Forestar Group Inc.

Previous wording

Our real estate segment conducts a wide range of project planning and management activities related to the entitlement, acquisition, community development and sale of residential lots. We generally secure entitlements while the land is under contract by creating plans that meet the needs of the markets where we operate, and we aim to have all entitlements secured before closing on the investment. Moving land through the entitlement and development process creates significant value. We primarily invest in entitled short-duration projects that can be developed in phases, enabling us to complete and sell lots at a pace that matches market demand, consistent with our focus on maximizing capital efficiency and returns. We occasionally make short-term strategic investments in finished lots (lot banking) and undeveloped land (land banking) with the intent to sell these assets within a short time period to utilize available capital prior to its deployment into longer-term lot development projects. For the three months ended December 31, 2025, we sold 1,944 lots with an average sales price of $121,000. At December 31, 2025, our lot position consisted of 101,000 residential lots, of which approximately 65,600 were owned and 35,400 were controlled through purchase contracts. Of our 65,600 owned lots, approximately 24,100 lots are under contract to be sold for an aggregate remaining sales price of approximately $2.2 billion.

Current wording

Our real estate segment conducts a wide range of project planning and management activities related to the entitlement, acquisition, community development and sale of residential lots. We generally secure entitlements while the land is under contract by creating plans that meet the needs of the markets where we operate, and we aim to have all entitlements secured before closing on the investment. Moving land through the entitlement and development process creates significant value. We primarily invest in entitled short-duration projects that can be developed in phases, enabling us to complete and sell lots at a pace that matches market demand, consistent with our focus on maximizing capital efficiency and returns. We occasionally make short-term strategic investments in finished lots (lot banking) and undeveloped land (land banking) with the intent to sell these assets within a short time period to utilize available capital prior to its deployment into longer-term lot development projects. For the six months ended March 31, 2026, we sold 4,882 lots with an average sales price of$116,000. At March 31, 2026, our lot position consisted of 94,400 residential lots, of which approximately 63,500 were owned and 30,900 were controlled through purchase contracts. Of our 63,500 owned lots, approximately 24,100 lots are under contract to be sold for an aggregate remaining sales price of approximately $2.2 billion.

Previous wording

We have expanded and diversified our lot development operations across 64 markets in 23 states by investing available capital into our existing markets and by entering new markets. We believe our geographically diverse operations provide a strong platform for us to consolidate market share in the highly fragmented lot development industry. We also believe our geographic diversification lowers our operational risks and enhances our earnings potential by mitigating the effects of local and regional economic cycles.

Current wording

We have expanded and diversified our lot development operations across 64 markets in 24 states by investing available capital into our existing markets and by entering new markets. We believe our geographically diverse operations provide a strong platform for us to consolidate market share in the highly fragmented lot development industry. We also believe our geographic diversification lowers our operational risks and enhances our earnings potential by mitigating the effects of local and regional economic cycles.

Previous wording

During the three months ended December 31, 2025, total residential lots sold decreased by 17% while the average sales price per lot increased 15% resulting in a 5% decrease in total residential lot sales revenue compared to the prior year period. Our consolidated revenues increased 9% to $273.0 million compared to $250.4 million. Our pre-tax income was $20.8 million in the three months ended December 31, 2025 compared to $21.9 million in the prior year period, and our pre-tax operating margin was 7.6% compared to 8.7%. Net income was $15.4 million in the three months ended December 31, 2025 compared to $16.5 million in the prior year period, and our diluted earnings per share was $0.30 compared to $0.32.

Current wording

During the six months ended March 31, 2026, total residential lots sold decreased by 15% while the average sales price per lot increased 12% resulting in a 5% decrease in total residential lot sales revenues compared to the prior year period, and our consolidated revenues increased 8% to $647.3 million compared to $601.3 million which was primarily the result of the increase in tract sales and other revenues compared to the prior year period. Our pre-tax income was $64.8 million in the six months ended March 31, 2026 compared to $62.6 million in the prior year period, and our pre-tax operating margin was 10.0% compared to 10.4%. Net income attributable to Forestar was $47.5 million in the six months ended March 31, 2026 compared to $48.1 million in the prior year period, and our diluted earnings per share was$0.93 compared to$0.94.

