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Form 8-K Forestar Group Inc. For: Nov 04

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November 4, 2015 6:08 AM EST



 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Date of Report: November 4, 2015
(Date of earliest event reported)
 
FORESTAR GROUP INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
Commission File Number
 
26-1336998
(State or other jurisdiction of incorporation or organization)
 
001-33662
 
(I.R.S. Employer
Identification No.)
 

6300 Bee Cave Road, Building Two, Suite 500
Austin, Texas 78746
(Address of principal executive offices) (zip code)
 
(512) 433-5200
(Registrant’s telephone number, including area code)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: 
o       Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o       Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o       Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o       Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

1



Item 2.02. Results of Operations and Financial Condition.
 
On November 4, 2015, Forestar Group Inc. (the “Company”) issued a press release announcing the Company’s results for the quarter ended September 30, 2015. A copy of the press release is furnished as Exhibit 99.1 of this report.

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
 
On November 4, 2015, the Company announced that Bruce F. Dickson will retire from his position as its Chief Real Estate Officer, effective as of March 31, 2016. A copy of the press release is furnished as Exhibit 99.1 of this report.

 Item 7.01. Regulation FD Disclosure
 
On November 4, 2015, management of the Company will participate in a conference call discussing the Company’s results for the quarter ended September 30, 2015. Copies of the presentation materials to be used by management are furnished as Exhibit 99.2 of this report.


Item 9.01. Financial Statements and Exhibits.
 
(d) Exhibits.
 
Exhibit
 
Description
 
 
 
99.1

 
Press release issued by the Company on November 4, 2015
 
 
 
99.2

 
Presentation materials to be used by management in a conference call on November 4, 2015, discussing the Company’s results for the quarter ended September 30, 2015.




2



SIGNATURE
 
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
FORESTAR GROUP INC.
 
 
 
 
 
 
Date:
November 4, 2015
By:
/s/ David M. Grimm
 
 
 
Name:
David M. Grimm
 
 
 
Title:
Chief Administrative Officer


3



EXHIBIT INDEX
 
Exhibit
 
Description
 
 
 
99.1

 
Press release issued by the Company on November 4, 2015
 
 
 
99.2

 
Presentation materials to be used by management in a conference call on November 4, 2015, discussing the Company’s results for the quarter ended September 30, 2015.

4
Exhibit 99.1



NEWS
RELEASE

FOR IMMEDIATE RELEASE
CONTACT:     Anna E. Torma
(512) 433-5312

FORESTAR GROUP INC. REPORTS THIRD QUARTER 2015 RESULTS

Tremendous changes at Forestar including four key initiatives:
•
Reducing costs across the entire organization
•
Reviewing entire portfolio of assets
•
Reviewing capital structure
•
Reviewing additional disclosures

AUSTIN, TEXAS, November 4, 2015—Forestar Group Inc. (NYSE: FOR) (“Forestar” or the “Company”)today reported a third quarter 2015 net loss of approximately ($164.2) million, or ($4.79) per share outstanding, compared with third quarter 2014 net income of approximately $5.2 million, or $0.12 per share outstanding. Third quarter 2015 results include charges of approximately ($153.9) million, or ($4.48) per share, related to a deferred tax asset valuation allowance, impairment of proved properties and unproved leasehold interests associated with non-core oil and gas assets, and severance related charges. To the extent the Company generates sufficient future taxable income, the Company may utilize the tax deductions represented by the deferred tax asset in future tax returns notwithstanding the valuation allowance. Excluding special items, third quarter 2015 net loss was approximately ($10.3) million, or ($0.31) per share.
 
 
Third Quarter
 
 
 
2015

 
2014

 
 
 
 
 
Net income (loss) per share - as reported
 

($4.79
)
 

$0.12

 
 
 
 
 
Special items per share:
 
 
 
 
Deferred tax asset valuation allowance
 
2.88

 
—

Proved property impairments - oil & gas
 
1.24

 
—

Unproved leasehold interest impairments - oil & gas
 
0.30

 
—

Severance related charges
 
0.06

 
—

Total special items per share (after-tax)
 

$4.48

 

$—

Net income (loss) per share - excluding special items
 

($0.31
)
 

$0.12


Focusing on Residential Housing Development, Significantly Reducing Costs and Reviewing Alternatives
“Forestar has made tremendous changes at the Board and management levels. We are focused on creating shareholder value through our core residential housing development business. In addition, we are focused on four key initiatives: to significantly reduce costs across our entire business, review our entire portfolio of assets, review our capital structure to match our real estate focus going forward, and review additional disclosures,” said Phil Weber, Chief Executive Officer of Forestar. “We have taken actions to eliminate over $13 million in general administrative and segment operating expenses, representing a 2016 cost reduction of approximately 22% compared to 2015 run rate levels. Going forward, we expect additional cost reductions as we focus on our core residential housing development business.”
Residential Housing Demand Stable, Despite Construction and Permitting Delays
“We continue to see stable market demand for our communities, with over 1,440 lots currently under option contracts with builders, with average residential lot prices up 4% compared with third quarter 2014. Multifamily

1


construction activity continued on four existing projects, with two additional multifamily developments, 360° in Denver and Acklen in Nashville, currently nearing completion and experiencing solid leasing activity. In addition, our two stabilized multifamily projects, Eleven in Austin and Midtown near Dallas, are both nearly 95% leased and generating effective rents above our initial underwriting.”

Forestar manages its operations through three business segments: real estate, oil and gas and other natural resources.

REAL ESTATE

Third Quarter 2015 Significant Highlights (Includes Ventures)
•
Sold 301 developed residential lots for over $76,600 per lot and average gross profit of over $30,500 per lot
•
Sold 220 acres of residential tracts for over $2,800 per acre
•
Sold 4,616 acres of undeveloped land for $2,190 per acre, principally from a 50% joint venture

Segment Financial Results:
($ in millions)
 
Q3 2015
 
Q3 2014
 
Q2 2015
Segment Revenues
 
$28.0
 
$32.4
 
$39.4
Segment Earnings
 
$5.2
 
$16.0
 
$15.5

Real estate segment earnings declined in third quarter 2015 compared with the prior year principally due to a $7.6 million gain in third quarter 2014 associated with acquisition of our partner's interest in the Eleven multifamily venture, decreased residential lot sales activity and $1.8 million of interest income in third quarter 2014 related to a loan secured by a mixed-use real estate community in Houston. Third quarter 2015 lot sales reflect the impact of construction and inspection delays associated with abnormally wet weather conditions in second quarter 2015. Real estate segment earnings declined in third quarter 2015 compared with second quarter 2015 principally due to lower residential lot sales activity.

OIL AND GAS

Third Quarter 2015 Significant Highlights (Includes Ventures)
•
Incurred non-cash impairment charges of approximately ($81) million related to proved properties and unproved leasehold interests, principally in North Dakota, Nebraska and Kansas, primarily due to the continued decline in oil and gas prices
•
Reduced operating expenses by approximately 36% compared with third quarter 2014
•
Generated over $11 million in proceeds from the sale of approximately 240 net mineral acres in the Bakken/Three Forks and 9,700 net mineral acres in Oklahoma, and 27 gross / 4 net producing wells

Segment Financial Results:
($ in millions)
 
Q3 2015
 
Q3 2014
 
Q2 2015
Segment Revenues
 
$13.5
 
$24.1
 
$16.2
Segment Earnings (Loss)
 
($86.2)
 
$6.0
 
($56.9)

“Through the successful execution of our initiatives to significantly reduce costs and capital expenditures, the oil and gas segment generated over $18 million in positive cash flow in third quarter 2015, including $11 million from non-core asset sales, compared with ($4) million in negative cash flow in third quarter 2014. Going forward, our oil and gas segment is positioned to generate positive cash flow at third quarter-end 2015 commodity prices,” concluded Mr. Weber.


