[PART I — FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This section presents the unaudited consolidated financial statements of Forestar Group Inc., along with detailed notes explaining various financial aspects [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements, including balance sheets, statements of operations, equity, and cash flows, with detailed explanatory notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's assets, liabilities, and equity at specific points in time Consolidated Balance Sheet Highlights (In millions) | Item | June 30, 2025 | September 30, 2024 | Change | % Change | | :-------------------------- | :------------ | :----------------- | :----- | :------- | | Cash and cash equivalents | $189.2 | $481.2 | $(292.0) | -60.7% | | Real estate | $2,823.5 | $2,266.2 | $557.3 | 24.6% | | Total assets | $3,120.4 | $2,840.1 | $280.3 | 9.9% | | Debt | $872.8 | $706.4 | $166.4 | 23.6% | | Total liabilities | $1,440.1 | $1,245.0 | $195.1 | 15.7% | | Total equity | $1,680.3 | $1,595.1 | $85.2 | 5.3% | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) This section details the company's revenues, expenses, and net income over specific periods Consolidated Statements of Operations Highlights (In millions, except per share amounts) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Revenues | $390.5 | $318.4 | $991.9 | $958.0 | | Income before income taxes | $43.6 | $51.6 | $106.2 | $161.6 | | Net income | $32.9 | $38.7 | $81.0 | $121.8 | | Basic net income per common share | $0.65 | $0.76 | $1.59 | $2.42 | | Diluted net income per common share | $0.65 | $0.76 | $1.59 | $2.40 | [Consolidated Statements of Total Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Total%20Equity) This section outlines changes in the company's equity from various sources, including net income and stock-based compensation Consolidated Statements of Total Equity Highlights (In millions) | Item | September 30, 2024 | June 30, 2025 | | :------------------------------------ | :----------------- | :------------ | | Balances at beginning of period | $1,595.1 | $1,595.1 | | Net income (9 months) | $81.0 | $81.0 | | Stock-based compensation expense (9 months) | $5.8 | $5.8 | | Total Equity at June 30, 2025 | - | $1,680.3 | | Total Equity at June 30, 2024 | $1,512.9 | - | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes the cash generated and used by the company across its operating, investing, and financing activities Consolidated Statements of Cash Flows Highlights (Nine Months Ended June 30, In millions) | Activity | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Net cash used in operating activities | $(454.0) | $(277.6) | | Net cash (used in) provided by investing activities | $(0.6) | $3.7 | | Net cash provided by financing activities | $162.6 | $17.1 | | Decrease in cash and cash equivalents | $(292.0) | $(256.8) | | Cash and cash equivalents at end of period | $189.2 | $359.2 | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the consolidated financial statements [Note 1 — Basis of Presentation](index=9&type=section&id=Note%201%20%E2%80%94%20Basis%20of%20Presentation) The financial statements are unaudited, prepared under GAAP, and include Forestar and its subsidiaries, with D.R. Horton as a related party, and the Company is evaluating new accounting standards - D.R. Horton owned approximately **62%** of the Company's outstanding common stock as of June 30, 2025, making it a related party[23](index=23&type=chunk) - The Company's business is seasonal, generally delivering more lots and generating greater revenues and pre-tax income in the fourth quarter of its fiscal year[25](index=25&type=chunk) - The Company is evaluating new FASB ASUs (2023-07, 2023-09, 2024-03) on segment reporting, income tax disclosures, and expense disaggregation, with impacts primarily expected on disclosures[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk) [Note 2 — Segment Information](index=10&type=section&id=Note%202%20%E2%80%94%20Segment%20Information) Forestar manages its operations through a single real estate segment, which is its core business, primarily focused on acquiring land and developing single-family residential lots for sale to homebuilders - The Company operates through a single real estate segment, which is its core business and generates substantially all revenues from selling residential single-family finished lots[29](index=29&type=chunk) [Note 3 — Real Estate](index=10&type=section&id=Note%203%20%E2%80%94%20Real%20Estate) Real estate assets increased significantly, with substantial investments in acquisition and development, and no impairment charges were recorded Real Estate Composition (In millions) | Item | June 30, 2025 | September 30, 2024 | | :------------------------------ | :------------ | :----------------- | | Developed and under development projects | $2,574.6 | $2,126.1 | | Land held for future development | $248.9 | $140.1 | | **Total Real Estate** | **$2,823.5** | **$2,266.2** | - In the nine months ended June 30, 2025, the Company invested **$532.6 million** for residential real estate acquisition and **$864.3 million** for development[30](index=30&type=chunk) - Land purchase contract deposit and pre-acquisition cost write-offs were **$3.9 million** for the nine months ended June 30, 2025, compared to **$1.0 million** in the prior year period[32](index=32&type=chunk) [Note 4 — Revenues](index=12&type=section&id=Note%204%20%E2%80%94%20Revenues) Residential lot sales are the primary revenue source, showing an increase for both the three and nine months ended June 30, 2025 Revenues by Type (In millions) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Residential lot sales | $383.0 | $305.8 | $977.3 | $935.9 | | Tract sales and other | $7.5 | $12.1 | $14.6 | $18.6 | | **Total Revenues** | **$390.5** | **$318.4** | **$991.9** | **$958.0** | [Note 5 — Capitalized