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(Mark One)
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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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26-1336998
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(State or Other Jurisdiction of Incorporation or Organization)
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(I.R.S. Employer Identification No.)
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Title of Each Class
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Trading Symbol
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Name of Each Exchange On Which Registered
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Common Stock, par value $1.00 per share
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FOR
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New York Stock Exchange
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o
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Emerging growth company o
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Page
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State
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Market
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State
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Market
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Alabama
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Birmingham
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Louisiana
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Baton Rouge
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Huntsville
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Mobile/Baldwin County
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Minnesota
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Minneapolis/St. Paul
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Montgomery
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Nevada
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Las Vegas
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Arizona
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Phoenix
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Tucson
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New Jersey
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Southern New Jersey
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California
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Bay Area
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North Carolina
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Charlotte
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Los Angeles County
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Greensboro
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Riverside County
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Raleigh/Durham
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Sacramento
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Oregon
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Salem
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Colorado
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Denver
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Fort Collins
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South Carolina
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Charleston
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Greenville
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Florida
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Fort Myers/Naples
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Myrtle Beach
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Jacksonville
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Lakeland
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Tennessee
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Chattanooga
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Melbourne
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Knoxville
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Miami/Fort Lauderdale
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Memphis
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Orlando
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Nashville
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Pensacola/Panama City
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Port St. Lucie
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Texas
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Austin
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Tampa/Sarasota
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Dallas
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Volusia County
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Fort Worth
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West Palm Beach
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Houston
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San Antonio
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Georgia
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Atlanta
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Augusta
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Utah
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Salt Lake City
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Illinois
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Chicago
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Virginia
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Southern Virginia
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Indiana
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Indianapolis
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Washington
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Seattle/Tacoma/Everett
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Vancouver
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•
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Economic conditions;
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•
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Employment levels and job growth;
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•
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Local housing affordability;
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•
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Availability of land and lots in desirable locations on acceptable terms;
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•
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Land entitlement and development processes;
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•
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Availability of qualified subcontractors;
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New and secondary home sales activity; and
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Competition.
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Site selection, which involves:
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Negotiating lot purchase, land acquisition and related contracts;
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Obtaining all necessary land development approvals;
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Selecting land development subcontractors and ensuring their work meets our contracted scopes;
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Planning and managing land development schedules;
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Determining the sales pricing for each lot in a given project;
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Developing and implementing local marketing and sales plans; and
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Coordinating all interactions with customers throughout the lot sale process.
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Allocation of capital;
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Cash management;
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Review and approval of business plans and budgets;
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Review, approval and funding of lot and land acquisitions (Board of Directors must approve acquisitions greater than $20 million in accordance with the Stockholders’ Agreement);
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Environmental assessments of land and lot acquisitions;
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Review of all business and financial analysis for potential land and lot inventory investments;
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Oversight of lot and land inventory levels;
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Monitoring and analysis of profitability, returns and costs; and
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•
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Review of major personnel decisions and incentive compensation plans.
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Accounting, finance and treasury;
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Risk and litigation management;
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Corporate governance;
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Information technology;
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Income tax;
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Internal audit;
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Investor and media relations; and
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Human resources, payroll and employee benefits.
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Managing our supply of lots and land owned and controlled under purchase contracts in each market based on anticipated future demand;
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Monitoring local market and demographic trends that affect housing demand;
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Limiting the size of our land development projects and focusing on short duration projects;
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Acquiring fully-entitled land and developing the land in phases;
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Focusing on developing lots for entry level housing, the segment where housing demand has been the highest;
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Developing the majority of our lots for a known buyer; and
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Geographically diversifying our land portfolio.
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our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other documents as soon as reasonably practicable after we file them with the SEC;
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copies of certain agreements with D.R. Horton including a Stockholder’s Agreement, a Master Supply Agreement, and a Shared Services Agreement;
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beneficial ownership reports filed by officers, directors, and principal security holders under Section 16(a) of the Securities Exchange Act of 1934, as amended (or the “Exchange Act”); and
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corporate governance information that includes our:
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corporate governance guidelines,
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audit committee charter,
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compensation committee charter,
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nominating and governance committee charter,
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standards of business conduct and ethics,
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code of ethics for senior financial officers, and
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information on how to communicate directly with our Board of Directors.
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business combinations involving us;
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sales or dispositions by D.R. Horton of all or any portion of its ownership interest in us;
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performance under the Master Supply Agreement between D.R. Horton and us;
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arrangements with third parties that are exclusionary to D.R. Horton or us; and
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business opportunities that may be attractive to both D.R. Horton and us.
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that a majority of our Board consist of independent directors;
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that we have a nominating and governance committee that is composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities;
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that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities; and
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that an annual performance evaluation of the nominating and governance committee and compensation committee be performed.
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require us to dedicate a substantial portion of our cash flow from operations to payment of our debt and reduce our ability to use our cash flow for other operating or investing purposes;
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limit our flexibility to adjust to changes in our business or economic conditions; and
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limit our ability to obtain future financing for working capital, capital expenditures, acquisitions, debt service requirements or other requirements.
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incur additional indebtedness;
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create liens;
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pay dividends and make other distributions in respect of our equity securities;
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redeem or repurchase our equity securities;
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make certain investments or certain other restricted payments;
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sell certain kinds of assets;
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enter into certain types of transactions with affiliates; and
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effect mergers or consolidations.
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declare all amounts outstanding, together with accrued and unpaid interest, to be immediately due and payable;
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require us to apply all of our available cash to repay such amounts; or
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prevent us from making debt service payments on certain of our debt instruments.
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an inability to accurately evaluate local housing market conditions and local economies;
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an inability to obtain land for development or to identify appropriate acquisition opportunities;
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an inability to hire and retain key personnel;
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an inability to successfully integrate operations; and
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lack of familiarity with local governmental and permitting procedures.
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fluctuations in our operating results, including results that vary from expectations of management, analysts and investors;
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announcements of strategic developments, acquisitions, financings and other material events by us or our competitors;
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the sale of a substantial number of shares of our common stock held by existing security holders in the public market; and
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•
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general conditions in the real estate industry.
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Year Ended December 31,
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Nine Months Ended
September 30, 2018 |
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Year Ended
September 30, 2019 |
||||||||||||||||||
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2014
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2015
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2016
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2017
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||||||||||||||
Forestar Group Inc.
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$
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100.00
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$
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71.04
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$
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86.36
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$
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142.85
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$
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137.66
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$
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118.70
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Russell 2000 Index
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100.00
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95.59
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115.96
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132.95
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148.26
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135.08
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||||||
Peer Group
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100.00
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91.15
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106.69
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102.06
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83.69
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|
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80.44
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Year Ended
September 30, 2019 |
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Nine Months Ended
September 30, 2018 |
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Year Ended December 31,
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||||||||||||||
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2017
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2016
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2015
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||||||||||||
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(In millions, except per share amounts)
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||||||||||||||||||
Consolidated Operating Data:
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||||||||||
Revenues
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$
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428.3
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$
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78.3
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$
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114.3
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$
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197.3
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$
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218.6
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Cost of sales (1)
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362.7
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49.5
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112.6
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175.1
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125.3
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|||||
Selling, general and administrative expense (2)
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28.9
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19.4
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75.3
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48.5
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70.9
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|||||
Equity in earnings of unconsolidated ventures
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(0.5
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)
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(4.8
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)
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(17.8
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)
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(6.1
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)
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(16.0
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)
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|||||
Gain on sale of assets (3)
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(3.0
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)
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(27.8
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)
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(113.4
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)
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(166.7
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)
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(1.6
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)
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|||||
Interest expense
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—
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3.7
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8.5
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20.0
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34.1
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|||||
Loss on extinguishment of debt (4)
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—
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—
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0.6
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35.9
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—
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|||||
Interest and other income
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(5.5
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)
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(6.4
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)
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(3.6
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)
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(1.7
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)
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(3.0
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)
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|||||
Income from continuing operations before taxes
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45.7
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44.7
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52.1
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|
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92.3
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8.9
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|
|||||
Income tax expense (benefit) (5)
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9.4
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(25.3
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)
|
|
45.8
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|
|
15.3
|
|
|
35.1
|
|
|||||
Net income (loss) from continuing operations
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36.3
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|
|
70.0
|
|
|
6.3
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|
|
77.0
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(26.2
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)
|
|||||
Income (loss) from discontinued operations, net of taxes (6)
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—
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|
|
—
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|
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46.0
|
|
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(16.8
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)
|
|
(186.1
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)
|
|||||
Net income (loss)
|
36.3
|
|
|
70.0
|
|
|
52.3
|
|
|
60.2
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|
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(212.3
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)
|
|||||
Net income attributable to noncontrolling interests
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3.3
|
|
|
1.2
|
|
|
2.0
|
|
|
1.6
|
|
|
0.7
|
|
|||||
Net income (loss) attributable to Forestar Group Inc.
