What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-11-19 compared with 2023-11-17 · 74 added, 57 removed, 611 unchanged (18% of the section changed)

115 unchanged sentences

Interest and other income ( 19.8 ) ( 13.6 ) ( 1.0 )

Loss on extinguishment of debt — — 18.1

Income before income taxes 270.1 221.6 235.8

1 unchanged sentence

Net income $ 203.4 $ 166.9 $ 178.8

Net income attributable to noncontrolling interests — — 0.3

Net income attributable to Forestar Group Inc.

$ 166.9 $ 178.8 $ 110.2

Basic net income per common share $ 4.03 $ 3.34 $ 3.59

12 unchanged sentences

0.1 1.6 — — 1.7

Purchase of noncontrolling interest, net — ( 1.7 ) — ( 0.1 ) ( 1.8 )

Stock issued under employee benefit plans ( 96,544 shares)

4 unchanged sentences

— 3.3 — — 3.3

Distributions to noncontrolling interests

— — — ( 0.1 ) ( 0.1 )

Balances at September 30, 2022 ( 49,761,480 shares)

1 unchanged sentence

— — 166.9 — 166.9

Issuance of common stock ( 84,547 shares)

0.1 1.6 — — 1.7

Stock issued under employee benefit plans ( 142,233 shares)

7 unchanged sentences

— — 203.4 — 203.4

Issuance of common stock ( 546,174 shares)

0.6 19.1 — — 19.7

Stock issued under employee benefit plans ( 203,750 shares)

19 unchanged sentences

Impairments and land option charges 4.1 24.0 12.5

Loss on extinguishment of debt — — 18.1

Gain on sale of assets ( 9.5 ) ( 1.6 ) ( 3.2 )

Other — — 0.1

Changes in operating assets and liabilities:

Decrease (increase) in real estate

(Increase) decrease in real estate

( 469.9 ) 206.3 ( 142.3 )

1 unchanged sentence

( 27.7 ) ( 7.0 ) ( 1.6 )

(Decrease) increase in accounts payable and other accrued liabilities

Increase (decrease) in accounts payable and other accrued liabilities

24.7 ( 12.7 ) 40.9

(Decrease) increase in accrued development costs

Increase (decrease) in accrued development costs

40.5 ( 18.2 ) 17.8

(Decrease) increase in earnest money deposits on sales contracts

Increase (decrease) in earnest money deposits on sales contracts

50.9 ( 14.7 ) ( 11.5 )

Decrease in income taxes receivable

Net cash provided by (used in) operating activities 364.1 108.7 ( 303.1 )

Net cash (used in) provided by operating activities ( 158.4 ) 364.1 108.7

INVESTING ACTIVITIES

5 unchanged sentences

Issuance of common stock 19.7 — 1.7

Additions to debt — — 458.0

Repayment of debt — ( 12.5 ) —

Deferred financing fees — — ( 4.9 )

Purchase of noncontrolling interest — — ( 2.4 )

Distributions to noncontrolling interests, net — — ( 0.1 )

Cash paid for shares withheld for taxes ( 3.4 ) ( 0.7 ) ( 0.5 )

Net cash (used in) provided by financing activities ( 13.2 ) 1.2 61.4

Increase (decrease) in cash and cash equivalents 351.2 111.2 ( 240.7 )

Net cash provided by (used in) financing activities 16.3 ( 13.2 ) 1.2

(Decrease) increase in cash and cash equivalents ( 134.8 ) 351.2 111.2

Cash and cash equivalents at beginning of year 616.0 264.8 153.6

9 unchanged sentences

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.

Generally Accepted Accounting Principles (GAAP) and includes the accounts of Forestar Group Inc.

("Forestar") and all of its 100% owned, majority-owned and controlled subsidiaries, which are collectively referred to as the Company unless the context otherwise requires.

2 unchanged sentences

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.

Net income attributable to noncontrolling interests is zero for all periods presented in the Company's statements of operations.

T he 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.

27 unchanged sentences

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.

Any changes to the estimated total development costs subsequent to the initial home or lot closings in a community are generally allocated on a pro-rata basis to the remaining homes or lots in the community associated with the relevant development activity.

The Company receives earnest money deposits from homebuilders for purchases of developed lots.

10 unchanged sentences

Real estate impairments are included in cost of sales in the consolidated statements of operations.

C apitalized Interest

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 is sold to the buyer.

Capitalized interest is charged to cost of sales as the related real estate is sold.