Interest](index=12&type=section&id=Note%205%20%E2%80%94%20Capitalized%20Interest) The Company capitalizes all incurred interest costs to real estate during development, which are later expensed to cost of sales upon property sale Interest Costs (In millions) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Interest incurred | $13.4 | $8.2 | $32.3 | $24.5 | | Interest charged to cost of sales | $(7.0) | $(5.8) | $(17.0) | $(18.4) | | Capitalized interest, end of period | $78.3 | $64.5 | $78.3 | $64.5 | [Note 6 — Other Assets, Accrued Expenses and Other Liabilities](index=12&type=section&id=Note%206%20%E2%80%94%20Other%20Assets%2C%20Accrued%20Expenses%20and%20Other%20Liabilities) Other assets increased due to higher deposits and prepaid expenses, while accrued expenses and other liabilities decreased, mainly from employee compensation and interest Other Assets (In millions) | Item | June 30, 2025 | September 30, 2024 | | :-------------------------- | :------------ | :----------------- | | Receivables, net | $24.2 | $28.4 | | Land purchase contract deposits | $32.8 | $23.4 | | **Total Other Assets** | **$100.1** | **$85.3** | Accrued Expenses and Other Liabilities (In millions) | Item | June 30, 2025 | September 30, 2024 | | :---------------------------------- | :------------ | :----------------- | | Accrued employee compensation and benefits | $8.4 | $13.5 | | Accrued interest | $14.9 | $7.3 | | Income taxes payable | $1.2 | $8.6 | | **Total Accrued Expenses and Other Liabilities** | **$63.5** | **$68.3** | [Note 7 — Debt](index=13&type=section&id=Note%207%20%E2%80%94%20Debt) Total debt increased significantly due to new 6.5% senior notes issuance, partially offset by repurchases of 3.85% senior notes, with substantial available credit and covenant compliance Notes Payable (In millions) | Item | June 30, 2025 | September 30, 2024 | | :------------------------ | :------------ | :----------------- | | 3.85% senior notes due 2026 | $70.4 | $398.4 | | 5.0% senior notes due 2028 | $298.5 | $298.1 | | 6.5% senior notes due 2033 | $494.0 | — | | Other note payable | $9.9 | $9.9 | | **Total Debt** | **$872.8** | **$706.4** | - In March 2025, the Company issued **$500 million** principal amount of **6.5% senior notes due March 15, 2033**, with an effective interest rate of **6.7%**[44](index=44&type=chunk) - Net proceeds from the 2033 notes issuance were primarily used to fund a tender offer for the **3.85% senior notes due 2026**, repurchasing **$329.4 million** and recognizing a **$1.1 million** loss on extinguishment of debt[44](index=44&type=chunk) - At June 30, 2025, the Company had **$602.8 million** of available capacity under its **$640 million** senior unsecured revolving credit facility and was in compliance with all debt covenants[40](index=40&type=chunk)[42](index=42&type=chunk)[49](index=49&type=chunk) [Note 8 — Earnings per Share](index=15&type=section&id=Note%208%20%E2%80%94%20Earnings%20per%20Share) Basic and diluted net income per common share decreased for both the three and nine months ended June 30, 2025 Earnings per Share (In millions, except per share amounts) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net income | $32.9 | $38.7 | $81.0 | $121.8 | | Basic net income per common share | $0.65 | $0.76 | $1.59 | $2.42 | | Diluted net income per common share | $0.65 | $0.76 | $1.59 | $2.40 | | Weighted average common shares outstanding — basic | 50,931,777 | 50,755,276 | 50,849,223 | 50,322,916 | [Note 9 — Income Taxes](index=15&type=section&id=Note%209%20%E2%80%94%20Income%20Taxes) Income tax expense and effective tax rates decreased, with a net deferred tax liability partially offset by a valuation allowance, and a new tax law is being evaluated Income Tax Expense and Effective Tax Rate | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Income tax expense | $10.7 million | $12.9 million | $25.2 million | $39.8 million | | Effective tax rate | 24.5% | 25.0% | 23.7% | 24.6% | - At June 30, 2025, the Company had net deferred tax liabilities of **$77.9 million**, partially offset by a **$0.7 million** valuation allowance for state deferred tax assets[54](index=54&type=chunk) - The Company is evaluating the impact of the 'One Big Beautiful Bill Act' signed on July 4, 2025, but none of its tax provisions are expected to have a significant impact[55](index=55&type=chunk) [Note 10 — Stockholders' Equity and Stock-Based Compensation](index=16&type=section&id=Note%2010%20%E2%80%94%20Stockholders%27%20Equity%20and%20Stock-Based%20Compensation) The Company has a $750 million shelf registration for equity securities, with no shares issued under its ATM program, and stock-based compensation expense increased due to PSU and RSU grants - A **$750 million** shelf registration statement for equity securities is effective, with **$300 million** reserved for an at-the-market equity offering program; no shares were issued under this program in the nine months ended June 30, 2025[56](index=56&type=chunk) Stock-Based Compensation Expense (In millions) | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Three Months Ended June 30 | $1.5 | $1.4 | | Nine Months Ended June 30 | $5.8 | $4.1 | - In the nine months ended June 30, 2025, the Company granted **99,097 Performance Stock Units (PSUs)** to executive officers and **306,300 Restricted Stock Units (RSUs)**[58](index=58&type=chunk)[59](index=59&type=chunk) [Note 11 — Commitments and Contingencies](index=17&type=section&id=Note%2011%20%E2%80%94%20Commitments%20and%20Contingencies) The Company has significant off-balance sheet arrangements, including letters of credit and surety bonds, and is involved in legal proceedings and substantial land purchase contracts Contractual Obligations and Off-Balance Sheet Arrangements (June 30, 2025, In millions) | Item | Amount | | :-------------------- | :----- | | Outstanding letters of credit | $37.2 | | Surety bonds issued by third parties | $808.5 | | Land purchase contracts (remaining purchase