AUSTIN, Texas--(BUSINESS WIRE)--

Forestar Group Inc. (NYSE: FOR):

2016 Transformation - Highlights

Core Community Development:

• Sold 1,940 developed residential lots for approximately $68,200 per lot with average gross profit of approximately $23,400 per lot
  • Excluding 235 bulk lot sales from non-core projects, average price was $72,200 per lot with average gross profit of approximately $26,500 per lot
  • Over 2,100 lots currently under option contracts with builders at year-end 2016
• Sold 298 commercial acres for approximately $44,600 per acre (principally non-core projects)
• Sold 1,792 residential tract acres for approximately $8,700 per acre (principally non-core projects)

Cost Reductions:

• Actions taken to eliminate nearly $60 million in annualized SG&A, once all non-core assets are sold
  • Reduced SG&A, including discontinued operations, by over 28% compared with 2015 actuals
  • Additional 34% reduction in work force in March 2017 compared to year-end 2016
  • Following the March 2017 reduction will have reduced headcount by over 70% compared with 2014 peak

Divest Non-Core Assets:

• Executed non-core asset sales generating $481.9 million in pre-tax net proceeds:

					Asset		Pre-Tax Net Proceeds
							(In millions)
					Timberland and Undeveloped Land (bulk and retail, ~73,000 acres sold)		$	138.0
					Radisson Hotel & Suites			128.8
					Multifamily properties (five sold)			118.7
					Oil and Gas Working Interests			77.1
					Non-Core Community Development Projects (five sold)			19.3
							$	481.9

Strengthened Balance Sheet:

• Reduced outstanding debt by $277.8 million in 2016 and by $323.3 million since third quarter-end 2015
  • Reduces annual interest expense by approximately $23 million going forward
  • Year-end 2016 debt to capital ratio of 16%
• Consolidated cash of $265.8 million at year-end 2016 and $331.4 million as of February 28, 2017

Subsequent Event - First Quarter 2017

• Sold non-core mineral assets for $85.6 million in first quarter 2017

Forestar Group Inc. (NYSE: FOR) today reported full year 2016 net income of approximately $58.6 million, or $1.38 per share outstanding, compared with full year 2015 net loss of approximately $(213.0) million, or $(6.22) per share outstanding. Full year 2016 earnings from continuing operations were approximately $75.5 million, or $1.78 per share outstanding, compared with full year 2015 net loss from continuing operations of approximately $(26.9) million, or $(0.79) per share outstanding.

Full year 2016 results include pre-tax net gains of approximately $153.1 million related to the sale of non-core assets, including discontinued operations, which was partially offset by non-cash impairment charges of $(56.5) million related to six non-core community development projects and two multifamily sites. Full year 2015 results include pre-tax charges of approximately $(264.1) million related to impairment of proved properties and unproved leasehold interests associated with non-core oil and gas assets, a deferred tax asset valuation allowance, and severance related charges.

Significant progress: Sold Non-Core Assets, Strengthened Balance Sheet, Reduced Costs and Focused on Core Community Development Business

"2016 was a transformative year for Forestar. We made exceptional progress executing our key initiatives to divest non-core assets, reduce outstanding debt, reduce SG&A costs and focus on maximizing shareholder value from our core community development business. Key highlights included selling nearly $482 million in non-core assets, reducing outstanding debt by over $320 million since third quarter 2015, and reducing annual interest expense by approximately $23 million going forward. Forestar is actively selling or preparing to sell its nine remaining non-core assets in 2017, four of which are already under contract to be sold. Sales of these remaining non-core assets will generate additional cash and annual SG&A savings,” said Phil Weber, Chief Executive Officer of Forestar.

"In addition to executing these key initiatives, we have focused on maximizing shareholder value delivered from our core community development business. Builder demand for residential lots in our key communities remains steady. We sold 1,940 residential lots in 2016 and we began 2017 with approximately 2,100 residential lots under option contract with builders," continued Mr. Weber.

Fourth Quarter 2016 Financial Results

Forestar reported fourth quarter 2016 net income of approximately $43.7 million, or $1.03 per share, compared with a fourth quarter 2015 net loss of approximately $(6.2) million, or $(0.14) per share outstanding. Fourth quarter 2016 earnings from continuing operations were approximately $43.2 million, or $1.02 per share outstanding, compared with fourth quarter 2015 earnings from continuing operations of approximately $33.3 million, or $0.79 per share outstanding.