2


Oil and gas segment results decreased in third quarter 2015 compared with third quarter 2014 and second quarter 2015 principally due to non-cash asset impairment charges of ($81) million, of which ($65) million is related to proved properties and ($16) million is related to unproved leasehold interests, principally due to the continued decline in oil and gas prices. Total oil and liquids production increased 18% in third quarter 2015 compared with third quarter 2014, driven by new wells commencing production in the Bakken / Three Forks formations in North Dakota. In addition, total oil and gas segment operating expenses were down approximately 36% in third quarter 2015 compared with third quarter 2014, principally due to lower staffing costs and initiatives to reduce oil and gas operating expenses. Second quarter 2015 oil and gas segment results include approximately ($57) million in non-cash charges principally related to impairment of proved properties and unproved leasehold interests and exploratory dry hole costs.

OTHER NATURAL RESOURCES

Third Quarter 2015 Significant Highlights (Includes Ventures)
•
Sold over 60,000 tons of fiber for $12.41 per ton
•
97,000 acres under lease for recreational purposes at $8.93 per acre

Segment Financial Results:
($ in millions)
 
Q3 2015
 
Q3 2014
 
Q2 2015
Segment Revenues
 
$1.7
 
$2.3
 
$1.9
Segment Earnings (Loss)
 
($0.1)
 
$0.7
 
($0.0)

Third quarter 2015 other natural resources segment results decreased compared with prior year principally due to lower fiber sales and almost $0.4 million in earnings in third quarter 2014 associated with a groundwater reservation agreement and gain on sale of water rights related to a real estate project in Colorado. Third quarter 2015 other natural resources segment results decreased compared with second quarter 2015 principally due to lower fiber pricing.

OUTLOOK

Forestar Target Residential Housing Markets Supported by Favorable Fundamentals
“Residential real estate market conditions continue to reflect relatively stable supply and demand fundamentals in our target markets. Despite a slowdown in job growth in Houston, lower housing and finished lot inventories are driving steady demand for our communities which are principally focused on first and second move-up markets, the largest segments of the new home construction market. With stable market demand for our communities and over 1,440 lots currently under option contracts with builders, the company anticipates lot sales in 2015 to be in the range of 1,400 - 1,600 lots.”
“Multifamily market conditions remain solid in our target markets, and our Midtown Cedar Hill multifamily project near Dallas is currently under contract and expected to close by year-end. Going forward, we will continue to strategically invest in multifamily development opportunities, principally located in urban core and other strong sub-markets where the company can achieve attractive risk-adjusted returns.”
Significantly Lower Costs and Focus on Core Residential Housing Development Business
“We are focused on executing our core residential housing development business. In addition, we have restructured our oil and gas business by significantly lowering operating expenses and reducing capital expenditures to generate positive cash flow at third quarter-end 2015 commodity pricing. We are also evaluating our entire portfolio of assets and expect to further reduce corporate and other segment operating expenses as we align the company’s cost structure with our core real estate businesses to maximize long-term shareholder value,” said Mr. Weber.

Chief Real Estate Officer Planning 2016 Retirement
The Company also announced today that Bruce Dickson, Chief Real Estate Officer, plans to retire on March 31, 2016. “We thank Bruce for his outstanding leadership of our real estate segment since 2011, and for his many other contributions to Forestar. We wish Bruce the very best following his retirement next year,” concluded Mr. Weber.


3


The Company will host a conference call on November 4, 2015 at 10:00 am ET to discuss results of third quarter 2015. The meeting may be accessed through webcast or by conference call. The webcast may be accessed through Forestar’s Internet site at www.forestargroup.com. To access the conference call, listeners calling from North America should dial 1-855-546-9555 at least 15 minutes prior to the start of the meeting. Those wishing to access the call from outside North America should dial 1-412-455-6094. The password is Forestar. Replays of the call will be available for two weeks following the completion of the live call and can be accessed at 1-855-859-2056 in North America and at 1-404-537-3406 outside North America. The password for the replay is 56791336.

About Forestar Group
Forestar Group Inc. operates in three business segments: real estate, oil and gas and other natural resources. At third quarter-end 2015, the real estate segment owns directly or through ventures 106,000 acres of real estate located in 12 states and 15 markets in the U.S. The real estate segment has 11 real estate projects representing approximately 24,400 acres currently in the entitlement process, and 80 entitled, developed and under development projects in 11 states and 14 markets encompassing 10,700 acres, comprised of 17,400 planned residential lots and approximately 1,900 commercial acres. The oil and gas segment includes approximately 914,000 net acres of oil and gas mineral interests, with approximately 590,000 acres of fee ownership located principally in Texas, Louisiana, Georgia, and Alabama, and approximately 324,000 net acres of leasehold interests principally located in Nebraska, Kansas, Oklahoma, North Dakota and Texas. These leasehold interests include about 9,000 net mineral acres in the core of the prolific Bakken and Three Forks formations. The other natural resources segment includes sale of wood fiber and management of our recreational leases, and approximately 1.5 million acres of groundwater resources, including a 45% nonparticipating royalty interest in groundwater rights on approximately 1.4 million surface acres in Texas, Louisiana, Georgia and Alabama and groundwater production from leases on about 20,000 surface acres in central Texas. Forestar’s address on the World Wide Web is www.forestargroup.com.

Forward Looking Statements
This release contains “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements are typically identified by words or phrases such as “will,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “forecast,” and other words and terms of similar meaning. These statements reflect management’s current views with respect to future events and are subject to risk and uncertainties. We note that a variety of factors and uncertainties could cause our actual results to differ significantly from the results discussed in the forward-looking statements, including but not limited to: general economic, market, or business conditions; changes in commodity prices; opportunities (or lack thereof) that may be presented to us and that we may pursue; fluctuations in costs and expenses including development costs; demand for new housing, including impacts from mortgage credit rates or availability; lengthy and uncertain entitlement processes; cyclicality of our businesses; accuracy of accounting assumptions; competitive actions by other companies; changes in laws or regulations; and other factors, many of which are beyond our control. Except as required by law, we expressly disclaim any obligation to publicly revise any forward-looking statements contained in this news release to reflect the occurrence of events after the date of this news release.


4


FORESTAR GROUP INC.
(UNAUDITED)
Business Segments
 
Third Quarter
 
First Nine Months
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Revenues:
 
 
 
 
 
 
 
Real estate
$
27,957

 
$
32,445

 
$
100,196

 
$
153,098

Oil and gas
13,485

 
24,145

 
42,835

 
66,076

Other natural resources
1,726

 
2,250

 
5,372

 
7,284

Total revenues
$
43,168

 
$
58,840

 
$
148,403

 
$
226,458

Segment earnings (loss):
 
 
 
 
 
 
 
Real estate
$
5,154

 
$
15,987

 
$
29,747

 
$
66,859

Oil and gas
(86,192
)
 
6,002

 
(146,000
)
 
16,331

Other natural resources
(77
)
 
669

 
(511
)
 
2,220

Total segment earnings (loss)
(81,115
)
 
22,658

 
(116,764
)
 
85,410

Items not allocated to segments:
 
 
 
 
 
 
 
General and administrative expense
(8,343
)
 
(5,190
)
 
(19,540
)
 
(15,924
)
Share-based and long-term incentive compensation expense
(2,245
)
 
(991
)
 
(5,726
)
 
(4,523
)
Interest expense
(8,315
)
 
(8,634
)
 
(25,851
)
 