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$
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33.0
|
|
|
$
|
68.8
|
|
|
$
|
50.3
|
|
|
$
|
58.6
|
|
|
$
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(213.0
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)
|
Net Income (Loss) per Basic Share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations
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$
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0.79
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|
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$
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1.64
|
|
|
$
|
0.10
|
|
|
$
|
1.80
|
|
|
$
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(0.79
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)
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Discontinued operations
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$
|
—
|
|
|
$
|
—
|
|
|
$
|
1.09
|
|
|
$
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(0.40
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)
|
|
$
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(5.43
|
)
|
Net income (loss) per basic share
|
$
|
0.79
|
|
|
$
|
1.64
|
|
|
$
|
1.19
|
|
|
$
|
1.40
|
|
|
$
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(6.22
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)
|
Net Income (Loss) per Diluted Share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations
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$
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0.79
|
|
|
$
|
1.64
|
|
|
$
|
0.10
|
|
|
$
|
1.78
|
|
|
$
|
(0.79
|
)
|
Discontinued operations
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1.09
|
|
|
$
|
(0.40
|
)
|
|
$
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(5.43
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)
|
Net income (loss) per diluted share
|
$
|
0.79
|
|
|
$
|
1.64
|
|
|
$
|
1.19
|
|
|
$
|
1.38
|
|
|
$
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(6.22
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
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September 30,
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December 31,
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||||||||||||||||
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2019
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|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
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(In millions)
|
||||||||||||||||||
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
382.8
|
|
|
$
|
318.8
|
|
|
$
|
323.0
|
|
|
$
|
266.1
|
|
|
$
|
96.6
|
|
Restricted cash
|
—
|
|
|
16.2
|
|
|
40.0
|
|
|
0.3
|
|
|
0.2
|
|
|||||
Real estate
|
1,028.9
|
|
|
498.0
|
|
|
130.4
|
|
|
293.0
|
|
|
586.7
|
|
|||||
Total assets
|
1,455.7
|
|
|
893.1
|
|
|
761.9
|
|
|
733.2
|
|
|
972.2
|
|
|||||
Debt
|
460.5
|
|
|
111.7
|
|
|
108.4
|
|
|
110.4
|
|
|
381.5
|
|
|||||
Forestar Group Inc. stockholders' equity
|
808.3
|
|
|
673.3
|
|
|
604.2
|
|
|
560.7
|
|
|
501.6
|
|
(1)
|
Cost of sales in fiscal 2017 includes impairment charges of $37.9 million associated with the mineral resources reporting unit goodwill and $5.8 million primarily related to our central Texas water assets.
|
(2)
|
Selling, general and administrative expense in fiscal 2017 includes merger related transaction costs of $37.2 million.
|
(3)
|
Gains on sales of assets in the nine months ended September 30, 2018 and in fiscal 2017 and 2016 represent gains in accordance with our initiatives to divest non-core assets.
|
(4)
|
Loss on extinguishment of debt in fiscal 2017 and 2016 is related to the early retirement of a total of $230.5 million principal amount of our 8.50% senior notes and $6.1 million principal amount of our convertible senior notes during those years.
|
(5)
|
Income tax benefit in the nine months ended September 30, 2018 reflects the release of our federal valuation allowance and a portion of our state valuation allowance. Fiscal 2017 income tax expense was impacted by non-deductible merger transaction costs and goodwill impairment. Fiscal 2015 income tax expense (reflected in both continuing and discontinued operations), includes an expense of $97.1 million to record a valuation allowance on a portion of our deferred tax asset that was determined to be more likely than not to be unrealizable.
|
(6)
|
Income from discontinued operations in fiscal 2017 reflects an income tax benefit of $46.0 million. Loss from discontinued operations in fiscal 2016 and 2015 includes impairment charges of $0.6 million and $163.0 million, respectively, related to non-core oil and gas working interests and losses of $13.7 million and $0.7 million, respectively, associated with the sale of working interest oil and gas properties.
|
•
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the effect of D.R. Horton’s controlling level of ownership on us and the holders of our securities;
|
•
|
our ability to realize the potential benefits of the strategic relationship with D.R. Horton;
|
•
|
the effect of our strategic relationship with D.R. Horton on our ability to maintain relationships with our vendors and customers;
|
•
|
demand for new housing, which can be affected by a number of factors including the availability of mortgage credit, job growth and fluctuations in interest rates;
|
•
|
competitive actions by other companies;
|
•
|
accuracy of estimates and other assumptions related to investment in and development of real estate, the expected timing and pricing of land and lot sales and related cost of real estate sales;
|
•
|
our ability to comply with our debt covenants, restrictions and limitations;
|
•
|
our ability to hire and retain key personnel;
|
•
|
changes in governmental policies, laws or regulations and actions or restrictions of regulatory agencies;
|
•
|
general economic, market or business conditions where our real estate activities are concentrated;
|
•
|
our ability to achieve our strategic initiatives;
|
•
|
our ability to obtain future entitlement and development approvals;
|
•
|
our ability to obtain or the availability of surety bonds to secure our performance related to construction and development activities and the pricing of bonds;
|
•
|
obtaining reimbursements and other payments from governmental districts and other agencies and timing of such payments;
|
•
|
the levels of resale housing inventory in our projects and the regions in which they are located;
|
•
|
fluctuations in costs and expenses, including impacts from shortages in materials or labor;
|
•
|
the opportunities (or lack thereof) that may be presented to us and that we may pursue;
|
•
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the strength of our information technology systems and the risk of cybersecurity breaches; and
|
•
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the conditions of the capital markets and our ability to raise capital to fund expected growth.
|
|
Year Ended
September 30, 2019 |
||
|
(In millions)
|
||
Revenues
|
$
|
428.3
|
|
Cost of sales
|
362.7
|
|
|
Selling, general and administrative expense
|
28.9
|
|
|
Equity in earnings of unconsolidated ventures
|
(0.5
|
)
|
|
Gain on sale of assets
|
(3.0
|
)
|
|
Interest expense
|
—
|
|
|
Interest and other income
|
(5.5
|
)
|
|
Income from continuing operations before taxes
|
$
|
45.7
|
|
|
Nine Months Ended September 30, 2018
|
||||||||||||||
|
Real Estate
|
|
Other
|
|
Items Not Allocated
|
|
Consolidated
|
||||||||
|
(In millions)
|
||||||||||||||
Revenues
|
$
|
78.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
78.3
|
|
Cost of sales
|
48.9
|
|
|
0.6
|
|
|
—
|
|
|
49.5
|
|
||||
Selling, general and administrative expense
|
7.1
|
|
|
0.3
|
|
|
12.0
|
|
|
19.4
|
|
||||
Equity in earnings of unconsolidated ventures
|
(4.8
|
)
|
|
—
|
|
|
—
|
|
|
(4.8
|
)
|
||||
Gain on sale of assets
|
(18.6
|
)
|
|
(9.2
|
)
|
|
—
|
|
|
(27.8
|
)
|
||||
Interest expense
|
—
|
|
|
—
|
|
|
3.7
|
|
|
3.7
|
|
||||
Interest and other income
|
(1.8
|
)
|
|
—
|
|
|
(4.6
|
)
|
|
(6.4
|
)
|
||||
Income (loss) from continuing operations before taxes
|
$
|
47.5
|
|
|
$
|
8.3
|
|
|
$
|
(11.1
|
)
|
|
$
|
44.7
|
|
Net income attributable to noncontrolling interests
|
1.2
|
|
|
—
|
|
|
—
|
|
|
1.2
|
|
||||
Income (loss) from continuing operations before taxes attributable to Forestar Group Inc.