Fourth quarter 2016 results include pre-tax gains of $48.9 million related to the sale of over 58,300 acres of non-core bulk timberland and undeveloped land. Fourth quarter 2015 results include pre-tax non-cash impairment charges and changes in deferred tax asset valuation allowance of approximately ($34.8) million principally related to proved properties and unproved leasehold interest impairments related to discontinued operations.

Fourth Quarter 2016 Significant Highlights (Includes Ventures)

• Sold 835 developed residential lots for approximately $67,600 per lot with average gross profit of approximately $21,500 per lot
  • Excluding 235 bulk lot sales from non-core projects, average price was approximately $78,900 per lot with average gross profit of approximately $29,300 per lot
• Sold 1,539 residential tract acres for approximately $5,700 per acre (principally non-core projects)
• Sold 178 commercial acres for approximately $7,400 per acre (non-core projects)
• Sold 58,300 acres of non-core timberland and undeveloped land in three separate transactions for net proceeds of $103.2 million which generated combined gains of $48.9 million
• Incurred a $3.9 million non-cash impairment charge of goodwill related to our water interests as a result of entering into an agreement to sell these assets

Fourth Quarter and Full Year 2016 Segment Financial Results (Includes Ventures)

Real Estate

($ in millions)		Q4 2016			Q4 2015			FY 2016			FY 2015
Segment Revenues		$	62.5		$	102.6		$	190.3		$	202.8
Segment Earnings		$	12.9		$	37.9		$	121.4		$	67.7

Full year 2016 real estate segment earnings were higher compared with full year 2015 due to gain on sale of assets of $117.9 million in 2016, principally due to a $95.3 million gain associated with the sale of the Radisson Hotel & Suites and $20.8 million in gains associated with the sale of five multifamily assets, compared with $1.6 million in 2015, which was partially offset by non-cash impairment charges of ($56.5) million in 2016. Fourth quarter 2016 real estate segment earnings and revenues were lower compared with fourth quarter 2015 principally due to sale of Midtown Cedar Hill and higher undeveloped retail land sales in 2015.

Mineral Resources

($ in millions)		Q4 2016			Q4 2015			FY 2016			FY 2015
Segment Revenues		$	1.2		$	1.5		$	5.1		$	9.1
Segment Earnings		$	0.7		$	1.0		$	3.3		$	4.2

In fourth quarter and full year 2016, mineral resources segment revenues and earnings decreased principally due to lower realized oil and gas prices and lower production volumes from our royalty interests.

Other

($ in millions)		Q4 2016				Q4 2015				FY 2016				FY 2015
Segment Revenues		$	0.8			$	1.3			$	2.0			$	6.7
Segment Loss			($3.7	)			($0.1	)			($4.6	)			($0.6	)

Fourth quarter and full year 2016 other segment loss increased compared with fourth quarter and full year 2015 principally due to the deferral of timber harvest activity in support of our key initiative to divest our non-core timberland and undeveloped land and a $3.9 million goodwill non-cash impairment charge related to our water interests in groundwater leases in central Texas as result of entering into an agreement to sell these assets.

OUTLOOK

Fundamentals Stable in Forestar's Community Development Markets

“Finished vacant home inventories in Forestar's target markets remain in the equilibrium range, vacant developed lot supply remains low, and housing costs remain affordable relative to other markets. Our communities in major markets are well located in areas of housing demand, and favorable job and population growth," said Phil Weber.

The Company will host a conference call on March 2, 2017 at 10:00 am ET to provide additional information on execution of key initiatives and discuss results of full year and fourth quarter 2016. The meeting may be accessed through webcast or by conference call. The webcast may be accessed through Forestar’s Internet site at www.forestargroup.com. To access the conference call, listeners calling from North America should dial 1-844-634-1445 at least 15 minutes prior to the start of the call. Those wishing to access the call from outside North America should dial 1-615-247-0254. The passcode is Forestar. Replays of the call will be available for two weeks following the completion of the live call and can be accessed at 1-855-859-2056 in North America and at 1-404-537-3406 outside North America. The password for the replay is 51065997.

