What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2020-11-19 compared with 2019-11-21 · 79 added, 48 removed, 144 unchanged (47% of the section changed)

We are a publicly traded residential lot development company listed on the New York Stock Exchange under the ticker symbol "FOR." At September 30, 2019 , we had operations in 51 markets in 20 states.

In October 2017 , we became a majority-owned subsidiary of D.R.

We are a publicly traded residential lot development company listed on the New York Stock Exchange under the ticker symbol "FOR." In October 2017, we became a majority-owned subsidiary of D.R.

Horton) by virtue of a merger with a wholly-owned subsidiary of D.R.

Horton (Merger).

Immediately following the merger, D.R.

Horton owned 75% of our outstanding common stock.

As a controlling shareholder, D.R.

Horton owned 75% of our outstanding common stock, and as of September 30, 2020 they owned 65% of our outstanding common stock.

As our controlling shareholder, D.R.

Horton has significant influence in guiding our strategic direction and operations.

At September 30, 2019, D.R.

Horton owned approximately 66% of our outstanding common stock.

In connection with the merger, we entered into certain agreements with D.R.

Horton including a Stockholder’s Agreement, a Master Supply Agreement and a Shared Services Agreement.

The Merger provides us an opportunity to grow our lot development business by establishing a strategic relationship to supply finished lots to D.R.

Horton at market terms under the Master Supply Agreement.

Under the terms of the Master Supply Agreement with D.R.

Horton, both companies are identifying land development opportunities to expand our portfolio of assets.

Our strategy is focused on making significant investments in land acquisition and development to expand our residential lot development business across a geographically diversified national platform.

Under the terms of the Master Supply Agreement, we supply finished lots to D.R.

Horton at market terms and both companies identify land development opportunities to expand our portfolio of assets.

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.

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 strategy is a unique, lower-risk business model that we expect will produce more consistent returns than other public and private land developers.

At September 30, 2019 , we owned or controlled through option purchase contracts approximately 38,300 residential lots.

Approximately 12,800 of these residential lots are under contract to sell to D.R.

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.

At September 30, 2020, we had operations in 49 markets in 21 states, and our lot position consisted of 60,500 residential lots, of which approximately 42,400 were owned and 18,100 were controlled through purchase contracts.

Of our total owned residential lots, approximately 14,000 are under contract to sell to D.R.

Additionally, D.R.

Horton has the right of first offer on approximately 10,600 of these residential lots based on executed purchase and sale agreements.

At September 30, 2019 , lots owned included approximately 4,400 that are fully developed, of which approximately 2,100 are related to lot banking.

We manage our operations through one real estate reporting segment.

Horton has the right of 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.

We manage our operations through our real estate segment.

Our results of operations, including information regarding our real estate segment, are discussed in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, and in Item 8, Financial Statements and Supplementary Data.

We conduct our operations in the states and markets listed below.

Mobile/Baldwin County

Minneapolis/St.

Southern New Jersey

North Carolina

Los Angeles County

State Market State Market

Alabama Birmingham Maryland Suburban Washington, D.C.

Mobile/Baldwin County Minnesota Minneapolis/St.

Arizona Phoenix Nevada Las Vegas

New Jersey Southern New Jersey

California Los Angeles County

Modesto/Merced New Mexico Albuquerque

Riverside County

Sacramento North Carolina Charlotte

San Diego County Greensboro

Raleigh/Durham

South Carolina

Fort Myers/Naples

Miami/Fort Lauderdale

Colorado Denver

Fort Collins Pennsylvania Philadelphia

Florida Fort Myers/Naples South Carolina Charleston

Jacksonville Greenville

Lakeland Myrtle Beach

Miami Tennessee Knoxville

Orlando Nashville

Pensacola/Panama City

Tampa/Sarasota

Volusia County

West Palm Beach

Salt Lake City

Southern Virginia

Seattle/Tacoma/Everett

Lucie Texas Austin

Tampa/Sarasota Dallas

Volusia County Fort Worth

West Palm Beach Houston

Georgia Atlanta

Augusta Utah Salt Lake City

Illinois Chicago Virginia Southern Virginia

Indiana Indianapolis Washington Seattle/Tacoma/Everett

When evaluating new or existing markets for purposes of capital allocation, we consider local, market-specific factors, including among others:

6 unchanged sentences

• New and secondary home sales activity;

• Competition.

Business Operations

15 unchanged sentences

• Determining the sales pricing for each lot in a given project;

Developing and implementing local marketing and sales plans;

• Developing and implementing marketing and sales plans;

• Coordinating all interactions with customers throughout the lot sale process.

3 unchanged sentences

• Review and approval of business plans and budgets;

Review, approval and funding of lot and land acquisitions (Board of Directors must approve acquisitions greater than $20 million in accordance with the Stockholders’ Agreement);

• Review, approval and funding of lot and land acquisitions (Board of Directors must approve acquisitions greater than $20 million in accordance with the Stockholder's Agreement);

• Environmental assessments of land and lot acquisitions;

12 unchanged sentences

• Information technology;

• Income tax;

• Internal audit;

1 unchanged sentence

• Human resources, payroll and employee benefits.

We have a Master Supply Agreement (MSA) with D.R.

We have a Master Supply Agreement with D.R.

Horton which establishes our business relationship with D.R.