Previous wording

During thefirst quarter, new home demand continued to be impacted by ongoing affordability constraints and cautious consumer sentiment. Homebuilders have continued to offer elevated levels of sales incentives, such as mortgage rate buydowns, to address affordability and spur the demand for new homes. Despite current market conditions, our revenues increased 9% from the prior year period. Our ongoing focus is primarily to develop lots for homes at affordable price points. While disruptions in the supply chain for certain construction materials and tightness in the labor market have largely subsided, delays in receiving the necessary approvals from municipalities are still extending development cycle times in certain markets, and development costs remain elevated. We attempt to offset cost increases in one component with savings in another, and we increase our land and lot sales prices when market conditions permit. However, if market conditions are challenging, we may have to reduce selling prices or may not be able to offset cost increases with higher selling prices.

Current wording

During the second quarter, new home demand continued to be impacted by ongoing affordability constraints and cautious consumer sentiment. Homebuilders have continued to offer elevated levels of sales incentives, such as mortgage interest rate buydowns, to address affordability and spur the demand for new homes. Despite current market conditions, second quarter revenues increased 7% from the prior year quarter. Our ongoing focus is primarily to develop lots for homes at affordable price points. While disruptions in the supply chain for certain construction materials and tightness in the labor market have largely subsided, delays in receiving the necessary approvals from municipalities are still extending development cycle times in certain markets, and development costs remain elevated. We attempt to offset cost increases in one component with savings in another, and we increase our land and lot sales prices when market conditions permit. However, if market conditions are challenging, we may have to reduce selling prices or may not be able to offset cost increases with higher selling prices.

Previous wording

The following tables and related discussion set forth key operating and financial data as of and for the three months ended December 31, 2025 and 2024.

Current wording

The following tables and related discussion set forth key operating and financial data as of and for the three and six months ended March 31, 2026 and 2025.

Previous wording

Residential lot sales revenues in the three months ended December 31, 2025 decreased compared to the prior year period primarily due to the decrease in lot sales volume, which was partially offset by the increase in our average selling price per lot. The increase in our average sales price per lot was primarily due to changes in the regional mix of lot sales.

Current wording

Residential lot sales revenues in the three and six months ended March 31, 2026 decreased compared to the prior year periods primarily due to the decrease in lot sales volume, which was partially offset by the increase in our average selling price per lot. The increase in our average sales price per lot was primarily due to changes in the regional mix of lot sales.

Previous wording

Lots sold to customers other than D.R. Horton in the three months ended December 31, 2025 included 146 lots that were sold for $33.4 million to a lot banker who expects to sell those lots to D.R. Horton at a future date.

Current wording

Lots sold to customers other than D.R. Horton in the six months ended March 31, 2026 included 146 lots that were sold for $33.4 million to a lot banker who expects to sell those lots to D.R. Horton at a future date. Lots sold to customers other than D.R. Horton in the three and six months ended March 31, 2025 included 362 lots that were sold for $18.8 million to a lot banker who expects to sell those lots to D.R. Horton at a future date.

Previous wording

Tract sales and other revenues in three months ended December 31, 2025 primarily consisted of 193 tract acres sold to customers other than D.R. Horton for $29.3 million.

Current wording

Tract sales and other revenues in three months ended March 31, 2026 primarily consisted of 332 tract acres sold to customers other than D.R. Horton for $24.1 million and 56 tract acres sold to D.R. Horton for $11.5 million. Tract sales and other revenues in six months ended March 31, 2026 consisted of 525 tract acres sold to customers other than D.R. Horton for $53.4 million and 56 tract acres sold to D.R. Horton for $11.5 million. Tract sales and other revenue from sales to D.R. Horton in both the three and six months ended March 31, 2026 include a multifamily site representing 295 rental units which we developed and sold to D.R. Horton for $9.1 million.

Previous wording

Cost of sales in the three months ended December 31, 2025 increased compared to the prior year periods primarily due to the increase in revenues. Cost of sales related to tract sales and other revenues in the three months ended December 31, 2025 was $26.9 million.

Current wording

Cost of sales in the three and six months ended March 31, 2026 increased compared to the prior year periods primarily due to the increase in revenues. Cost of sales related to tract sales and other revenues in the three and six months ended March 31, 2026 was $30.6 million and $57.5 million.

