
17,660
$ 76,526
$ (31,917 ) $ (84,585 )

Note 8 — ~~Receivables~~

~~Receivables consist of:~~

At Year-End
2016 2015
(In thousands)
Funds held by qualified intermediary for potential 1031 like-kind exchange $ —
$ 14,703
Other receivables and accrued interest 1,505
2,218
Other loans secured by real estate, average interest rate of 5.86% at year-end 2016 and 11.31% at year-end 2015 7,452
2,130
8,957
19,051
Allowance for bad debts (26 ) (26 )
$ 8,931
$ 19,025

~~In 2016, we received funds previously held by qualified intermediary because we did not complete an intended like-kind exchange related to a sale of 6,915 acres of undeveloped land.~~

~~Other loans secured by real estate generally are secured by a deed of trust and due within three to five years.~~

~~Note 9 —~~ Debt

~~Debt consists of:~~

The Company's notes payable at their carrying amounts consist of the following:

At Year-End
2016 2015
(In thousands)
8.50% senior secured notes due 2022 5,200
224,647
3.75% convertible senior notes due 2020, net of discount 104,673
104,719
6.00% tangible equity units, net —
8,666
Secured promissory notes — average interest rates of 3.42% at year-end 2015 —
15,400
Other indebtedness due through 2018 at variable and fixed interest rates ranging from 5.0% to 5.50% 485
28,083
$ 110,358
$ 381,515


	September 30,
	2020		2019
	(In millions)
Unsecured:
3.75% convertible senior notes due 2020	$	0	$	116.7
8.0% senior notes due 2024 (1)	345.2		343.8
5.0% senior notes due 2028 (1)	295.9		0
Revolving credit facility	0		0
	$	641.1	$	460.5

~~In 2016, we reduced~~______________

(1)Unamortized debt issuance costs that were deducted from the ~~revolving commitment provided by our~~carrying amounts of the senior ~~secured~~notes totaled $8.9 million and $6.2 million at September 30, 2020 and 2019, respectively.

Bank Credit Facility

The Company has a $380 million senior unsecured revolving credit facility ~~which matures on May 15, 2017 (with two one-year extension options), from $300,000,000~~with an uncommitted accordion feature that could increase the size of the facility to ~~$125,000,000, none~~$570 million, subject to certain conditions and availability of ~~which was drawn at year-end 2016.~~additional bank commitments. The ~~revolving line~~facility also provides for the issuance of ~~credit may be prepaid at any time without penalty. The revolving line of credit includes a $100,000,000 sublimit for~~ letters of credit with a sublimit equal to the greater of ~~which $14,850,000 was outstanding at year-end 2016. Total borrowings~~$100 million and 50% of the revolving credit commitment. Borrowings under ~~our senior secured~~the revolving credit facility ~~(including~~are subject to a borrowing base calculation based on the ~~face amount~~book value of the Company's real estate assets and unrestricted cash. Letters of credit issued under the facility reduce the available borrowing capacity. There were 0 borrowings or repayments under the facility during fiscal 2020. At September 30, 2020, there were 0 borrowings outstanding and $36.0 million of letters of ~~credit) may not exceed~~credit issued under the revolving credit facility, resulting in available capacity of $344.0 million. The maturity date of the facility is October 2, 2022, which can be extended by up to one year on up to two additional occasions, subject to the approval of lenders holding a ~~borrowing base formula.~~majority of the commitments.

The revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants. The financial covenants require a minimum level of tangible net worth, a minimum level of liquidity and a maximum allowable leverage ratio. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity. At ~~year-end 2016, we had $71,262,000~~September 30, 2020, the Company was in ~~net unused borrowing capacity under our senior~~compliance with all of the covenants, limitations and restrictions of its revolving credit facility.

~~Under~~

Senior Notes

In February 2020, the ~~terms~~Company issued $300 million principal amount of ~~our~~5.0% senior ~~secured credit facility, at our option, we can borrow at LIBOR plus~~ ~~4.0 percent~~ ~~or at the alternate base rate plus~~ ~~3.0 percent. The alternate base rate is the highest of (i) KeyBank National Association’s base rate, (ii) the federal funds effective rate plus~~ ~~0.5 percent~~ ~~or (iii) 30 day LIBOR plus~~ ~~1 percent. Borrowings~~notes pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. The notes mature March 1, 2028 with interest payable semi-annually and represent senior ~~secured credit facility are or~~unsecured obligations that rank equally in right of payment to all existing and future senior unsecured indebtedness. The notes may be ~~secured by (a) mortgages on~~redeemed prior to maturity, subject to certain limitations and premiums defined in the ~~timberland, high value timberland and portions~~indenture agreement. On or after March 1, 2023, the notes may be redeemed at 102.5% of raw entitled land, as well as pledges of other rights including certain oil and gas operating properties, (b) assignments of current and future leases, rents and contracts, (c) a security interest in our primary operating account, (d) a pledge of the equity interests in current and future material operating subsidiaries and most of our majority-owned joint venture interests, or if such pledge is not permitted, a pledge of the right to distributions from such entities, and (e) a pledge of certain reimbursements payable to us from special improvement district tax collections in connection with our Cibolo Canyons project. The senior secured credit facility provides for releases of real estate and other collateral provided that borrowing base compliance is maintained.

Our debt agreements contain financial covenants customary for such agreements including minimum levels of interest coverage and limitations on coverage. At year-end 2016, our tangible net worth requirement was $426,312,000 computed as: $379,044,000 plus 85 percent of the aggregate net proceeds received by us from any equity offering, plus 75 percent of all positive net income, on a cumulative basis since third quarter 2015. At year-end 2016, we were in compliance with the financial covenants of these agreements.

~~In 2014, we issued $250,000,000~~ ~~aggregate principal of8.5%~~ Senior Secured Notes due 2022 (Notes). The Notes will mature on June 1, 2022 and interest on the Notes is payable semiannually at a rate of 8.5 percent per annum in arrears. In 2016, we completed a cash tender offer for our Notes, pursuant to which we purchased $215,495,000their principal amount ~~(representing approximately 97.6% outstanding) of the Notes. Total consideration paid was $245,604,000, which included $29,091,000 in premium at 113.5% and $1,018,000 in~~plus any accrued and unpaid interest. In ~~addition, we received consent from holders~~accordance with the indenture, the redemption price decreases annually thereafter and the notes can be redeemed at par on or after March 1, 2026 through maturity. The notes are guaranteed by each of the ~~Notes~~Company's subsidiaries to ~~eliminate or modify~~the extent such subsidiaries guarantee the Company's revolving credit facility. The annual effective interest rate of the notes after giving effect to the amortization of financing costs is 5.2%.

Table of Contents

FORESTAR GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

The Company also has $350 million principal amount of 8.0% senior notes outstanding. The notes mature April 15, 2024 with interest payable semi-annually and represent senior unsecured obligations that rank equally in right of payment to all existing and future senior unsecured indebtedness. The notes may be redeemed prior to maturity, subject to certain ~~covenants, events of default~~limitations and ~~other provisions contained~~premiums defined in the indenture agreement. On or after April 15, 2021, the notes may be redeemed at 104% of their principal amount plus any accrued and unpaid interest. In accordance with the indenture, the redemption price decreases annually thereafter and the notes can be redeemed at par on or after April 15, 2023 through maturity. The notes are guaranteed by each of the Company's subsidiaries to the extent such subsidiaries guarantee the Company's revolving credit facility. The annual effective interest rate of the notes after giving effect to the amortization of financing costs is 8.5%.

In March 2020, the Company repaid $118.9 million principal amount of its 3.75% convertible senior notes in cash at maturity.

The indentures governing the ~~Notes,~~senior notes require that, upon the occurrence of both a change of control and a rating decline (each as defined in the indentures), the Company offer to ~~release~~purchase the ~~subsidiary guarantees and collateral securing~~notes at 101% of their principal amount. If the ~~Notes. We also purchased $9,750,000~~Company or its restricted subsidiaries dispose of assets, under certain circumstances, the Company will be required to either invest the net cash proceeds from such asset sales in its business within a specified period of time, repay certain senior secured debt or debt of its non-guarantor subsidiaries, or make an offer to purchase a principal amount of the Notes between 99% and 99.95% of face value in open market transactions. The 2016 tender offer and open market purchases resulted in a $35,681,000 loss on extinguishment of debt, which includes the premium paid to repurchase the Notes, write-off of unamortized debt issuance costs of $5,416,000 and $1,301,000 in other costs related to tender offer advisory services.

In 2015, we purchased $19,440,000 principal amount of Notes at 97% of face value, resulting in a gain of $589,000 on the early extinguishment of the retired Notes, offset by the write-off of unamortized debt issuance costs of $506,000 allocatednotes equal to the ~~retired Notes.~~

~~In 2013, we issued $125,000,000 aggregate principal amount of 3.75% convertible senior notes due 2020 (Convertible Notes). Interest on the Convertible Notes is payable semiannually~~excess net cash proceeds at a ~~rate~~purchase price of ~~3.75 percent per annum and they mature on March 1, 2020. The Convertible Notes have an initial conversion rate~~100% of ~~40.8351 per $1,000~~their principal amount. The ~~initial conversion rate is subject~~indentures contain covenants that, among other things, restrict the ability of the Company and its restricted subsidiaries to ~~adjustment upon~~pay dividends or distributions, repurchase equity, prepay subordinated debt and make certain investments; incur additional debt or issue mandatorily redeemable equity; incur liens on assets; merge or consolidate with another company or sell or otherwise dispose of all or substantially all of the ~~occurrence of~~Company’s assets; enter into transactions with affiliates; and allow to exist certain ~~events. Prior to November 1, 2019, the Convertible Notes are convertible only upon certain circumstances, and thereafter are convertible at any time prior to the close of business~~restrictions on the ~~second scheduled trading day prior~~ability of subsidiaries to ~~maturity. If converted, holders will receive cash, shares of our common stock~~pay dividends or ~~a combination thereof at our election. We intend to settle~~make other payments. At September 30, 2020, the ~~principal amount~~Company was in compliance with all of the ~~Convertible Notes in cash upon conversion,~~limitations and restrictions associated with ~~any excess conversion value~~its senior note obligations.

Effective April 30, 2020, the Board of Directors authorized the repurchase of up to ~~be settled in shares of our common stock. At year-end 2016, unamortized debt discount of our Convertible Notes was $13,809,000.~~

In 2016, we purchased $5,000,000 of 3.75% Convertible Senior Notes due 2020 at 93.25% of face value in open market transactions for $4,663,000 and we allocated $4,452,000 to extinguish the debt and $211,000 to reacquire the equity component within the convertible notes based on the fair value$30 million of the Company’s debt ~~component. We recognized a $110,000 loss on extinguishment of debt based on the difference between the fair value~~securities. The authorization has no expiration date. All of the ~~debt component prior to conversion and the carrying value of the debt component. Total loss on extinguishment of debt including write-off of debt issuance costs allocated to the repurchased notes~~$30 million authorization was ~~$183,000.~~remaining at September 30, 2020.

In 2013, we issued $150,000,000 aggregate principal amount of 6.00% tangible equity units (Units). The total offering was 6,000,000 Units, including 600,000 exercised by the underwriters, each with a stated amount of $25.00. Each Unit is comprised of (i) a prepaid stock purchase contract to be settled by delivery of a number of shares of our common stock, par value $1.00 per share to be determined pursuant to a purchase contract agreement, and (ii) a senior amortizing note due December 15, 2016 that has an initial principal amount of $4.2522, bears interest at a rate of 4.50% per annum and has a final installment payment date of December 15, 2016. On December 15, 2016, we made the final installment payment of principal and accrued interest and issued 7,857,000 shares upon settlement of the stock purchase contract based on the applicable market value, as defined in the purchase contract agreement associated with issuance of the Units.

~~In 2016, a secured promissory note of~~ ~~$15,400,000~~ ~~was paid in full in connection with sale of the Radisson Hotel & Suites, for $130,000,000.~~

~~In 2016, other indebtedness decreased principally as a result of selling Eleven, a 257-unit multifamily project in Austin, for $60,150,000 and paying in full the associated debt of $23,936,000.~~

~~At year-end 2016 and~~ ~~2015, we have~~ ~~$1,633,000~~ ~~and~~ ~~$8,267,000~~ in unamortized deferred fees which were deducted from our debt. In addition, at year-end 2016 and 2015, unamortized deferred financing fees related to our senior credit facility included in other assets were $314,000 and $2,768,000. Amortization of deferred financing fees was ~~$3,598,000~~ ~~in 2016,~~ ~~$4,002,000~~ in ~~2015~~ ~~and~~ ~~$3,845,000~~ in ~~2014~~ ~~and is included in interest expense.~~

~~Debt maturities during the next~~ ~~five~~ ~~years are:~~ ~~2017~~ — $0; ~~2018~~ — ~~$485,000~~; ~~2019~~ — $0; ~~2020~~ — ~~$104,673,000; 2021 —~~ $0 ~~and thereafter —~~ ~~$5,200,000~~.

Note 109 — Fair Value Measurements

Fair value is the exchange price that would be ~~the amount~~ received for an asset or paid to transfer a liability in an orderly transaction between market participants. In arriving at a fair value measurement, ~~we use~~the Company uses a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable. The three levels of inputs used to establish fair value are the following:

•Level 1 — Quoted prices in active markets for identical assets or liabilities;

•Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

•Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company elected not to use the fair value option for cash and cash equivalents ~~accounts receivable, other current~~and debt.

Table of Contents

FORESTAR GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

For the financial assets ~~variable debt, accounts payable~~ and ~~other current liabilities.~~liabilities that the Company does not reflect at fair value, the following tables present both their respective carrying value and fair value at September 30, 2020 and 2019.


			Fair Value at September 30, 2020
	Carrying Value		Level 1		Level 2		Level 3		Total
	(in millions)
Cash and cash equivalents (a)	$	394.3	$	394.3	$	0	$	0	$	394.3
Debt (b)	641.1		0		673.5		0		673.5


			Fair Value at September 30, 2019
	Carrying Value		Level 1		Level 2		Level 3		Total
	(in millions)
Cash and cash equivalents (a)	$	382.8	$	382.8	$	0	$	0	$	382.8
Debt (b)	460.5		0		497.3		0		497.3

_____________________

(a) The ~~carrying amounts~~fair values of ~~these financial instruments~~cash and cash equivalents approximate their ~~fair~~carrying values due to their short-term nature ~~or variable interest rates. We determine~~and are classified as Level 1 within the fair value hierarchy.

(b) At September 30, 2020 and 2019, debt consisted of ~~fixed rate financial instruments using quoted prices for similar instruments in active markets.~~

~~Information about our fixed rate financial instruments not measured at~~the Company's senior notes. The fair value ~~follows:~~of the senior notes is determined based on quoted market prices, which is classified as Level 2 within the fair value hierarchy.

Year-End 2016 Year-End 2015

Carrying
Amount

Fair
Value

Carrying
Amount

Fair
Value

Valuation
Technique
(In thousands)
Fixed rate debt $ (111,506 ) $ (109,789 ) $ (346,090 ) $ (321,653 ) Level 2

Non-financial assets measured at fair value on a non-recurring basis ~~principally~~primarily include real estate assets ~~oil~~which the Company reviews for indicators of potential impairment and ~~gas properties, assets held for sale, goodwill and intangible assets, which are measured for impairment.~~performs impairment evaluations when necessary.

In 2016, we recognized non-cash impairment charges of $56,453,000 related to six non-core community development projects and two multifamily sites as a result of the review of our entire portfolio of assets and marketing these properties for sale, of which four non-core community development projects and one multifamily site were sold in 2016. We based our valuations primarily on executed purchase and sale agreements, current negotiations and letters of intent with expected buyers and third party broker price opinions. In 2016, we recognized non-cash impairment charges of $612,000 related to non-core oil and gas working interest properties that were sold in 2016.

In 2015, we recognized non-cash impairment charges of $107,140,000 related to non-core oil and gas working interest assets classified as discontinued operations in 2016. These properties were primarily located in North Dakota, Nebraska and Kansas and were impaired primarily due to a significant decline in oil and gas prices and the likelihood these assets will be sold. The fair value of these properties was determined using Level 3 inputs and income valuation method based on estimated future commodity prices and our various operational assumptions. In instances where a third party bid was received for a combination of proved and unproved properties, an estimate of the allocation of bid prices was performed and fair value was adjusted accordingly. Included in proved oil and gas non-cash impairments were impairments associated with properties that were sold in fourth quarter 2015. In addition, in 2015 we recognized impairments of $57,691,000 for unproved leasehold interests as a result of continued decline in oil prices and our current plans to only allocate capital to these non-core assets to preserve values and optionality for ultimate sale. Fair value of certain unproved leasehold interests that were impaired were based on market comparables or where a third party bid was received for a combination of proved and unproved properties, an estimate of the allocation of fair value was performed which reduced the carrying value of these leasehold interests.