price) | $854.6 | | Land purchase contract deposits | $32.8 | - A stockholder derivative complaint was filed on April 29, 2025, against D.R. Horton and certain Company directors, alleging breach of fiduciary duty related to lot sale transactions; the outcome is uncertain, and a possible loss cannot be estimated[62](index=62&type=chunk)[63](index=63&type=chunk) - The Maryland Department of Environment filed a suit on September 6, 2024, regarding stormwater compliance issues, which the Company does not believe will have a material effect on its financial position[64](index=64&type=chunk) [Note 12 — Related Party Transactions](index=18&type=section&id=Note%2012%20%E2%80%94%20Related%20Party%20Transactions) The Company engages in ongoing related party transactions with D.R. Horton, its majority owner, including shared services, land development, and significant residential lot sales - D.R. Horton provides administrative, compliance, operational, and procurement services under a Shared Services Agreement[68](index=68&type=chunk) Residential Lots and Sales to D.R. Horton (In millions, except lot count) | Item | June 30, 2025 | September 30, 2024 | | :---------------------------------------------------------------- | :------------ | :----------------- | | Residential lots under contract to sell to D.R. Horton | 24,200 | 20,500 | | Owned lots subject to right of first offer with D.R. Horton | 18,500 | 17,200 | | Earnest money deposits from D.R. Horton for lots under contract | $225.2 | $168.4 | | Remaining sales price of lots under contract with D.R. Horton | $2,172.5 | $1,840.5 | Residential Lot Sales Revenues from D.R. Horton (In millions) | Period | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :---------------------------------------- | :------------------------------ | :------------------------------ | | Residential lots sold to D.R. Horton | 7,688 | 8,842 | | Residential lot sales revenues from sales to D.R. Horton | $810.2 | $846.6 | [Note 13 — Fair Value Measurements](index=19&type=section&id=Note%2013%20%E2%80%94%20Fair%20Value%20Measurements) The Company uses a three-level fair value hierarchy, classifying cash as Level 1, senior notes as Level 2, and other notes payable as Level 3 - Fair value hierarchy: Level 1 for cash and cash equivalents, Level 2 for senior notes, and Level 3 for the other note payable[76](index=76&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk) Fair Value of Debt (June 30, 2025, In millions) | Item | Carrying Value | Fair Value | | :--- | :------------- | :--------- | | Debt | $872.8 | $880.3 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and operational performance, discussing business operations, key financial results, liquidity, capital resources, and critical accounting policies [Our Operations](index=20&type=section&id=Our%20Operations) Forestar Group Inc. is a national residential lot development company, majority-owned by D.R. Horton, focusing on land acquisition and development for single-family residential lots across diverse markets - Forestar is a national residential lot development company, primarily focused on acquiring land and developing finished single-family residential lots for homebuilders[80](index=80&type=chunk)[82](index=82&type=chunk) - D.R. Horton, Inc. owned approximately **62%** of the Company's outstanding common stock as of June 30, 2025, exerting significant influence on strategic direction[81](index=81&type=chunk) Land and Lot Position (June 30, 2025) | Item | Count | | :---------------------------------------- | :------ | | Total lots owned and controlled | 102,300 | | Owned lots | 68,300 | | Lots controlled through purchase contracts | 34,000 | | Owned lots under contract to be sold | 25,700 | - The Company has expanded its operations across **64 markets** in **23 states**, focusing on affordable price points for entry-level, first-time move-up, and active adult homes[84](index=84&type=chunk)[85](index=85&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) For the nine months ended June 30, 2025, total residential lots sold decreased, but average sales price increased, leading to higher revenues but lower pre-tax income, net income, and diluted EPS due to increased costs and a debt extinguishment loss Key Operating and Financial Data (Nine Months Ended June 30, In millions, except per share amounts) | Item | 2025 | 2024 | Change | % Change | | :---------------------------------- | :----- | :----- | :----- | :------- | | Consolidated Revenues | $991.9 | $958.0 | $33.9 | 3.5% | | Pre-tax income | $106.2 | $161.6 | $(55.4) | -34.3% | | Pre-tax operating margin | 10.7% | 16.9% | -6.2% | -36.7% | | Net income | $81.0 | $121.8 | $(40.8) | -33.5% | | Diluted earnings per share | $1.59 | $2.40 | $(0.81) | -33.8% | Residential Lot Sales Performance | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Total residential lots sold | 3,605 | 3,255 | 9,349 | 9,694 | | Average sales price per lot | $106,600 | $94,000 | $104,500 | $96,300 | | Residential lot sales revenues | $383.0 million | $305.8 million | $977.3 million | $935.9 million | - Selling, general and administrative (SG&A) expense as a percentage of revenues increased to **11.3%** for the nine months ended June 30, 2025, from **9.0%** in the prior year period[99](index=99&type=chunk) - A **$1.1 million** loss on extinguishment of debt was recognized in the nine months ended June 30, 2025, due to the partial repurchase of senior notes[100](index=100&type=chunk) [Income Taxes](index=24&type=section&id=Income%20Taxes_MD%26A) Income tax expense and effective tax rates decreased for the three and nine months ended June 30, 2025, with a net deferred tax liability and ongoing evaluation of a new tax law Income Tax Expense and Effective Tax Rate | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Income tax expense | $10.7 million | $12.9 million | $25.2 million | $39.8 million | | Effective tax rate | 24.5% | 25.0% | 23.7% | 