(21,507
)
Other corporate non-operating income
38

 
139

 
133

 
391

Income (loss) before taxes
(99,980
)
 
7,982

 
(167,748
)
 
43,847

Income tax (expense) benefit (a)
(64,236
)
 
(2,755
)
 
(39,133
)
 
(15,464
)
Net income (loss) attributable to Forestar Group Inc.
$
(164,216
)
 
$
5,227

 
$
(206,881
)
 
$
28,383

 
 
 
 
 
 
 
 
Net income (loss) per common share:
 
 
 
 
 
 
 
Diluted
$
(4.79
)
 
$
0.12

 
$
(6.04
)
 
$
0.65

 
 
 
 
 
 
 
 
Weighted average common shares outstanding (in millions):
 
 
 
 
 
 
 
Diluted (b)
34.3

 
43.9

 
34.2

 
43.8


 
 
Third Quarter
Supplemental Financial Information:
 
2015
 
2014
 
 
(In thousands)
Cash and cash equivalents
 
$
92,640

 
$
170,606

 
 
 
 
 
Senior secured notes
 
250,000

 
250,000

Convertible senior notes, net of discount
 
105,672

 
102,368

Tangible equity unit notes, net of discount
 
10,899

 
19,192

Other debt (c)
 
68,724

 
57,735

Total debt
 
$
435,295

 
$
429,295

Net debt
 
$
342,655

 
$
258,689

 _____________________
(a) 
Income tax provision for third quarter 2015 was ($64.2) million which includes a ($98.9) million valuation allowance for our deferred tax asset and is net of an income tax benefit of $34.7 million associated with our third quarter 2015 pre-tax losses.
(b) 
Weighted average diluted shares outstanding during third quarter and first nine months 2015 exclude 7.9 million shares associated with tangible equity units issued during fourth quarter 2013. The actual number of shares to be issued in December 2016 will be between 6.5 million - 7.9 million shares based on the market value of our stock. Weighted average diluted shares outstanding during third quarter and first nine months 2014 includes 7.9 million shares associated with tangible equity units issued during fourth quarter 2013.
(c) 
Other debt for third quarter-end 2015 consists principally of $48.1 million in senior secured loans for two multifamily properties, and excludes unconsolidated venture debt and outstanding letters of credit of approximately $144.0 million and $16.2 million, respectively.


5


FORESTAR GROUP INC.
REAL ESTATE SEGMENT
PERFORMANCE METRICS
 
Third Quarter
 
First Nine Months
 
2015
 
2014
 
2015
 
2014
REAL ESTATE
 
 
 
 
 
 
 
Owned, Consolidated & Equity Method Ventures:
 
 
 
 
 
 
 
Residential Lots Sold
301

 
323

 
1,109

 
1,834

Revenue per Lot Sold
$
76,623

 
$
73,653

 
$
75,019

 
$
54,354

Commercial Acres Sold
3

 
4

 
56

 
7

Revenue per Commercial Acre Sold
$
28,037

 
$
589,203

 
$
216,997

 
$
369,874

Undeveloped Acres Sold
4,616

 
637

 
6,595

 
13,174

Revenue per Acre Sold
$
2,190

 
$
3,179

 
$
2,411

 
$
2,249

Owned & Consolidated Ventures:
 
 
 
 
 
 
 
Residential Lots Sold
186

 
286

 
699

 
1,603

Revenue per Lot Sold
$
76,232

 
$
72,352

 
$
73,287

 
$
52,052

Commercial Acres Sold
3

 
—

 
27

 
3

Revenue per Commercial Acre Sold
$
28,037

 
$
—

 
$
109,802

 
$
96,774

Undeveloped Acres Sold
744

 
637

 
2,378

 
12,916

Revenue per Acre Sold
$
2,900

 
$
3,179

 
$
2,911

 
$
2,248

Ventures Accounted For Using the Equity Method:
 
 
 
 
 
 
 
Residential Lots Sold
115

 
37

 
410

 
231

Revenue per Lot Sold
$
77,256

 
$
83,711

 
$
77,973

 
$
70,325

Commercial Acres Sold
—

 
4

 
29

 
4

Revenue per Commercial Acre Sold
$
—

 
$
589,203

 
$
311,995

 
$
589,203

Undeveloped Acres Sold
3,872

 
—

 
4,217

 
258

Revenue per Acre Sold
$
2,053

 
$
—

 
$
2,129

 
$
2,306



THIRD QUARTER 2015
REAL ESTATE PIPELINE
Real Estate
 
 
Entitled Acres
 
Developed & Under Development Acres
 
Total Acres (a)
Residential
 
 
 
 
 
 
 
Owned
 
 
6,902
 
653
 


Ventures
 
 
1,075
 
157
 
8,787

Commercial
 
 
 
 
 
 
 
Owned
 
 
1,065
 
525
 


Ventures
 
 
210
 
103
 
1,903

Total Acres
 
 
9,252
 
1,438
 
10,690

 
 
 
 
 
 
 
 
Estimated Residential Lots
 
14,930
 
2,437
 
17,367

 _____________________
(a) 
Excludes acres associated with commercial and income producing properties, 70,769 undeveloped timberland acres and 24,430 acres in the entitlement process.

6


FORESTAR GROUP INC.
PROJECTS IN ENTITLEMENT

A summary of our real estate projects in the entitlement process (a) at third quarter-end 2015 follows:
Project
County
 
Market
 
Project Acres (b)
California
 
 
 
 
 
Hidden Creek Estates
Los Angeles
 
Los Angeles
 
700

Terrace at Hidden Hills
Los Angeles
 
Los Angeles
 
30

 
 
 
 
 
 
Georgia
 
 
 
 
 
Ball Ground
Cherokee
 
Atlanta
 
500

Crossing
Coweta
 
Atlanta
 
230

Fincher Road
Cherokee
 
Atlanta
 
3,890

Garland Mountain
Cherokee/Bartow
 
Atlanta
 
350

Martin’s Bridge
Banks
 
Atlanta
 
970

Mill Creek
Coweta
 
Atlanta
 
770

Wolf Creek
Carroll/Douglas
 
Atlanta
 
12,230

Yellow Creek
Cherokee
 
Atlanta
 
1,060

 
 
 
 
 
 
Texas
 
 
 
 
 
Lake Houston
Harris/Liberty
 
Houston
 
3,700

Total
 
 
 
 
24,430

 _____________________
(a) 
A project is deemed to be in the entitlement process when customary steps necessary for the preparation of an application for governmental land-use approvals, like conducting pre-application meetings or similar discussions with governmental officials, have commenced, or an application has been filed. Projects listed may have significant steps remaining, and there is no assurance that entitlements ultimately will be received.
(b) 
Project acres, which are the total for the project regardless of our ownership interest, are approximate. The actual number of acres entitled may vary.