|
$
|
46.3
|
|
|
$
|
8.3
|
|
|
$
|
(11.1
|
)
|
|
$
|
43.5
|
|
|
Year Ended
September 30, 2019 |
|
Nine Months Ended
September 30, 2018 |
||||
Development projects
|
2,610
|
|
|
935
|
|
||
Lot banking projects
|
1,522
|
|
|
89
|
|
||
|
4,132
|
|
|
1,024
|
|
||
|
|
|
|
||||
Average sales price per lot (a)
|
$
|
84,200
|
|
|
$
|
76,600
|
|
|
Year Ended
September 30, 2019 |
|
Nine Months Ended
September 30, 2018 |
||||
|
(In millions)
|
||||||
Residential lot sales:
|
|
|
|
||||
Development projects
|
$
|
218.8
|
|
|
$
|
75.8
|
|
Lot banking projects
|
128.9
|
|
|
2.6
|
|
||
Change in contract liabilities or deferred revenue
|
4.0
|
|
|
(6.4
|
)
|
||
|
351.7
|
|
|
72.0
|
|
||
Residential tract sales
|
55.8
|
|
|
3.6
|
|
||
Commercial tract sales
|
18.5
|
|
|
2.0
|
|
||
Other
|
2.3
|
|
|
0.7
|
|
||
|
$
|
428.3
|
|
|
$
|
78.3
|
|
|
Nine Months Ended
September 30, 2018 |
||
|
(In millions)
|
||
Revenues
|
$
|
—
|
|
Cost of sales
|
0.6
|
|
|
Selling, general and administrative expense
|
0.3
|
|
|
Gain on sale of assets
|
(9.2
|
)
|
|
Segment earnings
|
$
|
8.3
|
|
|
Payments Due by Period
|
||||||||||||||||||
|
Total
|
|
Less Than
1 Year
|
|
1 - 3 Years
|
|
> 3 - 5 Years
|
|
More Than
5 Years
|
||||||||||
|
(In millions)
|
||||||||||||||||||
Debt — Principal (1)
|
$
|
468.9
|
|
|
$
|
118.9
|
|
|
$
|
—
|
|
|
$
|
350.0
|
|
|
$
|
—
|
|
Debt — Interest (1)
|
142.1
|
|
|
30.1
|
|
|
56.0
|
|
|
56.0
|
|
|
—
|
|
|||||
Operating leases (2)
|
3.4
|
|
|
0.9
|
|
|
2.1
|
|
|
0.4
|
|
|
—
|
|
|||||
Performance bond (3)
|
2.5
|
|
|
2.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Standby letter of credit (3)
|
6.8
|
|
|
6.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
623.7
|
|
|
$
|
159.2
|
|
|
$
|
58.1
|
|
|
$
|
406.4
|
|
|
$
|
—
|
|
(1)
|
Debt represents principal and interest payments due on our senior notes and our revolving credit facility. Because the balance of our revolving credit facility was zero at September 30, 2019, we did not assume any principal or interest payments related to this facility in future periods.
|
(2)
|
Our operating leases are primarily for office space. We lease office space in Arlington, Texas as our corporate headquarters and also lease office space in other locations to support our business operations.
|
(3)
|
The performance bond and standby letter of credit were provided in support of a bond issuance by Cibolo Canyons Special Improvement District (CCSID). In 2014, we received $50.6 million from CCSID principally related to its issuance of $48.9 million Hotel Occupancy Tax (HOT) and Sales and Use Tax Revenue Bonds. These bonds are obligations solely of CCSID and are payable from HOT and sales and use taxes levied by CCSID. To facilitate the issuance of the bonds, we provided a $6.8 million letter of credit to the bond trustee as security for certain debt service fund obligations in the event CCSID tax collections are not sufficient to support payment of the bonds in accordance with their terms. The letter of credit must be maintained until the earlier of redemption of the bonds or scheduled bond maturity in 2034. We also entered into an agreement with the owner of the JW Marriott San Antonio Hill Country Resort & Spa to assign its senior rights to us in exchange for consideration provided by us, including a performance bond to be drawn if CCSID tax collections are not sufficient to support ad valorem tax rebates payable. The performance bond decreases as CCSID makes annual ad valorem tax rebate payments, which obligation is scheduled to be retired in full by 2020. The performance bond and letter of credit are included in accrued expenses and other liabilities in our consolidated balance sheets.
|
•
|
gross margins on lots sold in recent months;
|
•
|
projected gross margins based on budgets;
|
•
|
trends in gross margins, average selling prices or cost of sales; and
|
•
|
lot sales absorption rates;
|
•
|
supply and availability of land and lots;
|
•
|
location and desirability of our land and lots;
|
•
|
amount of land and lots we own or control in a particular market or sub-market; and
|
•
|
local economic and demographic trends.
|
|
September 30,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions, except share data)
|
||||||
ASSETS
|
|
|
|
||||
Cash and cash equivalents
|
$
|
382.8
|
|
|
$
|
318.8
|
|
Restricted cash
|
—
|
|
|
16.2
|
|
||
Total cash, cash equivalents and restricted cash
|
382.8
|
|
|
335.0
|
|
||
Real estate
|
1,028.9
|
|
|
498.0
|
|
||
Investment in unconsolidated ventures
|
7.3
|
|
|
11.7
|
|
||
Income taxes receivable
|
3.2
|
|
|
4.4
|
|
||
Property and equipment, net
|
2.4
|
|
|
1.7
|
|
||
Deferred tax asset, net
|
17.4
|
|
|
26.9
|
|
||
Other assets
|
13.7
|
|
|
15.4
|
|
||
Total assets
|
$
|
1,455.7
|
|
|
$
|
893.1
|
|
LIABILITIES
|
|
|
|
||||
Accounts payable
|
$
|
16.8
|
|
|
$
|
7.9
|
|
Earnest money deposits on sales contracts
|
89.9
|
|
|
49.4
|
|
||
Accrued expenses and other liabilities
|
79.6
|
|
|
49.6
|
|
||
Debt
|
460.5
|
|
|
111.7
|
|
||
Total liabilities
|
646.8
|
|
|
218.6
|
|
||
Commitments and contingencies (Note 14)
|
|
|
|
||||
EQUITY
|
|
|
|
||||
Common stock, par value $1.00 per share, 200,000,000 authorized shares, 47,997,366 and
41,939,403 shares issued and outstanding at September 30, 2019 and 2018, respectively
|
48.0
|
|
|
41.9
|
|
||
Additional paid-in capital
|
602.2
|
|
|
506.3
|
|
||
Retained earnings
|
158.1
|
|
|
125.1
|
|
||
Stockholders' equity
|
808.3
|
|
|
673.3
|
|
||
Noncontrolling interests
|
0.6
|
|
|
1.2
|
|
||
Total equity
|
808.9
|
|
|
674.5
|
|
||
Total liabilities and equity
|
$
|
1,455.7
|
|
|
$
|
893.1
|
|
|
Year Ended
September 30, 2019 |
|
Nine Months Ended
September 30, 2018 |
|
Year Ended
December 31, 2017 |
||||||
|
(In millions, except per share amounts)
|
||||||||||
Revenues
|
$
|
428.3
|
|
|
$
|
78.3
|
|
|
$
|
114.3
|
|
Cost of sales
|
362.7
|
|
|
49.5
|
|
|
112.6
|
|
|||
Selling, general and administrative expense
|
28.9
|
|
|
19.4
|
|
|
75.3
|
|
|||
Equity in earnings of unconsolidated ventures
|
(0.5
|
)
|
|
(4.8
|
)
|
|
(17.8
|
)
|
|||
Gain on sale of assets
|
(3.0
|
)
|
|
(27.8
|
)
|
|
(113.4
|
)
|
|||
Interest expense
|
—
|
|
|
3.7
|
|
|
8.5
|
|
|||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
0.6
|
|
|||
Interest and other income
|
(5.5
|
)
|
|
(6.4
|
)
|
|
(3.6
|
)
|
|||
Income from continuing operations before taxes
|
45.7
|
|
|
44.7
|
|
|
52.1
|
|
|||
Income tax expense (benefit)
|
9.4
|
|
|
(25.3
|
)
|
|
45.8
|
|
|||
Net income from continuing operations
|
36.3
|
|
|
70.0
|
|
|
6.3
|
|
|||
Income from discontinued operations, net of taxes
|
—
|
|
|
—
|
|
|
46.0
|
|
|||
Net income
|
36.3
|
|
|
70.0
|
|
|
52.3
|
|
|||
Net income attributable to noncontrolling interests
|
3.3
|
|
|
1.2
|
|
|
2.0
|
|
|||
Net income attributable to Forestar Group Inc.