In 2015, certain real estate assets were remeasured and reported at fair value due to events or circumstances that indicated the carrying value may not be recoverable. We determined estimated fair value based on the present value of future probability weighted cash flows expected from the sale of the long-lived asset or based on a third party appraisal of current value. As a result, we recognized non-cash asset impairment charges of $1,044,000 in 2015 associated with a residential development with golf course and country club property near Fort Worth which was sold in April 2015, one owned project near Atlanta where the remaining lots were sold in August 2015 and one owned entitled project in Atlanta.

~~Non-financial assets measured at fair value on a non-recurring basis are as follows:~~

Year-End 2016 Year-End 2015
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
(In thousands)
Non-financial Assets and Liabilities:
Real estate $ —
$ —
$ —
$ —
$ —
$ —
$ 641
$ 641
Assets of discontinued operations $ —
$ —
$ —
$ —
$ —
$ —
$ 57,219
$ 57,219

Note 1110 — ~~Capital Stock~~

~~In 2015, we accelerated the expiration date of our shareholder rights plan from~~ ~~December 11, 2017~~ ~~to March 13, 2015, resulting in termination of the plan.~~

~~Please read~~ ~~Note 12 — Net Income (Loss) per Share~~ ~~for information about shares of common stock that could be issued under our 3.75% convertible senior notes due 2020.~~

~~Please read~~ ~~Note 17 — Share-Based and Long-Term Incentive Compensation~~ ~~for information about additional shares of common stock that could be issued under terms of our share-based compensation plans.~~

~~Please read~~ ~~Note 21 — Subsequent Events~~ ~~for information about preferred stock purchase rights pursuant to our tax benefits preservation plan.~~

~~At year-end 2016, personnel of former affiliates held options to purchase~~ ~~234,764~~ ~~shares of our common stock. The options have a weighted average exercise price of~~ ~~$30.56~~ ~~and will expire in February 2017. At year-end 2016, the options have an aggregate intrinsic value of~~ $0.

On December 15, 2016, we issued 7,857,000 shares of our common stock upon settlement of the stock purchase contract related to the 6.00% tangible equity units. In 2016, we repurchased 283,976 shares of our common stock for $3,537,000. In 2014, we repurchased 1,491,187 shares of our common stock for $24,595,000. We have repurchased ~~3,777,308~~ ~~shares of our common stock for~~ ~~$57,696,000~~ ~~since we announced our 2009 strategic initiative of repurchasing up to 20 percent or up to 7,000,000 shares of our common stock.~~

~~Note 12 — Net Income (Loss)~~Earnings per Share

Basic and diluted earnings (loss) per share are computed using the two-class method. The two-class method is an earnings allocation formula that determines net income per share for each class of common stock and participating security. We have determined that our 6.00% tangible equity units are participating securities. Per share amounts are computed by dividing earnings available to common shareholders by the weighted average shares outstanding during each period. In periods with a net loss, no such adjustment is made to earnings as the holders of the participating securities have no obligation to fund losses.

The computations of basic and diluted earnings ~~(loss)~~ per share are as follows:


	Year Ended September 30,				Nine Months Ended September 30, 2018
	2020		2019
	(In millions, except share and per share amounts)
Numerator:
Net income attributable to Forestar Group Inc.	$	60.8	$	33.0	$	68.8
Denominator:
Weighted average common shares outstanding — basic	48,037,018		41,974,429		41,938,987
Dilutive effect of stock-based compensation	57,093		30,712		30,069
Total weighted average shares outstanding — diluted	48,094,111		42,005,141		41,969,056

Basic net income per common share attributable to Forestar Group Inc.	$	1.26	$	0.79	$	1.64
Diluted net income per common share attributable to Forestar Group Inc.	$	1.26	$	0.79	$	1.64

For the Year
2016 2015 2014
(In thousands)
Numerator:
Continuing operations
Net income (loss) from continuing operations $ 77,044
$ (26,241 ) $ 36,697
Less: Net (income) attributable to noncontrolling interest (1,531 ) (676 ) (505 )
Earnings (loss) available for diluted earnings per share $ 75,513
$ (26,917 ) $ 36,192
Less: Undistributed net income from continuing operations allocated to participating securities (13,493 ) —
(6,586 )
Earnings (loss) from continuing operations available to common shareholders for basic earnings per share $ 62,020
$ (26,917 ) $ 29,606

Discontinued operations
Net income (loss) from discontinued operations available for diluted earnings per share (16,865 ) (186,130 ) (19,609 )
Less: Undistributed net income from discontinued operations allocated to participating securities 3,014
—
3,569
Earnings (loss) from discontinued operations available to common shareholders for basic earnings per share (13,851 ) (186,130 ) (16,040 )
Denominator:
Weighted average common shares outstanding — basic 34,546
34,266
35,317
Weighted average common shares upon conversion of participating securities ^(a)
7,515
—
7,857
Dilutive effect of stock options, restricted stock and equity-settled awards 273
—
422
Total weighted average shares outstanding — diluted 42,334
34,266
43,596
Anti-dilutive awards excluded from diluted weighted average shares outstanding 2,102
10,864
2,238

~~_____________________~~


^(a)	~~Our earnings per share calculation reflects the weighted average shares issuable upon settlement of the prepaid stock purchase contract component of our 6.00% tangible equity units, issued in 2013.~~

~~On December 15, 2016, we issued 7,857,000 shares of our common stock upon settlement of~~In March 2020, the ~~stock purchase contract related to the 6.00% tangible equity units.~~

~~We intend to settle the~~Company repaid $118.9 million principal amount of ~~the Convertible Notes~~its 3.75% convertible senior notes in cash upon conversion with any excess conversion value to be settled in shares of our common stock. Therefore, only the amount in excess of the par value of the Convertible Notes will be included in our calculation of diluted net income per share using the treasury stock method. As such, the Convertible Notes haveat maturity. The notes had no impact on diluted net income per share ~~until the price of our common stock exceeds the conversion price~~in any of the ~~Convertible Notes~~prior periods presented.

Table of ~~$24.49. The average price of our common stock in 2016 did not exceed the conversion price which resulted in no additional diluted outstanding shares.~~Contents

FORESTAR GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 1311 — Income Taxes

~~Income~~

The components of the Company's income tax ~~(expense) benefit from continuing operations consists of:~~expense are as follows:


	Year Ended September 30,				Nine Months Ended September 30, 2018
	2020		2019
	(In millions)
Current tax expense (benefit):
Federal	$	(7.6)	$	(0.3)	$	(0.5)
State and other	0.9		0.3		0
	(6.7)		0		(0.5)
Deferred tax expense (benefit):
Federal	21.2		9.1		(23.5)
State and other	1.9		0.3		(1.3)
	23.1		9.4		(24.8)
Income tax expense (benefit)	$	16.4	$	9.4	$	(25.3)

For the Year
2016 2015 2014
(In thousands)
Current tax provision:
U.S. Federal $ (15,089 ) $ 6,740
$ (18,905 )
State and other (1,520 ) (418 ) (2,182 )
(16,609 ) 6,322
(21,087 )
Deferred tax provision:
U.S. Federal 1,382
(38,262 ) 184
State and other (75 ) (3,191 ) 53
1,307
(41,453 ) 237
Income tax (expense) benefit $ (15,302 ) $ (35,131 ) $ (20,850 )

A reconciliation of the federal statutory rate to the Company's effective income tax rate ~~on continuing operations~~ follows:


	Year Ended September 30,				Nine Months Ended September 30, 2018
	2020		2019
Federal statutory rate	21	%	21	%	21	%
State, net of federal benefit	3		1		4
Valuation allowance	0		0		(81)
Tax benefits previously unrecognized	(2)		0		0
Tax rate benefit in carryback years	(1)		0		0
Noncontrolling interests	0		(1)		(1)
Effective tax rate (benefit)	21	%	21	%	(57)	%

For the Year
2016 2015 2014
Federal statutory rate (benefit) 35 % 35 % 35 %
State, net of federal benefit —
10
2
Valuation allowance (19 ) 348

Noncontrolling interests (1 ) (3 ) —
Installment sale ace adjustment 2
—
—
Stock based compensation —
5
—
Charitable contributions —
—
(1 )
Oil and gas percentage depletion —
(1 ) —
Other —
1
—
Effective tax rate 17 % 395 % 36 %

~~Our 2016~~The effective tax rate for fiscal 2020 includes a ~~19 percent~~tax benefit ~~from~~of $2.3 million related to the net operating loss (NOL) carryback provisions of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which allows the Company to carryback a portion of its fiscal 2018 NOL. The carryback provisions result in the recognition of previously unrecognized tax benefits and the revaluation of deferred tax assets due to the utilization of NOLs at a higher tax rate in the carryback period. The Company's effective tax rate for the nine months ended September 30, 2018 also includes a benefit for the release of its federal valuation allowance ~~decrease due to~~and a ~~decrease in our~~portion of its state valuation allowance associated with its deferred tax assets. ~~Our 2015~~The effective tax rate for all periods includes an expense for state income taxes and nondeductible expenses and a ~~348 percent detriment from the recording~~benefit related to noncontrolling interests.

Table of ~~a valuation allowance.~~Contents

FORESTAR GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Significant components of deferred taxes are:


	September 30,
	2020		2019
	(In millions)
Deferred tax assets:
Real estate	$	10.5	$	10.2
Employee benefits	1.5		1.5
Net operating loss carryforwards	1.7		15.1
AMT credits	0		0.6
Accruals not deductible until paid	0.2		0.2
Total deferred tax assets	13.9		27.6
Valuation allowance	(1.5)		(3.3)
Total deferred tax assets, net of valuation allowance	12.4		24.3
Deferred tax liabilities:
Deferral of profit on lot sales	(18.1)		(6.4)
Convertible debt	0		(0.5)
Total deferred tax liabilities	(18.1)		(6.9)
Deferred tax (liability) asset, net	$	(5.7)	$	17.4

At Year-End
2016 2015
(In thousands)
Deferred Tax Assets:
Real estate $ 50,759
$ 69,594
Employee benefits 13,185
15,752
Net operating loss carryforwards 2,804
13,827
Oil and gas properties 1,672
5,510
AMT credits 5,900
3,620
Income producing properties 2,055
—
Oil and gas percentage depletion carryforwards 3,478
3,616
Accruals not deductible until paid 552
911
Other assets —
139
Gross deferred tax assets 80,405
112,969
Valuation allowance (73,405 ) (97,068 )
Deferred tax asset net of valuation allowance 7,000
15,901
Deferred Tax Liabilities:
Undeveloped land (1,359 ) (7,588 )
Convertible debt (5,035 ) (6,516 )
Income producing properties —
(2,257 )
Timber (283 ) (577 )
Gross deferred tax liabilities (6,677 ) (16,938 )
Net Deferred Tax Asset (Liability) $ 323
$ (1,037 )

In October 2017, D.R. Horton acquired 75% of the Company's common stock resulting in an ownership change under Section 382 of the Internal Revenue Code. Section 382 limits the Company's ability to use certain tax attributes and built-in losses and deductions in a given year. Any federal tax attributes or built-in losses and deductions that were limited in fiscal 2018 or 2019 have been fully utilized.

At ~~year-end 2016, we~~September 30, 2020, the Company had ~~approximately $7,500,000~~0 federal NOL carryforwards as a result of NOL carryback claims and ~~$64,200,000~~taxable income in the current year. At September 30, 2020, the Company had tax benefits of ~~federal and~~$1.7 million related to state net operating loss carryforwards. Approximately $7,500,000 of the federal and $2,400,000 of the state net operating loss carryforwards were from our acquisition of Credo at third quarter 2012 and are subject to certain limitations. If not utilized, the federal carryforwards will expire in 2031 and the state carryforwards will expire in 2017 to 2036. We had approximately $9,200,000 of oil and gas percentage depletionNOL carryforwards, of which ~~approximately $9,200,000 were a result of our acquisition of Credo~~$1.4 million will expire between 2030 and ~~are subject to certain limitations. We had approximately $5,900,000 of AMT credit carryforwards. The percentage depletion and AMT credit carryforwards~~2037 while the remaining $0.3 million do not ~~expire.~~have an expiration date.

~~Goodwill associated with our oil and gas and mineral resources enterprise are not deductible for income tax purposes.~~

~~At year-end 2016 and 2015, we have provided~~The Company has a valuation allowance ~~for our deferred tax asset~~ of ~~$73,405,000~~$1.5 million and ~~$97,068,000 respectively for the portion of the deferred tax asset that~~$3.3 million at September 30, 2020 and 2019 because it is more likely than not that a portion of the Company's state deferred tax assets, primarily NOL carryforwards, will not be realized because the Company is no longer operating in some states or the NOL carryforward periods are too brief to ~~be unrealizable.~~realize the related deferred tax asset. The current year decrease in the valuation allowance is primarily attributable to the write-off of state deferred tax assets for NOLs which are not expected to be utilized, resulting in no impact to state tax expense. The Company will continue to evaluate both the ~~year was $23,663,000.~~

~~In determining our valuation allowance, we assessed available~~ positive and negative evidence ~~to estimate whether sufficient future taxable income would be generated to permit use~~in determining the need for a valuation allowance on its deferred tax assets. Any reversal of the ~~existing deferred~~valuation allowance in future periods will impact the effective tax asset. A significant piece of objective evidence was the cumulative loss incurred over the three-year period ended December 31, 2016, principally driven by impairments of oil and gas and real estate assets. Such evidence limited our ability to consider other subjective evidence, such as our projected future taxable income.rate.

The ~~amount~~Company is subject to a Tax Sharing Agreement with D.R. Horton. The agreement sets forth an equitable method for reimbursements of ~~deferred~~ tax ~~asset considered realizable could be adjusted if negative evidence~~liabilities or benefits between the Company and D.R. Horton related to state and local income, margin or franchise tax returns that are filed on a unitary basis with D.R. Horton. In accordance with the agreement, the Company reimbursed D.R. Horton $0.2 million in fiscal 2020 for its tax expense generated in fiscal 2019, and D.R. Horton reimbursed the Company $0.4 million in fiscal 2019 for its tax benefit generated in the ~~form of cumulative losses is no longer present and additional weight is given to subjective evidence, such as our projected future taxable income.~~nine months ended September 30, 2018.

~~We file~~

The Company files income tax returns in the U.S. ~~federal jurisdiction~~ and in various state jurisdictions. ~~We are no longer subject~~The federal statute of limitations for tax years prior to ~~U.S. federal~~2016 is closed and the statute of limitations in major state ~~income~~jurisdictions for tax ~~examinations for~~ years ~~before 2012.~~prior to 2016 is closed. The Company is not currently being audited by the IRS or any state jurisdictions.

~~At year-end 2016, our unrecognized~~

Table of Contents

FORESTAR GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

A reconciliation of the beginning and ending amount of tax ~~benefit~~benefits not recognized for book purposes ~~was $2,499,000~~is as follows:


	Year Ended September 30,				Nine Months Ended September 30, 2018
	2020		2019
	(In millions)
Balance at beginning of period	$	1.6	$	1.6	$	1.1
(Decrease) increase for tax positions taken in prior periods	(1.6)		0		0.5
Balance at end of period	$	0	$	1.6	$	1.6

The Company had no unrecognized tax benefits at September 30, 2020 as a result of ~~tax positions taken in~~ the ~~current year. We did not have any~~recognition of $1.6 million of previously unrecognized tax benefits ~~for~~during fiscal 2020. All of the ~~years 2015 and 2014. If the total amount~~$1.6 million of ~~unrecognized~~recognized tax benefits ~~were recognized, it would result in a deferred tax asset and a corresponding increase in our valuation allowance. Therefore, such tax benefit would not affect~~affected the Company’s effective tax rate ~~if recognized in~~and was attributable to the ~~current year.~~NOL carryback provisions of the CARES Act allowing previously uncertain tax attributes to be recognized.

~~We recognize~~

The Company recognizes interest accrued related to unrecognized tax benefits in income tax expense. In ~~2016,~~ ~~2015~~fiscal years 2020, 2019 and ~~2014, we recognized no~~in the nine months ended September 30, 2018, 0 significant interest ~~expense.~~related to unrecognized tax benefits was recognized. At ~~year-end 2016 and~~ ~~2015, we have~~ noSeptember 30, 2020, there were 0 accrued interest or penalties.

Note 12 — Stockholders' Equity

The Company has an effective shelf registration statement filed with the Securities and Exchange Commission (SEC) in September 2018 registering $500 million of equity securities. As of September 30, 2020, $394.3 million remained available for issuance under the shelf registration statement, $100 million of which is reserved for sales under the at-the-market equity offering program discussed below.

In August 2020, the Company entered into an equity distribution agreement to issue and sell, from time to time, up to $100 million in aggregate offering price of its common stock through an at-the-market equity offering program. As of September 30, 2020, 0 shares had been issued under the at-the-market equity offering program.

Note 13 — Employee Benefit Plans

Retirement Plans

The Company has a 401(k) plan for all employees who have been with the Company for a period of six months or more. The Company matches portions of employees’ voluntary contributions. Additional employer contributions in the form of profit sharing may also be made at the Company’s discretion. The Company recorded expense of $0.4 million, $0.2 million and $0.1 million for matching contributions in fiscal 2020, 2019 and the nine months ended September 30, 2018, respectively.