Previous wording

Each quarter, we review the performance and outlook for all of our real estate for indicators of potential impairment and perform detailed impairment evaluations and analyses when necessary. As a result of this process, no impairment charges were recorded in the three months ended December 31, 2025 and 2024. In the three months ended December 31, 2025, land purchase contract deposit and pre-acquisition cost write-offs related to land purchase contracts that we have terminated or expect to terminate were $0.8 million, compared to $1.1 million in the prior year period.

Current wording

Each quarter, we review the performance and outlook for all of our real estate for indicators of potential impairment and perform detailed impairment evaluations and analyses when necessary. As a result of this process, no impairment charges were recorded in the three and six months ended March 31, 2026 and 2025. In the three and six months ended March 31, 2026, land purchase contract deposit and pre-acquisition cost write-offs related to land purchase contracts that we have terminated or expect to terminate were $6.3 million and $7.1 million, respectively, compared to $0.9 million and $2.0 million in the prior year periods.

Previous wording

We capitalize interest costs throughout the development period (active real estate). Capitalized interest is charged to cost of sales as the related real estate is sold to the buyer. Interest incurred was $12.5 million in the three months ended December 31, 2025 compared to $8.3 million in the prior year period. Interest charged to cost of sales in the three months ended December 31, 2025 was 2.0% of total cost of sales (excluding impairments and land option charges) compared to 1.8% and for the prior year period.

Current wording

We capitalize interest costs throughout the development period (active real estate). Capitalized interest is charged to cost of sales as the related real estate is sold to the buyer. Interest incurred was $12.5 million and $25.0 million in the three and six months ended March 31, 2026 compared to $10.6 million and $18.8 million in the prior year periods. Interest charged to cost of sales in the three and six months ended March 31, 2026 was 2.4% and 2.2% of total cost of sales (excluding impairments and land option charges) compared to 2.4% and 2.1% for the prior year periods.

Previous wording

SG&A expense in the three months ended December 31, 2025 was $36.5 million compared to $36.0 million in the prior year period. SG&A expense as a percentage of revenues was 13.4% in the three months ended December 31, 2025 compared to 14.4% in the prior year period. Our SG&A expense primarily consisted of employee compensation and related costs. Our business operations employed 415 and 427 employees at December 31, 2025 and 2024, respectively. We attempt to control our SG&A costs while ensuring that our infrastructure supports our operations; however, we cannot make assurances that we will be able to maintain or improve upon the current SG&A expense as a percentage of revenues.

Current wording

SG&A expense in the three and six months ended March 31, 2026 was $37.9 million and $74.3 million compared to $38.4 million and $74.3 million in the prior year periods. SG&A expense as a percentage of revenues was 10.1% and 11.5% in the three and six months ended March 31, 2026 compared to 10.9% and 12.4% in the prior year periods. Our SG&A expense primarily consisted of employee compensation and related costs. Our business operations employed 406 and 440 employees at March 31, 2026 and 2025, respectively. We attempt to control our SG&A costs while ensuring that our infrastructure supports our operations; however, we cannot make assurances that we will be able to maintain or improve upon the current SG&A expense as a percentage of revenues.

Previous wording

Income tax expense for both the three months ended December 31, 2025 and 2024 was $5.4 million. Our effective tax rate was 26.0% for the three months ended December 31, 2025 compared to 24.7% in the prior year period. The effective tax rate for both periods included an expense for state income taxes and nondeductible expenses as well as a benefit for nontaxable income.

Current wording

Income tax expense for the three and six months ended March 31, 2026 was $11.7 million and $17.1 million compared to $9.1 million and $14.5 million in the prior year periods. Our effective tax rate was 26.7% and 26.4% for the three and six months ended March 31, 2026 compared to 22.4% and 23.2% in the prior year periods. The effective tax rate for all periods included an expense for state income taxes and nondeductible expenses and a benefit for stock-based compensation and nontaxable income.