About Forestar Group

Forestar is a residential and mixed-use real estate development company. At year-end 2016, we own directly or through ventures interests in 50 residential and mixed-use projects comprised of approximately 4,600 acres of real estate located in 10 states and 14 markets. In addition, we own interests in various other assets that have been identified as non-core that the company is divesting opportunistically over time. At year-end 2016, our remaining non-core assets principally include over 523,000 net acres of owned mineral assets principally located in Texas, Louisiana, Georgia and Alabama, 19,000 acres of timberland and undeveloped land (including mitigation banking), four multifamily assets and approximately 20,000 acres of groundwater leases in central Texas. On February 17, 2017, we sold our owned mineral assets for $85.6 million. Forestar operates in three business segments: real estate, mineral resources and other. Forestar’s address on the World Wide Web is www.forestargroup.com.

Forward-Looking Statements

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

FORESTAR GROUP INC.
(UNAUDITED)
Business Segments
		Fourth Quarter								Full Year
			2016				2015				2016				2015
		(In thousands)
Revenues:
Real estate (a)		$	62,497			$	102,634			$	190,273			$	202,830
Mineral resources			1,234				1,478				5,076				9,094
Other			766				1,280				1,965				6,652
Total revenues		$	64,497			$	105,392			$	197,314			$	218,576
Segment earnings (loss):
Real estate		$	12,889			$	37,931			$	121,420			$	67,678
Mineral resources			659				1,015				3,327				4,230
Other			(3,651	)			(97	)			(4,625	)			(608	)
Total segment earnings (loss)			9,897				38,849				120,122				71,300
Items not allocated to segments:
General and administrative expense			(4,282	)			(5,262	)			(18,274	)			(24,802	)
Share-based and long-term incentive compensation expense			(1,445	)			1,252				(4,425	)			(4,474	)
Gain on sale of assets			48,891				—				48,891				—
Interest expense			(2,059	)			(8,215	)			(19,985	)			(34,066	)
Loss on extinguishment of debt, net			—				—				(35,864	)			—
Other corporate non-operating income			67				123				350				256
Income (loss) from continuing operations before taxes			51,069				26,747				90,815				8,214
Income tax (expense) benefit			(7,887	)			6,568				(15,302	)			(35,131	)
Net income (loss) from continuing operations attributable to Forestar Group Inc.			43,182				33,315				75,513				(26,917	)
Net income (loss) from discontinued operations, net of taxes (b)			563				(39,481	)			(16,865	)			(186,130	)
Net income (loss) attributable to Forestar Group Inc.		$	43,745			$	(6,166	)		$	58,648			$	(213,047	)
Net income (loss) per diluted share:
Continuing operations		$	1.02			$	0.79			$	1.78			$	(0.79	)
Discontinued operations		$	0.01			$	(0.93	)		$	(0.40	)		$	(5.43	)
Net income (loss) per diluted share		$	1.03			$	(0.14	)		$	1.38			$	(6.22	)
Weighted average common shares outstanding (in millions):
Basic			35.5				34.3				34.5				34.3
Diluted			42.3				42.4				42.3				34.3

		Year-End
Supplemental Financial Information:			2016			2015
		(In thousands)
Cash and cash equivalents		$	265,798		$	96,442
Senior secured notes			5,200			224,647
Convertible senior notes, net of discount			104,673			104,719
Tangible equity unit notes, net of discount			—			8,666
Other debt (c)			485			43,483
Total debt (d)			110,358			381,515
Net cash (debt)		$	155,440		$	(285,073	)

_____________________

(a)		Fourth quarter and full year 2015 real estate revenues include the sale of Midtown Cedar Hill, a 354-unit multifamily property we developed near Dallas, for $42.9 million.
(b)		Fourth quarter and full year 2015 discontinued operations results include non-cash impairment charges of $37.6 million and $164.8 million related to unproved leasehold interests and proved properties.
(c)		Other debt at year-end 2015 consisted principally of a $23.9 million senior secured note for one multifamily property and $15.4 million secured promissory note associated with our hotel property. 2016 debt excludes approximately $128.3 million of unconsolidated venture debt and approximately $14.9 million of outstanding letters of credit. In 2016, we sold Radisson Hotel & Suites and Eleven for $130.0 million and $60.2 million. The proceeds were used to pay off the related senior secured loans of $39.3 million.
(d)		At year-end 2016 and 2015, $1,633,000 and $8,267,000 of unamortized deferred financing fees are deducted from our outstanding debt.