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.

10 unchanged sentences

Land purchase contracts can result in the creation of a variable interest in the entity holding the land parcel under contract.

There were no variable interest entities reported in the consolidated balance sheets at September 30, 2023 or 2022 because, with regard to each entity, the Company determined it did not control the activities that most significantly impact the variable interest entity’s economic performance.

There were no variable interest entities reported in the consolidated balance sheets at September 30, 2024 and 2023 because, with regard to each entity, the Company determined it did not control the activities that most significantly impact the variable interest entity’s economic performance.

The maximum exposure to losses related to the Company’s unconsolidated variable interest entities is limited to the amounts of the Company’s related deposits.

28 unchanged sentences

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 Company’s Board of Directors authorizes the grant of stock-based compensation to its employees and directors from these available shares.

At September 30, 2023, 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.

From time to time, the Compensation Committee of the Company’s Board of Directors (Compensation Committee) authorizes the grant of stock-based compensation to its employees and directors from these available shares.

At September 30, 2024, the outstanding stock-based compensation awards consist of time-based restricted stock units.

Grants of time-based restricted stock units vest over a certain number of years as determined by the Compensation Committee.

Restricted stock units outstanding at September 30, 2024 have a remaining vesting period of up to 4.5 years.

The compensation expense for stock-based awards is based on the fair value of the award and is recognized on a straight-line basis over the remaining vesting period.

The compensation expense for stock-based awards is based on the grant date fair value of the award and is recognized on a straight-line basis over the remaining vesting period.

The fair values of restricted stock units are based on the Company’s stock price at the date of grant.

3 unchanged sentences

Non-financial assets measured at fair value on a non-recurring basis principally include real estate assets which the Company reviews for indicators of impairment when events and circumstances indicate that the carrying value is not recoverable.

Pending Accounting Standards

In November 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-07, “Segment Reporting - Improvements to Reportable Segment Disclosures,” which is intended to improve reportable segment disclosures.

The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss.

It also requires disclosure of the amount and description of the composition of other segment items and interim disclosures of a reportable segment’s profit or loss and assets.

The standard is effective for the Company’s annual periods beginning in fiscal 2025 and interim periods beginning in the first quarter of fiscal 2026 on a retrospective basis to all periods presented.

This standard will impact the Company’s disclosures but will not impact its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes - Improvements to Income Tax Disclosures,” which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation and modifies other income tax related disclosures.

The standard is effective for the Company beginning October 1, 2025, with early adoption permitted.

The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures,” which requires disclosure of certain costs and expenses on an interim and annual basis in the notes to the financial statements.

The standard is effective for the Company’s annual periods beginning in fiscal 2028 and interim periods beginning in the first quarter of fiscal 2029, with early adoption permitted.

The Company is currently evaluating the impact this standard will have on its disclosures.

Note 2 — Segment Information

6 unchanged sentences

Real estate consists of:

September 30,

(In millions)

2 unchanged sentences

$ 2,266.2 $ 1,790.3

During fiscal 2023, the Company invested $ 199.4 million for the acquisition of residential real estate and $ 777.2 million for the development of residential real estate.

At September 30, 2023 and 2022, land held for future development primarily consisted of undeveloped land which the Company has the contractual right to sell to D.R.

During fiscal 2024, the Company invested $ 570.0 million for the acquisition of residential real estate and $ 1.0 billion for the development of residential real estate.

At September 30, 2024 and 2023, land held for future development primarily consisted of undeveloped land which the Company has under contract to sell to D.R.

Horton at a sales price equal to the carrying value of the land at the time of sale plus additional consideration of 12 % to 16 % per annum.

Each quarter, the Company reviews the performance and outlook for all of its real estate for indicators of potential impairment and performs detailed impairment evaluations and analyses when necessary.

As a result of this process, the Company recorded real estate impairment charges of $ 19.4 million and $ 3.8 million during fiscal 2023 and 2022, respectively.

There were no real estate impairment charges recorded in fiscal 2021.

As a result of this process, no impairment charges were recorded during fiscal 2024.

During fiscal 2023 and 2022, the Company recorded non-cash impairment charges of $ 19.4 million and $ 3.8 million, respectively.

During fiscal 2024, 2023 and 2022 land purchase contract deposit and pre-acquisition cost write-offs related to land purchase contracts that the Company has terminated or expects to terminate were $ 4.1 million, $ 4.6 million and $ 8.7 million, respectively.