|
$
|
33.0
|
|
|
$
|
68.8
|
|
|
$
|
50.3
|
|
Weighted Average Common Shares Outstanding:
|
|
|
|
|
|
||||||
Basic
|
42.0
|
|
|
41.9
|
|
|
42.1
|
|
|||
Diluted
|
42.0
|
|
|
42.0
|
|
|
42.4
|
|
|||
Net Income per Basic Share:
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
0.79
|
|
|
$
|
1.64
|
|
|
$
|
0.10
|
|
Discontinued operations
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1.09
|
|
Net income per basic share
|
$
|
0.79
|
|
|
$
|
1.64
|
|
|
$
|
1.19
|
|
Net Income per Diluted Share:
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
0.79
|
|
|
$
|
1.64
|
|
|
$
|
0.10
|
|
Discontinued operations
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1.09
|
|
Net income per diluted share
|
$
|
0.79
|
|
|
$
|
1.64
|
|
|
$
|
1.19
|
|
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Retained Earnings
|
|
Treasury Stock
|
|
Non-controlling Interests
|
|
Total Equity
|
||||||||||||
|
(In millions, except share amounts)
|
||||||||||||||||||||||
Balances at December 31, 2016 (44,803,603 common shares; 3,187,253 treasury shares)
|
$
|
44.8
|
|
|
$
|
553.0
|
|
|
$
|
12.6
|
|
|
$
|
(49.8
|
)
|
|
$
|
1.5
|
|
|
$
|
562.1
|
|
Net income
|
—
|
|
|
—
|
|
|
50.3
|
|
|
—
|
|
|
2.0
|
|
|
52.3
|
|
||||||
Settlement of equity awards
|
—
|
|
|
(12.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12.8
|
)
|
||||||
Issuances of common stock for vested share-settled units (decrease of 335,261 treasury shares)
|
—
|
|
|
(5.3
|
)
|
|
—
|
|
|
5.3
|
|
|
—
|
|
|
—
|
|
||||||
Issuances from exercises of stock options, net of swaps (decrease of 63,195 treasury shares)
|
—
|
|
|
(0.4
|
)
|
|
—
|
|
|
1.0
|
|
|
—
|
|
|
0.6
|
|
||||||
Shares withheld for taxes (increase of 75,870 treasury shares)
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.0
|
)
|
|
—
|
|
|
(1.0
|
)
|
||||||
Retirement of treasury shares (decrease of 2,864,667 common shares and treasury shares)
|
(2.9
|
)
|
|
(35.0
|
)
|
|
(6.6
|
)
|
|
44.5
|
|
|
—
|
|
|
—
|
|
||||||
Stock-based compensation expense
|
—
|
|
|
6.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6.5
|
|
||||||
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.1
|
)
|
|
(2.1
|
)
|
||||||
Balances at December 31, 2017 (41,938,936 common shares)
|
$
|
41.9
|
|
|
$
|
506.0
|
|
|
$
|
56.3
|
|
|
$
|
—
|
|
|
$
|
1.4
|
|
|
$
|
605.6
|
|
Net income
|
—
|
|
|
—
|
|
|
68.8
|
|
|
—
|
|
|
1.2
|
|
|
70.0
|
|
||||||
Issuances of common stock under employee benefit plans (467 common shares)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Stock-based compensation expense
|
—
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
||||||
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.4
|
)
|
|
(1.4
|
)
|
||||||
Balances at September 30, 2018 (41,939,403 common shares)
|
$
|
41.9
|
|
|
$
|
506.3
|
|
|
$
|
125.1
|
|
|
$
|
—
|
|
|
$
|
1.2
|
|
|
$
|
674.5
|
|
Net income
|
—
|
|
|
—
|
|
|
33.0
|
|
|
—
|
|
|
3.3
|
|
|
36.3
|
|
||||||
Issuance of common stock (6,037,500 common shares)
|
6.0
|
|
|
94.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
100.7
|
|
||||||
Issuances of common stock under employee benefit plans (20,463 common shares)
|
0.1
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Stock-based compensation expense
|
—
|
|
|
1.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
||||||
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.9
|
)
|
|
(3.9
|
)
|
||||||
Balances at September 30, 2019 (47,997,366 common shares)
|
$
|
48.0
|
|
|
$
|
602.2
|
|
|
$
|
158.1
|
|
|
$
|
—
|
|
|
$
|
0.6
|
|
|
$
|
808.9
|
|
|
Year Ended
September 30, 2019 |
|
Nine Months Ended
September 30, 2018 |
|
Year Ended
December 31, 2017 |
||||||
|
(In millions)
|
||||||||||
OPERATING ACTIVITIES
|
|
|
|
|
|
||||||
Consolidated net income
|
$
|
36.3
|
|
|
$
|
70.0
|
|
|
$
|
52.3
|
|
Adjustments:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
6.7
|
|
|
3.9
|
|
|
5.5
|
|
|||
Deferred income taxes
|
9.5
|
|
|
(24.8
|
)
|
|
(1.7
|
)
|
|||
Equity in earnings of unconsolidated ventures
|
(0.5
|
)
|
|
(4.8
|
)
|
|
(17.8
|
)
|
|||
Distributions of earnings of unconsolidated ventures
|
4.9
|
|
|
3.5
|
|
|
23.0
|
|
|||
Stock-based compensation expense
|
1.3
|
|
|
0.3
|
|
|
6.6
|
|
|||
Asset impairments
|
1.3
|
|
|
0.3
|
|
|
47.2
|
|
|||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
0.6
|
|
|||
Gain on sale of assets
|
(3.0
|
)
|
|
(27.8
|
)
|
|
(113.4
|
)
|
|||
Other
|
0.1
|
|
|
0.9
|
|
|
0.8
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
Increase in real estate
|
(531.7
|
)
|
|
(361.1
|
)
|
|
(17.7
|
)
|
|||
Decrease (increase) in other assets
|
0.3
|
|
|
(1.6
|
)
|
|
2.3
|
|
|||
Increase (decrease) in accounts payable and other accrued liabilities
|
41.9
|
|
|
18.4
|
|
|
(7.8
|
)
|
|||
Increase in earnest money deposits on sales contracts
|
40.5
|
|
|
37.5
|
|
|
0.6
|
|
|||
Decrease in income taxes receivable
|
1.2
|
|
|
2.3
|
|
|
4.2
|
|
|||
Net cash used in operating activities
|
(391.2
|
)
|
|
(283.0
|
)
|
|
(15.3
|
)
|
|||
INVESTING ACTIVITIES
|
|
|
|
|
|
||||||
Property, equipment, software and other
|
(0.9
|
)
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|||
Oil and gas properties and equipment
|
—
|
|
|
—
|
|
|
(2.4
|
)
|
|||
Investment in unconsolidated ventures
|
—
|
|
|
—
|
|
|
(4.5
|
)
|
|||
Return of investment in unconsolidated ventures
|
0.1
|
|
|
0.8
|
|
|
11.4
|
|
|||
Proceeds from sale of assets
|
—
|
|
|
258.3