24.6% | - At June 30, 2025, the Company had net deferred tax liabilities of **$77.9 million**, partially offset by a **$0.7 million** valuation allowance[103](index=103&type=chunk) - The 'One Big Beautiful Bill Act' signed on July 4, 2025, is being evaluated, but its tax provisions are not expected to significantly impact financial statements[104](index=104&type=chunk) [Land and Lot Position](index=24&type=section&id=Land%20and%20Lot%20Position) The Company's total land and lot position increased, with a notable increase in owned lots and lots under contract to sell to D.R. Horton Land and Lot Position | Item | June 30, 2025 | September 30, 2024 | | :---------------------------------------- | :------------ | :----------------- | | Lots owned | 68,300 | 57,800 | | Lots controlled through purchase contracts | 34,000 | 37,300 | | **Total lots owned and controlled** | **102,300** | **95,100** | | Owned lots under contract to sell to D.R. Horton | 24,200 | 20,500 | | Owned lots fully developed | 10,000 | 6,300 | [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) The Company maintains strong liquidity with cash and available credit, despite decreased cash and increased debt, aiming for a net debt to total capital ratio of approximately 40% or less Liquidity and Capital Ratios (In millions, except ratios) | Item | June 30, 2025 | September 30, 2024 | | :---------------------------------------- | :------------ | :----------------- | | Cash and cash equivalents | $189.2 | $481.2 | | Available borrowing capacity (revolving credit facility) | $602.8 | - | | Ratio of debt to total capital | 34.2% | 30.7% | | Ratio of net debt to total capital | 28.9% | 12.4% | - Net cash used in operating activities was **$454.0 million** for the nine months ended June 30, 2025, primarily due to increases in real estate and other assets[121](index=121&type=chunk) - Net cash provided by financing activities was **$162.6 million** for the nine months ended June 30, 2025, driven by the issuance of **$500 million** in 2033 notes and **$280 million** in revolving credit facility borrowings, partially offset by debt repurchases and repayments[123](index=123&type=chunk) - The Company has **$70.6 million** principal amount of senior note maturities in the next twelve months[106](index=106&type=chunk) [Critical Accounting Policies and Estimates](index=28&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) There have been no material changes in the Company's critical accounting policies or estimates from those disclosed in its 2024 Annual Report on Form 10-K - No material changes in critical accounting policies or estimates from the 2024 Annual Report on Form 10-K[124](index=124&type=chunk) [New and Pending Accounting Pronouncements](index=28&type=section&id=New%20and%20Pending%20Accounting%20Pronouncements_MD%26A) This section refers readers to Note 1—Basis of Presentation for details on new and pending accounting pronouncements - Refer to Note 1—Basis of Presentation for information on new and pending accounting pronouncements[125](index=125&type=chunk) [Forward-Looking Statements](index=29&type=section&id=Forward-Looking%20Statements) This section contains a cautionary statement regarding forward-looking statements, identifying various factors and uncertainties that could cause actual results to differ materially from projections - Forward-looking statements are subject to risks and uncertainties, including the effect of D.R. Horton's controlling ownership, cyclical industry conditions, inflation, interest rates, supply shortages, and governmental policies[126](index=126&type=chunk) - The Company disclaims any obligation to update or revise forward-looking statements to reflect events or circumstances after the statement date[128](index=128&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the Company's exposure to market risks, specifically focusing on interest rate risk and its potential impact on financial position and cash flows [Interest Rate Risk](index=31&type=section&id=Interest%20Rate%20Risk) The Company is exposed to interest rate risk from its senior debt, revolving credit facility, and other note payable, utilizing both fixed and variable rate debt - The Company is subject to interest rate risk on its senior debt, revolving credit facility, and other note payable, managing exposure through a mix of fixed and variable rate debt[129](index=129&type=chunk) - At June 30, 2025, fixed rate debt included **$70.6 million** of **3.85% senior notes (2026)**, **$300 million** of **5.0% senior notes (2028)**, **$500 million** of **6.5% senior notes (2033)**, and **$9.9 million** of **4.0% other note payable (2025)**; there were no outstanding borrowings on the variable rate revolving credit facility[130](index=130&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on the effectiveness of the Company's disclosure controls and procedures and confirms no material changes in internal control over financial reporting during the quarter [Disclosure controls and procedures](index=31&type=section&id=Disclosure%20controls%20and%20procedures) Management, with the participation of the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025 - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[131](index=131&type=chunk) [Changes in internal control over financial reporting](index=31&type=section&id=Changes%20in%20internal%20control%20over%20financial%20reporting) There have been no material changes in the Company's internal control over financial reporting during the quarter ended June 30, 2025 - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[132](index=132&type=chunk) [PART II — OTHER INFORMATION](index=32&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This section covers additional information not included in the financial statements, such as legal proceedings, other disclosures, and exhibits [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in various legal