FORESTAR GROUP INC.
REAL ESTATE SEGMENT
PERFORMANCE METRICS
		Fourth Quarter						Full Year
			2016			2015			2016			2015
REAL ESTATE
Owned, Consolidated & Equity Method Ventures:
Residential Lots Sold			835			363			1,940			1,472
Revenue per Lot Sold		$	67,594		$	83,739		$	68,152		$	77,170
Commercial Acres Sold			178			7			298			63
Revenue per Commercial Acre Sold		$	7,442		$	491,723		$	44,623		$	248,278
Undeveloped Acres Sold			1,016			7,267			14,914			13,862
Revenue per Acre Sold		$	2,395		$	2,192		$	2,455		$	2,296
Owned & Consolidated Ventures:
Residential Lots Sold			687			273			1,662			972
Revenue per Lot Sold		$	65,832		$	85,063		$	66,694		$	76,594
Commercial Acres Sold			178			4			294			31
Revenue per Commercial Acre Sold		$	7,442		$	657,530		$	37,312		$	182,184
Undeveloped Acres Sold			540			7,267			14,438			9,645
Revenue per Acre Sold		$	3,123		$	2,192		$	2,485		$	2,369
Ventures Accounted For Using the Equity Method:
Residential Lots Sold			148			90			278			500
Revenue per Lot Sold		$	75,775		$	79,725		$	76,866		$	78,288
Commercial Acres Sold			—			3			4			32
Revenue per Commercial Acre Sold		$	—		$	283,428		$	527,152		$	309,224
Undeveloped Acres Sold			476			—			476			4,217
Revenue per Acre Sold		$	1,567		$	—		$	1,567		$	2,129

YEAR-END 2016
REAL ESTATE PIPELINE
Real Estate			Entitled Acres		Developed & Under Development Acres		Total Acres
Residential
Owned			2,603		466
Ventures			656		145		3,870
Commercial
Owned			335		165
Ventures			179		88		767
Total Acres			3,773		864		4,637

FORESTAR GROUP INC.
PROJECTS IN ENTITLEMENT
A summary of our real estate projects in the entitlement process (a) at year-end 2016 follows:
Project		County		Market		Project Acres (b)
California
Hidden Creek Estates		Los Angeles		Los Angeles		700
Terrace at Hidden Hills		Los Angeles		Los Angeles		30
Total						730

_____________________

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

UNDEVELOPED LAND
A summary of our non-core timberland and undeveloped land classified as held for sale at year-end 2016 follows:
		Acres
Timberland
Georgia		11,100
Texas (a)		7,900
Total		19,000

_____________________

(a)

Includes 3,700 acres in Houston that was previously in the entitlement process.