Previous wording

At December 31, 2025, we haddeferred tax liabilities, net of deferred tax assets, of $86.8 million. The deferred tax assets were partially offset by a valuation allowance of $0.6 million, resulting in a net deferred tax liability of $87.4 million. At September 30, 2025, deferred tax liabilities, net of deferred tax assets, were $85.6 million. The deferred tax assets were partially offset by a valuation allowance of $0.6 million, resulting in a net deferred tax liability of $86.2 million. The valuation allowance for both periods was recorded because it is more likely than not that a portion of our state deferred tax assets, primarily net operating loss (NOL) carryforwards, will not be realized because we are no longer operating in some states or the NOL carryforward periods are too brief to realize the related deferred tax asset. We will continue to evaluate both the positive and negative evidence in determining the need for a valuation allowance on our deferred tax assets. Any reversal of the valuation allowance in future periods will impact our effective tax rate.

Current wording

At March 31, 2026, we haddeferred tax liabilities, net of deferred tax assets, of $83.7 million. The deferred tax assets were partially offset by a valuation allowance of $0.6 million, resulting in a net deferred tax liability of $84.3 million. At September 30, 2025, deferred tax liabilities, net of deferred tax assets, were $85.6 million. The deferred tax assets were partially offset by a valuation allowance of $0.6 million, resulting in a net deferred tax liability of $86.2 million. The valuation allowance for both periods was recorded because it is more likely than not that a portion of our state deferred tax assets, primarily net operating loss (NOL) carryforwards, will not be realized because we are no longer operating in some states or the NOL carryforward periods are too brief to realize the related deferred tax asset. We will continue to evaluate both the positive and negative evidence in determining the need for a valuation allowance on our deferred tax assets. Any reversal of the valuation allowance in future periods will impact our effective tax rate.

Previous wording

At December 31, 2025, we had $211.7 million of cash and cash equivalents and $607.6 million of available borrowing capacity on our revolving credit facility. We have no senior note maturities until 2028. We believe we are well-positioned to operate effectively during changing economic conditions because of our low net leverage and strong liquidity position, our low overhead model and our strategic relationship with D.R. Horton.

Current wording

At March 31, 2026, we had $362.2 million of cash and cash equivalents and $672.1 million of available borrowing capacity on our revolving credit facility. We have no senior note maturities until 2028. We believe we are well-positioned to operate effectively during changing economic conditions because of our low net leverage and strong liquidity position, our low overhead model and our strategic relationship with D.R. Horton.

Previous wording

At December 31, 2025, our ratio of debt to total capital (debt divided by stockholders’ equity plus debt) was 30.8% compared to 31.2% at September 30, 2025 and 33.3% at December 31, 2024. Our ratio of net debt to total capital (debt net of unrestricted cash divided by stockholders’ equity plus debt net of unrestricted cash) was 24.6% compared to 19.3% at September 30, 2025 and 29.5% at December 31, 2024. Over the long term, we intend to maintain our ratio of net debt to total capital at approximately 40% or less. We believe that the ratio of net debt to total capital is useful in understanding the leverage employed in our operations.

Current wording

At March 31, 2026, our ratio of debt to total capital (debt divided by stockholders’ equity plus debt) was 30.4% compared to 31.2% at September 30, 2025 and 34.7% at March 31, 2025. Our ratio of net debt to total capital (debt net of unrestricted cash divided by stockholders’ equity plus debt net of unrestricted cash) was 19.2% compared to 19.3% at September 30, 2025 and 29.8% at March 31, 2025. Over the long term, we intend to maintain our ratio of net debt to total capital at approximately 40% or less. We believe that the ratio of net debt to total capital is useful in understanding the leverage employed in our operations.

Previous wording

We have a $665 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $1 billion, subject to certain conditions and availability of additional bank commitments. Of the total commitments, $600 million matures on December 18, 2029 and $65 million matures on October 28, 2026. The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the total revolving credit commitments. Borrowings under the revolving credit facility are subject to a borrowing base calculation based on the book value of our real estate assets and unrestricted cash. Letters of credit issued under the facility reduce the available borrowing capacity. At December 31, 2025, there were no borrowings outstanding and $57.4 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $607.6 million.

Current wording

We have a $715 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $1 billion, subject to certain conditions and availability of additional bank commitments. The current capacity of the facility reflects additional bank commitments of $25 million and $50 million obtained in October 2025 and March 2026, respectively. Of the total commitments, $650 million matures on December 18, 2029 and $65 million matures on October 28, 2026. The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the total revolving credit commitments. Borrowings under the revolving credit facility are subject to a borrowing base calculation based on the book value of our real estate assets and unrestricted cash. Letters of credit issued under the facility reduce the available borrowing capacity. At March 31, 2026, there were no borrowings outstanding and $42.9 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $672.1 million.