7


FORESTAR GROUP INC.
REAL ESTATE PROJECTS

A summary of activity within our projects in the development process, which includes entitled (a), developed and under development real estate projects, at third quarter-end 2015 follows:
 
 
 
 
 
Residential Lots (c)
 
Commercial Acres (d)
Project
County
 
Interest
    Owned (b)
 
Lots Sold
Since
Inception
 
Lots
Remaining
 
Acres
Sold
Since
Inception
 
Acres
Remaining (e)
Projects we own
 
 
 
 
 
 
 
 
 
 
 
California
 
 
 
 
 
 
 
 
 
 
 
San Joaquin River
Contra Costa/Sacramento
 
100
%
 
—

 
—

 
—

 
288

Colorado
 
 
 
 
 
 
 
 
 
 
 
Buffalo Highlands
Weld
 
100
%
 
—

 
164

 
—

 
—

Johnstown Farms
Weld
 
100
%
 
281

 
313

 
2

 
3

Pinery West
Douglas
 
100
%
 
86

 
—

 
20

 
106

Stonebraker
Weld
 
100
%
 
—

 
603

 
—

 
—

Georgia
 
 
 
 
 
 
 
 
 
 
 
Seven Hills
Paulding
 
100
%
 
843

 
240

 
26

 
113

The Villages at Burt Creek
Dawson
 
100
%
 
—

 
1,715

 
—

 
57

West Oaks
Cobb
 
100
%
 
—

 
57

 
—

 
—

Other projects (17)
Various
 
100
%
 
245

 
2,258

 
—

 
695

North & South Carolina
 
 
 
 
 
 
 
 
 
 
 
Habersham
York
 
100
%
 
20

 
167

 
—

 
—

Walden
Mecklenburg
 
100
%
 
—

 
387

 
—

 
—

Tennessee
 
 
 
 
 
 
 
 
 
 
 
Beckwith Crossing
Wilson
 
100
%
 
—

 
99

 
—

 
—

Morgan Farms
Williamson
 
100
%
 
86

 
87

 
—

 
—

Scales
Williamson
 
100
%
 
—

 
87

 
—

 
—

Weatherford Estates
Williamson
 
100
%
 
—

 
17

 
—

 
—

Texas
 
 
 
 
 
 
 
 
 
 
 
Arrowhead Ranch
Hays
 
100
%
 
—

 
381

 
—

 
11

Bar C Ranch
Tarrant
 
100
%
 
366

 
739

 
—

 
—

Barrington Kingwood
Harris
 
100
%
 
170

 
10

 
—

 
—

Cibolo Canyons
Bexar
 
100
%
 
954

 
815

 
130

 
56

Harbor Lakes
Hood
 
100
%
 
231

 
—

 
21

 
—

Hunter’s Crossing
Bastrop
 
100
%
 
510

 
—

 
54

 
49

Imperial Forest
Harris
 
100
%
 
—

 
428

 
—

 
—

La Conterra
Williamson
 
100
%
 
202

 
—

 
3

 
55

Lakes of Prosper
Collin
 
100
%
 
151

 
136

 
4

 
—

Lantana
Denton
 
100
%
 
1,220

 
544

 
14

 
—

Maxwell Creek
Collin
 
100
%
 
941

 
60

 
10

 
—

Oak Creek Estates
Comal
 
100
%
 
273

 
281

 
13

 
—

Parkside
Collin
 
100
%
 
8

 
192

 
—

 
—

River's Edge
Denton
 
100
%
 
—

 
202

 
—

 
—

Stoney Creek
Dallas
 
100
%
 
231

 
477

 
—

 
—

Summer Creek Ranch
Tarrant
 
100
%
 
983

 
268

 
35

 
44

Summer Lakes
Fort Bend
 
100
%
 
675

 
394

 
56

 
—


8


 
 
 
 
 
Residential Lots (c)
 
Commercial Acres (d)
Project
County
 
Interest
Owned (b)
 
Lots Sold
Since
Inception
 
Lots
Remaining
 
Acres
Sold
Since
Inception
 
Acres
Remaining  (e)
Summer Park
Fort Bend
 
100
%
 
69

 
130

 
28

 
68

The Colony
Bastrop
 
100
%
 
455

 
1,430

 
22

 
31

The Preserve at Pecan Creek
Denton
 
100
%
 
587

 
195

 
—

 
7

Village Park
Collin
 
100
%
 
567

 
—

 
3

 
2

Westside at Buttercup Creek
Williamson
 
100
%
 
1,496

 
1

 
66

 
—

Other projects (7)
Various
 
100
%
 
1,566

 
20

 
135

 
5

Other
 
 
 
 
 
 
 
 
 
 
 
Other projects (2)
Various
 
100
%
 
543

 
320

 
—

 
—

 
 
 
 
 
13,759

 
13,217

 
642

 
1,590

Projects in entities we consolidate
 
 
 
 
 
 
 
 
 
 
 
Texas
 
 
 
 
 
 
 
 
 
 
 
City Park
Harris
 
75
%
 
1,311

 
504

 
52

 
113

Timber Creek
Collin
 
88
%
 
—

 
601

 
—

 
—

Willow Creek Farms II
Waller/Fort Bend
 
90
%
 
90

 
175

 
—

 
—

Other projects (2)
Various
 
Various

 
10

 
198

 
—

 
18

 
 
 
 
 
1,411

 
1,478

 
52

 
131

Total owned and consolidated
 
 
 
 
15,170

 
14,695

 
694

 
1,721

Projects in ventures that we account for using the equity method
 
 
 
 
 
 
 
 
Texas
 
 
 
 
 
 
 
 
 
 
 
Entrada
Travis
 
50
%
 
—

 
821

 
—

 
—

Fannin Farms West
Tarrant
 
50
%
 
324

 
—

 
—

 
—

Harper’s Preserve
Montgomery
 
50
%
 
513

 
1,215

 
30

 
49

Lantana - Rayzor Ranch
Denton
 
25
%
 
1,163

 
—

 
50

 
—

Long Meadow Farms
Fort Bend
 
38
%
 
1,514

 
290

 
187

 
118

Southern Trails
Brazoria
 
80
%
 
870

 
126

 
1

 
—

Stonewall Estates
Bexar
 
50
%
 
363

 
27

 
—

 
—

Other projects (7)
Various
 
Various

 
—

 
193

 
—

 
15

Total in ventures
 
 
 
 
4,747

 
2,672

 
268

 
182

Combined total
 
 
 
 
19,917

 
17,367

 
962

 
1,903

 _____________________
(a) 
A project is deemed entitled when all major discretionary governmental land-use approvals have been received. Some projects may require additional permits and/or non-governmental authorizations for development.
(b) 
Interest owned reflects our net equity interest in the project, whether owned directly or indirectly. There are some projects that have multiple ownership structures within them. Accordingly, portions of these projects may appear as owned, consolidated or accounted for using the equity method.
(c) 
Lots are for the total project, regardless of our ownership interest. Lots remaining represent vacant developed lots, lots under development and future planned lots and are subject to change based on business plan revisions.
(d) 
Commercial acres are for the total project, regardless of our ownership interest, and are net developable acres, which may be fewer than the gross acres available in the project.
(e) 
Excludes acres associated with commercial and income producing properties.

9


A summary of our significant commercial and multifamily properties at third quarter-end 2015 follows:
Project
 
Market
 
Interest
    Owned (a)
 
Type
 
Acres
 
Description
Radisson Hotel
 
Austin
 
100
%
 
Hotel
 
2

 
413 guest rooms and suites
Dillon (b)
 
Charlotte
 
100
%
 
Multifamily
 
3

 
379-unit luxury apartment
Eleven
 
Austin
 
100
%
 
Multifamily
 
3

 
257-unit luxury apartment
Midtown
 
Dallas
 
100
%
 
Multifamily
 
13

 
354-unit luxury apartment
Music Row (b)
 
Nashville
 
100
%
 
Multifamily
 
1

 
230-unit luxury apartment
Elan 99 (b)
 
Houston
 
90
%
 
Multifamily
 
17

 
360-unit luxury apartment
Acklen (b)
 
Nashville
 
30
%
 
Multifamily
 
4

 
320-unit luxury apartment
HiLine (b)
 
Denver
 
25
%
 
Multifamily
 
18

 
385-unit luxury apartment
360° (b)
 
Denver
 
20
%
 
Multifamily
 
4

 
304-unit luxury apartment
 _____________________
(a) 
Interest owned reflects our total interest in the project, whether owned directly or indirectly.
(b) 
Construction in progress.