proceedings, including a stockholder derivative complaint and an environmental suit, with varying assessments of potential financial impact - A stockholder derivative complaint was filed on April 29, 2025, against D.R. Horton and certain Company directors, alleging breach of fiduciary duty related to lot sale transactions; the outcome is uncertain, and a possible loss cannot be estimated[136](index=136&type=chunk)[137](index=137&type=chunk) - The Maryland Department of Environment filed a suit on September 6, 2024, regarding stormwater compliance issues, which the Company does not believe will have a material effect on its financial position[138](index=138&type=chunk) - The Company believes adequate reserves have been established for any probable losses from various other legal proceedings and does not anticipate a significant adverse effect on its financial position or long-term results[134](index=134&type=chunk) [Item 5. Other Information](index=32&type=section&id=Item%205.%20Other%20Information) This section provides other relevant information, specifically noting that no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during the quarter [Trading Plans](index=32&type=section&id=Trading%20Plans) During the three months ended June 30, 2025, no director or Section 16 officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No director or Section 16 officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[139](index=139&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications from the CEO and CFO and XBRL-related documents - Exhibits include certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, along with XBRL Instance, Schema, Calculation, Definition, Label, and Presentation Linkbase Documents[140](index=140&type=chunk) [SIGNATURE](index=34&type=section&id=SIGNATURE) This section contains the formal signature block, confirming the report's official submission [SIGNATURE](index=34&type=section&id=SIGNATURE_Details) This section contains the formal signature block, confirming that the report has been duly caused to be signed on behalf of Forestar Group Inc. by its Executive Vice President and Chief Financial Officer - The report was signed on July 23, 2025, by James D. Allen, Executive Vice President and Chief Financial Officer (Principal Financial and Principal Accounting Officer) of Forestar Group Inc[146](index=146&type=chunk)

Financial Results Exhibit 99.1 FORESTAR REPORTS FISCAL 2025 THIRD QUARTER RESULTS ARLINGTON, Texas (Business Wire) - July 22, 2025 — Forestar Group Inc. ("Forestar") (NYSE: FOR), a leading national residential lot developer, today reported financial results for its third fiscal quarter ended June 30, 2025. Fiscal 2025 Third Quarter Highlights All comparisons to the prior year quarter Net income for the third quarter of fiscal 2025 decreased 15% to $32.9 million, or $0.65 per diluted share, compared to $38.7 ...

Financial Data and Key Metrics Changes - In the third quarter, net income was $32.9 million or $0.65 per diluted share, compared to $38.7 million or $0.76 per diluted share in the prior year quarter [4][7] - Revenues for the third quarter increased 23% to $390.5 million compared to $318.4 million in the prior year quarter [7] - Gross profit margin for the quarter was 20.4%, down from 22.5% in the same quarter last year; excluding the impact of a low-margin community closeout, the gross margin would have been approximately 21.1% [7][8] Business Line Data and Key Metrics Changes - Lots sold increased 11% year over year and 6% sequentially to 3,605 lots, with an average sales price of $106,600 [4][9] - Lots under contract to sell increased 26% from a year ago to 25,700 lots, representing 38% of the owned lot position and $2.3 billion of future revenue, marking the highest contracted backlog in five years [5][13] Market Data and Key Metrics Changes - The company noted that new home sales have been slower than last year due to affordability constraints and weaker consumer confidence, but mortgage rate buy-down incentives are helping to spur demand [11] - The availability of contractors and necessary materials remains solid, and land development costs have stabilized [11] Company Strategy and Development Direction - The company is focused on turning inventory, maximizing returns, and consolidating market share in a highly fragmented industry [5] - The strategic goal includes increasing market share within D.R. Horton, which currently accounts for 15% of their lots, with a target to double that in the intermediate term [12][42] Management's Comments on Operating Environment and Future Outlook - Management expects home affordability constraints and cautious home buyers to continue to be a near-term headwind for new home demand, but remains confident in long-term demand for finished lots [17] - The company is maintaining its fiscal 2025 revenue guidance of $1.5 billion to $1.55 billion while lowering lot delivery guidance to 14,500 to 15,000 lots [17] Other Important Information - The company ended the quarter with $792 million of liquidity, including an unrestricted cash balance of $189 million [15] - Total debt at June 30 was $873 million, with a net debt to capital ratio of 28.9% [15] Q&A Session Summary Question: Regarding gross margins and their future outlook - Management indicated that the gross margin for the quarter was at the lower end of the historical range of 21% to 23%, but sees no indication of significantly lower margins going forward [20][25] Question: On development costs and their stability - Development costs have stabilized and are classified as flattish quarter over quarter, with no significant declines observed [26] Question: Clarification on revenue guidance and pricing - The company reiterated revenue guidance while trimming volume guidance, attributing this to a higher average selling price driven by lot price increases and community mix [31][32] Question: Insights on new market entries - The company has entered new markets in the Pacific Northwest, Northern California, Salt Lake, and Reno, with teams actively building support in these regions [35] Question: Consideration of conversion to a REIT structure - Management clarified that there is no consideration for conversion to a REIT, as the focus remains on being a developer rather than a land banker [37] Question: Impact of D.R. Horton's slower growth on future plans - The company sees significant growth opportunities within D.R. Horton and is also expanding its customer base with other builders [42]