Restricted Stock Units (RSUs)

The Company’s Stock Incentive Plan provides for the granting of stock options and restricted stock units to executive officers, other key employees and non-management directors. Restricted stock unit awards may be based on performance (performance-based) or on service over a requisite time period (time-based). RSU equity awards represent the contingent right to receive one share of the Company’s common stock per RSU if the vesting conditions and/or performance criteria are satisfied and have no voting rights during the vesting period.

Table of Contents

FORESTAR GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

During fiscal 2020, 2019 and in the nine months ended September 30, 2018, the Company granted time-based RSUs that vest annually in equal installments over periods of three to five years. The following table provides additional information related to time-based RSU activity during those periods.


	Year Ended September 30,						Nine Months Ended September 30, 2018
	2020			2019
	Number of Restricted Stock Units	Weighted Average Grant Date Fair Value		Number of Restricted Stock Units	Weighted Average Grant Date Fair Value		Number of Restricted Stock Units	Weighted Average Grant Date Fair Value
Outstanding at beginning of period	200,960	$	19.68	86,500	$	18.09	85,994	$	17.54
Granted	181,325	16.11		149,400	20.24		12,000	22.35
Vested	(79,432)	19.58		(23,740)	18.03		(500)	18.40
Cancelled	(16,990)	19.10		(11,200)	18.39		(10,994)	18.40
Outstanding at end of period	285,863	$	17.47	200,960	$	19.68	86,500	$	18.09

The total fair value of shares vested on the vesting date during fiscal 2020 and 2019 was $1.6 million and $0.4 million, respectively. Total stock-based compensation expense related to the Company's restricted stock units for fiscal 2020, 2019 and the nine months ended September 30, 2018 was $2.0 million, $1.3 million and $0.3 million, respectively, and fiscal 2020 and 2019 included $0.5 million and $0.6 million, respectively, of expense recognized for employees that were retirement eligible on the date of grant. These expenses are included in selling, general and administrative expense in the Company's consolidated statements of operations. At September 30, 2020, there was $3.2 million of unrecognized compensation expense related to unvested time-based RSU awards. This expense is expected to be recognized over a weighted average period of 2.6 years.

Note 14 — ~~Litigation~~Commitments and ~~Environmental~~ Contingencies

Contractual Obligations and Off-Balance Sheet Arrangements

In support of the Company's residential lot development business, it issues letters of credit under the revolving credit facility and has a surety bond program that provides financial assurance to beneficiaries related to the execution and performance of certain development obligations. At September 30, 2020, the Company had outstanding letters of credit of $36.0 million under the revolving credit facility and surety bonds of $236.9 million issued by third parties to secure performance under various contracts. The Company expects that its performance obligations secured by these letters of credit and bonds will generally be completed in the ordinary course of business and in accordance with the applicable contractual terms. When the Company completes its performance obligations, the related letters of credit and bonds are generally released shortly thereafter, leaving the Company with no continuing obligations. The Company has no material third-party guarantees.

Litigation

~~We are~~

The Company is involved in various legal proceedings that arise from time to time in the ordinary course of ~~doing~~ business and ~~believe~~believes that adequate reserves have been established for any probable losses. ~~We do~~The Company does not believe that the outcome of any of these proceedings ~~should~~will have a significant adverse effect on ~~our~~its financial position, long-term results of operations or cash flows. It is possible, however, that charges related to these matters could be significant to ~~our~~the Company's results or cash flows in any one accounting period.

~~On October 4, 2014, James Huffman, a former director and CEO of CREDO Petroleum Corporation (Credo), which we acquired in 2012 and is now known as Forestar Petroleum Corporation, filed~~ ~~Huffman vs. Forestar Petroleum Corporation~~, Case Number 14CV33811, Civ. Div., Dist. Ct., City and County of Denver, Colorado, claiming entitlement to certain overriding royalty interests under a Credo compensation program. In third quarter 2016, we settled a portion of the case for $150,000 and accrued an additional $1,100,000 following an adverse jury verdict in Huffman's favor in regard to the portion of his claim related to past damages. In fourth quarter 2016, following additional rulings by the court, we accrued an additional $1,890,000 representing our estimate of future damages to which Huffman is entitled plus interest and costs, resulting in a total accrual of $2,990,000 at year-end 2016.

Other Commitments

The ~~case was settled for the amount of accrual.~~

~~Environmental~~

Environmental remediation liabilities arise from time to time in the ordinary course of doing business, and we believe we have established adequate reserves for any probable losses that we can reasonably estimate. In 2016, we sold all but 25 of our 289 acres near Antioch, California, approximately 80 acres of which had not yet received a certificate of completion under the voluntary remediation program in which we were participating. The buyer of the former paper manufacturing sites assumed responsibility for environmental, remediation and monitoring activities, subject to limited exclusions, and obtained a $20,000,000, ten year pollution legal liability insurance policy naming us as an additional insured.

We have asset retirement obligations related to the abandonment and site restoration requirements that result from the acquisition, construction and development of oil and gas properties. We record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. Accretion expense related to the asset retirement obligation and depletion expense related to capitalized asset retirement cost are included in cost of mineral resources and cost of oil and gas producing activities in discontinued operations on our consolidated statements of income (loss) and comprehensive income (loss). At year-end 2016, our asset retirement obligation was $103,000, which is included in liabilities held for sale. In addition, at year-end 2016, we have accrued $1,155,000 related to potential environmental liabilities to plug and abandon certain oil and gas wells in Wyoming which is included in liabilities of discontinued operations.

~~Note 15 — Commitments and Other Contingencies~~

~~We lease~~Company leases facilities and equipment under non-cancelable long-term operating lease agreements. In addition, ~~we have~~the Company has various obligations under other office space and equipment leases of less than one year. Rent expense onfor facilities and equipment was ~~$1,923,000~~$1.1 million in ~~2016,~~ ~~$3,872,000~~fiscal 2020, $0.7 million in ~~2015~~fiscal 2019 and ~~$2,617,000~~$0.6 million in ~~2014~~.the nine months ended September 30, 2018. Future minimum rental commitments, by fiscal year, under non-cancelable operating leases having aan initial or remaining term in excess of one year are: ~~2017 — $2,267,000; 2018 — $1,593,000; 2019 — $298,000; 2020 — $182,000;~~ 2021 — ~~$62,000;~~$1.2 million; 2022 — $0.9 million; 2023 — $0.9 million; 2024 — $0.7 million; 2025 — $0.3 million; and thereafter ~~—$0.~~— $0.0 million.

~~We have one year remaining on groundwater leases~~

Table of ~~about~~ ~~20,000~~ ~~acres. At year-end 2016,~~Contents

FORESTAR GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 15 — Related Party Transactions

The Company has a Shared Services Agreement with D.R. Horton whereby D.R. Horton provides the ~~remaining contractual obligation~~Company with certain administrative, compliance, operational and procurement services. During fiscal 2020, 2019 and the nine months ended September 30, 2018, the Company paid D.R. Horton $5.0 million, $2.1 million and $0.9 million for these ~~groundwater leases is $494,000.~~

~~We lease approximately 22,000 square feet~~shared services and $2.7 million, $1.4 million and $0.9 million for the cost of office space in Austin, Texas, which we occupy as our corporate headquarters. The remaining contractual obligation for this lease is $1,983,000. We also lease office space in other locations in support of our business operations. The total remaining contractual obligations for these leases is $1,925,000.

We may provide performance bonds and letters of credit on behalf of certain ventures that would be drawn on due to failure to satisfy construction obligations as general contractor or for failure to timely deliver streets and utilities in accordance with local codes and ordinances.

~~Unallocated Severance-related Costs~~

In connection with the departures of our former CEO and CFO in September 2015, we recorded severance-related charges of $3,314,000 which are included in general and administrative expense on our consolidated statements of income (loss) and comprehensive income (loss). We paid $2,732,000 of these severance-related charges in fourth quarter 2015 with the remainder paid in 2016.

~~Non-core Assets Restructuring Costs~~

In connection with key initiatives to reduce costs across our entire organization and divest non-core assets, in 2016, we incurred and paid severance costs related to workforce reductions of $1,422,000 in our real estate segment, $164,000 in our other segment and $486,000 in unallocated general and administrative expenses. In addition, we offered retention bonuses to certain key personnel provided they remained our employees through completion of sale transactions. We expensed retention bonus costs over the estimated retention periods. These restructuring costs are included in other operating expense.

~~The following table summarizes activity related to liabilities associated with our restructuring activities in 2016:~~

Employee-Related Costs Retention Bonuses Total
(In thousands)
Balance at year-end 2015 $ (1,049 ) $ —
$ (1,049 )
Additions (2,072 ) (832 ) (2,904 )
Payments 3,121
832
3,953
Balance at year-end 2016 $ —
$ —
$ —

~~Note 16 — Segment Information~~

~~We manage our operations through~~ ~~three~~ business segments: real estate, mineral resources and other. Real estate secures entitlements and develops infrastructure on our lands for single-family residential and mixed-use communities, and manages our undeveloped land, commercial and income producing properties, which consist of three projects and one multifamily site. Mineral resources manages our owned mineral interests. Other manages our timber, recreational leases and water resource initiatives.

We evaluate performance based on segment earnings (loss) before unallocated items and income taxes. Segment earnings (loss) consist of operating income, equity in earnings (loss) of unconsolidated ventures, gain on sales of assets, interest income on loans secured by real estate and net (income) loss attributable to noncontrolling interests. Items not allocated to our business segments consist of general and administrative expense, share-based and long-term incentive compensation, gain on sale of strategic timberland, interest expense, loss on extinguishment of debthealth insurance and other ~~corporate non-operating income and expense. The accounting policies of the segments are the same as those described in~~ ~~Note 1 — Summary of Significant Accounting Policies. Our revenues are derived from our U.S. operations and all of our assets are located in the U.S. In 2016,~~ ~~2015~~ ~~and~~ ~~2014, no single customer accounted for more than~~ ~~10 percent~~ ~~of our total revenues, other than the customer associated with the sale of our Midtown Cedar Hill multifamily project in 2015.~~

Real
Estate
Mineral Resources Other
Items Not
Allocated to
Segments
Total
(In thousands)
For the year or at year-end 2016
Revenues $ 190,273
$ 5,076
$ 1,965
$ —
   $ 197,314
Depreciation, depletion and amortization 976
145
352
7,772
   9,245
Equity in earnings of unconsolidated ventures 5,778
173
172
—
   6,123
Income (loss) before taxes from continuing operations attributable to Forestar Group Inc. 121,420
3,327
(4,625 ) (29,307 )
^(a)
90,815
Total assets ^(b)
403,062
38,907
11,531
279,694
   733,194
Investment in unconsolidated ventures 77,611
—
—
—
   77,611
Capital expenditures 5,783
—
299
56
   6,138
For the year or at year-end 2015
Revenues $ 202,830
$ 9,094
$ 6,652
$ —
   $ 218,576
Depreciation, depletion and amortization 7,605
383
540
8,166
   16,694
Equity in earnings of unconsolidated ventures 15,582
275
151
—
   16,008
Income (loss) before taxes from continuing operations attributable to Forestar Group Inc. 67,678
4,230
(608 ) (63,086 )
^(a)
8,214
Total assets ^(b)
691,238
39,469
19,106
117,466
   867,279
Investment in unconsolidated ventures 82,453
—
—
—
   82,453
Capital expenditures 13,644
59
745
242
   14,690
For the year or at year-end 2014
Revenues $ 213,112
$ 15,690
$ 9,362
$ —
   $ 238,164
Depreciation, depletion and amortization 3,741
684
497
8,035
   12,957
Equity in earnings of unconsolidated ventures 8,068
586
31
—
   8,685
Income (loss) before taxes from continuing operations attributable to Forestar Group Inc. 96,906
9,116
5,499
(54,479 )
^(a)
57,042
Investment in unconsolidated ventures 65,005
—
—
—
   65,005
Capital expenditures 28,980
2,240
5,817
616
   37,653

~~_____________________~~


^(a)	~~Items not allocated to segments consist of:~~


^(b)	~~Total assets excludes assets of discontinued operations of $14 and $104,967 in 2016 and 2015.~~

~~Note 17 — Share-Based and Long-Term Incentive Compensation~~

~~Share-based and long-term incentive compensation expense consists of:~~

For the Year
2016 2015 2014
(In thousands)
Cash-settled awards $ 717
$ (3,127 ) $ (3,710 )
Equity-settled awards 2,444
5,026
5,168
Restricted stock 22
(8 ) (25 )
Stock options 854
2,355
1,984
Total share-based compensation $ 4,037
$ 4,246
$ 3,417
Deferred cash 388
228
—
$ 4,425
$ 4,474
$ 3,417

~~Share-based and long-term incentive compensation expense is included in:~~

For the Year
2016 2015 2014
(In thousands)
General and administrative $ 3,323
$ 2,451
$ 1,001
Other operating 1,102
2,023
2,416
$ 4,425
$ 4,474
$ 3,417

Excluded from share-based compensation expense in the table above are fees earned by directors in the amount of $725,000 for 2016, $1,203,000 for 2015 and $906,000 for 2014 for which they elected to defer payment until retirement in the form of share-settled units.employee benefits. These expenses are included in selling, general and administrative expense ~~on our~~in the consolidated statements of ~~income (loss)~~operations.

The Company is subject to a Tax Sharing Agreement with D.R. Horton. The agreement sets forth an equitable method for reimbursements of tax liabilities or benefits between the Company and ~~comprehensive income (loss).~~

~~Share-Based Compensation~~

~~The fair value of awards granted to retirement-eligible employees and expensed at the date of grant was~~ ~~$600,000~~ ~~in 2016,~~ ~~$517,000~~ in ~~2015~~ ~~and~~ ~~$760,000~~ in ~~2014. Unrecognized share-based compensation expense~~D.R. Horton related to ~~non-vested equity-settled awards~~state and ~~stock options was $1,878,000 at year-end 2016. The weighted average period over which this amount will be recognized is estimated to be one year. We did not capitalize any share-based compensation~~local income, margin or franchise tax returns that are filed on a unitary basis with D.R. Horton. In accordance with the agreement, the Company reimbursed D.R. Horton $0.2 million in ~~2016,~~ ~~2015~~ or ~~2014~~.

~~In 2016~~fiscal 2020 for its tax expense generated in fiscal 2019, and ~~2015~~, we issued 300,491 and 288,089 shares out of our treasury stock associated with vesting of stock-based awards or exercise of stock options, net of 25,082 and 51,521 shares withheld having a value of $222,000 and $762,000D.R. Horton reimbursed the Company $0.4 million in fiscal 2019 for ~~payroll taxes in connection with vesting of stock-based awards or exercise of stock options which are reflected in financing activities in our consolidated statements of cash flows.~~

~~A summary of awards granted under our 2007 Stock Incentive Plan follows:~~

~~Cash-settled awards~~

~~Cash-settled awards granted to our employees~~its tax benefit generated in the form of restricted stock units or stock appreciation rights generally vest over three to four years from the date of grant and generally provide for accelerated vesting upon death, disability or if there is a change in control. Cash-settled stock appreciation rights have a ~~ten-year term, generally become exercisable ratably over~~ ~~four years~~ and provide for accelerated or continued vesting upon retirement, death, disability or if there is a change in control. Stock appreciation rights were granted with an exercise price equal to the market value of our stock on the date of grant.nine months ended September 30, 2018.

~~Cash-settled awards granted to our directors in the form of restricted stock units are fully vested at the time of grant and payable upon retirement.~~

~~The following table summarizes the activity of cash-settled restricted stock unit awards in 2016:~~

Equivalent
Units
Weighted Average Grant Date Fair Value
(In thousands) (Per unit)
Non-vested at beginning of period 117
$16.00
Granted —
—
Vested (41 ) 18.84
Forfeited (34 ) 13.83
Non-vested at end of period 42
14.98

The weighted average grant date fair value of cash-settled restricted stock unit awards was $13.26 per unit for 2015 and $18.96 per unit for 2014. The fair value of cash-settled restricted stock unit awards settled was $1,195,000 in 2016, $2,469,000 in 2015, and $2,286,000 in 2014. The aggregate current value of non-vested awards is $555,000 at year-end 2016 based on a year-end stock price of $13.30.

~~The following table summarizes the activity of cash-settled stock appreciation rights in 2016:~~

Rights
Outstanding

Weighted Average
Exercise Price

Weighted Average
Remaining Contractual Term

Aggregate Intrinsic Value
(Current Value Less Exercise Price)
(In thousands) (Per share) (In years) (In thousands)
Balance at beginning of period 487
$12.97 4 $404
Granted —
—
Exercised (52 ) 9.29
Forfeited (61 ) 16.12
Balance at end of period 374
12.97 3 773
Exercisable at end of period 345
12.87 3 773

~~The intrinsic value of cash-settled stock appreciation rights settled was~~ ~~$154,000~~ ~~in 2016,~~ ~~$206,000~~ in ~~2015~~ ~~and~~ ~~$1,181,000~~ in ~~2014~~.