Horton as both companies identify residential real estate opportunities.

The MSA provides D.R.

Horton the right of first offer (ROFO) to purchase, at market prices and terms, up to 100% of the lots from D.R.

The agreement provides D.R.

Horton the right of first offer to purchase, at market prices and terms, up to 100% of the lots from D.R.

Horton sourced projects and up to 50% of the lots in the first phase of a Forestar sourced project and up to 50% of the lots in any subsequent phase in which D.R.

Horton purchases at least 25% of the lots in the previous phase.

Horton has no ROFO rights on third-party sourced development opportunities.

The MSA continues until the earlier of (i) the date at which D.R.

Horton has no such rights on third-party sourced development opportunities.

The Master Supply Agreement continues until the earlier of (i) the date at which D.R.

Horton owns less than 15% of our voting shares or (ii) June 29, 2037;

however, we may terminate the MSA at anytime when D.R.

however, we may terminate the agreement at any time when D.R.

Horton owns less than 25% of our voting shares.

6 unchanged sentences

Horton owns at least 20% of our voting securities, it retains the right to nominate individuals to our board based on its equity ownership as well as designate the Executive Chairman.

Horton nominated four of our five current board members.

As long as D.R.

Horton owns at least 35% of our voting securities, we must obtain D.R.

Horton’s consent to (i) issue any new class of equity or shares of our common stock in excess of certain amounts, (ii) incur, assume, refinance or guarantee debt that would increase our total leverage to greater than 40%, (iii) select, terminate, remove or change compensation arrangements for the Executive Chairman, Chief Executive Officer, Chief Financial Officer and other key senior management, and (iv) make an acquisition or investment greater than $20 million.

Horton’s consent to (i) issue any new class of equity or shares of our common stock in excess of certain amounts;

(ii) incur, assume, refinance or guarantee debt that would increase our total leverage to greater than 40%;

(iii) select, terminate, remove or change compensation arrangements for the Executive Chairman, Chief Executive Officer, Chief Financial Officer and other key senior management;

and (iv) make an acquisition or investment greater than $20 million.

The Stockholder’s Agreement also established an investment committee to approve new investments up to $20 million.

23 unchanged sentences

Horton for land development services in projects owned by us in geographic markets where we do not have established development teams and capabilities.

We are subject to governmental regulations that affect our land development operations.

We may experience delays in receiving the proper approvals from municipalities or other government agencies that delay our anticipated development activities in certain projects.

Lot/Land Banking

17 unchanged sentences

During periods when access to capital is restricted, participants in a weaker financial condition tend to be less active.

At September 30, 2019 , we had 78 employees.

None of our employees participate in collective bargaining arrangements.

We believe we have a good relationship with our employees.

Human Capital Resources

We believe the people who work for our company are our most important resources and are critical to our continued success.

We increased our number of employees from 78 at September 30, 2019 to 143 at September 30, 2020 to support the growth of our residential lot development business across a geographically diversified platform.

At September 30, 2020, 106 of our employees worked in our regional and divisional offices and 37 worked at our corporate office.

In fiscal 2020, our total cost for employee compensation and benefits was $25.0 million.

In addition to our employees, we also have a Shared Services Agreement with D.R.

Horton whereby D.R.

Horton employees provide us with certain administrative, compliance, operational and procurement services.

We focus significant attention toward attracting and retaining talented and experienced individuals to manage and support our operations.

Management is committed to supporting the development of our employees in many ways including onboarding programs, training, and providing employees exposure to senior management.

We are committed to hiring, developing and supporting a diverse and inclusive workplace.

Our management teams are expected to exhibit and promote honest, ethical and respectful conduct in the workplace.

All of our employees must adhere to a code of conduct that sets standards for appropriate behavior and includes required internal training on preventing, identifying, reporting and stopping any type of discrimination.

We offer our employees a broad range of company-paid benefits, and we believe our compensation package and benefits are competitive with others in our industry.

In addition to base pay, all our employees participate in our short-term incentive bonus program and certain employees participate in our long-term stock incentive program.

Additional information about our employee benefit plans is included in Note 13.

As a result of the COVID-19 pandemic (C-19), we have implemented safety protocols to protect our employees and our contractors.

These protocols include complying 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.

Many of our administrative and operational functions during this time have required modification, including some of our workforce working remotely.

Our experienced teams of people adapted to the changes in our work environment and have managed our business successfully during this challenging time.

Governmental Regulation and Environmental Matters

3 unchanged sentences

These regulations and requirements affect substantially all aspects of our land development and sales processes in varying degrees across our markets.

Our properties are subject to inspection by local authorities where required and may be subject to various assessments for schools, parks, streets, utilities and other public improvements.

Our properties are subject to inspection and approval by local authorities where required and may be subject to various assessments for schools, parks, streets, utilities and other public improvements.

We may experience delays in receiving the proper approvals from local authorities that could delay our anticipated development activities in certain projects.

Available Information

7 unchanged sentences

• copies of certain agreements with D.R.

Horton including a Stockholder’s Agreement, a Master Supply Agreement, and a Shared Services Agreement;

Horton, including the Stockholder’s Agreement and Master Supply Agreement;

• beneficial ownership reports filed by officers, directors, and principal security holders under Section 16(a) of the Securities Exchange Act of 1934, as amended (or the “Exchange Act”);

10 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business