Financial Data and Key Metrics Changes - In Q3 2025, the company reported net income of $32.9 million, or $0.65 per diluted share, compared to $38.7 million, or $0.76 per diluted share in the prior year quarter [4][7] - Revenues increased by 23% to $390.5 million from $318.4 million in the prior year quarter [7] - Gross profit margin for the quarter was 20.4%, down from 22.5% in the same quarter last year, primarily impacted by the closeout of a low-margin community [7][8] - Pre-tax income was $43.6 million, down from $51.6 million in the third quarter of last year, with a pre-tax profit margin of 11.2% compared to 16.2% in the prior year quarter [8] Business Line Data and Key Metrics Changes - Lots sold increased by 11% year-over-year and 6% sequentially to 3,605 lots, with an average sales price of $106,600 [4][9] - Lots under contract to sell increased by 26% from a year ago to 25,700 lots, representing 38% of the owned lot position and $2.3 billion of future revenue, marking the highest contracted backlog in five years [5][14] Market Data and Key Metrics Changes - The company noted that new home sales have been slower due to affordability constraints and weaker consumer confidence, but mortgage rate buy-down incentives are helping to stimulate demand [12] - The availability of contractors and necessary materials remains solid, and land development costs have stabilized [12] Company Strategy and Development Direction - The company is focused on developing lots for new homes targeting entry-level and first-time buyers, which is the largest segment of the new home market [12] - The company aims to consolidate market share in the highly fragmented lot development industry, leveraging its financial strength and operational expertise [5][6] - The company is maintaining its fiscal 2025 revenue guidance of $1.5 billion to $1.55 billion while lowering lot delivery guidance to 14,500 to 15,000 lots [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term demand for finished lots despite near-term headwinds from home affordability constraints and cautious home buyers [19] - The company is well-positioned to take advantage of attractive opportunities due to its strong liquidity and capital structure [17][18] Other Important Information - The company ended the quarter with $792 million of liquidity, including an unrestricted cash balance of $189 million [17] - Total debt was $873 million, with a net debt to capital ratio of 28.9% [17] Q&A Session Summary Question: Impact of gross margins and future expectations - Management indicated that the gross margin for the quarter was at the lower end of the historical range of 21% to 23%, with no significant indicators of reduced margins going forward [22][25][28] Question: Development costs stabilization - Management confirmed that development costs have stabilized and are flattish quarter over quarter, with no significant declines observed [29] Question: Guidance clarification on volume and pricing - Management explained that the higher average selling price (ASP) is due to a mix of communities and lot price increases, leading to maintained revenue guidance [34][35] Question: New market entry and regional focus - The company is expanding into new markets such as the Pacific Northwest and Northern California, with teams on the ground to support growth [38] Question: Consideration of REIT structure - Management clarified that the company is focused on being a developer rather than converting to a REIT structure [40] Question: Growth opportunities with D.R. Horton - Management expressed optimism about growth opportunities within D.R. Horton, aiming to double their market share in the intermediate term [44]

Q2 2025 Highlights - Lots Contracted for Sale increased by 41% from Q2 FY 2024 to 25,400 lots[14] - Lot Position increased by 11% from Q2 FY 2024 to 105,900 lots[14] - Book Value Per Share increased by 10% from Q2 FY 2024 to $3236[14] - Revenues increased 5% to $351 million on 3,411 lots sold[17] - Real estate book value increased 30% year-over-year to $28 billion at March 31, 2025[17] Financial Position - Earnings per diluted share of $062 on net income of $316 million[17] - Pre-tax income of $407 million[17] - Net debt to capital of 298%, with total liquidity of $792 million[17] - The company issued $500 million of 650% senior unsecured notes due 2033[17] - The company completed a tender offer to purchase $3294 million of existing 385% senior unsecured notes due 2026[17] Strategic Goals and Market Position - Forestar targets a return on average inventory of >15% and return of phase 1 investment within 36 months[21] - Pre-tax profit margin of 151% for Q2 TTM FY 2025[22] - Forestar is targeting 5% market share within the US single-family residential lot development industry[49] - Owned lots under contract to sell increased 41% year-over-year to 25,400 lots, representing 37% of the owned lot position[84]

Forestar Group (FOR) came out with quarterly earnings of $0.65 per share, missing the Zacks Consensus Estimate of $0.78 per share. This compares to earnings of $0.76 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -16.67%. A quarter ago, it was expected that this real estate and natural resources developer would post earnings of $0.71 per share when it actually produced earnings of $0.64, delivering a surprise of -9.86%. Ther ...