~~The fair value of accrued cash-settled awards at year-end~~ ~~2016~~ ~~and year-end 2015 were $1,758,000 and $3,757,000 and is included in other liabilities in our consolidated balance sheets.~~

~~Equity-settled awards~~

Equity-settled awards granted to our employees include restricted stock units (RSU), which vest after three years from the date of grant, market-leveraged stock units (MSU), which vest after three years from date of grant and performance stock units (PSU), which generally vest after ~~three years~~ from the date of grant if certain performance goals are met. Equity settled awards in the form of restricted stock units granted to our directors are fully vested at time of grant and settled upon retirement. The following table summarizes the activity of equity-settled awards in 2016:

Equivalent
Units
Weighted Average Grant Date Fair Value
(In thousands) (Per unit)
Non-vested at beginning of period 631
$ 18.25
Granted 313
9.04
Vested (281 ) 15.12
Forfeited (108 ) 17.91
Non-vested at end of period 555
14.70

In 2016, we granted 313,000 RSU awards at market value of the stock on the date of the grant. In 2015 and 2014, we granted 234,000 and 86,000 MSU awards. These awards will be settled in common stock based upon our stock price performance over three years from the date of grant. The number of shares to be issued could range from a high of 351,000 shares if our stock price increases by 50 percent or more, to 117,000 shares if our stock price decreases by 50 percent, or could be zero if our stock price decreases by more than 50 percent, the minimum threshold performance. We estimate the grant date

~~fair value of MSU awards using a Monte Carlo simulation pricing model and the following assumptions:~~

For the Year
2015 2014
Expected stock price volatility 32.9 % 42.2 %
Risk-free interest rate 1.0 % 0.7 %
Expected dividend yield — % — %
Weighted average grant date fair value of MSU awards (per unit) $ 15.11
$ 20.38

The weighted average grant date fair value of equity-settled awards (RSU, MSU and PSU) per unit in 2016, 2015 and 2014 was $9.04, $12.99 and $19.18. The fair value of equity-settled awards settled was $2,884,478, $4,451,000 and $3,119,000 in 2016, 2015 and 2014.

Unrecognized share-based compensation expense related to non-vested equity-settled awards is $1,106,000 at year-end 2016. The weighted average period over which this amount will be recognized is estimated to be one year.

~~Restricted stock awards~~

~~Restricted stock awards generally vest over~~ ~~three years, typically if we achieve a minimum~~ ~~one percent~~ ~~annualized return on assets over such~~ ~~three-year period. The following table summarizes the activity of restricted stock awards in 2016:~~

Restricted
Shares
Weighted Average Grant Date Fair Value
(In thousands) (Per unit)
Non-vested at beginning of period 4
$ 20.55
Granted —
—
Vested (4 ) 20.55
Forfeited —
—
Non-vested at end of period —
—

~~The fair value of our restricted stock awards settled in 2016, 2015 and 2014 was $44,000, $88,000 and $341,000.~~

~~Stock options~~

~~Stock options have a~~ ~~ten-year term, generally become exercisable ratably over~~ ~~four years~~ and provide for accelerated or continued vesting upon retirement, death, disability or if there is a change in control. In 2016 and 2015, options were granted with an exercise price equal to the market value of our stock on the date of grant. In the first quarter of 2016, stock options were issued to each of two new directors to acquire 20,000 shares of common stock of which 6,500 shares vest on the first and second anniversary of the date of grant and the remaining 7,000 shares vest on the third anniversary of the date of grant. Expense associated with annual restricted stock units and non-qualified stock options to our board of directors is included in share-based compensation expense. The following table summarizes the activity of stock option awards in 2016:

Options
Outstanding

Weighted
Average
Exercise Price

Weighted
Average
Remaining
Contractual
Term

Aggregate
Intrinsic Value
(Current
Value Less
Exercise Price)
(In thousands) (Per share) (In years) (In thousands)
Balance at beginning of period 2,171
$ 19.56
5 $ 156
Granted 53
9.98

Exercised (35 ) 9.29

Forfeited (353 ) 20.03

Balance at end of period 1,836
19.39
5 449
Exercisable at end of period 1,597
20.25
4 261

~~We estimate the grant date fair value of stock options that do not have a market condition using the Black-Scholes option pricing model and the following assumptions:~~

For the Year
2016 2015
Expected stock price volatility 39.5 % 45.6 %
Risk-free interest rate 1.5 % 1.8 %
Expected life of options (years) 6
6
Expected dividend yield — % — %
Weighted average grant date fair value of options (per share) $ 8.60
$ 6.51

We determine the expected life using the simplified method which utilizes the midpoint between the vesting period and the contractual life of the awards. The expected stock price volatility assumption was determined using a blend of historical and implied volatility.

Stock option awards granted in third quarter 2015 in connection with management promotions have a ten-year term, vest ratably over three years and are exercisable only when our stock price exceeds $17.50 per share. We estimated the fair value of these options with market conditions using Monte Carlo simulation pricing model and the following assumptions:

Expected stock price volatility 61.4 %
Risk-free interest rate 2.2 %
Expected dividend yield — %
Weighted average grant date fair value of options (per share) $ 7.87

The fair value of vested stock options was $0 in 2016, $0 in 2015 and $21,000 in 2014. The intrinsic value of options exercised was $61,000 in 2016, $0 in 2015 and $568,000 in 2014. Unrecognized share-based compensation expense related to non-vested stock options is $772,000 at year-end 2016. The weighted average period over which this amount will be recognized is estimated to be two years.

~~Pre-Spin Awards~~

Certain of our employees participated in Temple-Inland’s share-based compensation plans. In conjunction with our 2007 spin-off, these awards were equitably adjusted into separate awards of the common stock of Temple-Inland and the spin-off entities. No pre-spin awards were exercised in 2016. The intrinsic value of pre-spin awards exercised was $0 in 2016, $24,000 in 2015 and $352,000 in 2014.

Pre-spin stock option awards to our employees to purchase our common stock have a ten-year term, generally become exercisable ratably over four years and provide for accelerated or continued vesting upon retirement, death, disability or if there is a change in control. At year-end 2016, there were 17,000 pre-spin awards outstanding and exercisable on our stock with a weighted average exercise price of $30.56 and weighted average remaining term of less than one year.

~~Long-Term Incentive Compensation~~

In 2016, we granted $620,000 of long-term incentive compensation in the form of deferred cash compensation. The 2016 deferred cash awards vest annually over two years, and the 2015 deferred cash awards vest after three years. Both awards provide for accelerated vesting upon retirement, disability, death, or if there is a change in control. Expense associated with deferred cash awards is recognized ratably over the vesting period or earlier based on retirement eligibility. The accrued liability was $539,000 at year-end 2016 and is included in other liabilities.

~~Note 18 — Retirement Plans~~

Our defined contribution retirement plans include a 401(k) plan, which is funded, and a supplemental plan for certain employees, which is unfunded. The expense of our defined contribution retirement plans was $978,000 in 2016, $1,060,000 in 2015 and $1,338,000 in 2014. The unfunded liability for our supplemental plan was $334,000 at year-end 2016 and $802,000 at year-end ~~2015~~ ~~and is included in other liabilities.~~

~~Note 19 — Supplemental Oil and Gas Disclosures (Unaudited)~~

The following unaudited information regarding our oil and gas reserves has been prepared and is presented pursuant to requirements of the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB).

As of year-end 2016, we have divested substantially all of our oil and gas working interest properties. As a result of this significant change in our operations, we have reported the results of operations and financial position of these assets as discontinued operations within our consolidated statements of income (loss) and comprehensive income (loss) and consolidated balance sheets for all periods presented. However, all information presented in this unaudited supplemental oil and gas disclosures footnote includes all oil and gas reserve estimates and results of operations.

We lease our mineral interests, principally in Texas and Louisiana, to third-party entities for the exploration and production of oil and gas. When we lease our mineral interests, we may negotiate a lease bonus payment and we retain a royalty interest and may take an additional participation in production, including a working interest in which we pay a share of the costs to drill, complete and operate a well and receive a proportionate share of the production revenues.

We engaged independent petroleum engineers, Netherland, Sewell & Associates, Inc., to assist in preparing estimates of our proved oil and gas reserves, all of which are located in the U.S., and future net cash flows as of year-end 2016, ~~2015~~ ~~and~~ ~~2014~~.

~~These estimates were based on the economic and operating conditions existing at year-end 2016,~~ ~~2015~~ ~~and~~ ~~2014~~. Proved developed reserves are those quantities of petroleum from existing wells and facilities, which by analysis of geosciences and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward for known reservoirs and under defined economic conditions, operating methods and government regulations.

SEC rules require disclosure of proved reserves using the twelve-month average beginning-of-month price (which we refer to as the average price) for the year. These same average prices also are used in calculating the amount of (and changes in) future net cash inflows related to the standardized measure of discounted future net cash flows.

~~For 2016,~~ ~~2015~~ ~~and~~ ~~2014, the average spot price per barrel of oil based on the West Texas Intermediate price is $42.75,~~ ~~$50.28~~ ~~and~~ ~~$94.99~~ ~~and the average price per MMBTU of gas based on the Henry Hub spot is $2.48,~~ ~~$2.59~~ ~~and~~ ~~$4.35. All prices were then adjusted for quality, transportation fees and differentials.~~

The process of estimating proved reserves and future net cash flows is complex involving decisions and assumptions in evaluating the available engineering and geologic data and prices for oil and gas and the cost to produce these reserves and other factors, many of which are beyond our control. As a result, these estimates are imprecise and should be expected to change as future information becomes available. These changes could be significant. In addition, this information should not be construed as being the current fair market value of our proved reserves.

~~Estimated Quantities of Proved Oil and Gas Reserves~~

~~Estimated quantities of proved oil and gas reserves are summarized as follows:~~

Reserves

Oil ^(a)
(Barrels)

Gas
(Mcf)
(In thousands)
Consolidated entities:
Year-end 2013 5,824
13,630
Revisions of previous estimates 608
293
Extensions and discoveries 2,191
774
Acquisitions 85
31
Sales (105 ) (218 )
Production (931 ) (1,861 )
Year-end 2014 7,672
12,649
Revisions of previous estimates (855 ) (1,675 )
Extensions and discoveries 224
173
Acquisitions —
—
Sales (704 ) (1,223 )
Production (1,158 ) (1,967 )
Year-end 2015 5,179
7,957
Revisions of previous estimates (11 ) 631
Extensions and discoveries 29
—
Acquisitions —
—
Sales (4,460 ) (3,756 )
Production (291 ) (996 )
Year-end 2016 446
3,836
Our share of ventures accounted for using the equity method:
Year-end 2013 —
2,332
Revisions of previous estimates —
(382 )
Production —
(199 )
Year-end 2014 —
1,751
Revisions of previous estimates —
(320 )
Production —
(168 )
Year-end 2015 —
1,263
Revisions of previous estimates —
79
Production —
(143 )
Year-end 2016 —
1,199
Total consolidated and our share of equity method ventures:
Year-end 2014
Proved developed reserves 5,269
12,599
Proved undeveloped reserves 2,403
1,801
Total Year-end 2014 7,672
14,400
Year-end 2015
Proved developed reserves 5,179
9,220
Proved undeveloped reserves —
—
Total Year-end 2015 5,179
9,220
Year-end 2016
Proved developed reserves 446
5,035
Proved undeveloped reserves —
—
Total Year-end 2016 446
5,035

~~_____________________~~


^(a)	~~Includes natural gas liquids (NGLs).~~

~~We do not have any estimated reserves of synthetic oil, synthetic gas or products of other non-renewable natural resources that are intended to be upgraded into synthetic oil and gas.~~

~~At year-end 2016, estimated quantities of proved oil and gas reserves are related to our owned mineral interests which are classified as assets held for sale.~~

In 2016, we sold oil and gas wells located primarily in Oklahoma, Kansas, Nebraska and North Dakota. Our net reserves for those properties as of year-end 2015 less our share of 2016 production were 4,155,000 barrels of oil, 305,000 barrels of NGL, and 3,756,000 Mcf of gas. Oklahoma properties sold were mainly mature gas wells. Kansas and Nebraska produce oil from the Lansing/Kansas City formation. The North Dakota oil wells produce from the Bakken/Three Forks formation.

In 2015, oil and gas properties having reserves consisting of approximately 704,000 barrels of oil and 1,223,000 Mcf of gas located primarily in the Texas Panhandle and Bakken/Three Forks formations were sold. Due to the significant decline in oil and gas prices during 2015, net negative revisions of previous estimates were 855,000 barrels of oil and 1,995,000 Mcf of gas. At year-end 2015, we had no barrels of oil equivalent (BOE) of proved undeveloped (PUD) reserves based on our plan to exit non-core oil and gas working interest assets compared with 2,703,000 BOE of PUD reserves at year-end 2014.

In 2014, increases in extensions and discoveries of 2,191,000 barrels were primarily associated with new reserves in the Bakken/Three Forks formations. An estimated 694,000 barrels of these extensions and discoveries were associated with new producing wells while a further 913,000 barrels of proved undeveloped reserves were added during 2014. Approximately 105,000 barrels of oil and 218,000 Mcf of gas reserves located primarily in Oklahoma were sold during the year. We realized a net positive revision of previous estimates of 608,000 barrels which is primarily driven by improved drilling results in the Bakken/Three Forks formation yielding higher average estimated ultimate recoverable quantities of proved reserves per well.

In ~~2015~~ ~~and~~ ~~2014~~, reserve additions from new wells drilled and completed during the year are shown for both consolidated entities and ventures accounted for using the equity method under extensions and discoveries. There were no new well additions in 2016, 36 ~~new well additions in~~ ~~2015~~ ~~and~~ ~~106~~ ~~new well additions in~~ ~~2014~~.

~~Capitalized Costs Relating to Oil and Gas Producing Activities~~

~~Capitalized costs related to our oil and gas producing activities classified as assets held for sale at year-end 2016 are as follows:~~

At Year-End
2016 2015
(In thousands)
Consolidated entities:
Unproved oil and gas properties $ 374
$ 19,441
Proved oil and gas properties 5,159
119,414
Total costs 5,533
138,855
Less accumulated depreciation, depletion and amortization (4,751 ) (58,242 )
$ 782
$ 80,613

~~We have not capitalized any costs for our share in ventures accounted for using the equity method.~~

~~Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development~~

~~Costs incurred in oil and gas property acquisition, exploration and development activities, whether capitalized or expensed, follows:~~

For the Year
2016 2015 2014
(In thousands)
Consolidated entities:
Acquisition costs
Proved properties $ —
$ —
$ 2,001
Unproved properties 15
4,832
25,666
Exploration costs 21
17,922
39,399
Development costs 537
27,609
40,277
$ 573
$ 50,363
$ 107,343

We have not incurred any costs for our share in ventures accounted for using the equity method. In 2015, acquisition of leasehold interests, exploration expenses, and development costs have decreased as a result of our increased focus on exiting and selling our leasehold working interests.

~~Standardized Measure of Discounted Future Net Cash Flows~~

Estimates of future cash flows from proved oil and gas reserves are shown in the following table. Estimated income taxes are calculated by applying the appropriate tax rates to the estimated future pre-tax net cash flows less depreciation of the tax basis of properties and the statutory depletion allowance.

At Year-End
2016 2015 2014
(In thousands)
Consolidated entities:
Future cash inflows $ 24,304
$ 216,588
$ 665,657
Future production and development costs (2,988 ) (93,623 ) (271,735 )
Future income tax expenses (3,926 ) (22,218 ) (106,002 )
Future net cash flows 17,390
100,747
287,920
10% annual discount for estimated timing of cash flows (7,077 ) (33,951 ) (124,079 )
Standardized measure of discounted future net cash flows $ 10,313
$ 66,796
$ 163,841
Our share in ventures accounted for using the equity method:
Future cash inflows $ 2,010
$ 2,283
$ 6,186
Future production and development costs (216 ) (245 ) (664 )
Future income tax expenses (537 ) (774 ) (2,098 )
Future net cash flows 1,257
1,264
3,424
10% annual discount for estimated timing of cash flows (585 ) (562 ) (1,649 )
Standardized measure of discounted future net cash flows $ 672
$ 702
$ 1,775
Total consolidated and our share of equity method ventures $ 10,985
$ 67,498
$ 165,616

Future net cash flows were computed using prices used in estimating proved oil and gas reserves, year-end costs, and statutory tax rates (adjusted for tax deductions) that relate to proved oil and gas reserves.

