What changed in this filing

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Item 1. Business

2021-11-18 compared with 2020-11-19 · 83 added, 71 removed, 152 unchanged (50% 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." In October 2017, we became a majority-owned subsidiary of D.R.

We are a national, well-capitalized residential lot development company focused primarily on selling finished single-family residential lots to 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 while consolidating market share in the fragmented U.S.

lot development industry.

We are primarily investing in short-duration, phased development projects.

This 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 strategic short-term investments in finished lots (lot banking) and undeveloped land with the intent to sell these assets within a short time period utilizing available capital prior to its deployment into longer-term lot development projects.

At September 30, 2021, we had operations in 56 markets in 23 states, and our lot position consisted of 97,000 residential lots, of which approximately 64,400 were owned and 32,600 were controlled through purchase contracts.

At September 30, 2021, our lots owned included approximately 5,300 lots that are fully developed, of which approximately 300 are related to lot banking.

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.

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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.

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 21,000 are under contract to sell to D.R.

Additionally, D.R.

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.

Horton has the right of first offer on approximately 18,200 of our owned residential lots based on executed purchase and sale agreements.

We manage our operations through our real estate segment.

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State Market State Market

Alabama Birmingham Maryland Suburban Washington, D.C.

Alabama Birmingham Maryland Washington/Arlington/Alexandria

Mobile/Baldwin County Minnesota Minneapolis/St.

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New Jersey Southern New Jersey

California Los Angeles County

Modesto/Merced New Mexico Albuquerque

Riverside County

Sacramento North Carolina Charlotte

San Diego County Greensboro

California San Diego County

Riverside County New Mexico Albuquerque/Santa Fe

Modesto North Carolina Charlotte

Raleigh-Durham

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

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

Colorado Denver Asheville

Fort Collins Greensboro

Florida Fort Myers/Naples

Volusia County Ohio Columbus

Lakeland Oregon Portland/Salem

West Palm Beach Pennsylvania Allentown/Bethlehem/Easton

Melbourne South Carolina Charleston

Pensacola/Panama City Myrtle Beach

Lucie Greenville

Tampa/Sarasota

Ocala Tennessee Nashville

Gainesville Knoxville

Georgia Atlanta Texas Austin

Augusta Dallas

Illinois Chicago San Antonio

Indiana Indianapolis Utah Salt Lake City

Iowa Des Moines Washington Seattle/Tacoma/Everett

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

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• Competition;

• Performance capabilities of our local management teams.

Business Operations

The majority of our real estate projects are single-family residential communities.

We develop lots for single-family homes on sites we typically purchase in the open market and sell residential lots primarily to local, regional and national homebuilders.

In certain markets where we do not have local development infrastructure in place, D.R.

Horton provides development services to us for a fee.

Our managers are responsible for the following activities related to our lot and land acquisition and development activities.

We develop lots for single-family homes on sites we typically purchase in the open market and sell residential finished lots primarily to local, regional and national homebuilders.

In select situations, we contract with D.R.

Horton for land development services, generally in geographic markets where we do not have established development teams and capabilities.

Our managers are responsible for the following activities related to our land and lot acquisition and development activities.

• Site selection, which involves:

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– Financial analysis of the potential project;

• Negotiating lot purchase, land acquisition and related contracts;

• Negotiating land acquisition, lot purchase and related contracts;

• Obtaining all necessary land development approvals;

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• 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 Stockholder's Agreement);

• Review, approval and funding of land and lot 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;

• Review of all business and financial analysis for potential land and lot inventory investments;

• Oversight of lot and land inventory levels;

• Oversight of land and lot inventory levels;

• Monitoring and analysis of profitability, returns and costs;

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Our corporate executives and corporate office departments are responsible for, and provide oversight and review for, the following shared services performed by D.R.

• Accounting, finance and treasury;

• Finance and treasury;

• Risk and litigation management;

• Corporate governance;

• Information technology;

• Income tax;

• Internal audit;

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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 sourced projects, 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.

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Land/Lot Acquisition and Inventory Management

We acquire land for use in our development operations after we have completed due diligence and after we have obtained the rights (known as entitlements) to begin development work resulting in an acceptable number of residential lots.

We acquire land for use in our development operations after we have completed due diligence and after we have obtained the development rights (known as entitlements).

Before we acquire lots or tracts of land, we complete a feasibility study, which includes soil tests, independent environmental studies, other engineering work and financial analysis.

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We attempt to mitigate our exposure to real estate inventory risks by:

• Managing our supply of lots and land owned and controlled under purchase contracts in each market based on anticipated future demand;

• Managing our supply of land and lots owned and controlled through purchase contracts in each market based on anticipated future demand;

• Monitoring local market and demographic trends that affect housing demand;

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We typically do not maintain inventories of land development materials, except for work in progress materials for active development projects.