FORESTAR GROUP INC.
REAL ESTATE PROJECTS
A summary of activity within our projects in the development process, which includes entitled, developed and under development single-family and mixed-use projects, at year-end 2016 follows:
							Residential Lots/Units				Commercial Acres
Project		County		Interest Owned (a)			Lots/Units Sold Since Inception		Lots/Units Remaining		Acres Sold Since Inception		Acres Remaining
Projects with lots/units in inventory, under development or future planned development, projects with remaining commercial acres only and projects sold out in 2016
Texas
Austin
Arrowhead Ranch		Hays		100	%		6		378		—		19
The Colony		Bastrop		100	%		566		—		27		—
Double Horn Creek		Burnet		100	%		167		—		—		—
Hunter's Crossing		Bastrop		100	%		510		—		54		51
La Conterra		Williamson		100	%		202		—		3		—
Westside at Buttercup Creek		Williamson		100	%		1,497		—		66		—
							2,948		378		150		70
Corpus Christi
Caracol		Calhoun		75	%		65		—		14		—
Padre Island (b)		Nueces		50	%		—		—		—		15
Tortuga Dunes		Nueces		75	%		95		—		4		—
							160		—		18		15
Dallas-Ft. Worth
Bar C Ranch		Tarrant		100	%		467		654		—		—
Keller		Tarrant		100	%		—		—		1		—
Lakes of Prosper		Collin		100	%		187		100		4		—
Lantana		Denton		100	%		3,670		432		44		—
Maxwell Creek		Collin		100	%		1,001		—		10		—
Parkside		Collin		100	%		138		62		—		—
The Preserve at Pecan Creek		Denton		100	%		631		151		—		7
River's Edge		Denton		100	%		—		202		—		—
Stoney Creek		Dallas		100	%		320		376		—		—
Summer Creek Ranch		Tarrant		100	%		983		245		35		44
Timber Creek		Collin		88	%		80		521		—		—
Village Park		Collin		100	%		567		—		3		2
							8,044		2,743		97		53
Houston
Barrington Kingwood		Harris		100	%		176		4		—		—
City Park		Harris		75	%		1,468		—		58		104
Harper's Preserve (b)		Montgomery		50	%		588		1,094		30		49
Imperial Forest		Harris		100	%		84		347		—		—
Long Meadow Farms (b)		Fort Bend		38	%		1,648		149		194		99
Southern Trails (b)		Brazoria		80	%		954		41		1		—
Spring Lakes		Harris		100	%		348		—		25		4
Summer Lakes		Fort Bend		100	%		780		294		56		—
Summer Park		Fort Bend		100	%		125		74		34		67
Willow Creek Farms II		Waller / Fort Bend		90	%		154		111		—		—
							6,325		2,114		398		323
							Residential Lots/Units				Commercial Acres
Project		County		Interest Owned (a)			Lots/Units Sold Since Inception		Lots/Units Remaining		Acres Sold Since Inception		Acres Remaining
San Antonio
Cibolo Canyons		Bexar		100	%		1,142		649		97		58
Oak Creek Estates		Comal		100	%		326		227		13		—
Olympia Hills		Bexar		100	%		747		7		10		—
Stonewall Estates (b)		Bexar		50	%		378		8		—		—
							2,593		891		120		58
Total Texas							20,070		6,126		783		519
Colorado
Denver
Buffalo Highlands		Weld		100	%		—		164		—		—
Cielo		Douglas		100	%		—		343		—		—
Johnstown Farms		Weld		100	%		281		317		2		—
Pinery West		Douglas		100	%		86		—		20		104
Stonebraker		Weld		100	%		—		603		—		—
							367		1,427		22		104
Georgia
Atlanta
Harris Place		Paulding		100	%		22		5		—		—
Montebello (b)		Forsyth		90	%		—		224		—		—
Seven Hills		Paulding		100	%		912		341		26		113
West Oaks		Cobb		100	%		6		50		—		—
							940		620		26		113
North & South Carolina
Charlotte
Ansley Park		Lancaster		100	%		—		307		—		—
Habersham		York		100	%		91		96		—		6
Moss Creek		Cabarrus		100	%		—		84		—		—
Walden		Mecklenburg		100	%		—		384		—		—
							91		871		—		6
Raleigh
Beaver Creek (b)		Wake		90	%		31		162		—		—
							31		162		—		—
							122		1,033		—		6
Tennessee
Nashville
Beckwith Crossing		Wilson		100	%		32		67		—		—
Morgan Farms		Williamson		100	%		132		41		—		—
Scales Farmstead		Williamson		100	%		26		171		—		—
Weatherford Estates		Williamson		100	%		8		9		—		—
							198		288		—		—
Wisconsin
Madison
Juniper Ridge/Hawks Woods (b) (d)		Dane		90	%		18		196		—		—
Meadow Crossing II (b) (c)		Dane		90	%		7		165		—		—
							25		361		—		—
							Residential Lots/Units				Commercial Acres
Project		County		Interest Owned (a)			Lots/Units Sold Since Inception		Lots/Units Remaining		Acres Sold Since Inception		Acres Remaining
Arizona, California, Missouri, Utah
Tucson
Boulder Pass (b) (d)		Pima		50	%		29		59		—		—
Dove Mountain		Pima		100	%		—		98		—		—
Oakland
San Joaquin River		Contra Costa/Sacramento		100	%		—		—		264		25
Kansas City
Somerbrook		Clay		100	%		185		—		—		—
Salt Lake City
Suncrest (b) (c)		Salt Lake		90	%		—		171		—		—
							214		328		264		25
Total							21,936		10,183		1,095		767

____________________

(a)		Interest owned reflects our total interest in the project, whether owned directly or indirectly, which may be different than our economic interest in the project.
(b)		Projects in ventures that we account for using equity method.
(c)		Venture project that develops and sells homes.
(d)		Venture project that develops and sells lots and homes.

A summary of our non-core multifamily properties, excluding one multifamily site in Austin classified as held for sale, at year-end 2016 follows:

Project		Market		Interest Owned (a)			Type		Acres		Description
Elan 99		Houston		90	%		Multifamily		17		360-unit luxury apartment
Acklen		Nashville		30	%		Multifamily		4		320-unit luxury apartment
HiLine		Denver		25	%		Multifamily		18		385-unit luxury apartment

_____________________

(a)

Interest owned reflects our total interest in the project, whether owned directly or indirectly, which may be different than our economic interest in the project.

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