~~Changes in the standardized measure of discounted future net cash flow follows:~~

For the Year
Consolidated
Our Share of Equity
Method Ventures
Total
(In thousands)
Year-end 2013 $ 135,553
$ 1,300
$ 136,853
Changes resulting from:
Net change in sales prices and production costs (1,064 ) 1,571
507
Net change in future development costs 1,308
—
1,308
Sales of oil and gas, net of production costs (63,192 ) (787 ) (63,979 )
Net change due to extensions and discoveries 58,228
—
58,228
Net change due to acquisition of reserves 2,778
—
2,778
Net change due to divestitures of reserves (5,804 ) —
(5,804 )
Net change due to revisions of quantity estimates 15,303
(343 ) 14,960
Previously estimated development costs incurred 15,497
—
15,497
Accretion of discount 18,067
210
18,277
Net change in timing and other 4,198
115
4,313
Net change in income taxes (17,031 ) (291 ) (17,322 )
Aggregate change for the year 28,288
475
28,763
Year-end 2014 163,841
1,775
165,616
Changes resulting from:
Net change in sales prices and production costs (136,536 ) (1,112 ) (137,648 )
Net change in future development costs 92
—
92
Sales of oil and gas, net of production costs (31,732 ) (428 ) (32,160 )
Net change due to extensions and discoveries 11,747
—
11,747
Net change due to acquisition of reserves —
—
—
Net change due to divestitures of reserves (15,855 ) —
(15,855 )
Net change due to revisions of quantity estimates (15,164 ) (267 ) (15,431 )
Previously estimated development costs incurred 15,096
—
15,096
Accretion of discount 22,600
286
22,886
Net change in timing and other 4,018
(210 ) 3,808
Net change in income taxes 48,689
658
49,347
Aggregate change for the year (97,045 ) (1,073 ) (98,118 )
Year-end 2015 66,796
702
67,498
Changes resulting from:
Net change in sales prices and production costs (3,585 ) (60 ) (3,645 )
Net change in future development costs —
—
—
Sales of oil and gas, net of production costs (5,663 ) (208 ) (5,871 )
Net change due to extensions and discoveries 410
—
410
Net change due to acquisition of reserves —
—
—
Net change due to divestitures of reserves (63,535 ) (63,535 )
Net change due to revisions of quantity estimates 1,304
63
1,367
Previously estimated development costs incurred —
—
—
Accretion of discount 2,992
113
3,105
Net change in timing and other (128 ) (80 ) (208 )
Net change in income taxes 11,722
142
11,864
Aggregate change for the year (56,483 ) (30 ) (56,513 )
Year-end 2016 $ 10,313
$ 672
$ 10,985

~~Results of Operations for Oil and Gas Producing Activities~~

Our royalty interests are contractually defined and based on a percentage of production at prevailing market prices. We receive our percentage of production in cash. Similarly, for operating properties our working interests and the associated net revenue interests are contractually defined and we pay our proportionate share of the capital and operating costs to develop and operate the well and we market our share of the production. Our revenues fluctuate based on changes in the market prices for

~~oil and gas, the decline in production from existing wells, and other factors affecting oil and gas exploration and production activities, including the cost of development and production.~~

~~Information about the results of operations of our oil and gas interests follows:~~

For the Year
2016 2015 2014
(In thousands)
Consolidated entities
Revenues $ 10,111
$ 51,553
$ 82,919
Production costs (4,392 ) (19,820 ) (19,727 )
Exploration costs (124 ) (11,864 ) (17,416 )
Depreciation, depletion, amortization (2,157 ) (28,774 ) (29,442 )
Non-cash impairment of proved oil and gas properties and unproved leasehold interests (612 ) (164,831 ) (32,665 )
Oil and gas administrative expenses (8,700 ) (11,700 ) (17,000 )
Accretion expense (56 ) (144 ) (121 )
Income tax (expense) benefit (20 ) 14,717
13,398
Results of operations (5,950 ) (170,863 ) (20,054 )
Our share in ventures accounted for using the equity method:
Revenues $ 284
$ 428
$ 786
Production costs (76 ) (102 ) (105 )
Oil and gas administrative expenses (35 ) (51 ) (95 )
Income tax (expense) benefit —
21
(235 )
Results of operations $ 173
$ 296
$ 351
Total results of operations $ (5,777 ) $ (170,567 ) $ (19,703 )

Production costs represent our share of oil and gas production severance taxes, and lease operating expenses. Exploration costs principally represent exploratory dry hole costs, geological and geophysical and seismic study costs.

~~Note 20 — Summary of Quarterly Results of Operations (Unaudited)~~

~~Summarized quarterly financial results for 2016 and~~ ~~2015~~ ~~follows:~~

First Quarter ^(a)

Second Quarter ^(a)

Third
    Quarter ^(a)

Fourth
    Quarter ^(a)
(In thousands, except per share amounts)
2016
Total revenues $ 37,618
$ 47,992
$ 47,207
$ 64,497
Gross profit (loss) 18,579
(24,953 ) 17,403
17,352
Operating income (loss) 13,590
69,528
6,256
50,980
Equity in earnings of unconsolidated ventures 47
188
3,637
2,251
Income from continuing operations before taxes attributable to Forestar Group Inc. 5,992
26,591
7,163
51,069
Income (loss) from discontinued operations, net of taxes (8,216 ) (2,048 ) (7,164 ) 563
Net income (loss) attributable to Forestar Group Inc. (4,376 ) 9,614
9,665
43,745

Net income (loss) per share — basic
   Continuing operations $ 0.11
$ 0.28
$ 0.40
$ 1.03
   Discontinued operations $ (0.24 ) $ (0.05 ) $ (0.17 ) $ 0.01
Net income (loss) per share — basic $ (0.13 ) $ 0.23
$ 0.23
$ 1.04

Net income (loss) per share — diluted
   Continuing operations $ 0.09
0.28
0.40
$ 1.02
   Discontinued operations $ (0.19 ) (0.05 ) (0.17 ) $ 0.01
Net income (loss) per share — diluted $ (0.10 ) 0.23
0.23
$ 1.03

2015
Total revenues $ 37,374
$ 43,625
$ 32,185
$ 105,392
Gross profit (loss) 18,012
21,060
12,879
46,655
Operating income (loss) (3,424 ) 5,919
(8,482 ) 29,929
Equity in earnings of unconsolidated ventures 3,045
5,584
2,909
4,470
Income from continuing operations before taxes attributable to Forestar Group Inc. (8,204 ) 3,382
(13,711 ) 26,747
Income (loss) from discontinued operations, net of taxes (2,719 ) (36,992 ) (106,937 ) (39,482 )
Net loss attributable to Forestar Group Inc. (8,158 ) (34,507 ) (164,216 ) (6,166 )

Net income (loss) per share — basic
   Continuing operations $ (0.16 ) $ 0.07
$ (1.67 ) $ 0.97
   Discontinued operations $ (0.08 ) $ (1.08 ) $ (3.12 ) $ (1.15 )
Net income (loss) per share — basic $ (0.24 ) $ (1.01 ) $ (4.79 ) $ (0.18 )

Net income (loss) per share — diluted
   Continuing operations $ (0.16 ) $ 0.06
$ (1.67 ) $ 0.79
   Discontinued operations $ (0.08 ) $ (0.87 ) $ (3.12 ) $ (0.93 )
Net income (loss) per share — diluted $ (0.24 ) $ (0.81 ) $ (4.79 ) $ (0.14 )

~~_____________________~~

^(a)~~Non-cash impairment charges related to real estate, water assets and unproved leasehold interests and proved oil and gas properties included in our quarterly financial results are as follows:~~

First Quarter Second Quarter Third
Quarter Fourth
Quarter
(In thousands)
2016

   Continuing operations $ —
$ 48,826
$ 7,627
$ 3,874
   Discontinued operations $ —
$ 612
$ —
$ —
2015

   Continuing operations $ 504
$ 225
$ —
$ 315
   Discontinued operations $ 7
$ 45,938
$ 81,240
$ 37,646

~~Note 21 — Subsequent Events~~

On January 5, 2017, we entered into a tax benefits preservation plan (the “Plan”) with Computershare Trust Company, N.A., as rights agent, and our Board of Directors declared a dividend distribution of one right (a “Right”) for each outstanding share of common stock, par value $1.00 per share, to stockholders of record at the close of business on January 17, 2017. Each Right is governed byUnder the terms of the ~~Plan~~Master Supply Agreement with D.R. Horton, both companies identify land development opportunities to expand Forestar's portfolio of assets. At September 30, 2020 and ~~entitles the registered holder to purchase from~~2019, the Company ~~a unit consisting~~owned or controlled through purchase contracts approximately 60,500 and 38,300 residential lots, of ~~one one-thousandth of a share of Series B Junior Participating Preferred Stock, par value $0.01 per share, at a purchase price of $50 per unit, subject~~which D.R. Horton had the following involvement.


	September 30,
	2020		2019
	(Dollars in millions)
Residential lots under contract to sell to D.R. Horton	14,000		12,800
Residential lots subject to right of first offer with D.R. Horton	16,400		10,600
Earnest money deposits from D.R. Horton for lots under contract	$	92.2	$	88.7
Earnest money notes from D.R. Horton for lots under contract	$	4.8	$	0
Remaining purchase price of lots under contract with D.R. Horton	$	1,022.2	$	953.8

During fiscal 2020, 2019 and the nine months ended September 30, 2018, the Company's residential lot sales totaled 10,373, 4,132 and 1,024, and lot sales revenues were $880.3 million, $351.7 million and $72.0 million. Lot and land sales to ~~adjustment. The Plan is intended to help protect our tax attributes, such~~D.R. Horton during those periods were as ~~built in losses and other tax attributes, by deterring any person from becoming a “5-percent shareholder” (as defined in Section 382~~follows.


	Year Ended September 30,				Nine Months Ended September 30, 2018
	2020		2019
	(Dollars in millions)
Residential single-family lots sold to D.R. Horton	10,164		3,728		642
Residential lot sales revenues from sales to D.R. Horton	$	859.7	$	311.7	$	43.6
Residential tract acres sold to D.R. Horton	143		290		79
Residential tract sales revenues from sales to D.R. Horton	$	25.6	$	10.9	$	2.0

In addition, the net impact of the ~~Internal Revenue Code of 1986, as amended,~~change in contract liabilities or revenue deferrals increased revenues on lot sales to D.R. Horton by $2.3 million and $4.0 million in fiscal 2020 and 2019, respectively, and decreased revenues by $6.4 million in the ~~Treasury Regulations promulgated thereunder).~~

On February 17, 2017, we entered into a Purchase and Sale Agreement with Mineral Resource Partners, LLC, whereby we sold substantially all of our remaining oil and gas assets for $85,600,000, of which $75,000,000 was received at closing. The balance ofnine months ended September 30, 2018. During the ~~purchase price is being held in a third-party escrow account pending completion of (a) title review, and (b) transfer of certain mineral interests owned by~~nine months ended September 30, 2018, a venture in which the Company owns a 37.5% interest sold 40 residential tract acres to D.R. Horton for $7.8 million. The Company's share of these earnings was $2.5 million, which is ~~a member (Venture Minerals). Prorations~~included in equity in earnings of ~~operating revenues~~unconsolidated ventures in its consolidated statements of operations.

During fiscal 2020, 2019 and ~~expenses will be made utilizing an effective date~~the nine months ended September 30, 2018, the Company reimbursed D.R. Horton approximately $27.0 million, $34.5 million and $21.2 million for previously paid earnest money and $36.3 million, $13.1 million and $15.2 million for pre-acquisition and other due diligence and development costs related to land purchase contracts whereby D.R. Horton assigned its rights under these land purchase contracts to the Company.

Table of ~~January 1, 2017. This agreement also contains representations, warranties~~Contents

FORESTAR GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

During fiscal 2020, 2019 and ~~indemnities customary~~the nine months ended September 30, 2018, the Company paid D.R. Horton $6.2 million, $2.4 million and $0.6 million for ~~oil~~land development services. These amounts are included in cost of sales in the Company’s consolidated statements of operations.

At September 30, 2020 and ~~gas industry entity~~2019, undeveloped land was $5.4 million and asset sale and purchase transactions, and includes purchase price adjustment provisions, within certain parameters, relating to title and failure or inability to transfer the Venture Minerals. In first quarter 2017, we expect to recognize a gain on sale$17.1 million. Undeveloped land primarily consists of approximately $82,400,000, of which $10,600,000 will be deferred until verification of title for non-producing fee minerals in Texas and Louisiana, transfer of certain mineral interests owned by a venture inundeveloped land which the Company ishas the contractual right to sell to D.R. Horton within approximately one year of its purchase or, if D.R. Horton elects, at an earlier date, at a ~~member and release~~sales price equal to the carrying value of the ~~escrowed funds.~~land at the time of sale plus additional consideration of 16% per annum. In ~~addition,~~fiscal 2019, the Company ~~expects~~sold approximately 63 acres of undeveloped land to ~~incur~~ a ~~non-cash charge of $37,900,000 related to oil and gas enterprise goodwill that is impaired due to~~third party for approximately $44.2 million. In conjunction with the sale, the Company paid D.R. Horton a fee of ~~substantially all~~approximately $2.1 million to terminate an existing purchase and sale agreement whereby D.R. Horton had the option to purchase the property at a fixed price. This termination fee is included in cost of sales in the Company's ~~remaining oil~~consolidated statements of operations.

At September 30, 2020 and ~~gas assets.~~2019, accrued expenses and other liabilities on the Company's consolidated balance sheets included $8.4 million and $2.2 million owed to D.R. Horton for any accrued and unpaid shared service charges, land purchase contract deposits and due diligence and other development cost reimbursements.

~~Forestar Group Inc.~~

~~Schedule III~~Note 16 — Quarterly Results of Operations (Unaudited)

Consolidated ~~Real Estate~~quarterly results of operations for fiscal year 2020 and ~~Accumulated Depreciation~~2019 were (in millions, except per share amounts):

~~Year-End 2016~~


2020	Three Months Ended December 31, 2019		Three Months Ended March 31, 2020		Three Months Ended June 30, 2020		Three Months Ended September 30, 2020
Total revenues	$	247.2	$	159.1	$	177.9	$	347.6
Income before income taxes	22.2		13.7		10.3		32.0
Income tax expense	5.4		3.3		0.2		7.5
Net income	16.8		10.4		10.1		24.5
Net (loss) income attributable to noncontrolling interests	(0.1)		0.8		0		0.3
Net income attributable to Forestar Group Inc.	16.9		9.6		10.1		24.2

Net income per share — basic	$	0.35	$	0.20	$	0.21	$	0.50
Net income per share — diluted	$	0.35	$	0.20	$	0.21	$	0.50

2019	Three Months Ended December 31, 2018		Three Months Ended March 31, 2019		Three Months Ended June 30, 2019		Three Months Ended September 30, 2019
Total revenues	$	38.5	$	65.3	$	88.2	$	236.3
Income before income taxes	4.9		16.4		8.4		16.0
Income tax expense	1.0		3.6		1.5		3.4
Net income	3.9		12.8		6.9		12.6
Net income (loss) attributable to noncontrolling interests	0.6		2.7		0		(0.1)
Net income attributable to Forestar Group Inc.	3.3		10.1		6.9		12.7

Net income per share — basic	$	0.08	$	0.24	$	0.16	$	0.30
Net income per share — diluted	$	0.08	$	0.24	$	0.16	$	0.30

~~(In thousands)~~

Initial Cost to
Company

Costs Capitalized
Subsequent to Acquisition
Gross Amount Carried at End of Period
Description Encumbrances Land
Buildings &
Improvements

Improvements
less Cost of
Sales and Other

Carrying
Costs^(a)

Land & Land
Improvements

Buildings &
Improvements
Total
Accumulated
Depreciation

Date of
Construction

Date
Acquired
Entitled, Developed, and Under Development Projects:
ARIZONA
Pima County
Dove Mountain $ 5,860
$ 3
$ 5,863
$ 5,863
2015
CALIFORNIA
Contra Costa County
San Joaquin River 12,225
(10,558 ) 1,667
1,667

^(b)
COLORADO
Douglas County
Pinery West 7,308
3,791
11,099
11,099
2006 2006
Cielo 3,933
2,645
6,578
6,578
2016
Weld County
Buffalo Highlands 3,001
(295 ) 2,706
2,706
2006 2005
Johnstown Farms 2,749
4,189
$ 100
7,038
7,038
2002 2002
Stonebraker 3,878
(1,786 ) 2,092
2,092
2005 2005
GEORGIA
Cobb County
West Oaks 1,669
1,543
3,212
3,212
2015 2015
Paulding County
Harris Place 265
(111 ) 154
154
2012
Seven Hills 2,964
1,162
13
4,139
4,139
2012
NORTH CAROLINA
Cabbarrus County
Moss Creek 1,254
101
1,355
1,355
2016
Mecklenburg County
Walden 12,085
2,279
87
14,451
14,451
2016 2015
SOUTH CAROLINA
Lancaster County
Ansley Park 5,089
1,594
6,683
6,683
2015
York County
Habersham 3,877
1,128
421
5,426
5,426
2014 2013

Table of Contents

~~Forestar Group Inc.~~FORESTAR GROUP INC.