11 unchanged sentences

Horton for a total transaction price of $ 63.9 million.

In fiscal 2023 and 2022, the Company recognized $ 29.0 million and $ 26.8 million of revenues as a result of its progress towards completion of its remaining unsatisfied performance obligations on these deferred development projects.

In fiscal 2024, 2023 and 2022, the Company recognized $ 8.1 million, $ 29.0 million and $ 26.8 million, respectively, of revenues as a result of its progress towards completion of its remaining unsatisfied performance obligations on these deferred development projects.

At September 30, 2024, all performance obligations related to deferred development lot sales have been fully satisfied.

FORESTAR GROUP INC.

17 unchanged sentences

Land purchase contract deposits 23.4 7.0

Contract assets 8.9 —

Other assets 1.8 2.0

13 unchanged sentences

$ 68.3 $ 61.2

Contract liabilities at September 30, 2023 and 2022 include $ 3.5 million and $ 12.0 million, respectively, related to the Company's remaining unsatisfied performance obligations on deferred development lot sales.

FORESTAR GROUP INC.

18 unchanged sentences

At September 30, 2024, there were no borrowings outstanding and $ 32.8 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $ 377.2 million.

The revolving credit facility is guaranteed by the Company’s wholly-owned subsidiaries that are not immaterial subsidiaries or have not been designated as unrestricted subsidiaries.

The revolving credit facility is guaranteed by the Company’s wholly-owned subsidiaries that are not immaterial subsidiaries and have not been designated as unrestricted subsidiaries.

The revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants.

29 unchanged sentences

Other Note Payable

In August 2023, the Company repaid the $ 12.5 million principal amount, together with accrued interest, of a note payable that was issued as part of a transaction to acquire real estate for development.

The note was non-recourse, was secured by the underlying real estate and accrued interest of 4.0 % per annum.

In December 2023, the Company issued a note payable of $ 9.9 million as part of a transaction to acquire real estate for development.

The note is non-recourse, is secured by the underlying real estate, accrues interest at 4.0 % per annum and matures in December 2025.

Note 8 — Earnings per Share

52 unchanged sentences

At September 30, 2024, the Company had tax benefits of $ 0.9 million related to state NOL carryforwards, of which $ 0.4 million will expire between 2030 and 2037 while the remaining $ 0.5 million do not have an expiration date.

The Company has a valuation allowance of $ 0.9 million and $ 1.0 million at September 30, 2023 and 2022, respectively, 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 realize the related deferred tax asset.

The Company had a valuation allowance of $ 0.8 million and $ 0.9 million at September 30, 2024 and 2023, respectively, 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 realize the related deferred tax asset.

The Company will continue to evaluate both the positive and negative evidence in determining the need for a valuation allowance on its deferred tax assets.

8 unchanged sentences

The federal statute of limitations for tax years prior to 2021 is closed and the statute of limitations in major state jurisdictions for tax years prior to 2019 is closed.

The Company is not currently being audited by the IRS or any state jurisdictions.

The Company is not currently being audited by the IRS.

T he Company is under audit by various states;

however, the Company is not aware of any significant findings by the state taxing authorities.

The Company had no unrecognized tax benefits at September 30, 2024, 2023 and 2022.

1 unchanged sentence

The Company has an effective shelf registration statement, filed with the Securities and Exchange Commission in October 2021, registering $ 750 million of equity securities, of which $ 300 million was reserved for sales under the at-the-market equity offering program that became effective in November 2021.

In fiscal 2023, there were no shares of common stock issued under the Company's at-the-market equity offering program.

At September 30, 2023, $ 748.2 million remained available for issuance under the shelf registration statement, of which $ 298.2 million was reserved for sales under the at-the-market equity offering program.

In fiscal 2024, the Company issued 546,174 shares of common stock under its at-the-market equity offering program for proceeds of $ 19.7 million, net of commissions and other issuance costs totaling $ 0.4 million.

In September 2024, the Company filed a new shelf registration statement, which became effective in October 2024, registering $ 750 million of equity securities.

At the time of filing the new registration statement, $ 728.1 million of equity securities remained available for issuance under the Company's prior registration statement, which has since expired.

The Company's at-the-market equity offering program expired in October 2024, and the Company anticipates entering into a new at-the-market offering program under its September 2024 shelf registration statement.

FORESTAR GROUP INC.