|
|
|
130.1
|
|
|||
Net cash (used in) provided by investing activities
|
(0.8
|
)
|
|
259.0
|
|
|
134.5
|
|
|||
FINANCING ACTIVITIES
|
|
|
|
|
|
||||||
Issuance of common stock
|
100.7
|
|
|
—
|
|
|
—
|
|
|||
Payments of debt
|
(85.0
|
)
|
|
(0.5
|
)
|
|
(10.0
|
)
|
|||
Additions to debt
|
435.0
|
|
|
0.2
|
|
|
3.0
|
|
|||
Deferred financing fees
|
(6.9
|
)
|
|
(2.3
|
)
|
|
(0.3
|
)
|
|||
Distributions to noncontrolling interests, net
|
(3.9
|
)
|
|
(1.4
|
)
|
|
(2.1
|
)
|
|||
Settlement of equity awards
|
(0.1
|
)
|
|
—
|
|
|
(13.1
|
)
|
|||
Net cash provided by (used in) financing activities
|
439.8
|
|
|
(4.0
|
)
|
|
(22.5
|
)
|
|||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
47.8
|
|
|
(28.0
|
)
|
|
96.7
|
|
|||
Cash, cash equivalents and restricted cash at beginning of period
|
335.0
|
|
|
363.0
|
|
|
266.3
|
|
|||
Cash, cash equivalents and restricted cash at end of period
|
$
|
382.8
|
|
|
$
|
335.0
|
|
|
$
|
363.0
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
|
||||||
Interest paid, net of amounts capitalized
|
$
|
—
|
|
|
$
|
0.9
|
|
|
$
|
3.3
|
|
Income taxes paid (refunded), net
|
$
|
(1.7
|
)
|
|
$
|
(3.4
|
)
|
|
$
|
(2.7
|
)
|
|
As of September 30, 2019
|
||||||||||
|
As Reported
|
|
Impact of Adoption
|
|
As Adjusted
|
||||||
|
(In millions)
|
||||||||||
Real estate
|
$
|
1,028.9
|
|
|
$
|
2.1
|
|
|
$
|
1,026.8
|
|
Contract liabilities
|
2.5
|
|
|
2.5
|
|
|
—
|
|
|||
Deferred income
|
9.3
|
|
|
(0.4
|
)
|
|
9.7
|
|
|
Year Ended
September 30, 2019 |
|
Nine Months Ended
September 30, 2018 |
||||
|
(In millions)
|
||||||
Capitalized interest, beginning of period
|
$
|
3.2
|
|
|
$
|
0.5
|
|
Interest incurred
|
25.3
|
|
|
7.3
|
|
||
Interest expensed:
|
|
|
|
||||
Directly to interest expense
|
—
|
|
|
(3.7
|
)
|
||
Charged to cost of sales
|
(4.8
|
)
|
|
(0.9
|
)
|
||
Capitalized interest, end of period
|
$
|
23.7
|
|
|
$
|
3.2
|
|
|
Estimated Useful Lives
|
|
September 30,
|
||||||
|
|
2019
|
|
2018
|
|||||
|
|
|
(In millions)
|
||||||
Buildings and building improvements
|
10 to 40 years
|
|
$
|
0.9
|
|
|
$
|
0.3
|
|
Property and equipment
|
2 to 10 years
|
|
3.4
|
|
|
3.1
|
|
||
Total property and equipment
|
4.3
|
|
|
3.4
|
|
||||
Accumulated depreciation
|
(1.9
|
)
|
|
(1.7
|
)
|
||||
Property and equipment, net
|
$
|
2.4
|
|
|
$
|
1.7
|
|
|
September 30, 2018
|
||||||||||||||
|
Real Estate
|
|
Other
|
|
Items Not Allocated
|
|
Consolidated
|
||||||||
|
(In millions)
|
||||||||||||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
318.8
|
|
|
$
|
318.8
|
|
Restricted cash
|
—
|
|
|
—
|
|
|
16.2
|
|
|
16.2
|
|
||||
Real estate
|
498.0
|
|
|
—
|
|
|
—
|
|
|
498.0
|
|
||||
Investment in unconsolidated ventures
|
11.7
|
|
|
—
|
|
|
—
|
|
|
11.7
|
|
||||
Income taxes receivable
|
—
|
|
|
—
|
|
|
4.4
|
|
|
4.4
|
|
||||
Property and equipment, net
|
—
|
|
|
1.5
|
|
|
0.2
|
|
|
1.7
|
|
||||
Deferred tax asset, net
|
—
|
|
|
—
|
|
|
26.9
|
|
|
26.9
|
|
||||
Other assets
|
12.4
|
|
|
0.4
|
|
|
2.6
|
|
|
15.4
|
|
||||
|
$
|
522.1
|
|
|
$
|
1.9
|
|
|
$
|
369.1
|
|
|
$
|
893.1
|
|
|
Nine Months Ended September 30, 2018
|
||||||||||||||
|
Real Estate
|
|
Other
|
|
Items Not Allocated
|
|
Consolidated
|
||||||||
|
(In millions)
|
||||||||||||||
Revenues
|
$
|
78.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
78.3
|
|
Cost of sales
|
48.9
|
|
|
0.6
|
|
|
—
|
|
|
49.5
|
|
||||
Selling, general and administrative expense
|
7.1
|
|
|
0.3
|
|
|
12.0
|
|
|
19.4
|
|
||||
Equity in earnings of unconsolidated ventures
|
(4.8
|
)
|
|
—
|
|
|
—
|
|
|
(4.8
|
)
|
||||
Gain on sale of assets
|
(18.6
|
)
|
|
(9.2
|
)
|
|
—
|
|
|
(27.8
|
)
|
||||
Interest expense
|
—
|
|
|
—
|
|
|
3.7
|
|
|
3.7
|
|
||||
Interest and other income
|
(1.8
|
)
|
|
—
|
|
|
(4.6
|
)
|
|
(6.4
|
)
|
||||
Income from continuing operations before taxes
|
$
|
47.5
|
|
|
$
|
8.3
|
|
|
$
|
(11.1
|
)
|
|
$
|
44.7
|
|
Net income attributable to noncontrolling interests
|
1.2
|
|
|
—
|
|
|
—
|
|
|
1.2
|
|
||||
Income from continuing operations before taxes attributable to Forestar Group Inc.
|
$
|
46.3
|
|
|
$
|
8.3
|
|
|
$
|
(11.1
|
)
|
|
$
|
43.5
|
|
|
Year Ended December 31, 2017
|
||||||||||||||||||
|
Real Estate
|
|
Mineral Resources
|
|
Other
|
|
Items Not Allocated
|
|
Consolidated
|
||||||||||
|
(In millions)
|
||||||||||||||||||
Revenues
|
$
|
112.7
|
|
|
$
|
1.5
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
114.3
|
|
Cost of sales
|
67.8
|
|
|
38.3
|
|
|
6.5
|
|
|
—
|
|
|
112.6
|
|
|||||
Selling, general and administrative expense
|
15.9
|
|
|
1.4
|
|
|
0.4
|
|
|
57.6
|
|
|
75.3
|
|
|||||
Equity in earnings of unconsolidated ventures
|
(16.4
|
)
|
|
(1.4
|
)
|
|
—
|
|
|
—
|
|
|
(17.8
|
)
|
|||||
Gain on sale of assets
|
(1.9
|
)
|
|
(82.4
|
)
|
|
(0.4
|
)
|
|
(28.7
|
)
|
|
(113.4
|
)
|
|||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
8.5
|
|
|
8.5
|
|
|||||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
0.6
|
|
|
0.6
|
|
|||||
Interest and other income
|
(2.0
|
)
|
|
—
|
|
|
—
|
|
|
(1.6
|
)
|
|
(3.6
|
)
|
|||||
Income (loss) from continuing operations before taxes
|
$
|
49.3
|
|
|
$
|
45.6
|
|
|
$
|
(6.4
|
)
|
|
$
|
(36.4
|
)
|
|
$
|
52.1
|
|
Net income attributable to noncontrolling interests
|
2.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.0
|
|
|||||
Income (loss) from continuing operations before taxes attributable to Forestar Group Inc.
