for-20211231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From To

Commission File Number: 001-33662

FORESTAR GROUP INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware						26-1336998
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

2221 E. Lamar Blvd., Suite 790

Arlington, Texas 76006

(Address of Principal Executive Offices, including Zip Code)

(817) 769-1860

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, par value $1.00 per share

FOR

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer

☒

Non-accelerated filer ¨

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes x No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $1.00 par value -- 49,675,768 shares as of January 21, 2022


			Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets			3
Consolidated Statements of Operations			4
Consolidated Statements of Total Equity			5
Consolidated Statements of Cash Flows			6
Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
Item 3. Quantitative and Qualitative Disclosures About Market Risk			23
Item 4. Controls and Procedures			23
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			24
Item 6. Exhibits			24
SIGNATURE			25


	December 31, 2021		September 30, 2021
	(In millions, except share data)
ASSETS
Cash and cash equivalents	$	162.5	$	153.6
Real estate	1,960.1		1,905.2
Investment in unconsolidated ventures	0.5		0.9
Property and equipment, net	4.2		2.9
Other assets	35.2		39.1
Total assets	$	2,162.5	$	2,101.7
LIABILITIES
Accounts payable	$	53.5	$	47.4
Accrued development costs	116.7		104.5
Earnest money on sales contracts	141.9		148.3
Deferred tax liability, net	24.2		24.4
Accrued expenses and other liabilities	62.9		56.7
Debt	704.9		704.5
Total liabilities	1,104.1		1,085.8
Commitments and contingencies (Note 11)
EQUITY
Common stock, par value $1.00 per share, 200,000,000 authorized shares, 49,675,768 and 49,580,389 shares issued and outstanding at December 31, 2021 and September 30, 2021, respectively	49.7		49.6
Additional paid-in capital	638.1		636.2
Retained earnings	369.6		329.1
Stockholders' equity	1,057.4		1,014.9
Noncontrolling interests	1.0		1.0
Total equity	1,058.4		1,015.9
Total liabilities and equity	$	2,162.5	$	2,101.7


	Three Months Ended December 31,
	2021		2020
	(In millions, except per share amounts)
Revenues	$	407.6	$	307.1
Cost of sales	334.2		262.9
Selling, general and administrative expense	21.5		15.5
Equity in earnings of unconsolidated ventures	(1.1)		(0.2)
Gain on sale of assets	(0.5)		—
Interest and other income	—		(0.3)
Income before income taxes	53.5		29.2
Income tax expense	13.0		7.1
Net income	40.5		22.1
Net income attributable to noncontrolling interests	—		0.1
Net income attributable to Forestar Group Inc.	$	40.5	$	22.0

Basic net income per common share attributable to Forestar Group Inc.	$	0.81	$	0.46
Weighted average number of common shares	49.7		48.1

Diluted net income per common share attributable to Forestar Group Inc.	$	0.81	$	0.46
Adjusted weighted average number of common shares	49.7		48.2


	Common Stock		Additional Paid-in Capital		Retained Earnings		Non-controlling Interests		Total Equity
	(In millions, except share data)
Balances at September 30, 2021 (49,580,389 shares)	$	49.6	$	636.2	$	329.1	$	1.0	$	1,015.9
Net income	—		—		40.5		—		40.5
Issuance of common stock (84,547 shares)	0.1		1.6		—		—		1.7
Stock issued under employee benefit plans (10,832 shares)	—		—		—		—		—
Cash paid for shares withheld for taxes	—		(0.1)		—		—		(0.1)
Stock-based compensation expense	—		0.4		—		—		0.4
Balances at December 31, 2021 (49,675,768 shares)	$	49.7	$	638.1	$	369.6	$	1.0	$	1,058.4


	Three Months Ended December 31,
	2021		2020
	(In millions)
OPERATING ACTIVITIES
Net income	$	40.5	$	22.1
Adjustments:
Depreciation and amortization	0.8		0.8
Deferred income taxes	(0.2)		2.2
Equity in earnings of unconsolidated ventures	(1.1)		(0.2)
Stock-based compensation expense	0.4		0.3
Land option charges	0.6		0.4
Gain on sale of assets	(0.5)		—
Changes in operating assets and liabilities:
Increase in real estate	(55.5)		(218.6)
Decrease (increase) in other assets	2.6		(2.6)
Increase (decrease) in accounts payable and other accrued liabilities	12.2		(1.0)
Increase in accrued development costs	12.2		12.6
(Decrease) increase in earnest money deposits on sales contracts	(6.2)		21.1
Decrease in income taxes receivable	—		4.2
Net cash provided by (used in) operating activities	5.8		(158.7)
INVESTING ACTIVITIES
Expenditures for property, equipment, software and other	(1.5)		(0.1)
Return of investment in unconsolidated ventures	1.5		2.1
Proceeds from sale of assets	3.2		—
Net cash provided by investing activities	3.2		2.0
FINANCING ACTIVITIES
Distributions to noncontrolling interests, net	—		(0.1)
Cash paid for shares withheld for taxes	(0.1)		(0.1)
Net cash used in financing activities	(0.1)		(0.2)
Net increase (decrease) in cash and cash equivalents	8.9		(156.9)
Cash and cash equivalents at beginning of period	153.6		394.3
Cash and cash equivalents at end of period	$	162.5	$	237.4
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES
Note payable issued for real estate	$	—	$	12.5
Issuance of common stock not settled	$	1.7	$	—


	December 31, 2021		September 30, 2021
	(Dollars in millions)
Residential lots under contract to sell to D.R. Horton	20,000		21,000
Residential lots subject to right of first offer with D.R. Horton	18,300		18,200
Earnest money deposits from D.R. Horton for lots under contract	$	134.8	$	143.1
Earnest money notes from D.R. Horton for lots under contract	$	0.6	$	0.7
Remaining purchase price of lots under contract with D.R. Horton	$	1,491.5	$	1,582.7


			Fair Value at December 31, 2021
	Carrying Value		Level 1		Level 2		Level 3		Total
	(in millions)
Cash and cash equivalents (a)	$	162.5	$	162.5	$	—	$	—	$	162.5
Debt (b) (c)	704.9		—		709.9		12.5		722.4


			Fair Value at September 30, 2021
	Carrying Value		Level 1		Level 2		Level 3		Total
	(in millions)
Cash and cash equivalents (a)	$	153.6	$	153.6	$	—	$	—	$	153.6
Debt (b) (c)	704.5		—		711.2		12.5		723.7


	December 31, 2021	September 30, 2021
Lots owned	65,700	64,400
Lots controlled through land and lot purchase contracts	37,600	32,600
Total lots owned and controlled	103,300	97,000


Exhibit						Description

10.1						Equity Distribution Agreement, dated as of November 18, 2021, among Forestar Group Inc. and the Sales Agents named therein (incorporated by reference to Exhibit 1.1 of the Company's Current Report on Form 8-K filed with the Commission on November 18, 2021).
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.
101.INS**						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.SCH**						Inline XBRL Taxonomy Extension Schema Document.
101.CAL**						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF**						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.


	Three Months Ended December 31,
	2021		2020
Development projects	4,381		3,102
Lot banking projects	135		465
	4,516		3,567

Average sales price per lot (a)	$	89,000	$	86,000


	FORESTAR GROUP INC.

Date: January 28, 2022	By:	/s/ James D. Allen
		James D. Allen, on behalf of Forestar Group Inc.
		as Executive Vice President and Chief Financial Officer
		(Principal Financial and Principal Accounting Officer)

SEC Form 10-Q filed by Forestar Group Inc