Q2 2025 Highlights - Lots contracted for sale increased by 41% from Q2 FY 2024 to 25,400 lots[14] - Lot position increased by 11% from Q2 FY 2024 to 105,900 lots[14] - Book value per share increased by 10% from Q2 FY 2024 to $3236[14] - Revenues increased 5% to $351 million on 3,411 lots sold[17] - Real estate book value increased 30% year-over-year to $28 billion at March 31, 2025[17] Financial Position - Earnings per diluted share of $062 on net income of $316 million[17] - Pre-tax income of $407 million[17] - Net debt to capital of 298% with total liquidity of $792 million[17] Strategic Initiatives - Forestar targets a minimum 15% return on average inventory and return of phase 1 investment within 36 months[21, 55, 99] - Forestar is targeting 5% market share within the US single-family residential lot development industry[49] - Expect to invest approximately $19 billion in land acquisition and development in fiscal 2025[74]

Sales Performance - For the six months ended March 31, 2025, the company sold 5,744 lots with an average sales price of $103,200, compared to 6,439 lots sold in the prior year period[83]. - Residential lot sales to D.R. Horton decreased to 2,501 lots in the three months ended March 31, 2025, compared to 3,105 lots in the prior year period[92]. Revenue and Expenses - Total revenues for the three months ended March 31, 2025 were $351.0 million, an increase of 5% compared to $333.8 million in the prior year period[89]. - The cost of sales for the three months ended March 31, 2025 was $271.8 million, up from $250.7 million in the prior year period, primarily due to an increase in the number of lots sold[89][95]. - Selling, general and administrative (SG&A) expenses for the three months ended March 31, 2025 were $38.4 million, representing 10.9% of revenues, compared to 8.7% in the prior year period[98]. - Income before income taxes for the three months ended March 31, 2025 was $40.7 million, down from $58.9 million in the prior year period[89]. Tax and Liabilities - The effective tax rate for the three months ended March 31, 2025 was 22.4%, compared to 23.6% in the prior year period[101]. - As of March 31, 2025, the company had deferred tax liabilities of $74.9 million, an increase from $67.5 million at September 30, 2024[102]. Market Operations - The company has expanded its lot development operations across 65 markets in 24 states, enhancing its market share and reducing operational risks[84]. Debt and Financing - Interest incurred for the three months ended March 31, 2025 was $10.6 million, compared to $8.2 million in the prior year period[97]. - The company issued $500 million principal amount of 6.5% senior notes due March 15, 2033, with net proceeds primarily used to repurchase $329.4 million of 3.85% senior notes due 2026[110]. - The company has a $640 million senior unsecured revolving credit facility, which can be increased to $1 billion under certain conditions[107]. - As of March 31, 2025, the company had $70.6 million remaining principal amount of 2026 notes maturing on May 15, 2026[112]. - The company is in compliance with all financial covenants associated with its revolving credit facility as of March 31, 2025[108]. - As of March 31, 2025, the company has fixed rate debt totaling $880.5 million, which includes $70.6 million of 3.85% senior notes due May 2026, $300 million of 5.0% senior notes due March 2028, and $500 million of 6.5% senior notes due March 2033[128]. - The company also has $9.9 million in other note payable at a 4.0% interest rate due in December 2025[128]. - The company’s variable rate debt consists of a $640 million senior unsecured revolving credit facility, with no outstanding borrowings as of March 31, 2025[128]. Cash Flow and Investments - The total lots owned and controlled increased to 105,900 as of March 31, 2025, up from 95,100 at September 30, 2024[103]. - The company reported cash and cash equivalents of $174.3 million and available borrowing capacity of $617.7 million as of March 31, 2025[104]. - The debt to total capital ratio rose to 34.7% as of March 31, 2025, compared to 30.7% at September 30, 2024[105]. - In the six months ended March 31, 2025, net cash used in operating activities was $469.8 million, compared to $215.9 million in the same period of the previous year[119]. - The company did not issue any shares of common stock under its at-the-market equity offering program in the six months ended March 31, 2025, with $750 million remaining available for issuance[118]. Interest Rate Management - The company monitors its exposure to interest rate risk and utilizes both fixed and variable rate debt to manage this risk[127]. - Changes in interest rates affect the fair value of fixed rate debt but do not impact earnings or cash flows[127]. - For variable rate debt, changes in interest rates may affect future earnings and cash flows but not the fair value of the debt instrument[127]. - The company does not have an obligation to prepay fixed-rate debt prior to maturity, minimizing cash flow impact from interest rate changes until refinancing is required[127].