10


FORESTAR GROUP INC.
OIL AND GAS SEGMENT
PERFORMANCE METRICS
 
Third Quarter
 
First Nine Months
 
2015
 
2014
 
2015
 
2014
Leasing Activity from Owned Mineral Interests
 
 
 
 
 
 
 
Acres Leased
1,720

 
744

 
3,343

 
3,865

Average Bonus / Acre
$
291

 
$
205

 
$
298

 
$
320

Delay Rentals Received
$
98,000

 
$
—

 
$
182,000

 
$
14,000

Oil & Gas Production
 
 
 
 
 
 
 
Royalty Interests (a)
 
 
 
 
 
 
 
Gross Wells (at end of the period)
533

 
547

 
533

 
547

Oil Production (Barrels) (b)
31,800

 
32,900

 
102,600

 
96,000

Average Oil Price ($ / Barrel)
$
45.92

 
$
91.08

 
$
47.81

 
$
89.34

Natural Gas Production (MMcf)
258.3

 
273.5

 
775.3

 
792.0

Average Natural Gas Price ($ / Mcf)
$
2.45

 
$
4.35

 
$
2.82

 
$
4.18

BOE Production (c)
74,800

 
78,500

 
231,800

 
228,000

Average Price ($ / BOE)
$
27.94

 
$
53.30

 
$
30.60

 
$
52.15

Working Interests
 
 
 
 
 
 
 
Gross Wells (at end of the period)
413

 
447

 
413

 
447

Oil Production (Barrels) (b)
277,500

 
229,100

 
789,500

 
575,300

Average Oil Price ($ / Barrel)
$
36.87

 
$
83.17

 
$
41.23

 
$
87.74

Natural Gas Production (MMcf)
293.5

 
226.2

 
855.9

 
654.1

Average Natural Gas Price ($ / Mcf)
$
2.20

 
$
4.12

 
$
2.60

 
$
4.59

BOE Production (c)
326,400

 
266,900

 
932,100

 
684,400

Average Price ($ / BOE)
$
33.32

 
$
74.91

 
$
37.31

 
$
78.15

Total Oil & Gas Interests
 
 
 
 
 
 
 
Gross Wells (d) (at end of the period)
914

 
961

 
914

 
961

Oil Production (Barrels) (b)
309,300

 
262,000

 
892,100

 
671,300

Average Oil Price ($ / Barrel)
$
37.80

 
$
84.16

 
$
41.98

 
$
87.97

Natural Gas Production (MMcf)
551.8

 
499.7

 
1,631.2

 
1,446.1

Average Natural Gas Price ($ / Mcf)
$
2.31

 
$
4.24

 
$
2.71

 
$
4.37

BOE Production (c)
401,200

 
345,400

 
1,163,900

 
912,400

Average Price ($ / BOE)
$
32.32

 
$
70.00

 
$
35.97

 
$
71.65

Average Daily Production
 
 
 
 
 
 
 
BOE per Day
 
 
 
 
 
 
 
Royalty Interests
813

 
853

 
849

 
835

Working Interests
3,548

 
2,901

 
3,414

 
2,507

Total
4,361

 
3,754

 
4,263

 
3,342

Working Interests BOE per Day 
 
 
 
 
 
 
 
North Dakota
2,589

 
1,664

 
2,318

 
1,347

Kansas/Nebraska
476

 
707

 
563

 
610

Texas, Louisiana and Other
483

 
530

 
533

 
550

Total
3,548

 
2,901

 
3,414

 
2,507

 _____________________
(a) 
Includes our share of venture activity of which we own a 50% interest. Our share of natural gas production was 46.8 MMcf and 129.2 MMcf in the third quarter and first nine months of 2015 and 49.1 MMcf and 152.3 MMcf in the third quarter and first nine months of 2014.
(b) 
Oil production includes natural gas liquids (NGLs).
(c) 
BOE – Barrels of oil equivalent (converting natural gas to oil at 6 Mcfe / Bbl).
(d) 
Represent wells in which we own a royalty or working interest in a producing well. Includes wells operated by third-party lessees/operators. Excludes 31 and 33 working interest wells at third quarter-end 2015 and third quarter-end 2014, as we also own a royalty interest in these wells.

11


FORESTAR GROUP INC.
OIL AND GAS SEGMENT

 
Third Quarter
 
First Nine Months
 
2015
 
2014
 
2015
 
2014
Well Activity
 
 
 
 
 
 
 
Mineral Interests Owned (a)
 
 
 
 
 
 
 
Net Acres Held By Production
36,000

 
36,000

 
36,000

 
36,000

Productive Gross Wells
532

 
547

 
532

 
547

Mineral Interests Leased 
 
 
 
 
 
 
 
Net Acres Held By Production (b)
45,000

 
46,000

 
45,000

 
46,000

Gross Wells Drilled
7

 
31

 
38

 
97

Productive Gross Wells (c)
382

 
414

 
382

 
414

Total Well Activity
 
 
 
 
 
 
 
Net Acres Held By Production
81,000

 
82,000

 
81,000

 
82,000

Gross Wells Drilled
7

 
31

 
38

 
97

Productive Gross Wells
914

 
961

 
914

 
961

 _____________________
(a) 
Represent wells in which we own a royalty or working interest in a producing well. Includes wells operated by third-party lessees/operators.
(b) 
Excludes approximately 8,000 net acres in which we have an overriding royalty interest.
(c) 
Excludes approximately 1,200 wells in which we have an overriding royalty, and 31 and 33 working interest wells at third quarter-end 2015 and third quarter-end 2014, as we also own a royalty interest in these wells.








12


FORESTAR GROUP INC.
OTHER NATURAL RESOURCES SEGMENT
PERFORMANCE METRICS

 
Third Quarter
 
First Nine Months
 
2015
 
2014
 
2015
 
2014
Fiber Sales
 
 
 
 
 
 
 
Pulpwood tons sold
45,600

 
71,500

 
109,100

 
157,900

Average pulpwood price per ton
$
9.89

 
$
11.18

 
$
9.41

 
$
11.00

Sawtimber tons sold
14,400

 
21,500

 
53,800

 
100,000

Average sawtimber price per ton
$
20.41

 
$
21.31

 
$
21.22

 
$
22.38

 
 
 
 
 
 
 
 
Total tons sold
60,000

 
93,000

 
162,900

 
257,900

Average stumpage price per ton (a)
$
12.41

 
$
13.52

 
$
13.31

 
$
15.41

 
 
 
 
 
 
 
 
Recreational Activity
 
 
 
 
 
 
 
Average recreational acres leased
97,000

 
107,800

 
99,900

 
111,400

Average price per leased acre
$
8.93

 
$
8.66

 
$
9.18

 
$
9.17

 _____________________

(a) 
Average stumpage price per ton is based on gross revenues less cut and haul costs.

13


FORESTAR GROUP INC.
CALCULATION OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED)

In our third quarter and first nine months 2015 earnings release and conference call presentation materials furnished to the Securities and Exchange Commission on Form 8-K on November 4, 2015, we used certain non-GAAP financial measures. The non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures. These non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP financial statements and the accompanying reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of our business. We strongly encourage investors to review our consolidated financial statements and publicly filed reports in their entirety.