12 unchanged sentences

Under the terms of the plan, the total fair market value of common stock that an eligible employee may purchase each year is limited to the lesser of 15 % of the employee’s annual compensation or $ 25,000 .

Under the plan, employees purchased 6,941 shares for $ 0.2 million in fiscal 2024 .

No shares were purchased under the ESPP in fiscal 2023.

The aggregate number of shares of the Company's stock reserved for issuance under the plan is 2.5 million.

Our inaugural offering period under the ESPP is July 1, 2023 to December 31, 2023.

Through September 30, 2023, we had not yet issued any shares under the ESPP.

Restricted Stock Units (RSUs)

31 unchanged sentences

The Company enters into land purchase contracts to acquire land for the development of residential lots.

Under these contracts, the Company will fund a stated deposit in consideration for the right, but not the obligation, to purchase land or lots at a future point in time with predetermined terms.

Under the terms of many of the purchase contracts, the deposits are not refundable in the event the Company elects to terminate the contract.

Land purchase contract deposits and capitalized pre-acquisition costs are expensed to cost of sales when the Company believes it is probable that it will not acquire the property under contract and will not be able to recover these costs through other means.

At September 30, 2024, the Company had total deposits of $ 23.4 million related to contracts to purchase land with a total remaining purchase price of approximately $ 846.9 million.

12 unchanged sentences

and $ 0.6 million thereafter.

FORESTAR GROUP INC.

Notes to Consolidated Financial Statements

Note 13 — Related Party Transactions

10 unchanged sentences

Horton $ 2.2 million, $ 1.7 million and $ 0.7 million in fiscal 2024, 2023 and 2022, respectively, for its tax expense generated in fiscal 2023, 2022 and 2021.

FORESTAR GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

12 unchanged sentences

Horton $ 1,840.5 $ 1,319.2

During fiscal 2023, 2022 and 2021, the Company's residential lot sales totaled 14,040, 17,691 and 15,915 and lot sales revenues were $ 1.3 billion, $ 1.5 billion and $ 1.3 billion.

Lot and land sales to D.R.

Horton during those periods were as follows.

Horton during fiscal years 2024, 2023 and 2022 were as follows:

Year Ended September 30,

5 unchanged sentences

Horton $ 1,271.4 $ 1,094.7 $ 1,230.0

Change in contract liabilities on lot sales to D.R.

Decrease in contract liabilities on lot sales to D.R.

Horton $ 2.9 $ — $ 1.8

3 unchanged sentences

Horton $ 15.2 $ 114.1 $ —

Other revenues from D.R.

$ 8.5 $ 1.0 $ —

During fiscal 2024, 2023 and 2022, the Company reimbursed D.R.

4 unchanged sentences

These amounts are included in cost of sales in the Company’s consolidated statements of operations.

At September 30, 2023 and 2022, land held for future development primarily consisted of undeveloped land which the Company has the contractual right to sell to D.R.

Horton at a sales price equal to the carrying value of the land at the time of sale plus additional consideration of 12 % to 16 % per annum.

At September 30, 2022, accrued expenses and other liabilities on the Company's consolidated balance sheets included $ 3.2 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.

Notes to Consolidated Financial Statements

At September 30, 2024 and 2023, land held for future development primarily consisted of undeveloped land which the Company has under contract to sell to D.R.

Horton at a sales price equal to the carrying value of the land at the time of sale plus additional consideration of 12 % to 16 % per annum.

At September 30, 2024 and 2023 accrued expenses and other liabilities on the Company's consolidated balance sheets included $ 5.2 million and $ 3.2 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.

At September 30, 2024, other assets on the Company's consolidated balance sheet included $ 6.5 million of contract assets related to a contract with D.R.

During fiscal 2024, the Company acquired a tract of residential real estate from Double R DevCo, LLC ("R&R") for $ 11.3 million and simultaneously entered into a finished lot purchase agreement with D.R.

The tract was originally under contract with D.R.

The Company independently underwrote the transaction and chose to close in place of D.R.

R&R is owned and controlled by Ryan Horton and Reagan Horton, the adult sons of the late Donald R.

Horton, former Chairman of D.R.

Note 14 — Fair Value Measurements

8 unchanged sentences

The Company elected not to use the fair value option for cash and cash equivalents and debt.

FORESTAR GROUP INC.

Notes to Consolidated Financial Statements

For the financial assets and 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, 2024 and 2023.

18 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 8. Financial Statements and Supplementary Data