Generally, the materials used in our operations are readily available from numerous sources.

We contract with D.R.

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

Generally, the materials used in our operations have been readily available from numerous sources.

More recently, the effects of the COVID-19 pandemic, combined with the improvement in economic conditions and strong demand in the real estate industry, have caused disruptions in our supply chain and resulted in shortages in certain construction materials and tightness in the labor market, which has caused our development cycle to lengthen in some markets.

In select situations, we contract with D.R.

Horton for land development services, generally in geographic markets where we do not have established development teams and capabilities.

Lot/Land Banking

In addition to our residential lot development activities, 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.

In addition to our residential lot development activities, we also make strategic 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.

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We face significant competition for the acquisition, development and sale of real estate in our markets.

Our major competitors include landowners who market and sell undeveloped land and numerous national, regional and local developers, including homebuilders.

In addition, our projects compete with other development projects offering similar amenities, products and/or locations.

Our major competitors include numerous national, regional and local developers, including homebuilders.

In addition, we compete with other development projects offering similar amenities, products and/or locations.

Competition also exists for investment opportunities, financing, available land, raw materials and labor.

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The presence of competition may increase the bargaining power of property owners seeking to sell.

These competitive market pressures can sometimes make it difficult to acquire, develop or sell lots and land at prices that meet our return criteria.

The lot and land acquisition and development business is highly fragmented, and we are unaware of any meaningful concentration of national market share by any one competitor.

These competitive market pressures can sometimes make it difficult to acquire, develop or sell land and lots at prices that meet our return criteria.

The land and lot acquisition and development business is highly fragmented, and we are unaware of any meaningful concentration of national market share by any one competitor.

Enterprises of varying sizes, from individuals or small companies to large corporations, actively engage in the real estate development business.

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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.

People and Culture

For the past two fiscal years, despite the COVID-19 pandemic, we increased our number of employees and made no reductions to our employee compensation plans or employee benefit plans.

We have increased our number of employees from 143 at September 30, 2020 to 250 at September 30, 2021 to support the growth of our residential lot development business across a geographically diversified platform.

At September 30, 2021, 201 of our employees worked in our regional and divisional offices and 49 worked at our corporate office.

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

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

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.

Our people 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.

Recruitment, Development and Retention

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

We believe diversity in the workplace produces unique perspectives and fresh ideas and helps us better serve our customers.

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

Our management team also supports a culture of developing future leaders from our existing workforce, enabling us to promote from within for many leadership positions.

We believe this provides long-term focus and continuity to our operations while also providing opportunities for the growth and advancement of our employees.

Compensation and Benefits

We believe our compensation package and benefits are competitive with others in our industry.

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

We also offer our employees a broad range of benefits, including medical, dental and vision healthcare benefits and paid parental leave.

Additional information about our employee benefit plans is included in Note 11 to the accompanying financial statements.

Workplace Safety and Wellness

The safety and well-being of our employees is our first priority.

We take workplace safety seriously at our construction sites and in our offices.

We provide certification training to our field personnel through an Occupational Safety and Health Administration (OSHA) authorized third-party vendor, and we communicate with all of our employees through a monthly safety newsletter to inform and reinforce our commitment to and concern for their well being.

We also require certain personal protective equipment, such as hard hats, high visibility safety wear and hearing and eye protection to be worn in certain circumstances at our active development sites.

During the COVID-19 pandemic, we implemented safety protocols to protect our employees and our contractors.

These protocols include complying with 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.

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

Our land development activities are also subject to an extensive array of local, state and federal statutes, ordinances, rules and regulations concerning protection of health, safety and the environment.

The particular compliance requirements for each site vary greatly according to location, environmental condition and the present and former uses of the site and adjoining properties.

We believe that we are in compliance in all material respects with existing environmental regulations applicable to our business.

Additionally, our compliance with such regulations has not had, nor is expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows.

However, changes in regulations could increase our costs to comply with such regulations, as discussed in “Item 1A.

Risk Factors.”

Available Information

Forestar Group Inc.

is a Delaware corporation formed in 2007.

Our principal executive offices are located at 2221 E.

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Our telephone number is (817) 769-1860.

From our Internet website, https://www.forestar.com , you may obtain additional information about us including:

On the Investor Relations section of our website, www.forestar.com , you may obtain additional information about us including:

• our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other documents as soon as reasonably practicable after we file them with the SEC;

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We will also provide printed copies of any of these documents to any stockholder free of charge upon request.

The SEC also maintains an Internet website ( http://www.sec.gov ) that contains reports, proxy and information statements, and other information that is filed electronically with the SEC.

The SEC also maintains a website ( www.sec.gov ) that contains reports, proxy and information statements and other information that is filed electronically with the SEC.

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