Financial Performance - Net income for Q2 fiscal 2025 decreased 30% to $31.6 million, or $0.62 per diluted share, compared to $45.0 million, or $0.89 per diluted share in Q2 fiscal 2024[2] - For the first six months of fiscal 2025, net income decreased 42% to $48.1 million, with revenues decreasing 6% to $601.3 million compared to the same period in fiscal 2024[3] - The company expects to deliver between 15,000 and 15,500 lots generating $1.5 billion to $1.55 billion of revenue for fiscal 2025, down from previous guidance of 16,000 to 16,500 lots generating $1.6 billion to $1.65 billion[12] Revenue and Sales - Revenues for Q2 fiscal 2025 increased 5% to $351.0 million from $333.8 million in the same quarter of fiscal 2024[2] - Total revenues for Q1 2025 reached $351.0 million, a 5.1% increase from $333.8 million in Q1 2024[25] - Lot banking projects generated $8.0 million in revenue for Q1 2025, significantly up from $0.7 million in Q1 2024[25] Lot Sales and Position - Lots sold during Q2 fiscal 2025 increased 4% to 3,411 lots compared to 3,289 lots in the same quarter of fiscal 2024[5] - Residential lots sold in Q1 2025 totaled 3,411, up from 3,289 in Q1 2024, representing a 3.7% increase[25] - The total lots owned as of March 31, 2025, increased to 68,400, up from 57,800 on September 30, 2024, marking a 18.0% growth[26] - Total lots owned and controlled reached 105,900 as of March 31, 2025, compared to 95,100 on September 30, 2024, indicating a 11.3% increase[26] - Owned lots under contract to sell to D.R. Horton rose to 24,700, up from 20,500, which is a 20.0% increase[26] - Owned lots fully developed increased to 9,500 as of March 31, 2025, compared to 6,300 on September 30, 2024, representing a 50.8% growth[26] Financial Position and Liquidity - The company ended the quarter with $174.3 million of unrestricted cash and $617.7 million of available borrowing capacity, totaling $792.0 million in liquidity[9] - Debt at March 31, 2025, totaled $872.5 million, with a net debt to total capital ratio of 29.8%[10] - Return on equity was 10.7% for the trailing twelve months ended March 31, 2025[4] - Book value per share increased 11% to $32.36[8] Future Outlook - The company anticipates continued growth in residential lot sales and is focused on expanding its development projects[25] - The company reported a decrease in contract liabilities, with a reduction of $2.1 million in Q1 2024[25]

Financial Data and Key Metrics Changes - In Q2 2025, the company generated net income of $31.6 million or $0.62 per diluted share on revenues of $351 million, compared to $45 million or $0.89 per diluted share in the prior year quarter [7][12] - Revenues increased by 5% from $333.8 million in the prior year quarter [12] - Gross profit margin for the quarter was 16.6% compared to 22.9% for the same quarter last year, primarily due to nonrecurring high-margin items in the prior year [12][13] - Pre-tax income was $40.7 million compared to $58.9 million in the second quarter of last year [13] Business Line Data and Key Metrics Changes - Lots sold increased by 4% to 3,411 lots with an average sales price of $101,700 [14] - Lots under contract to sell increased by 41% from a year ago to 25,400 lots, representing 37% of the company's own lot position [7][24] - The current backlog represents $2.3 billion of future revenue [8][24] Market Data and Key Metrics Changes - The company entered 10 new markets in the last year and increased community count by 21% [8][16] - The home building industry is facing headwinds from home affordability constraints and declining consumer confidence, leading to a slower than expected start to the spring selling season [9][32] - Demand in Florida is weaker compared to Texas, with some strength noted in markets like Las Vegas and the Carolinas [57] Company Strategy and Development Direction - The company aims to consolidate market share in the highly fragmented lot development industry while moderating the pace of land acquisition [10][34] - The focus remains on developing lots for new homes at affordable price points, with 79% of investments this quarter directed towards land development [10][26] - The company expects to invest approximately $1.9 billion in land acquisition and development in fiscal 2025, subject to market conditions [27] Management's Comments on Operating Environment and Future Outlook - Management anticipates continued headwinds from homeowner affordability constraints and cautious homebuyers affecting lot deliveries [32] - The company is confident in the long-term demand for finished lots and its ability to gain market share [34] - Management has updated guidance for fiscal 2025, expecting to deliver between 15,000 and 15,500 lots, generating between $1.5 billion and $1.55 billion of revenue [33] Other Important Information - The company ended the quarter with $792 million of liquidity, including an unrestricted cash balance of $174 million [28] - Total debt at March 31 was $873 million, with no senior note maturities until May 2026 [29] - The capital structure provides operational flexibility and positions the company to take advantage of attractive opportunities [30] Q&A Session Summary Question: Guidance change context - The guidance change is mostly prospective, reflecting community-level inventory buildup, with no anticipated margin changes [38][40] Question: Flexibility of raw land sellers - There is more flexibility on terms from raw land sellers, but prices remain firm [44] Question: Lot banker deal specifics - The company allows home builders to assign contracts to lot bankers, maintaining the same pricing as contracted with builders [45][47] Question: Balancing increased costs with weak market - SG&A increase is tied to headcount growth to support active projects, with expectations for SG&A as a percentage of revenues to decrease in the second half of the year [50][53] Question: Impact of tariffs on land development costs - Currently, there are no significant cost increases from trade partners, and it is too early to assess tariff impacts [55] Question: Demand characterization in Texas and Florida - Demand in Florida is weaker compared to Texas, with strong activity in sales centers despite affordability challenges [57] Question: Sensitivity of land development spend to demand - The company can moderate spend based on demand changes, with a robust pipeline of projects available [64] Question: Competitors' pullback and market share - The company sees opportunities to consolidate market share as competitors pull back [66] Question: Federal deregulation impact on lot supply - It is too early to determine the impact of federal deregulation on lot supply [75] Question: Long-term margin outlook - Margins have remained stable over the past few years, with expectations for continued stability subject to market conditions [77]