Reconciliation of Non-GAAP Financial Measures (Unaudited)

The following table shows a reconciliation of net income before special items and earnings per share excluding special items to net income and earnings per share (the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles, or GAAP). Net income excluding special items and earnings per share excluding special items are useful to evaluate the performance of the company because it excludes non-recurring non-cash impairments and other costs, which management believes are not indicative of the ongoing operating results of the business. A reconciliation of net income and earnings per share excluding special items to net income and earnings per share as computed under GAAP is illustrated below:

 
Third Quarter
 
First Nine Months
 
2015

 
2014

 
2015

 
2014

 
(In millions, except share data)
 
 
 
 
 
 
 
 
Net income (loss) - as reported

($164.2
)
 

$5.2

 

($206.9
)
 

$28.4

Net income (loss) per share - as reported

($4.79
)
 

$0.12

 

($6.04
)
 

$0.65

 
 
 
 
 
 
 
 
Special items:
 
 
 
 
 
 
 
Deferred tax asset valuation allowance
98.9

 
—

 
98.9

 
—

Proved property impairments - oil & gas
42.5

 
—

 
58.8

 
—

Unproved leasehold interest impairments - oil & gas
10.3

 
—

 
23.8

 
—

Exploratory dry hole expense and other charges
—

 
—

 
6.9

 
—

Severance related charges
2.2

 
—

 
2.2

 
—

Total special items (after-tax)

$153.9

 

$—

 

$190.6

 

$—

Total special items per share (after-tax)

$4.48

 

$—

 

$5.57

 

$—

 
 
 
 
 
 
 
 
Net income (loss) - excluding special items

($10.3
)
 

$5.2

 

($16.3
)
 

$28.4

Net Income (loss) per share - excluding special items

($0.31
)
 

$0.12

 

($0.47
)
 

$0.65


14

Third Quarter 2015 Financial Results November 4, 2015 Exhibit 99.2

 
Notice to Investors This presentation contains “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements are typically identified by words or phrases such as “will,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “forecast,” and other words and terms of similar meaning. These statements reflect management’s current views with respect to future events and are subject to risk and uncertainties. We note that a variety of factors and uncertainties could cause our actual results to differ significantly from the results discussed in the forward-looking statements, including but not limited to: general economic, market, or business conditions; changes in commodity prices; opportunities (or lack thereof) that may be presented to us and that we may pursue; fluctuations in costs and expenses including development costs; demand for new housing, including impacts from mortgage credit rates or availability; lengthy and uncertain entitlement processes; cyclicality of our businesses; accuracy of accounting assumptions; competitive actions by other companies; changes in laws or regulations; and other factors, many of which are beyond our control. Except as required by law, we expressly disclaim any obligation to publicly revise any forward-looking statements contained in this presentation to reflect the occurrence of events after the date of this presentation. This presentation includes Non-GAAP financial measures. The required reconciliation to GAAP financial measures can be found as an exhibit to this presentation and on our website at www.forestargroup.com. 2

 
Initiatives Reducing Costs Across the Entire Organization • Taking actions to eliminate over $13 million of G&A and segment operating expenses in 2016 vs 2015, an estimated 22% cost reduction • Additional cost reductions to be identified across organization Reviewing Entire Portfolio of Assets • Core residential housing assets• Non-core, non-residential housing assets Reviewing Capital Structure • Evaluating capital structure Reviewing Additional Disclosures • Reviewing additional disclosures Focusing Forestar on Residential Housing Development 3 Tremendous Changes Underway at Forestar

 
Third Quarter 2015 Results Impacted By Deferred Tax Asset Valuation Allowance and Impairment Charges Principally Related To Non-Core Oil and Gas Assets 4 ($ in Millions, except per share data) Q3 2015 Q3 2014 Net Income (Loss) - As Reported ($164.2) $5.2 Net Income (Loss) Per Share - As Reported ($4.79) $0.12 Special Items: Deferred Tax Asset Valuation Allowance 98.9 -- Proved Property Impairments – Oil & Gas 42.5 -- Unproved Leasehold Interest Impairments – Oil & Gas 10.3 -- Severance Related Charges 2.2 -- Total Special Items (After-Tax) $153.9 -- Net Income (Loss) – Excluding Special Items* ($10.3) $5.2 Net Income (Loss) Per Share – Excluding Special Items* ($0.31) $0.12 • Q3 2015 financial results include non-cash charges of ($52.8) million, or ($1.54) per share, after-tax, primarily associated with impairment of proved properties and unproved leasehold interests associated with non-core oil and gas assets principally in North Dakota, Nebraska and Kansas • Q3 2015 financial results include a deferred tax asset valuation allowance of ($98.9) million, or ($2.88) per share, as a result of cumulative net losses incurred over the three-year period ending September 30, 2015 primarily due to non-cash asset impairment charges related to the oil and gas segment *Reconciliation to GAAP can be found in the appendix to this presentation Note: Weighted average diluted shares outstanding were 34.3 million in Q3 2015 and 43.9 million in Q3 2014 (Q3 2015 diluted shares outstanding exclude 7.9 million shares associated with tangible equity units issued during Q4 2013)

 
Segment Results Adversely Impacted By Impairment Charges Related to Non-Core Oil & Gas Assets 5 ($ in Millions, except per share data) Q3 2015 As Reported Q3 2015 Excluding Special Items* Q3 2014 As Reported Segment Earnings (Loss) Real Estate $5.2 $5.2 $16.0 Oil and Gas (86.2) (5.0) 6.0 Other Natural Resources (0.1) (0.1) 0.7 Total Segment Earnings (Loss) ($81.1) $0.1 $22.7 • Q3 2014 real estate segment results include a gain of $7.6 million, pre-tax, associated with acquisition of our partner’s interest in the Eleven multifamily venture in Austin • Q3 2015 oil and gas segment results include non-cash charges of ($81.2) million, pre-tax, principally associated with impairment of proved properties and unproved leasehold interests associated with non-core oil and gas assets principally in North Dakota, Nebraska and Kansas * Reconciliation to GAAP can be found in the appendix to this presentation.

 
Stable Market Demand in Texas with Construction and Inspection Delays Impacting Lot Sales Timing 6 Texas New Home Inventory Below Equilibrium 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 0 5,000 10,000 15,000 20,000 25,000 30,000 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 Housing Inventory Months of Supply Equilibrium M on th s of S up pl y Ne w Ho m e In ve nt or ie s Note: Includes ventures Source: Metrostudy and Bureau of Labor Statistics September 2015 vs. September 2014 Austin 3.2% Dallas / Fort Worth 3.2% Houston 1.2% San Antonio 3.7% U.S. Average 2.0% Texas Job Growth vs. National Average • 2015 total lot sales expected to be in the range of 1,400 – 1,600 lots, primarily due to construction and inspection delays 0 500 1,000 1,500 2,000 Q 11 2 Q 21 2 Q 31 2 Q 41 2 Q 11 3 Q 21 3 Q 31 3 Q 41 3 Q 11 4 Q 21 4 Q 31 4 Q 41 4 Q 11 5 Q 21 5 Q 31 5 Re sid en tia l L ot s Developed Lots Lots Under Development Forestar: > 1,440 Lots Under Option Contract

 
Pipeline of Well Located Class A Multifamily Communities Multifamily Development Projects – Q3 2015 ($ in millions) Project Market FOR Ownership Units % Complete Projected Total Development Cost* Projected Total FOR Contribution* Co m pl et e Eleven Austin 100% 257 100% $40 $25 Midtown Dallas 100% 354 100% 35 11 Un de r C on st ru ct io n 360° Denver 20% 304 99% 56 – 57 4 Acklen Nashville 30% 320 99% 58 – 59 6 HiLine Denver 25% 385 ~45% 71 – 73 6 – 7 Elan 99** Houston 90% 360 ~40% 53 – 55 13 – 14 Music Row Nashville 100% 230 <1% 47 – 48 16 – 17 Dillon Charlotte 100% 379 <3% 81 – 83 28 – 30 69% 2,589 Downtown Edge Austin TBD 234 n/a $48 – 50 TBD Note: Forestar acquired partner’s 75% interest in Eleven venture for $21.5 million in Q3 2014 * Based on estimates, actual results may vary **FOR is limited partner and not developer of this project 7 Po te nt ia l De ve lo pm en t Si te