|
$
|
47.3
|
|
|
$
|
45.6
|
|
|
$
|
(6.4
|
)
|
|
$
|
(36.4
|
)
|
|
$
|
50.1
|
|
|
Nine Months Ended
September 30, 2018 |
|
Year Ended
December 31, 2017 |
||||
|
(In millions)
|
||||||
Selling, general and administrative expense
|
$
|
11.5
|
|
|
$
|
50.4
|
|
Stock-based and long-term incentive compensation expense
|
0.5
|
|
|
7.2
|
|
||
Gain on sale of assets
|
—
|
|
|
(28.7
|
)
|
||
Interest expense
|
3.7
|
|
|
8.5
|
|
||
Loss on extinguishment of debt
|
—
|
|
|
0.6
|
|
||
Interest and other income
|
(4.6
|
)
|
|
(1.6
|
)
|
||
|
$
|
11.1
|
|
|
$
|
36.4
|
|
|
September 30,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
Developed and under development projects
|
$
|
1,011.8
|
|
|
$
|
463.1
|
|
Undeveloped land
|
17.1
|
|
|
34.9
|
|
||
|
$
|
1,028.9
|
|
|
$
|
498.0
|
|
|
Year Ended
September 30, 2019 |
|
Nine Months Ended
September 30, 2018 |
|
Year Ended
December 31, 2017 |
||||||
|
(In millions)
|
||||||||||
Residential lot sales
|
$
|
351.7
|
|
|
$
|
72.0
|
|
|
$
|
83.9
|
|
Residential tract sales
|
55.8
|
|
|
3.6
|
|
|
14.6
|
|
|||
Commercial tract sales
|
18.5
|
|
|
2.0
|
|
|
13.0
|
|
|||
Other
|
2.3
|
|
|
0.7
|
|
|
2.8
|
|
|||
|
$
|
428.3
|
|
|
$
|
78.3
|
|
|
$
|
114.3
|
|
|
September 30,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
Assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1.6
|
|
|
$
|
10.2
|
|
Real estate
|
13.6
|
|
|
17.2
|
|
||
Other assets
|
0.1
|
|
|
0.1
|
|
||
Total assets
|
$
|
15.3
|
|
|
$
|
27.5
|
|
Liabilities and Equity:
|
|
|
|
||||
Accounts payable and other liabilities
|
$
|
0.3
|
|
|
$
|
0.6
|
|
Equity
|
15.0
|
|
|
26.9
|
|
||
Total liabilities and equity
|
$
|
15.3
|
|
|
$
|
27.5
|
|
|
|
|
|
||||
Forestar's investment in unconsolidated ventures
|
$
|
7.3
|
|
|
$
|
11.7
|
|
|
Year Ended
September 30, 2019 |
|
Nine Months Ended
September 30, 2018 |
|
Year Ended
December 31, 2017 |
||||||
|
(In millions)
|
||||||||||
Revenues
|
$
|
1.9
|
|
|
$
|
22.2
|
|
|
$
|
65.7
|
|
Earnings
|
$
|
1.3
|
|
|
$
|
15.1
|
|
|
$
|
39.2
|
|
Forestar's equity in earnings of unconsolidated ventures
|
$
|
0.5
|
|
|
$
|
4.8
|
|
|
$
|
17.8
|
|
|
Year Ended
December 31, 2017 |
||
|
(In millions)
|
||
Revenues
|
$
|
—
|
|
Cost of sales
|
—
|
|
|
Selling, general and administrative expense
|
(0.2
|
)
|
|
Income from discontinued operations before income taxes
|
$
|
0.2
|
|
Loss on sale of assets before income taxes
|
0.2
|
|
|
Income tax benefit
|
46.0
|
|
|
Income from discontinued operations, net of taxes
|
$
|
46.0
|
|
|
Year Ended
December 31, 2017 |
||
|
(In millions)
|
||
Operating activities:
|
|
||
Decrease in accounts payable and other accrued liabilities
|
$
|
(3.0
|
)
|
Loss on sale of assets
|
0.2
|
|
|
|
$
|
(2.8
|
)
|
|
|
||
Investing activities:
|
|
||
Proceeds from sale of assets
|
$
|
0.2
|
|
|
September 30,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
Receivables, net
|
$
|
1.1
|
|
|
$
|
2.7
|
|
Prepaid expenses
|
3.4
|
|
|
3.1
|
|
||
Land purchase contract deposits
|
5.1
|
|
|
4.1
|
|
||
Intangible assets
|
—
|
|
|
0.5
|
|
||
Other assets
|
4.1
|
|
|
5.0
|
|
||
|
$
|
13.7
|
|
|
$
|
15.4
|
|
|
September 30,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
Accrued employee compensation and benefits
|
$
|
5.6
|
|
|
$
|
6.7
|
|
Accrued property taxes
|
2.1
|
|
|
1.7
|
|
||
Accrued interest
|
13.5
|
|
|
0.4
|
|
||
Contract liabilities
|
2.5
|
|
|
—
|
|
||
Deferred income
|
9.3
|
|
|
11.6
|
|
||
Accrued development costs
|
35.4
|
|
|
17.6
|
|
||
Other accrued expenses
|
8.4
|
|
|
9.6
|
|
||
Other liabilities
|
2.8
|
|
|
2.0
|
|
||
|
$
|
79.6
|
|
|
$
|
49.6
|
|
|
September 30,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions)
|
||||||
Unsecured:
|
|
|
|
||||
3.75% convertible senior notes due 2020
|
$
|
116.7
|
|
|
$
|
111.7
|
|
8.0% senior notes due 2024
|
343.8
|
|
|
—
|
|
||
Revolving credit facility
|
—
|
|
|
—
|
|
||
|
$
|
460.5
|
|
|
$
|
111.7
|
|
•
|
Level 1 — Quoted prices in active markets for identical assets or liabilities;
|
•
|
Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
|
•
|
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
|
|
|
Fair Value at September 30, 2019
|
||||||||||||||||
|
Carrying Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Cash and cash equivalents (a)
|
$
|
382.8
|
|
|
$
|
382.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
382.8
|
|
Debt (b)
|
460.5
|
|
|
—
|
|
|
497.3
|
|
|
—
|
|
|
497.3
|
|
|
|
|
Fair Value at September 30, 2018
|
||||||||||||||||
|
Carrying Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Cash and cash equivalents (a)
|
$
|
318.8
|
|
|
$
|
318.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
318.8
|
|
Restricted cash (a)
|
16.2
|
|
|
16.2
|
|
|
—
|
|
|
—
|
|
|
16.2
|
|
|||||
Debt (b)
|
112.4
|
|
|
—
|
|
|
113.2
|
|
|
—
|
|
|
113.2
|
|
(a)
|
The fair values of cash, cash equivalents and restricted cash approximate their carrying values due to their short-term nature and are classified as Level 1 within the fair value hierarchy.
|
(b)
|
At September 30, 2019 and 2018, debt consisted of the Company's senior and convertible senior notes. The fair value of the senior notes is determined based on quoted prices, which is classified as Level 2 within the fair value hierarchy.
|
|
Year Ended
September 30, 2019 |
|
Nine Months Ended
September 30, 2018 |
|
Year Ended
December 31, 2017 |
||||||
|
(In millions, except share data)
|
||||||||||
Numerator:
|
|
|
|
|
|
||||||
Continuing operations
|
|
|
|
|
|
||||||
Net income from continuing operations attributable to Forestar Group Inc.