~~Schedule III — Consolidated Real Estate and Accumulated Depreciation~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

~~Year-End 2016~~

~~(In thousands)~~

Initial Cost to
Company

Costs Capitalized
Subsequent to Acquisition
Gross Amount Carried at End of Period
Description Encumbrances Land
Buildings &
Improvements

Improvements
less Cost of
Sales and Other

Carrying
Costs^(a)

Land & Land
Improvements

Buildings &
Improvements
Total
Accumulated
Depreciation

Date of
Construction

Date
Acquired
TENNESEE
Williamson County
Morgan Farms $ 6,841
$ (1,808 ) $ 88
$ 5,121
$ 5,121
2013 2013
Scales Farmstead 3,575
9,319
389
13,283
13,283
2015
Weatherford Estates 856
374
138
1,368
1,368
2015 2014
Wilson County
Beckwith Crossing 1,294
2,397
161
3,852
3,852
2015 2014
TEXAS
Bastrop County
Hunter’s Crossing 3,613
5,226

8,839
8,839
2001 2001
Bexar County
Cibolo Canyons 17,305
26,397
1,203
44,905
44,905
2004 1986
Calhoun County
Caracol

8,603
(8,025 )

578
578
2006 2006
Collin County
Lakes of Prosper 8,951
(3,005 ) 348
6,294
6,294
2012
Parkside 2,177
(4 ) 183
2,356
2,356
2014 2013
Timber Creek 7,282
9,862
17,144
17,144
2007 2007
Village Park 4,772
(4,720 )

52
52
2012
Comal County
Oak Creek Estates 1,921
685
22
2,628
2,628
2006 2005
Dallas County
Stoney Creek 12,822
327
443
13,592
13,592
2007 2007
Denton County
Lantana

27,673
(11,242 ) 529
16,960
16,960
2000 1999
River's Edge 1,227
436
1,663
1,663
2014
The Preserve at Pecan Creek 5,855
(1,387 ) 47
4,515
4,515
2006 2005
Fort Bend County
Summer Lakes
4,269
374
78
4,721
4,721
2013 2012
Summer Park
4,804
(2,557 ) 17
2,264
2,264
2013 2012
Willow Creek Farms 486
3,479
(1,187 )
2,292
2,292
2012 2012
Harris County
Barrington 8,950
(7,483 ) 1,467
1,467
2011
City Park

3,946
(2,243 ) 229
1,932
1,932
2002 2001
Imperial Forest 5,345
(957 ) 4
4,392
4,392
2015 2014

Note 17 — Transition Period Comparative Data

~~Forestar Group Inc.~~

~~Schedule III — Consolidated Real Estate~~The following table presents certain financial information for the nine months ended September 30, 2018 and ~~Accumulated Depreciation~~2017 (in millions, except per share amounts).

~~Year-End 2016~~


	For the Nine Months Ended September 30,
	2018		2017
			(Unaudited)
Revenues	$	78.3	$	83.5
Cost of sales	49.5		90.1
Selling, general and administrative expense	19.4		51.2
Equity in earnings of unconsolidated ventures	(4.8)		(10.9)
Gain on sale of assets	(27.8)		(113.4)
Interest expense	3.7		6.4
Interest and other income	(6.4)		(2.4)
Income from continuing operations before taxes	44.7		62.5
Income tax (benefit) expense	(25.3)		33.4
Net income from continuing operations	70.0		29.1
Income from discontinued operations, net of taxes	0		38.8
Net income	70.0		67.9
Net income attributable to noncontrolling interests	1.2		0.1
Net income attributable to Forestar Group Inc.	$	68.8	$	67.8
Weighted Average Common Shares Outstanding:
Basic	41.9		42.2
Diluted	42.0		42.5
Net Income per Basic Share:
Continuing operations	$	1.64	$	0.69
Discontinued operations	$	0	$	0.92
Net income per basic share	$	1.64	$	1.61
Net Income per Diluted Share:
Continuing operations	$	1.64	$	0.68
Discontinued operations	$	0	$	0.91
Net income per diluted share	$	1.64	$	1.59

~~(In thousands)~~

Initial Cost to
Company

Costs Capitalized
Subsequent to Acquisition
Gross Amount Carried at End of Period
Description Encumbrances Land
Buildings &
Improvements

Improvements
less Cost of
Sales and Other

Carrying
Costs^(a)

Land & Land
Improvements

Buildings &
Improvements
Total
Accumulated
Depreciation

Date of
Construction

Date
Acquired
Hays County
Arrowhead Ranch $ 12,856
$ 9,204
$ 233
$ 22,293
$ 22,293
2015 2007
Tarrant County
Summer Creek Ranch 2,887
(1,377 ) 1,510
1,510
2012
The Bar C Ranch 1,365
842
197
2,404
2,404
2012
Other 5,222
(276 ) 25
4,971
4,971

Total Entitled, Developed, and Under Development Projects $ 486
$ 234,047
$ —
$ 24,857
$ 4,955
$ 263,859
$ —
$ 263,859
$ —

Undeveloped Land and land in entitlement:
CALIFORNIA
Los Angeles County
Land In Entitlement Process $ 3,950
$ 20,838
$ 24,788
$ 24,788
1997
GEORGIA
Cherokee County
Undeveloped Land 80

80
80
(b)
TEXAS
Bexar County
Undeveloped Land 2,548
2,548
2,548
(b)
Montgomery County
Undeveloped Land 5
5
5
(b)
Other
Undeveloped Land 1,723
1,723
1,723
(b)
Total Undeveloped Land and Land in Entitlement $ —
$ 4,030
$ —
$ 25,114
$ —
$ 29,144
$ —
$ 29,144
$ —

Total $ 486
$ 238,077
$ —
$ 49,971
$ 4,955
$ 293,003
$ —
$ 293,003
$ —

Table of Contents

~~____________________~~

~~(a)We do not capitalize carrying costs until development begins.~~

~~(b)The acquisition date is not available.~~

~~Reconciliation of real estate:~~

2016 2015 2014
(In thousands)
Balance at beginning of year $ 618,844
$ 607,133
$ 547,530
Amounts capitalized 89,780
124,633
214,184
Amounts retired or adjusted (415,621 ) (112,922 ) (154,581 )
Balance at close of period $ 293,003
$ 618,844
$ 607,133

~~Reconciliation of accumulated depreciation:~~

2016 2015 2014
(In thousands)
Balance at beginning of year $ (32,129 ) $ (31,377 ) $ (28,066 )
Depreciation expense (816 ) (6,810 ) (3,319 )
Amounts retired or adjusted 32,945
6,058
8
Balance at close of period $ —
$ (32,129 ) $ (31,377 )



~~Item 9.~~	~~Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.~~

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.



~~Item 9A.~~	~~Controls and Procedures.~~

Item 9A. Controls and Procedures.

(a) Disclosure controls and procedures

Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ~~(or the~~(the Exchange Act)), as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act and were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Internal control over financial reporting

Management’s report on internal control over financial reporting and the report of our independent registered public accounting firm are included in Part II, Item 8 of this Annual Report on Form 10-K.

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the ~~fourth~~ quarter ~~2016~~ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



~~Item 9B.~~	~~Other Information.~~

Item 9B. Other Information.

None.

Table of Contents

PART III



~~Item 10.~~	~~Directors, Executive Officers and Corporate Governance.~~

Item 10. Directors, Executive Officers and Corporate Governance.

~~Set forth below is certain information about the members of our Board of Directors:~~

Name Age
Year First
Elected to
the Board
Principal Occupation
James A. Rubright 70 2007 Retired Chairman and Chief Executive Officer of Rock-Tenn Company
M. Ashton Hudson 44 2016 President and General Counsel of Rock Creek Capital Group, Inc.
William C. Powers, Jr. 70 2007 Professor of Law at The University of Texas at Austin
Daniel B. Silvers 40 2015 Managing Member at Matthews Lane Capital Partners LLC
Richard M. Smith 71 2007 President of Pinkerton Foundation
Richard D. Squires 59 2016 Managing Director and Co-Founder of Lennox Capital Partners, LLC
Phillip J. Weber 56 2015 Chief Executive Officer of Forestar Group Inc.

The ~~remaining~~ information required by this item is ~~incorporated herein by reference from~~set forth under the captions “Election of Directors,” “Delinquent Section 16(a) Reports” and “Board Matters” in our definitive ~~proxy statement, involving~~Proxy Statement for the ~~election~~2021 Annual Meeting of directors, to be filed pursuant to Regulation 14A with the SEC not later than 120 days after the end of the fiscal year covered by this Form 10-K (or Definitive Proxy Statement). Certain information required by this item concerning executive officers is included in Part I of this report.Stockholders.



~~Item 11.~~	~~Executive Compensation.~~

Item 11. Executive Compensation.

The information required by this item is ~~incorporated by reference from~~set forth under the captions “Executive Compensation” and “Compensation Committee Interlocks and Insider Participation” in our ~~Definitive~~definitive Proxy ~~Statement.~~Statement for the 2021 Annual Meeting of Stockholders.



~~Item 12.~~	~~Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.~~

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

~~Equity Compensation Plan Information~~

We have only one equity compensation plan, the Forestar 2007 Stock Incentive Plan. It was approved by our sole stockholder prior to spin-off and material terms and amendments thereto were subsequently approved by our stockholders. Information at year-end 2016 about our equity compensation plan under which our common stock may be issued follows:

Plan Category
Number of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights⁽¹⁾⁽²⁾

Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights

Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in Column (a))
(a) (b) (c)
Equity compensation plans approved by security holders 2,935,557
$ 20.73
1,097,059
Equity compensation plans not approved by security holders None
None
None
Total 2,935,557
$ 20.73
1,097,059

~~_____________________~~


⁽¹⁾	~~Includes 234,764 shares issuable to former Temple-Inland and the other spin-off entity personnel resulting from the equitable adjustment of Temple-Inland equity awards in connection with our spin-off.~~

⁽²⁾

Includes 484,406 equity-settled restricted stock units, 224,616 market-leveraged stock units and 138,819 performance stock units, which are excluded from the calculation of weighted-average exercise price. Market-leveraged stock unit and performance stock unit awards will be settled in common stock based upon performance over three years from the date of grant. For market-leveraged stock units, the number of shares to be issued could range from a high of 336,924 shares if our stock price increases by 50 percent or more, to 112,308 shares if our stock price decreases by 50 percent, or could be zero if our stock price decreases by more than 50 percent, the minimum threshold performance. For performance stock units, the number of shares to be issued could range from 277,638 shares at maximum performance to 138,819 at threshold performance, or could be zero below threshold performance.

The ~~remaining~~ information required by this item is ~~incorporated by reference from~~set forth under the captions “Securities Authorized for Issuance under Equity Compensation Plans” and “Voting Securities and Principal Stockholders” in our ~~Definitive~~definitive Proxy ~~Statement.~~Statement for the 2021 Annual Meeting of Stockholders.



~~Item 13.~~	~~Certain Relationships and Related Transactions, and Director Independence.~~

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is ~~incorporated by reference from~~set forth under the captions “Certain Relationships and Related Party Transactions” and “Board Matters” in our ~~Definitive~~definitive Proxy ~~Statement.~~Statement for the 2021 Annual Meeting of Stockholders.



~~Item 14.~~	~~Principal Accountant Fees and Services.~~

Item 14. Principal Accountant Fees and Services.

The information required by this item is ~~incorporated by reference from~~set forth under the caption “Proposal to Ratify the Selection of Ernst & Young as our ~~Definitive~~Independent Registered Public Accounting Firm” in our definitive Proxy ~~Statement.~~Statement for the 2021 Annual Meeting of Stockholders.

Table of Contents

PART IV



~~Item 15.~~	~~Exhibits and Financial Statement Schedules.~~

Item 15. Exhibits and Financial Statement Schedules.


~~(a)~~	~~Documents filed as part of this report.~~


~~(1)~~	~~Financial Statements~~ (a)The following documents are filed as part of this report. (1)Financial Statements

Our ~~Consolidated Financial Statements~~consolidated financial statements are included in Part II, Item 8 of this Annual Report on Form 10-K.


~~(2)~~	~~Financial Statement Schedules~~

~~Schedule III — Consolidated Real Estate and Accumulated Depreciation is included in Part II, Item 8 of this Annual Report on Form 10-K.~~(2)Financial Statement Schedules

~~Schedules other than those listed above~~All financial statement schedules are omitted asbecause they are not applicable or the required information is ~~either inapplicable~~included in the consolidated financial statements or ~~the information is presented in our Consolidated Financial Statements and~~ notes thereto.


~~(3)~~	~~Exhibits~~

(3)Exhibits

The exhibits listed in ~~the Exhibit Index in~~ (b) ~~below~~ are filed or incorporated by reference as part of this Annual Report on Form 10-K.

(b)Exhibits


~~(b)~~	~~Exhibits~~



Exhibit Number			Exhibit
~~3.1~~2.1			Agreement and Plan of Merger, dated as of June 29, 2017, by and among Forestar Group Inc., D.R. Horton, Inc. and Force Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Commission on June 29, 2017).
3.1			Second Amended and Restated Certificate of Incorporation of Forestar Group Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Commission on ~~December 11, 2007)~~October 10, 2017).
3.2			Second Amended and Restated Bylaws of Forestar Group Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed with the Commission on ~~December 11, 2007)~~October 10, 2017).
3.3			First Amendment to the Second Amended and Restated Bylaws ~~(incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Commission on February 19, 2008).~~
~~3.4~~	~~Second Amendment to Amended and Restated Bylaws (incorporated by reference to Exhibit 3.5 of the Company’s Annual Report on Form 10-K filed with the Commission on March 5, 2009).~~
~~3.5~~	Certificate of Ownership and Merger, dated November 21, 2008 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Commission on November 24, 2008).
~~3.6~~	~~Third Amendment to Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed with the Commission on November 24, 2008).~~
~~3.7~~	~~Fourth Amendment to the Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Commission on November 26, 2012).~~
~~3.8~~	~~Fifth Amendment to Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Commission on September 28, 2015).~~
~~3.9~~	Certificate of Amendment to Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q filed with the Commission on November 6, 2015).
~~3.10~~	~~Certificate of Designations, Preferences and Rights of Series B Junior Participating Preferred Stock~~ of Forestar Group Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Commission on January ~~5, 2017)~~30, 2018).
~~4.1~~3.4			Second Amendment to the Second Amended and Restated Bylaws of Forestar Group Inc. (incorporated by reference from Exhibit 3.1 to Forestar Group Inc.’s Quarterly Report on Form 10-Q filed with the Commission on August 8, 2018).
4.1			Specimen Certificate for shares of common stock, par value $1.00 per share (incorporated by reference to Exhibit ~~4.2~~4.7 of the Company's Registration Statement on Form S-3 filed with the Commission on September 24, 2018).
4.2			Indenture, dated as of April 12, 2019, by and among Forestar Group Inc., the subsidiary guarantors party thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed with the Commission on ~~January 5, 2017)~~April 12, 2019).
~~4.2~~4.3			Indenture, dated as of February ~~26, 2013~~25, 2020, by and among Forestar Group Inc., the subsidiary guarantors party thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed with the Commission on February ~~26, 2013)~~25, 2020).
~~4.3~~4.4			~~Supplemental Indenture, dated February 26, 2013~~ Description of Securities (incorporated by reference to Exhibit ~~4.2~~4.6 of the ~~Company’s Current~~Company's Annual Report on Form ~~8-K~~10-K filed with the Commission on ~~February 26, 2013)~~November 21, 2019).
~~4.4~~		Form of 3.75% Convertible Senior Notes due 2020 (included in Exhibit 4.3 above) (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed with the Commission on February 26, 2013).


10.1†
~~4.5~~	~~Indenture, dated May 12, 2014 (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K filed with the Commission on May 15, 2014).~~
~~4.6~~	Form of 8.500% Senior Secured Notes due 2022 (included in Exhibit 4.10 above) (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed with the Commission on May 15, 2014).
~~4.7~~	Supplemental Indenture, dated as of June 21, 2016, among Forestar (USA) Real Estate Group Inc., as issuer, the Guarantors named therein and U.S. Bank National Association, as trustee, to the Indenture, dated as of May 12, 2014, among Forestar (USA) Real Estate Group Inc., the Guarantors named therein and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K filed with the Commission on June 21, 2016).
~~4.8~~	Tax Benefits Preservation Plan, dated as of January 5, 2017, between Forestar Group Inc. and Computershare Trust Company, N.A. (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K filed with the Commission on January 5, 2017).
~~10.1†~~	Forestar Real Estate Group Inc. Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.5 of Amendment No. 5 to the Company’s Form 10 filed with the Commission on December 10, 2007).
10.2†		Amendment No. 1 to Forestar Group Inc. Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.3 of the Company’s Annual Report on Form 10-K filed with the Commission on March 14, 2013).