 
8

 

 
Third Quarter 2014 Non-Cash Gains and Lot Closing Delays Impact Year-Over-Year Real Estate Results ($7.2) ($2.5) $16.0 $1.6 $1.0 $0.2 ($2.2) ($1.7) $5.2 $0 $10 $20 Q3 2014 Multifamily and Income Producing Properties Residential & Commercial Tract Sales Undeveloped Land Sales Gains* Lot Sales Operating Expenses Interest Income Q3 2015 Segment Earnings Reconciliation Q3 2014 vs. Q3 2015 ($ in millions) Q3 2015 Highlights Residential Lots – 301 lots sold • >$76,600 avg. price per lot - up >4% vs Q3 2014 • ~$30,600 gross profit per lot - down >12% vs Q3 2014, due to mix of lots sold Residential Tracts – 220 acres sold • >$2,800 average price per acre Undeveloped Land – 4,616 acres sold, principally from 50% joint-venture • $2,200 average price per acre • ~$3.0 million in segment earnings 10 Note: Includes ventures *Includes $7.6 million gain in Q3 2014 associated with the acquisition of our partner’s 75% interest in the Eleven multifamily venture in Austin for $21.5 million reflecting the fair market value of the project on the date of acquisition. Includes $0.4 million gain in Q3 2015 related to proceeds from Cibolo hotel and occupancy receipts

 
Real Estate Segment KPI’s Q3 2015 Q3 2014 YTD Q3 2015 YTD Q3 2014 Residential Lot Sales Lots Sold 301 323 1,109 1,834 Average Price / Lot* $76,600 $73,700 $75,000 $54,400 Gross Profit / Lot* $30,600 $34,900 $34,200 $22,800 Commercial Tract Sales Acres Sold 3 4 56 7 Average Price / Acre $28,000 $589,200 $217,000 $369,900 Undeveloped Land Sales Acres Sold 4,616 637 6,595 13,174 Average Price / Acre $2,200 $3,200 $2,400 $2,200 Segment Revenues ($ in Millions) $28.0 $32.4 $100.2 $153.1 Segment Earnings ($ in Millions) $5.2 $16.0 $29.7 $66.9 YTD Q3 2014 average sales price was approximately $64,600 per lot and average gross profit was approximately $28,000 per lot, excluding almost 370 bulk lot sales. Q3 2014 and YTD Q3 2014 real estate segment results include a 7.6 million gain associated with the purchase of our partner’s 75% interest in Eleven, an Austin multifamily project. YTD Q3 2014 results also include a $10.5 million gain associated with a non-monetary exchange of leasehold timber rights for 5,400 acres of undeveloped land with a partner in a consolidated venture. Note: Includes ventures 11 **** ** * * *

 
Harvesting Value From Timberland Segment Earnings (Loss) Reconciliation Q3 2014 vs. Q3 2015 ($ in millions) $0.7 ($0.5) ($0.2) ($0.2) $0.1 ($0.1) ($0.5) $0.0 $0.5 $1.0 Q3 2014 Operating Costs Fiber Earnings Gain on Timber Lease Termination Water Earnings Q3 2015 Se gm en t E ar ni ng s (L os s) Q3 2015 Highlights • Sold > 60,000 tons of fiber, 35% lower vs. Q3 2014 due to reduced harvest schedules • Average fiber pricing $12.41 per ton, down 8% vs. Q3 2014 due to lower pulpwood and sawtimber pricing 12Note: Includes ventures Note: Q3 2014 segment results include $0.2 million gain associated with the sale of water rights related to a real estate project in Colorado

 
Other Natural Resources Segment KPI’s Q3 2015 Q3 2014 YTD Q3 2015 YTD Q3 2014 Fiber Sales Pulpwood Tons Sold 45,600 71,500 109,100 157,900 Average Pulpwood Price / Ton $9.89 $11.18 $9.41 $11.00 Sawtimber Tons Sold 14,400 21,500 53,800 100,000 Average Sawtimber Price / Ton $20.41 $21.31 $21.22 $22.38 Total Tons Sold 60,000 93,000 162,900 257,900 Average Price / Ton $12.41 $13.52 $13.31 $15.41 Recreational Leases Average Acres Leased 97,000 107,800 99,900 111,400 Average Lease Rate / Acre $8.93 $8.66 $9.18 $9.17 Segment Revenues ($ in Millions) $1.7 $2.3 $5.4 $7.3 Segment Earnings (Loss) ($ in Millions) * ($0.1) $0.7 ($0.5) $2.2 * Note: Segment results include costs of $0.6 million in Q3 2015, $0.5 million in Q3 2014, $2.2 million in YTD Q3 2015 and $2.6 million in YTD Q3 2014 associated with the development of our water initiatives. ** Q3 2014 and YTD Q3 2014 results include earnings of $0.2 million associated with sale of water rights associated with a real estate project in Colorado and a $0.7 million gain on termination ofatimber lease in connection with the Ironstob venture 13 ** **

 
Continued Declining Oil Price Negatively Impact Oil & Gas Results $6.0 $1.2 $4.2 ($5.5) ($1.5) ($5.0) ($13.4) ($10) ($5) $0 $5 $10 $15 $20 Q3 2014 Exploratroy Dry Hole Costs Working Interest Volume Operating Expenses Working Interest Cost of Sales Working Interest Pricing Gain on Sale Legacy Minerals Q3 2015 (Exluding Non-Cash Impairments) Se gm en t E ar ni ng s (L os s) $0.4 $3.6 Segment Earnings (Loss) Reconciliation Q3 2014 vs. Q3 2015 ($ in millions) Q3 2015 Highlights • Incurred non-cash impairment charges of ($81.2) million • Principally related to proved properties and unproved leasehold interests in North Dakota, Nebraska and Kansas • Oil production up >18% vs. Q3 2014** • Avg. working interest oil price down nearly 56% vs. Q3 2014** • Segment G&A expenses down 36% in Q3 2015 vs. Q3 2014 • Generated positive cash flow Q3 2015 vs Q3 2014 • Generated approximately $18.4 million in net cash flow in Q3 2015, including approximately $10.6 million from non-core asset sales, compared with ($4) million negative cash flow in Q3 2014 14 * Q3 2015 non-cash charges Include ($81.2) million principally associated with proved property and unproved leasehold interest impairments, primarily associated with non-core oil and gas assets in North Dakota, Nebraska and Kansas. ** Oil volumes and prices include NGL’s Note: Includes ventures Excluding Non-Cash Impairments