|
$
|
33.0
|
|
|
$
|
68.8
|
|
|
$
|
4.3
|
|
|
|
|
|
|
|
||||||
Discontinued operations
|
|
|
|
|
|
||||||
Net income from discontinued operations available for diluted earnings per share
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
46.0
|
|
|
|
|
|
|
|
||||||
Denominator:
|
|
|
|
|
|
||||||
Weighted average common shares outstanding — basic
|
41,974,429
|
|
|
41,938,987
|
|
|
42,142,690
|
|
|||
Dilutive effect of stock-based compensation
|
30,712
|
|
|
30,069
|
|
|
238,333
|
|
|||
Total weighted average shares outstanding — diluted
|
42,005,141
|
|
|
41,969,056
|
|
|
42,381,023
|
|
|||
Anti-dilutive awards excluded from diluted weighted average shares
|
—
|
|
|
—
|
|
|
1,093,394
|
|
|
Year Ended
September 30, 2019 |
|
Nine Months Ended
September 30, 2018 |
|
Year Ended
December 31, 2017 |
||||||
|
(In millions)
|
||||||||||
Current tax expense (benefit):
|
|
|
|
|
|
||||||
U.S. Federal
|
$
|
(0.3
|
)
|
|
$
|
(0.5
|
)
|
|
$
|
44.2
|
|
State and other
|
0.3
|
|
|
—
|
|
|
3.4
|
|
|||
|
—
|
|
|
(0.5
|
)
|
|
47.6
|
|
|||
Deferred tax expense (benefit):
|
|
|
|
|
|
||||||
U.S. Federal
|
9.1
|
|
|
(23.5
|
)
|
|
(1.7
|
)
|
|||
State and other
|
0.3
|
|
|
(1.3
|
)
|
|
(0.1
|
)
|
|||
|
9.4
|
|
|
(24.8
|
)
|
|
(1.8
|
)
|
|||
Income tax expense (benefit)
|
$
|
9.4
|
|
|
$
|
(25.3
|
)
|
|
$
|
45.8
|
|
|
Year Ended
September 30, 2019 |
|
Nine Months Ended
September 30, 2018 |
|
Year Ended
December 31, 2017 |
|||
Federal statutory rate (benefit)
|
21
|
%
|
|
21
|
%
|
|
35
|
%
|
State, net of federal benefit
|
1
|
|
|
4
|
|
|
3
|
|
Valuation allowance
|
—
|
|
|
(81
|
)
|
|
(42
|
)
|
Tax rate change due to new tax act
|
—
|
|
|
—
|
|
|
40
|
|
Noncontrolling interests
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
Stock based compensation
|
—
|
|
|
—
|
|
|
11
|
|
Goodwill
|
—
|
|
|
—
|
|
|
25
|
|
Merger costs
|
—
|
|
|
—
|
|
|
18
|
|
Other
|
—
|
|
|
—
|
|
|
(1
|
)
|
Effective tax rate
|
21
|
%
|
|
(57
|
)%
|
|
88
|
%
|
|
September 30, 2019
|
|
September 30, 2018
|
||||
|
(In millions)
|
||||||
Deferred Tax Assets:
|
|
|
|
||||
Real estate
|
$
|
10.2
|
|
|
$
|
11.0
|
|
Employee benefits
|
1.5
|
|
|
1.5
|
|
||
Net operating loss carryforwards
|
15.1
|
|
|
17.7
|
|
||
AMT credits
|
0.6
|
|
|
1.2
|
|
||
Accruals not deductible until paid
|
0.2
|
|
|
0.4
|
|
||
Gross deferred tax assets
|
27.6
|
|
|
31.8
|
|
||
Valuation allowance
|
(3.3
|
)
|
|
(3.4
|
)
|
||
Deferred tax asset net of valuation allowance
|
24.3
|
|
|
28.4
|
|
||
Deferred Tax Liabilities:
|
|
|
|
||||
Deferral of profit on lot sales
|
(6.4
|
)
|
|
—
|
|
||
Convertible debt
|
(0.5
|
)
|
|
(1.5
|
)
|
||
Gross deferred tax liabilities
|
(6.9
|
)
|
|
(1.5
|
)
|
||
Net Deferred Tax Asset
|
$
|
17.4
|
|
|
$
|
26.9
|
|
|
Year Ended
September 30, 2019 |
|
Nine Months Ended
September 30, 2018 |
|
Year Ended
December 31, 2017 |
||||||
|
(In millions)
|
||||||||||
Balance at beginning of year
|
$
|
1.6
|
|
|
$
|
1.1
|
|
|
$
|
2.5
|
|
Increases (decreases) for dispositions and other
|
—
|
|
|
0.5
|
|
|
(1.4
|
)
|
|||
Balance at end of year
|
$
|
1.6
|
|
|
$
|
1.6
|
|
|
$
|
1.1
|
|
|
Year Ended
September 30, 2019 |
|
Nine Months Ended
September 30, 2018 |
||||||||||
|
Number of Restricted Stock Units
|
|
Weighted Average Grant Date Fair Value
|
|
Number of Restricted Stock Units
|
|
Weighted Average Grant Date Fair Value
|
||||||
|
|
|
|
|
|
|
|
||||||
Outstanding at beginning of period
|
86,500
|
|
|
$
|
18.09
|
|
|
85,994
|
|
|
$
|
17.54
|
|
Granted
|
149,400
|
|
|
20.24
|
|
|
12,000
|
|
|
22.35
|
|
||
Vested
|
(23,740
|
)
|
|
18.03
|
|
|
(500
|
)
|
|
18.40
|
|
||
Cancelled
|
(11,200
|
)
|
|
18.39
|
|
|
(10,994
|
)
|
|
18.40
|
|
||
Outstanding at end of period
|
200,960
|
|
|
$
|
19.68
|
|
|
86,500
|
|
|
$
|
18.09
|
|
|
September 30,
|
||||||
|
2019
|
|
2018
|
||||
|
(Dollars in millions)
|
||||||
Residential lots under contract to sell to D.R. Horton
|
12,800
|
|
|
5,500
|
|
||
Residential lots subject to right of first offer with D.R. Horton
|
10,600
|
|
|
8,100
|
|
||
Earnest money deposits from D.R. Horton for lots under contract
|
$
|
88.7
|
|
|
$
|
45.3
|
|
Remaining purchase price of lots under contract with D.R. Horton
|
$
|
953.8
|
|
|
$
|
522.2
|
|
|
Year Ended
September 30, 2019 |
|
Nine Months Ended
September 30, 2018 |
|
Year Ended
December 31, 2017 |
||||||
|
(Dollars in millions)
|
||||||||||
Residential single-family lots sold to D.R. Horton
|
3,728
|
|
|
642
|
|
|
26
|
|
|||
Residential lot sales revenues from sales to D.R. Horton
|
$
|
311.7
|
|
|
$
|
43.6
|
|
|
$
|
1.2
|
|
Residential tract acres sold to D.R. Horton
|
290
|
|
|
79
|
|
|
96
|
|
|||
Residential tract sales revenues from sales to D.R. Horton
|
$
|
10.9
|
|
|
$
|
2.0
|
|
|
$
|
4.0
|
|
|
Three Months
Ended
December 31, 2018
|
|
Three Months
Ended
March 31, 2019
|
|
Three Months
Ended
June 30, 2019
|
|
Three Months
Ended
September 30, 2019
|
||||||||
2019
|
|
|
|
|
|
|
|
||||||||
Total revenues
|
$
|
38.5
|
|
|
$
|
65.3
|
|
|
$
|
88.2
|
|
|
$
|
236.3
|
|
Income before income taxes
|
4.9
|
|
|
16.4
|
|
|
8.4
|
|
|
16.0
|
|
||||
Income tax expense
|
1.0
|
|
|
3.6
|
|
|
1.5
|
|
|
3.4
|
|
||||
Net income
|
3.9
|
|
|
12.8
|
|
|
6.9
|
|
|
12.6
|
|
||||
Net income (loss) attributable to noncontrolling interests
|
0.6
|
|
|
2.7
|
|
|
—
|
|
|
(0.1
|
)
|
||||
Net income attributable to Forestar Group Inc.
|
3.3
|
|
|
10.1
|
|
|
6.9
|
|
|
12.7
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net income per share — basic
|
$
|
0.08
|
|
|
$
|
0.24
|
|
|
$
|
0.16
|
|
|
$
|
0.30
|
|
Net income per share — diluted
|
$
|
0.08
|
|
|
$
|
0.24
|
|
|
$
|
0.16
|
|
|
$
|
0.30
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three Months
Ended
March 31, 2018
|
|
Three Months
Ended
June 30, 2018
|
|
Three Months
Ended
September 30, 2018
|
|||||||||
2018
|
|
|
|
|
|
|
|||||||||
Total revenues
|
|
$
|
22.6
|
|
|
$
|
23.6
|
|
|
$
|
32.2
|
|
|||
Income before income taxes
|
|
4.7
|
|
|
10.4
|
|
|
29.6
|
|
||||||
Income tax expense (benefit)
|
|
0.1
|
|
|
0.1
|
|
|
(25.6
|
)
|
||||||
Net income
|
|
4.6
|
|
|
10.3
|
|
|
55.2
|
|
||||||
Net income attributable to noncontrolling interests
|
|
0.1
|
|
|
0.9
|
|
|
0.3
|
|
||||||
Net income attributable to Forestar Group Inc.