Table of Contents


10.3†		Amendment No. 2 to Forestar Group Inc. Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.25 of the Company's Annual Report on Form 10-K filed with the Commission on March 11, 2014).
10.4†		Form of Indemnification Agreement (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the Commission on October 10, 2017).
10.5†		Form of Change in Control/Severance Agreement between the Company and its named executive officers (incorporated by reference to Exhibit 10.10 of the Company’s Form 10 filed with the Commission on August 10, 2007).
10.6†		Form of First Amendment to Change in Control/Severance Agreement between the Company and certain named executive officers (incorporated by reference to Exhibit 10.8 of the Company’s Annual Report on Form 10-K filed with the Commission on February 28, 2018).
10.7*		Shared Services Agreement, dated October 6, 2017, between Forestar Group Inc. and D.R. Horton, Inc.
10.8		Stockholder’s Agreement dated as of June 29, 2017, by and between Forestar Group Inc. and D.R. Horton, Inc. (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Commission on June 29, 2017).
10.9		Master Supply Agreement dated as of June 29, 2017, by and between Forestar Group Inc. and D.R. Horton, Inc. (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Commission on June 29, 2017).
10.10†		Forestar Real Estate Group Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.6 of Amendment No. 5 to the Company’s Form 10 filed with the Commission on December 10, 2007).
~~10.4†~~10.11†		Amended and Restated Forestar Group Inc. Amended and Restated Directors' Fee Deferral Plan (incorporated by reference to Exhibit 10.5 of the Company's Annual Report on Form 10-K filed with the Commission on March 11, 2014).
~~10.5†~~	Form of Indemnification Agreement to be entered into between the Company and each of its directors (incorporated by reference to Exhibit 10.9 of Amendment No. 5 to the Company’s Form 10 filed with the Commission on December 10, 2007).
~~10.6†~~	Form of Change in Control/Severance Agreement between the Company and its named executive officers (incorporated by reference to Exhibit 10.10 to the Company’s Form 10 filed with the Commission on August 10, 2007).
~~10.7†~~	~~Form of Nonqualified Stock Option Agreement (incorporated by reference to Exhibit 10.12 of the Company’s Annual Report on Form 10-K filed with the Commission on March 5, 2009).~~
~~10.8†~~	~~Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.10 of the Company’s Annual Report on Form 10-K filed with the Commission on March 14, 2013).~~
~~10.9†~~	~~Form of Restricted Stock Units Agreement (incorporated by reference to Exhibit 10.11 of the Company’s Annual Report on Form 10-K filed with the Commission on March 14, 2013).~~
~~10.10†~~	~~Form of Stock Appreciation Right Agreement (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Commission on February 12, 2009).~~
~~10.11†~~	First Amendment to the Forestar Real Estate Group Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Commission on May 13, 2009).
10.12†		Second Amendment to the Forestar Group Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.22 toof the Company’s Annual Report on Form 10-K filed with the Commission on March 3, 2010).
10.13†		Form of ~~Market-Leveraged~~Restricted Stock ~~Unit Award~~Units Agreement pursuant to Forestar Real Estate Group Inc.’s 2007 Stock Incentive Plan (incorporated by reference to Exhibit ~~10.18~~10.11 of the Company’s Annual Report on Form 10-K filed with the Commission on March 14, 2013).
10.14†		Form of Indemnification Agreement entered into between the Company and each of its executive officers (incorporated by reference to Exhibit 10.19 of the Company’s Annual Report on Form 10-K filed with the Commission on March 14, 2013).
~~10.15†~~	~~Amendment No. 2 to~~ Forestar Group Inc. ~~Supplemental Executive Retirement~~2018 Stock Incentive Plan (incorporated by reference to Exhibit ~~10.25~~10.2 of the ~~Company's Annual~~Company’s Quarterly Report on Form ~~10-K~~10-Q filed with the Commission on ~~March 11, 2014)~~May 9, 2018).
~~10.16~~10.15†		Form of Restricted Stock Unit Agreement ~~of Guaranty and Suretyship (Completion), dated January 17, 2014, by~~(Employees) pursuant to Forestar Group Inc. ~~in favor~~’s 2018 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 of ~~PNC~~the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 9, 2018).
10.16		Credit Agreement, dated August 16, 2018, among Forestar Group Inc., the lenders party thereto and JPMorgan Chase Bank, ~~National Association~~N.A., as administrative agent (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Commission on ~~January~~August 17, ~~2014)~~2018).
~~10.17~~10.17†		Form of Restricted Stock Unit Award Agreement (Employee) pursuant to the Company's 2018 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of ~~Guaranty and Suretyship (Payment), dated January 17, 2014, by Forestar Group Inc. in favor~~the Company’s Quarterly Report on Form 10-Q filed with the Commission on July 30, 2019).
10.18†		Form of ~~PNC Bank, National Association~~Restricted Stock Unit Award Agreement (Director) pursuant to the Company's 2018 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 of the Company’s ~~Current~~Quarterly Report on Form ~~8-K filed with the Commission on January 17, 2014).~~
~~10.18~~	Third Amended and Restated Revolving Credit Agreement dated May 15, 2014, by and among the Company, Forestar (USA) Real Estate Group Inc. and certain of its wholly-owned subsidiaries; Key Bank National Association, as lender, swing line lender and agent, the lenders party thereto; and the other parties thereto (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Commission on May 16, 2014).
~~10.19~~	~~Guaranty, dated July 15, 2014, by Forestar (USA) Real Estate Group Inc. in favor of Regions Bank (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K~~10-Q filed with the Commission on July ~~18, 2014)~~30, 2019).
~~10.20~~10.19		~~Limited Waiver and~~ Amendment No. 1 to ~~the Third Amended and Restated Revolving~~ Credit Agreement, dated ~~September 30, 2015,~~October 2, 2019 by and among ~~the Company,~~ Forestar ~~(USA) Real Estate~~ Group Inc. ~~and certain of its wholly-owned subsidiaries signatory thereto, KeyBank National Association,~~, JPMorgan Chase Bank, N.A., as ~~lender, swing line lender and~~administrative agent, ~~the lenders party thereto,~~ and the ~~other parties thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on October 6, 2015).~~
~~10.21~~	First Amendment to Third Amended and Restated Revolving Credit Agreement dated December 30, 2015, by and among the Company, Forestar (USA) Real Estate Group Inc. and certain of its wholly-owned subsidiaries signatory thereto, KeyBank National Association, as lender, swing line lender and agent, the lenders party thereto, and the other parties theretoLenders named therein (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Commission on ~~December 31, 2015)~~October 3, 2019).

Table of Contents


~~10.22†~~10.20		~~Employment~~ Equity Distribution Agreement, dated ~~October 21, 2015, between~~as of August 7, 2020, among Forestar Group Inc. and the ~~Company and Phillip J. Weber~~Sales Agents named therein (incorporated by reference to Exhibit ~~10.1 to the Company’s Current Report on Form 8-K filed with the Commission on October 26, 2015).~~
~~10.23~~	Purchase and Sale Agreement, dated February 4, 2016, by and between Capital of Texas Insurance Group and Austin Lakeside Hotel Owner LLC (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 10, 2016).
~~10.24~~	Director Nomination Agreement, dated February 5, 2016, by and between Forestar Group Inc. and Carlson Capital, L.P. (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Commission on February 8, 2016).
~~10.25~~	Director Nomination Agreement, dated February 5, 2016, by and between Forestar Group Inc. and Cove Street Capital, LLC (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Commission on February 8, 2016).



~~10.26~~	Purchase and Sale Agreement, dated April 7, 2016, by and between Forestar Petroleum Corporation and DW Slate, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Commission on April 11, 2016).
~~10.27~~	Consent to Third Amended and Restated Credit Agreement dated June 30, 2016, by and among the Company, Forestar (USA) Real Estate Group Inc. and certain of its wholly-owned subsidiaries signatory thereto, KeyBank National Associate, as agent and lender, the lenders thereto, and the other parties thereto (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 5, 2016).
10.28*	~~Purchase and Sale Agreement, dated November 9, 2016 among Forestar Real Estate Group Inc., Forestar Petroleum Corporation and SPP Land, LLC.~~
10.29*	~~Purchase and Sale Agreement, dated November 10, 2016 among Forestar Real Estate Group Inc., Forestar Petroleum Corporation and Hubble Timber, LLC.~~
10.30*	~~Purchase and Sale Agreement, dated November 11, 2016 among Forestar Real Estate Group Inc., Forestar Petroleum Corporation and TIR Europe Forestry Fund S.C.A. SICAV-SIF.~~
~~10.31~~	~~Purchase and Sale Agreement, dated February 17, 2017, between Forestar (USA) Real Estate Group Inc. and Mineral Resources Partners, LLC (incorporated by reference to Exhibit 10.1~~1.1 of the Company's Current Report on Form 8-K filed with the Commission on ~~February 17, 2017)~~August 7, 2020).
21.1*		List of Subsidiaries of the Company.
23.1*		Consent of Ernst & Young LLP.
23.231.1		~~Consent of Netherland, Sewell & Associates, Inc.~~
31.1*	Certification of Chief Executive Officer ~~pursuant to Exchange Act rule 13a-14(a), as adopted~~ pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer ~~pursuant to Exchange Act rule 13a-14(a), as adopted~~ pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Chief Executive Officer ~~pursuant to 18 U.S.C. Section 1350, as adopted~~ pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Chief Financial Officer ~~pursuant to 18 U.S.C. Section 1350, as adopted~~ pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1101.INS*		~~Reserve report of Netherland, Sewell & Associates, Inc., dated February 3, 2017.~~XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.1101.SCH*		~~The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, formatted in~~Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income (Loss) and Comprehensive Income (Loss), (iii) Consolidated Statement of Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements.

~~_____________________~~

Taxonomy Extension Schema Document.
101.CAL**		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF**	~~Filed herewith.~~

Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB**						Inline XBRL Taxonomy Extension Label Linkbase Document.
†101.PRE**						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104**						Cover Page Interactive Data File (embedded within the Inline XBRL document contained in Exhibit 101).
_____________________
*						Filed or furnished herewith.
**						Submitted electronically herewith.
†						Management contract or compensatory plan or arrangement.



~~Item 16.~~	~~Form 10-K Summary.~~

Item 16. Form 10-K Summary.

None.

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


			Forestar Group Inc.
	F~~ORESTAR~~ G~~ROUP~~ INC.
Date:	November 19, 2020		By:	/s/ James D. Allen
	~~By:~~		~~/s/ Phillip J. Weber~~	James D. Allen
			~~Phillip J. Weber~~
		Executive Vice President and Chief ~~Executive~~Financial Officer

~~Date: March 3, 2017~~

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Daniel C. Bartok

Chief Executive Officer
(Principal Executive Officer)

November 19, 2020

Daniel C. Bartok

~~Signature~~

~~Capacity~~

~~Date~~

/s/ ~~Phillip J. Weber~~James D. Allen

~~Director~~Executive Vice President and ~~Chief Executive Officer~~

~~(Principal Executive Officer)~~

~~March 3, 2017~~

~~Phillip J. Weber~~

~~/s/ Charles D. Jehl~~

Chief Financial Officer

(Principal Financial ~~Officer)~~

~~March 3, 2017~~

~~Charles D. Jehl~~

~~/s/ Sabita C. Reddy~~

~~Vice President Accounting~~

(and Principal Accounting Officer)

~~March 3, 2017~~November 19, 2020

~~Sabita C. Reddy~~James D. Allen

/s/ ~~James A. Rubright~~Donald J. Tomnitz

Executive
Chairman of the Board

~~March 3, 2017~~November 19, 2020

~~James A. Rubright~~Donald J. Tomnitz

/s/ ~~M. Ashton Hudson~~Samuel R. Fuller

Director

~~March 3, 2017~~November 19, 2020

~~M. Ashton Hudson~~Samuel R. Fuller

/s/ ~~William C. Powers, Jr.~~Lisa H. Jamieson

Director

~~March 3, 2017~~November 19, 2020

~~William C. Powers, Jr.~~Lisa H. Jamieson

/s/ ~~Daniel B. Silvers~~G.F. (Rick) Ringler, III

Director

~~March 3, 2017~~November 19, 2020

~~Daniel B. Silvers~~G.F. (Rick) Ringler, III

/s/ ~~Richard M. Smith~~Donald C. Spitzer

Director

~~March 3, 2017~~November 19, 2020

~~Richard M. Smith~~Donald C. Spitzer

~~/s/ Richard D. Squires~~

~~Director~~

~~March 3, 2017~~

~~Richard D. Squires~~

9864



Delaware						26-1336998
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)



Assets	Pre-Tax Net Proceeds
	(In millions)
Timberland and Undeveloped Land (bulk and retail, ~73,000 acres)	$	138.0
Radisson Hotel & Suites	128.8
Multifamily properties (five properties)	118.7
Oil and Gas Working Interests	77.1
Non-core Community Development Projects (five projects)	19.3
	$	481.9



~~Name~~	~~Age~~	~~Position~~
~~Phillip J. Weber~~	56	~~Chief Executive Officer~~
~~Charles D. Jehl~~	48	~~Chief Financial Officer and Treasurer~~
~~David M. Grimm~~	56	~~Chief Administrative Officer, Executive Vice President, General Counsel and Secretary~~
~~Michael J. Quinley~~	55	~~President - Community Development~~



þ(Mark One)
☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


				Page
PART I
Item 1.			Business	3
Item 1A.			Risk Factors	9
Item 1B.			Unresolved Staff Comments	18
Item 2.			Properties	18
Item 3.			Legal Proceedings	18
Item 4.			Mine Safety Disclosures	18

PART II				~~Page~~
~~PART I.~~
Item 1.	~~Business~~5.	3
~~Item 1A.~~	~~Risk Factors~~	17
~~Item 1B.~~	~~Unresolved Staff Comments~~	22
~~Item 2.~~	~~Properties~~	22
~~Item 3.~~	~~Legal Proceedings~~	22
~~Item 4.~~	~~Mine Safety Disclosures~~	22

~~PART II.~~
~~Item 5.~~	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2319
Item 6.			Selected Financial Data	2521
Item 7.			Management’s Discussion and Analysis of Financial Condition and Results of Operations	2723
Item 7A.			Quantitative and Qualitative Disclosures About Market Risk	4833
Item 8.			Financial Statements and Supplementary Data	4934
Item 9.			Changes in and Disagreements ~~With~~with Accountants on Accounting and Financial Disclosure	9359
Item 9A.			Controls and Procedures	9359
Item 9B.			Other Information	9359

PART ~~III.~~III
Item 10.			Directors, Executive Officers and Corporate Governance	9460
Item 11.			Executive Compensation	9460
Item 12.			Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	9460
Item 13.			Certain Relationships and Related Transactions, and Director Independence	9560
Item 14.			Principal Accountant Fees and Services	9560

PART ~~IV.~~IV
Item 15.			Exhibits and Financial Statement Schedules	9561
Item 16.			10-K Summary	63

SIGNATURES					9864



				Residential Lots/Units		Commercial Acres
Project	County	Interest Owned ^(a)		Lots/Units Sold Since Inception	Lots/Units Remaining	Acres Sold Since Inception	Acres Remaining
Projects with lots/units in inventory, under development or future planned development, projects with remaining commercial acres only and projects sold out in 2016
Texas
Austin
Arrowhead Ranch	Hays	100	%	6	378	—	19
The Colony	Bastrop	100	%	566	—	27	—
Double Horn Creek	Burnet	100	%	167	—	—	—
Hunter's Crossing	Bastrop	100	%	510	—	54	51
La Conterra	Williamson	100	%	202	—	3	—
Westside at Buttercup Creek	Williamson	100	%	1,497	—	66	—
				2,948	378	150	70
Corpus Christi
Caracol	Calhoun	75	%	65	—	14	—
Padre Island ^(b)	Nueces	50	%	—	—	—	15
Tortuga Dunes	Nueces	75	%	95	—	4	—
				160	—	18	15
Dallas-Ft. Worth
Bar C Ranch	Tarrant	100	%	467	654	—	—
Keller	Tarrant	100	%	—	—	1	—
Lakes of Prosper	Collin	100	%	187	100	4	—
Lantana	Denton	100	%	3,670	432	44	—
Maxwell Creek	Collin	100	%	1,001	—	10	—
Parkside	Collin	100	%	138	62	—	—
The Preserve at Pecan Creek	Denton	100	%	631	151	—	7
River's Edge	Denton	100	%	—	202	—	—
Stoney Creek	Dallas	100	%	320	376	—	—
Summer Creek Ranch	Tarrant	100	%	983	245	35	44
Timber Creek	Collin	88	%	80	521	—	—
Village Park	Collin	100	%	567	—	3	2
				8,044	2,743	97	53
Houston
Barrington Kingwood	Harris	100	%	176	4	—	—
City Park	Harris	75	%	1,468	—	58	104
Harper's Preserve ^(b)	Montgomery	50	%	588	1,094	30	49
Imperial Forest	Harris	100	%	84	347	—	—
Long Meadow Farms ^(b)	Fort Bend	38	%	1,648	149	194	99
Southern Trails ^(b)	Brazoria	80	%	954	41	1	—
Spring Lakes	Harris	100	%	348	—	25	4
Summer Lakes	Fort Bend	100	%	780	294	56	—
Summer Park	Fort Bend	100	%	125	74	34	67
Willow Creek Farms II	Waller / Fort Bend	90	%	154	111	—	—
				6,325	2,114	398	323
San Antonio
Cibolo Canyons	Bexar	100	%	1,142	649	97	58
Oak Creek Estates	Comal	100	%	326	227	13	—
Olympia Hills	Bexar	100	%	747	7	10	—
Stonewall Estates ^(b)	Bexar	50	%	378	8	—	—
				2,593	891	120	58
Total Texas				20,070	6,126	783	519


^(a)	~~Interest owned reflects our total interest in the project, whether directly or indirectly, which may be different than our economic interest in the project.~~


^(b)	~~Projects in ventures that we account for using equity method.~~


^(d)	~~Venture project that develops and sells lots and homes.~~



State	Entitled, Developed, and Under Development Projects		Undeveloped Land and Land in Entitlement		Total
	(In thousands)
Texas	$	167,772	$	2,639	$	170,411
Georgia	7,504		409		7,913
North and South Carolina	27,915		117		28,032
California	1,667		25,957		27,624
Tennessee	23,624		22		23,646
Colorado	29,514		—		29,514
Other	5,863		—		5,863
Total	$	263,859	$	29,144	$	293,003



State	Unleased	Leased ^(b)	Held By Production ^(c)	Total ^(d)
Texas ^(e)	210,000	8,000	34,000	252,000
Louisiana ^{(e) (f)}	129,000	5,000	10,000	144,000
Georgia	84,000	—	—	84,000
Alabama	41,000	—	—	41,000
California	1,000	—	—	1,000
Indiana	1,000	—	—	1,000
	466,000	13,000	44,000	523,000


^(b)	Includes leases in primary lease term or for which a delayed rental payment has been received. In the ordinary course of business, leases covering a significant portion of leased net mineral acres may expire from time to time in a single reporting period.