Previous wording

Our $300 million principal amount of 5.0% senior notes (the "2028 notes") mature March 1, 2028 with interest payable semiannually. Until March 1, 2026, the 2028 notes may be redeemed at 100.833% of their principal amount plus any accrued and unpaid interest, and the 2028 notes can be redeemed at par on or after March 1, 2026 through maturity. The annual effective interest rate of the 2028 notes after giving effect to the amortization of financing costs is 5.2%.

Current wording

Our $300 million principal amount of 5.0% senior notes (the "2028 notes") mature March 1, 2028 with interest payable semiannually. The 2028 notes can be redeemed at par after March 1, 2026 through maturity. The annual effective interest rate of the 2028 notes after giving effect to the amortization of financing costs is 5.2%.

Previous wording

We have an effective shelf registration statement filed with the Securities and Exchange Commission in September 2024, registering $750 million of equity securities, of which $300 million was reserved for sales under our at-the-market equity offering program that we entered into in November 2024. In the three months ended December 31, 2025, we did not issue any shares of common stock under our at-the-market equity offering program. At December 31, 2025, the full $750 million remained available for issuance under the shelf registration statement, with $300 million reserved for sales under our at-the-market equity offering program.

Current wording

We have an effective shelf registration statement filed with the Securities and Exchange Commission in September 2024, registering $750 million of equity securities, of which $300 million was reserved for sales under our at-the-market equity offering program that we entered into in November 2024. In the six months ended March 31, 2026, we did not issue any shares of common stock under our at-the-market equity offering program. At March 31, 2026, the full $750 million remained available for issuance under the shelf registration statement, with $300 million reserved for sales under our at-the-market equity offering program.

Previous wording

In the three months ended December 31, 2025, net cash used in operating activities was $157.0 million, which was primarily the result of the increase in real estate, partially offset by net income generated in the period and the increases in accounts payable and other liabilities and earnest money deposits on sales contracts. In the three months ended December 31, 2024, net cash used in operating activities was $450.0 million, which was primarily the result of the increase in real estate and the decreases in accounts payable and other liabilities and accrued development costs, partially offset by net income generated in the period and the increase in earnest money deposits on sales contracts.

Current wording

In the six months ended March 31, 2026, net cash used in operating activities was $5.1 million, which was primarily the result of the increase in real estate and the decreases in accrued development costs and accounts payable and other accrued liabilities, partially offset by net income generated in the period and the increase in earnest money deposits on sales contracts and the decrease in other assets. In the six months ended March 31, 2025, net cash used in operating activities was $469.8 million, which was primarily the result of the increase in real estate and the decreases in accounts payable and other accrued liabilities and accrued development costs, partially offset by net income generated in the period and the increase in earnest money on sales contracts.

Previous wording

In the three months ended December 31, 2025, net cash used in investing activities was $0.1 million compared to $0.9 million of cash provided by investing activities in the prior year period.

Current wording

In the six months ended March 31, 2026, net cash used in investing activities was $0.3 million compared to $0.2 million of cash provided by investing activities in the prior year period.

Previous wording

In the three months ended December 31, 2025, net cash used in financing activities was $10.4 million which was primarily the result of the repayment of the $9.9 million principal amount of our other note payable. Cash provided by financing activities in the three months ended December 31, 2024 was $99.9 million which was primarily the result of $100 million of borrowings under our senior unsecured revolving credit facility.

Current wording

In the six months ended March 31, 2026, net cash used in financing activities was $11.6 million which was primarily the result of the repayment of the $9.9 million principal amount of our other note payable. Cash provided by financing activities in the six months ended March 31, 2025 was $162.7 million which was primarily the result of proceeds from the issuance of $500 million principal amount of our 2033 notes and $245 million of borrowings under our senior unsecured revolving credit facility, which were partially offset by the repurchase of $329.4 million of our $400 million principal amount of 2026 notes and $245 million in repayments under our senior unsecured revolving credit facility.

Previous wording

•the impacts of weather conditions and natural disasters;

Current wording

•the impacts of weather conditions and natural disasters on our business and financial results;