|
|
4.5
|
|
|
9.4
|
|
|
54.9
|
|
||||||
|
|
|
|
|
|
|
|||||||||
Net income per share — basic
|
|
$
|
0.11
|
|
|
$
|
0.22
|
|
|
$
|
1.31
|
|
|||
Net income per share — diluted
|
|
$
|
0.11
|
|
|
$
|
0.22
|
|
|
$
|
1.31
|
|
|
For the Nine Months Ended September 30,
|
||||||
|
2018
|
|
2017
|
||||
|
|
|
(Unaudited)
|
||||
Revenues
|
$
|
78.3
|
|
|
$
|
83.5
|
|
Cost of sales
|
49.5
|
|
|
90.1
|
|
||
Selling, general and administrative expense
|
19.4
|
|
|
51.2
|
|
||
Equity in earnings of unconsolidated ventures
|
(4.8
|
)
|
|
(10.9
|
)
|
||
Gain on sale of assets
|
(27.8
|
)
|
|
(113.4
|
)
|
||
Interest expense
|
3.7
|
|
|
6.4
|
|
||
Interest and other income
|
(6.4
|
)
|
|
(2.4
|
)
|
||
Income from continuing operations before taxes
|
44.7
|
|
|
62.5
|
|
||
Income tax (benefit) expense
|
(25.3
|
)
|
|
33.4
|
|
||
Net income from continuing operations
|
70.0
|
|
|
29.1
|
|
||
Income from discontinued operations, net of taxes
|
—
|
|
|
38.8
|
|
||
Net income
|
70.0
|
|
|
67.9
|
|
||
Net income attributable to noncontrolling interests
|
1.2
|
|
|
0.1
|
|
||
Net income attributable to Forestar Group Inc.
|
$
|
68.8
|
|
|
$
|
67.8
|
|
Weighted Average Common Shares Outstanding:
|
|
|
|
||||
Basic
|
41.9
|
|
|
42.2
|
|
||
Diluted
|
42.0
|
|
|
42.5
|
|
||
Net Income per Basic Share:
|
|
|
|
||||
Continuing operations
|
$
|
1.64
|
|
|
$
|
0.69
|
|
Discontinued operations
|
$
|
—
|
|
|
$
|
0.92
|
|
Net income per basic share
|
$
|
1.64
|
|
|
$
|
1.61
|
|
Net Income per Diluted Share:
|
|
|
|
||||
Continuing operations
|
$
|
1.64
|
|
|
$
|
0.68
|
|
Discontinued operations
|
$
|
—
|
|
|
$
|
0.91
|
|
Net income per diluted share
|
$
|
1.64
|
|
|
$
|
1.59
|
|
(a)
|
Documents filed as part of this report.
|
(1)
|
Financial Statements
|
(2)
|
Financial Statement Schedules
|
(3)
|
Exhibits
|
(b)
|
Exhibits
|
Exhibit
Number
|
|
Exhibit
|
2.1
|
|
|
3.1
|
|
|
3.2
|
|
|
3.3
|
|
|
3.4
|
|
|
4.1
|
|
|
4.2
|
|
|
4.3
|
|
|
4.4
|
|
|
4.5
|
|
|
4.6*
|
|
|
10.1†
|
|
|
10.2†
|
|
|
10.3†
|
|
10.4†
|
|
|
10.5†
|
|
|
10.6†*
|
|
|
10.7
|
|
|
10.8
|
|
|
10.9
|
|
|
10.10
|
|
|
10.11†
|
|
|
10.12†
|
|
|
10.13†
|
|
|
10.14†
|
|
|
10.15†
|
|
|
10.16†
|
|
|
10.17
|
|
|
10.18
|
|
|
10.19†
|
|
|
10.20†
|
|
|
10.21
|
|
|
21.1*
|
|
|
23.1*
|
|
|
31.1*
|
|
31.2*
|
|
|
32.1*
|
|
|
32.2*
|
|
|
101.1**
|
|
The following materials from the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements.
|
*
|
Filed or furnished herewith.
|
**
|
Submitted electronically herewith.
|
†
|
Management contract or compensatory plan or arrangement.
|
|
|
|
|
Forestar Group Inc.
|
|
|
|
|
|
Date:
|
November 21, 2019
|
By:
|
/s/ Bill W. Wheat
|
|
|
|
Bill W. Wheat
|
|
|
|
Principal Financial Officer
|
Signature
|
|
Capacity
|
|
Date
|
/s/ Daniel C. Bartok
|
|
Chief Executive Officer
(Principal Executive Officer)
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November 21, 2019
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Daniel C. Bartok
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/s/ Bill W. Wheat
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Principal Financial Officer
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November 21, 2019
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Bill W. Wheat
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/s/ Aron M. Odom
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Principal Accounting Officer
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November 21, 2019
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Aron M. Odom
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/s/ Donald J. Tomnitz
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Executive
Chairman of the Board
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November 21, 2019
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Donald J. Tomnitz
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/s/ Samuel R. Fuller
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Director
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November 21, 2019
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Samuel R. Fuller
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/s/ Lisa H. Jamieson
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Director
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November 21, 2019
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Lisa H. Jamieson
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/s/ G.F. (Rick) Ringler, III
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Director
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November 21, 2019
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G.F. (Rick) Ringler, III
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/s/ Donald C. Spitzer
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Director
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November 21, 2019
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Donald C. Spitzer
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•
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an article in the Charter prohibiting us from taking certain actions without the prior written consent of D.R. Horton for so long as D.R. Horton and its affiliates beneficially own 35% or more of our voting securities;
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provisions in the Charter and the Stockholder’s Agreement providing that, for so long as D.R. Horton and its affiliates beneficially own 20% or more of our voting securities, we will not amend or seek to amend the Charter or the Bylaws in any manner that could limit, restrict or adversely affect the rights of any stockholder under the Stockholder’s Agreement;
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a provision in the Bylaws providing that special meetings of stockholders may only be called by the chairman of the Board or pursuant to a written request by a majority of the entire Board. Only such business as is specified in the notice of any special meeting of the stockholders shall come before such meeting; and
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a provision in the Bylaws containing advance notice procedures for stockholders to make nominations of candidates for election as directors or to bring other business before a meeting of the stockholders. The business to be conducted at an annual meeting is limited to business properly brought before the annual meeting by or at the direction of the Board or a duly authorized committee thereof or by a stockholder of record who has given timely written notice to our Company’s secretary of that stockholder’s intention to bring such business before the meeting.
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before that person became an interested stockholder, our Board approved the transaction in which the interested stockholder became an interested stockholder or approved the business combination;
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upon completion of the transaction that resulted in the interested stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding stock held by persons who are both directors and officers of our corporation or by certain employee stock plans; or
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on or following the date on which that person became an interested stockholder, the business combination is approved by our Board and authorized at a meeting of stockholders by the affirmative vote of the holders of at least 66 2/3% of our outstanding voting stock excluding shares held by the interested stockholder.
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Legal Entity
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Jurisdiction
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% Ownership
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Forestar (USA) Real Estate Group Inc.
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Delaware
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100%
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4S/RPG Land Company LP
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Texas
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100%
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CL Realty, LLC
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Delaware
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50%
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CL Texas I GP, L.L.C.
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Georgia
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100%
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CL/RPG Land Company, LP
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Texas
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100%
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CREA FMF Nashville LLC
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Delaware
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30%
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FirstLand Investment Corporation
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Texas
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100%
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FMF Development LLC
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Delaware
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100%
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Forestar Real Estate Group Inc.
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Delaware
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100%
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Forestar Realty Inc.
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Delaware
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100%
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Forestar Walker Drive, LLC
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Delaware
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100%
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TEMCO Associates, LLC
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Georgia
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50%
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FORCO Real Estate Inc.
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Delaware
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100%
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Forestar/MWC WCF LLC
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Delaware
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90%
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GBF/LIC 288, Ltd.
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Texas
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75%
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Hickory Hill Development, LP
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Texas
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100%
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LM Land Holdings, LP
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Texas
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38%
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Mont 200 LLC
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Texas
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100%
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SWR Holdings LLC
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Delaware
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100%
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Sustainable Water Resources LLC
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Texas
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100%
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Timber Creek Properties LLC
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Delaware
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88%
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/s/ Ernst & Young LLP
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Fort Worth, Texas
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November 21, 2019
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1.
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I have reviewed this Annual Report on Form 10-K of Forestar Group Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Daniel C. Bartok
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Daniel C. Bartok
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Chief Executive Officer
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1.
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I have reviewed this Annual Report on Form 10-K of Forestar Group Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Bill W. Wheat
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Bill W. Wheat
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Principal Financial Officer
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/s/ Daniel C. Bartok
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Daniel C. Bartok
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/s/ Bill W. Wheat
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Bill W. Wheat
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