^(c)	~~Acres being held by production are producing oil or gas in paying quantities.~~


^(d)	Texas, Louisiana, California and Indiana net acres are calculated as the gross number of surface acres multiplied by our percentage ownership of the mineral interest. Alabama and Georgia net acres are calculated as the gross number of surface acres multiplied by our estimated percentage ownership of the mineral interest based on county sampling. In fourth quarter


^(e)	These owned mineral acre interests contain numerous oil and gas producing formations consisting of conventional, unconventional, and tight sand reservoirs. Of these reservoirs, we have mineral interests in and around production trends in the Wilcox, Frio, Cockfield, James Lime, Petet, Travis Peak, Cotton Valley, Austin Chalk, Haynesville Shale, Barnett Shale and Bossier formations.



	Reserves
	Oil ^(a) (Barrels)	Gas (Mcf)
	(In thousands)
Consolidated entities:
Proved developed	446	3,836
Proved undeveloped	—	—
Total proved reserves 2016	446	3,836
Proved developed	5,179	7,957
Proved undeveloped	—	—
Total proved reserves 2015	5,179	7,957
Proved developed	5,269	10,848
Proved undeveloped	2,403	1,801
Total proved reserves 2014	7,672	12,649
Our share of ventures accounted for using the equity method:
Proved developed	—	1,199
Proved undeveloped	—	—
Total proved reserves 2016	—	1,199
Proved developed	—	1,263
Proved undeveloped	—	—
Total proved reserves 2015	—	1,263
Proved developed	—	1,751
Proved undeveloped	—	—
Total proved reserves 2014	—	1,751
Total consolidated and our share of equity method ventures:
Proved developed	446	5,035
Proved undeveloped	—	—
Total proved reserves 2016	446	5,035
Proved developed	5,179	9,220
Proved undeveloped	—	—
Total proved reserves 2015	5,179	9,220
Proved developed	5,269	12,599
Proved undeveloped	2,403	1,801
Total proved reserves 2014	7,672	14,400



	Reserves
	Oil (Barrels)		Gas (Mcf)
	(In thousands)
Consolidated entities:
Year-end 2015	5,179		7,957
Revisions of previous estimates	(11	)	631
Extensions and discoveries	29		—
Acquisitions	—		—
Sales	(4,460	)	(3,756	)
Production	(291	)	(996	)
Year-end 2016	446		3,836
Our share of ventures accounted for using the equity method:
Year-end 2015	—		1,263
Revisions of previous estimates	—		79
Extensions and discoveries	—		—
Production	—		(143	)
Year-end 2016	—		1,199
Total consolidated and our share of equity method ventures:
Year-end 2016	446		5,035



Gross Wells
		Exploratory			Development
Year	Total	Oil	Gas	Dry	Oil	Gas	Dry
2016	—	—	—	—	—	—	—
2015 ^(a)	38	2	—	1	34	—	1
2014 ^(b)	119	21	—	32	46	1	19


^(a)	~~Of the gross wells drilled in 2015, we operated 3 wells or 8 percent. The remaining wells represent our participations in wells operated by others. The exploratory dry hole was located in Oklahoma.~~


^(b)	Of the gross wells drilled in 2014, we operated 72 wells or 61 percent. The remaining wells represent our participations in wells operated by others. Dry holes were principally located in Nebraska, Kansas and Oklahoma.



Net Wells
		Exploratory			Development
Year	Total	Oil	Gas	Dry	Oil	Gas	Dry
2016	—	—	—	—	—	—	—
2015	6.3	0.7	—	0.8	4.3	—	0.5
2014	57.3	11.9	—	20.1	13.6	0.1	11.6



	Productive Wells
	Gross	Net
Consolidated entities:
Oil	274	40.8
Gas	177	12.2
Total	451	53.0
Ventures accounted for using the equity method:
Oil	—	—
Gas	23	1.8
Total	23	1.8
Total consolidated and equity method ventures:
Oil	274	40.8
Gas	200	14.0
Total	474	54.8



	2016				2015
	Price Range				Price Range
	High		Low		High		Low
First Quarter	$	13.04	$	8.40	$	15.91	$	13.27
Second Quarter	$	13.74	$	11.23	$	16.29	$	13.16
Third Quarter	$	12.80	$	11.33	$	13.67	$	11.98
Fourth Quarter	$	13.65	$	10.75	$	14.59	$	10.58
For the Year	$	13.74	$	8.40	$	16.29	$	10.58



Period	Total Number of Shares Purchased ^(b)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan or Programs	Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs
Month 10 (10/1/2016 — 10/31/2016)	—	$	—	—	3,222,692
Month 11 (11/1/2016 — 11/30/2016)	56	$	11.10	—	3,222,692
Month 12 (12/1/2016 — 12/31/2016)	—	$	—	—	3,222,692
Total	56	$	11.10	—



	Senior Credit Facility
	(In thousands)
Borrowing base availability	$	86,112
Less: borrowings	—
Less: letters of credit	(14,850		)
Net unused borrowing capacity	$	71,262



	Payments Due or Expiring by Year
	Total		2017		2018-19		2020-21		Thereafter
	(In thousands)
Debt ^{(a) (b)}	$	125,801	$	—	$	486	$	120,000	$	5,315
Interest payments on debt	16,772		4,989		9,941		1,654		188
Purchase obligations	18,095		18,095		—		—		—
Operating leases	4,402		2,267		1,891		244		—
Performance bond ^(a)	6,631		6,631		—		—		—
Standby letter of credit ^(a)	6,846		6,846		—		—		—
Total	$	178,547	$	38,828	$	12,318	$	121,898	$	5,503



	At Year-End
	2016			2015
	(In thousands, except share data)
ASSETS
Cash and cash equivalents	$	265,798		$	96,442
Real estate, net	293,003			586,715
Assets of discontinued operations	14			104,967
Assets held for sale	30,377			—
Investment in unconsolidated ventures	77,611			82,453
Timber	—			7,683
Receivables, net	8,931			19,025
Income taxes receivable	10,867			12,056
Prepaid expenses	2,000			3,116
Property and equipment, net	3,116			10,732
Deferred tax asset, net	323			—
Goodwill and other intangible assets	37,900			43,455
Other assets	3,268			5,602
TOTAL ASSETS	$	733,208		$	972,246
LIABILITIES AND EQUITY
Accounts payable	$	4,804		$	11,617
Accrued employee compensation and benefits	4,126			5,547
Accrued property taxes	2,008			4,529
Accrued interest	1,585			3,267
Deferred tax liability, net	—			1,037
Earnest money deposits	10,511			10,214
Other accrued expenses	12,598			14,556
Liabilities of discontinued operations	5,295			11,192
Liabilities held for sale	103			—
Other liabilities	19,702			24,657
Debt, net	110,358			381,515
TOTAL LIABILITIES	171,090			468,131
COMMITMENTS AND CONTINGENCIES
EQUITY
Forestar Group Inc. shareholders’ equity:
Common stock, par value $1.00 per share, 200,000,000 authorized shares, 44,803,603 issued at December 31, 2016 and 36,946,603 issued at December 31, 2015	44,804			36,947
Additional paid-in capital	553,005			561,850
Retained earnings (Accumulated deficit)	12,602			(46,046		)
Treasury stock, at cost, 3,187,253 shares at December 31, 2016 and 3,203,768 shares at December 31, 2015	(49,760		)	(51,151		)
Total Forestar Group Inc. shareholders’ equity	560,651			501,600
Noncontrolling interests	1,467			2,515
TOTAL EQUITY	562,118			504,115
TOTAL LIABILITIES AND EQUITY	$	733,208		$	972,246



				Forestar Group Inc. Shareholders' Equity
				Common Stock			Additional Paid-in Capital			Treasury Stock					Retained Earnings (Accumulated Deficit)			Non-controlling Interests
	Total			Shares	Amount		Additional Paid-in Capital			Shares		Amount			Retained Earnings (Accumulated Deficit)			Non-controlling Interests
	(In thousands, except per share amounts)
Balance at December 31, 2013	$	715,397		36,946,603	$	36,947	$	556,676		(2,199,666	)	$	(34,196	)	$	150,418		$	5,552
Net income	17,088			—	—		—			—		—			16,583			505
Distributions to noncontrolling interest	(4,171		)	—	—		—			—		—			—			(4,171		)
Contributions from noncontrolling interest	2,585			—	—		—			—		—			—			2,585
Dissolution of noncontrolling interests	1,342			—	—		—			—		—			—			1,342
Purchase of noncontrolling interests, net	(6,242		)	—	—		(2,969		)	—		—			—			(3,273		)
Issuances of common stock for vested share-settled units	—			—	—		(2,567		)	164,914		2,567			—			—
Issuances from exercises of pre-spin stock options, net of swaps	877			—	—		(43		)	60,823		920			—			—
Issuances from exercises of stock options, net of swaps	329			—	—		(333		)	45,062		662			—			—
Shares withheld for payroll taxes	(1,043		)	—	—		(4		)	(55,238	)	(1,039		)	—			—
Shares repurchased	(24,595		)	—	—		—			(1,491,187	)	(24,595		)	—			—
Forfeitures of restricted stock awards	—			—	—		10			(9,986	)	(10		)	—			—
Share-based compensation	8,033			—	—		8,033			—		—			—			—
Tax benefit from exercise of restricted stock units and stock options and vested restricted stock	142			—	—		142			—		—			—			—
Balance at December 31, 2014	$	709,742		36,946,603	$	36,947	$	558,945		(3,485,278	)	$	(55,691	)	$	167,001		$	2,540
Net income (loss)	(212,371		)	—	—		—			—		—			(213,047		)	676
Distributions to noncontrolling interest	(701		)	—	—		—			—		—			—			(701		)
Issuances of common stock for vested share-settled units	—			—	—		(5,362		)	335,611		5,362			—			—
Issuances from exercises of pre-spin stock options, net of swaps	31			—	—		(33		)	3,999		64			—			—
Shares withheld for payroll taxes	(762		)	—	—		(1		)	(51,521	)	(761		)	—			—
Forfeitures of restricted stock awards	—			—	—		125			(6,579	)	(125		)	—			—
Share-based compensation	8,576			—	—		8,576			—		—			—			—
Tax benefit from exercise of restricted stock units and stock options and vested restricted stock	(400		)	—	—		(400		)	—		—			—			—
Balance at December 31, 2015	$	504,115		36,946,603	$	36,947	$	561,850		(3,203,768	)	$	(51,151	)	$	(46,046	)	$	2,515
Net income	60,179			—	—		—			—		—			58,648			1,531
Distributions to noncontrolling interests	(2,579		)	—	—		—			—		—			—			(2,579		)
Issuances of common stock for vested share-settled units	—			—	—		(4,570		)	288,397		4,570			—			—
Issuances from exercises of stock options, net of swaps	328			—	—		(224		)	35,406		552			—			—
Shares withheld for payroll taxes	(222		)	—	—		(28		)	(23,312	)	(194		)	—			—
Shares repurchased	(3,537		)	—	—		—			(283,976	)	(3,537		)	—			—
Share-based compensation	4,045			—	—		4,045			—		—			—			—
Settlement of tangible equity units	—			7,857,000	7,857		(7,857		)	—		—			—			—
Reacquisition of equity component related to convertible debt	(211		)	—	—		(211		)	—		—			—			—
Balance at December 31, 2016	$	562,118		44,803,603	$	44,804	$	553,005		(3,187,253	)	$	(49,760	)	$	12,602		$	1,467



	Year-End
	2016			2015
	(In thousands)
Beginning balance	$	1,758		$	1,807
Additions	6			65
Oil and gas working interest property dispositions	(1,610		)	(119		)
Liabilities settled	(107		)	(139		)
Accretion expense	56			144
	$	103		$	1,758



	Estimated	Year-End
	Useful Lives	2016			2015
		(In thousands)
Buildings and building improvements	10 to 40 years	$	2,700		$	4,044
Property and equipment	2 to 10 years	4,957			12,230
		7,657			16,274
Less: accumulated depreciation		(4,541		)	(5,542		)
		$	3,116		$	10,732



	Venture Assets				Venture Borrowings ^(a)				Venture Equity				Our Investment
	At Year-End
	2016		2015		2016		2015		2016		2015		2016		2015
	(In thousands)
242, LLC ^(b)	$	26,503	$	26,687	$	1,107	$	—	$	23,136	$	24,877	$	10,934	$	11,766
CL Ashton Woods, LP ^(c)	2,653		7,654		—		—		2,198		6,084		1,107		3,615
CL Realty, LLC	8,048		7,872		—		—		7,899		7,662		3,950		3,831
CREA FMF Nashville LLC ^(b)	56,081		57,820		37,446		50,845		17,091		4,291		4,923		3,820
Elan 99, LLC	49,652		34,192		36,238		14,587		13,100		15,838		11,790		14,255
FMF Littleton LLC	70,282		52,376		44,446		22,347		23,798		24,370		6,128		6,270
FMF Peakview LLC	—		48,869		—		30,485		—		16,828		—		3,447
FOR/SR Forsyth LLC	10,672		6,500		1,568		—		8,990		6,500		8,091		5,850
HM Stonewall Estates, Ltd ^(c)	852		2,842		—		—		852		2,842		477		1,294
LM Land Holdings, LP ^(c)	25,538		31,984		3,477		7,728		20,945		22,751		9,685		9,664
MRECV DT Holdings LLC	4,155		4,215		—		—		4,144		4,215		3,729		3,807
MRECV Edelweiss LLC	3,484		2,237		—		—		3,484		2,237		3,358		2,029
MRECV Juniper Ridge LLC	4,156		3,006		—		—		4,156		3,006		3,741		2,730
MRECV Meadow Crossing II LLC	2,492		728		—		—		2,491		728		2,242		655
Miramonte Boulder Pass, LLC	10,738		12,627		4,006		5,869		5,265		5,474		5,330		5,349
Temco Associates, LLC	4,368		5,284		—		—		4,253		5,113		2,126		2,557
Other ventures (d)	—		4,174		—		2,242		—		1,922		—		1,514
	$	279,674	$	309,067	$	128,288	$	134,103	$	141,802	$	154,738	$	77,611	$	82,453



	Revenues						Earnings (Loss)									Our Share of Earnings (Loss)
	For the Year
	2016		2015		2014		2016			2015			2014			2016			2015			2014
	(In thousands)
242, LLC ^(b)	$	5,835	$	20,995	$	5,612	$	1,259		$	9,588		$	2,951		$	668		$	4,919		$	1,514
CL Ashton Woods, LP ^(c)	2,870		9,820		5,431		914			3,881			1,748			1,332			5,000			2,471
CL Realty, LLC	567		856		1,573		237			424			1,068			119			212			534
CREA FMF Nashville LLC ^{(b) (d)}	4,955		1,227		—		(1,420		)	(1,696		)	(163		)	1,103			(1,696		)	(163		)
Elan 99, LLC	1,392		—		—		(2,739		)	(49		)	(87		)	(2,465		)	(44		)	(78		)
FMF Littleton LLC	3,116		120		—		(571		)	(367		)	(239		)	(143		)	(92		)	(60		)
FMF Peakview LLC	939		2,057		4		(248		)	(1,116		)	(410		)	(50		)	(223		)	(83		)
FOR/SR Forsyth LLC	—		—				(65		)	—						(58		)	—
HM Stonewall Estates, Ltd. ^(c)	2,112		3,990		1,728		832			1,881			613			361			952			248
LM Land Holdings, LP ^(c)	10,001		10,956		21,980		7,288			8,251			15,520			2,458			3,342			4,827
MRECV DT Holdings LLC	495		—				477			167						429			—
MRECV Edelweiss LLC	416		—				409			151						368			137
MRECV Juniper Ridge LLC	379		—				380			106						342			—
MRECV Meadow Crossing II LLC	267		—		—		220			—			—			198			—			—
Miramonte Boulder Pass, LLC	4,923		—				(399		)	(250		)				(200		)	(125		)
PSW Communities, LP	—		29,986		—		—			2,688			(86		)	—			1,169			(76		)
TEMCO Associates, LLC	1,344		9,485		2,155		440			2,358			494			220			1,179			247
Other ventures	6,519		36,237		3,960		2,105			33,303			3,879			1,441			1,278			(696		)
	$	46,130	$	125,729	$	42,443	$	9,119		$	59,320		$	25,288		$	6,123		$	16,008		$	8,685