 
Oil and Gas Segment KPI’s Q3 2015 ** Q3 2014 YTD Q3 2015 ** YTD Q3 2014 Fee Leasing Activity Net Fee Acres Leased 1,720 744 3,343 3,865 Average Bonus / Acre $291 $205 $298 $320 Total Oil and Gas Interests * Oil Produced (Barrels) 278,900 250,500 810,800 632,800 Average Price / Barrel $40.66 $86.13 $44.61 $90.73 NGL Produced (Barrels) 30,400 11,500 81,300 38,500 Average Price / Barrel $11.52 $41.12 $15.80 $42.56 Natural Gas Produced (MMCF) 551.8 499.7 1,631.2 1,446.1 Average Price / MCF $2.31 $4.24 $2.71 $4.37 Total BOE 401,200 345,400 1,163,900 912,400 Average Price / BOE $32.32 $70.00 $35.97 $71.65 Segment Revenues ($ in Millions) $13.5 $24.1 $42.8 $66.1 Segment Earnings (Loss) ($ in Millions) * ($86.2) $6.0 ($146.0) $16.3 Gross Producing Wells (end of period) 914 961 914 961 15 * Includes our share of venture production: 46.8 MMcf in Q3 2015, 49.1 MMcf in Q3 2014, 129.2 MMcf in YTD Q3 2015 and 152.3 MMcf in YTD Q3 2014. ** Q3 2015 oil and gas segment results include approximately $81 million in non-cash charges principally related to impairment of proved properties and leasehold interests associated with non-core oil and gas assets. YTD Q3 2015 oil and gas segment results include approximately $138 million in non-cash charges principally related to impairment of proved properties, leasehold interests and exploratory dry hole costs associated with non-core oil and gas assets, $3.7 million in restructuring costs associated with termination of Fort Worth office lease, retention bonus awards and employee severance costs and ($1.3) million net loss associated with the sale of approximately 27,662 net mineral acres of oil and gas leasehold interests in Nebraska and North Dakota and the disposition of 29 gross (5 net) producing oil and gas wells in Texas, North Dakota, Nebraska, Oklahoma and Colorado for total sale proceeds of $13.1 million.

 
Reconciliation of Non-GAAP Financial Measures (Unaudited) Forestar’s Segment EBITDA is a non-GAAP financial measure within the meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP financial measures are not in accordance with, or an alternative to, U.S. Generally Accepted Accounting Principles (GAAP). The company believes presenting non-GAAP Segment EBITDA is helpful to analyze financial performance without the impact of items that may obscure trends in the company’s underlying performance. A detailed reconciliation is provided below outlining the differences between these non- GAAP measures and the directly related GAAP measures. Third Quarter Year-to-Date ($ in millions) 2015 2014 2015 2014 Real Estate Segment Earnings in accordance with GAAP $5.2 $16.0 $29.7 $66.9 Depreciation, Depletion & Amortization 2.1 0.7 5.9 2.0 Real Estate Segment EBITDA $7.3 $16.7 $35.6 $68.9 Oil & Gas Segment Earnings (Loss) in accordance with GAAP ($86.2) $6.0 ($146.0) $16.3 Depreciation, Depletion & Amortization 9.2 8.3 24.6 20.7 Oil and Gas Segment EBITDA ($77.0) $14.3 ($121.4) $37.0 Other Natural Resources Segment Earnings (Loss) in accordance with GAAP ($0.1) $0.7 ($0.5) $2.2 Depreciation, Depletion & Amortization 0.1 0.1 0.4 0.4 Other Natural Resources Segment EBITDA $0.0 $0.8 ($0.1) $2.6 Total Segment Total Segment Earnings (Loss) in accordance with GAAP ($81.1) $22.7 ($116.8) $85.4 Depreciation, Depletion & Amortization 11.4 9.1 30.9 23.1 Total Segment EBITDA ($69.7) $31.8 ($85.9) $108.5 16

 
Reconciliation of Non-GAAP Financial Measures (Unaudited) 17 In our third quarter and first nine months 2015 earnings release and conference call presentation materials furnished to the Securities and Exchange Commission on Form 8-K on November 4, 2015, we used certain non-GAAP financial measures. The non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures. These non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP financial statements and the accompanying reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of our business. We strongly encourage investors to review our consolidated financial statements and publicly filed reports in their entirety. Reconciliation of Non-GAAP Financial Measures (Unaudited) The following table shows a reconciliation of net income before special items and earnings per share excluding special items to net income and earnings per share (the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles, or GAAP). Net income excluding special items and earnings per share excluding special items are useful to evaluate the performance of the company because it excludes non-recurring non-cash impairments and other costs, which management believes are not indicative of the ongoing operating results of the business. A reconciliation of net income and earnings per share excluding special items to net income and earnings per share as computed under GAAP is illustrated below: Third Quarter Year-to-Date ($ in millions except per share data) 2015 2014 2015 2014 Net Income (Loss) – As Reported ($164.2) $5.2 ($206.9) $28.4 Earnings (Loss) Per Share – As Reported ($4.79) $0.12 ($6.04) $0.65 Special Items Proved Property Impairments – oil & gas 42.5 ---- 58.8 ---- Unproved Leasehold Interest Impairments – oil & gas 10.3 ---- 23.8 ---- Exploratory Dry Hole Expense and Other Charges ---- ---- 6.9 ---- Severance-Related Charges 2.2 ---- 2.2 ---- Deferred Tax Asset Valuation Allowance 98.9 ---- 98.9 ---- Total Special Items (after-tax) $153.9 $---- $190.6 $---- Total Special Items Per Share (after-tax) $4.48 $---- $5.57 $---- Net Income (Loss) – Excluding Special Items ($10.3) $5.2 ($16.3) $28.4 Net Income (Loss) Per Share – Excluding Special Items ($0.31) $0.12 ($0.47) $0.65

 
Reconciliation of Non-GAAP Financial Measures (Unaudited) 18 In our third quarter and first nine months 2015 earnings release and conference call presentation materials furnished to the Securities and Exchange Commission on Form 8-K on November 4, 2015, we used certain non-GAAP financial measures. The non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures. These non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP financial statements and the accompanying reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of our business. We strongly encourage investors to review our consolidated financial statements and publicly filed reports in their entirety. Reconciliation of Non-GAAP Financial Measures (Unaudited) The following table shows a reconciliation of total segment earnings before special items to total segment earnings (the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles, or GAAP). Total segment earnings excluding special items are useful to evaluate the performance of the company because it excludes non-recurring non-cash impairments and other costs, which management believes are not indicative of the ongoing operating results of the business. A reconciliation of total segment earnings excluding special items to total segment earnings as computed under GAAP is illustrated below: Third Quarter Year-to-Date ($ in millions except per share data) 2015 2014 2015 2014 Total Segment Earnings (Loss) – As Reported ($81.1) $22.7 ($116.8) $85.4 Special Items (pre-tax) Proved Property Impairments – oil & gas 65.4 ---- 90.4 ---- Unproved Leasehold Interest Impairments – oil & gas 15.8 ---- 36.8 ---- Exploratory Dry Hole Expense and Other Charges ---- ---- 10.6 ---- Total Special Items (pre-tax) $81.2 $---- $137.8 $---- Total Segment Earnings – Excluding Special Items $0.1 $22.7 $21.0 $85.4

 
Reconciliation of Non-GAAP Financial Measures (Unaudited) 19 In our third quarter and first nine months 2015 earnings release and conference call presentation materials furnished to the Securities and Exchange Commission on Form 8-K on November 4, 2015, we used certain non-GAAP financial measures. The non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures. These non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP financial statements and the accompanying reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of our business. We strongly encourage investors to review our consolidated financial statements and publicly filed reports in their entirety. Reconciliation of Non-GAAP Financial Measures (Unaudited) The following table shows a reconciliation of total segment earnings before special items to total segment earnings (the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles, or GAAP). Total segment earnings excluding special items are useful to evaluate the performance of the company because it excludes non-recurring non-cash impairments and other costs, which management believes are not indicative of the ongoing operating results of the business. A reconciliation of total segment earnings excluding special items to total segment earnings as computed under GAAP is illustrated below: ($ in millions) Q3 2015 Oil & Gas Segment Earnings (Loss) – As Reported ($86.2) Special Items (pre-tax) Proved Property Impairments – oil & gas 65.4 Unproved Leasehold Interest Impairments – oil & gas 15.8 Total Special Items (pre-tax) $81.2 Oil & Gas Segment Earnings (Loss) – Excluding Special Items ($5.0)

 
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