UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________________________

FORM 10-Q

_________________________________________________________



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2015~~March 31, 2016



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-33662

_________________________________________________________

FORESTAR GROUP INC.

(Exact Name of Registrant as Specified in Its Charter)

_________________________________________________________



Delaware		26-1336998
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

6300 Bee Cave Road, Building Two, Suite 500, Austin, Texas 78746

(Address of Principal Executive Offices, Including Zip Code)

(512) 433-5200

(Registrant’s Telephone Number, Including Area Code)

_________________________________________________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	¨		Accelerated filer	x

Non-accelerated filer	¨	(Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Title of Each Class		Number of Shares Outstanding as of ~~November 2, 2015~~May 6, 2016
Common Stock, par value $1.00 per share		~~33,616,255~~33,908,002

~~Table of Contents~~

FORESTAR GROUP INC.

TABLE OF CONTENTS

~~Table of Contents~~

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

FORESTAR GROUP INC.

Consolidated Balance Sheets

(Unaudited)


	Third Quarter-End			Year-End			First Quarter-End			Year-End
	2015			2014			2016			2015
	(In thousands, except share data)						(In thousands, except share data)
ASSETS
Cash and cash equivalents	$	92,640		$	170,127		$	142,646		$	96,442
Real estate, net	620,813			575,756			471,353			586,715
Oil and gas properties and equipment, net	121,775			263,493			42,380			80,613
Assets held for sale							106,548			—
Investment in unconsolidated ventures	85,325			65,005			79,013			82,453
Timber	8,320			8,315			7,694			7,683
Receivables, net	13,212			24,589			9,677			23,656
Income taxes receivable	3,878			7,503			14,359			12,056
Prepaid expenses	2,714			6,000			3,570			3,213
Property and equipment, net	10,727			11,627			10,195			10,732
Deferred tax asset, net	1,118			40,624
Goodwill and other intangible assets	63,440			66,131			55,861			63,128
Other assets	17,254			19,029			4,756			5,555
TOTAL ASSETS	$	1,041,216		$	1,258,199		$	948,052		$	972,246
LIABILITIES AND EQUITY
Accounts payable	$	13,976		$	20,400		$	8,576		$	11,959
Accrued employee compensation and benefits	8,532			8,323			1,705			5,547
Accrued property taxes	7,839			5,966			2,507			4,788
Accrued interest	7,607			3,451			6,774			3,267
Deferred tax liability, net							1,037			1,037
Earnest money deposits	10,172			10,045			11,009			10,214
Other accrued expenses	21,573			35,729			17,718			23,481
Liabilities held for sale							751			—
Other liabilities	27,817			31,799			24,748			26,323
Debt	435,295			432,744			372,759			381,515
TOTAL LIABILITIES	532,811			548,457			447,584			468,131
COMMITMENTS AND CONTINGENCIES
EQUITY
Forestar Group Inc. shareholders’ equity:
Common stock, par value $1.00 per share, 200,000,000 authorized shares, 36,946,603 issued at third quarter-end 2015 and year-end 2014	36,947			36,947
Common stock, par value $1.00 per share, 200,000,000 authorized shares, 36,946,603 issued at first quarter-end 2016 and year-end 2015							36,947			36,947
Additional paid-in capital	562,591			558,945			559,859			561,850
Retained earnings (Accumulated deficit)	(39,880		)	167,001			(50,422		)	(46,046		)
Treasury stock, at cost, 3,329,060 shares at third quarter-end 2015 and 3,485,278 shares at year-end 2014	(53,085		)	(55,691		)
Treasury stock, at cost, 3,038,601 shares at first quarter-end 2016 and 3,203,768 shares at year-end 2015							(48,340		)	(51,151		)
Total Forestar Group Inc. shareholders’ equity	506,573			707,202			498,044			501,600
Noncontrolling interests	1,832			2,540			2,424			2,515
TOTAL EQUITY	508,405			709,742			500,468			504,115
TOTAL LIABILITIES AND EQUITY	$	1,041,216		$	1,258,199		$	948,052		$	972,246

Please read the notes to consolidated financial statements.

~~Table of Contents~~

FORESTAR GROUP INC.

Consolidated Statements of Income and Comprehensive Income

(Unaudited)


	Third Quarter						First Nine Months						First Quarter
	2015			2014			2015			2014			2016			2015
	(In thousands, except per share amounts)												(In thousands, except per share amounts)
REVENUES
Real estate sales and other	$	18,369		$	23,067		$	68,630		$	122,738		$	26,408		$	21,961
Commercial and income producing properties	9,588			9,378			31,566			30,360			9,690			10,869
Real estate	27,957			32,445			100,196			153,098			36,098			32,830
Oil and gas	13,485			24,145			42,835			66,076			5,352			13,185
Other natural resources	1,726			2,250			5,372			7,284			438			1,790
	43,168			58,840			148,403			226,458			41,888			47,805
COSTS AND EXPENSES
Cost of real estate sales and other	(9,588		)	(10,662		)	(33,840		)	(60,145		)	(13,262		)	(10,362		)
Cost of commercial and income producing properties	(6,780		)	(9,391		)	(22,020		)	(28,117		)	(5,162		)	(7,692		)
Cost of oil and gas producing activities	(95,553		)	(18,470		)	(177,236		)	(48,016		)	(5,194		)	(11,542		)
Cost of other natural resources	(819		)	(711		)	(2,599		)	(2,288		)	(385		)	(920		)
Other operating	(13,963		)	(12,860		)	(45,665		)	(43,187		)	(13,414		)	(18,060		)
General and administrative	(9,467		)	(5,140		)	(22,510		)	(17,141		)	(6,479		)	(8,142		)
	(136,170		)	(57,234		)	(303,870		)	(198,894		)	(43,896		)	(56,718		)
GAIN (LOSS) ON SALE OF ASSETS	(1,749		)	11,110			265			27,977
GAIN ON SALE OF ASSETS													2,604			1,176
OPERATING INCOME (LOSS)	(94,751		)	12,716			(155,202		)	55,541			596			(7,737		)
Equity in earnings of unconsolidated ventures	2,909			2,016			11,538			3,965			47			3,045
Interest expense	(8,315		)	(8,634		)	(25,851		)	(21,507		)	(7,639		)	(8,821		)
Other non-operating income	62			1,896			1,762			6,459			74			917
INCOME (LOSS) BEFORE TAXES	(100,095		)	7,994			(167,753		)	44,458			(6,922		)	(12,596		)
Income tax benefit (expense)	(64,236		)	(2,755		)	(39,133		)	(15,464		)
Income tax benefit													2,626			4,359
CONSOLIDATED NET INCOME (LOSS)	(164,331		)	5,239			(206,886		)	28,994			(4,296		)	(8,237		)
Less: Net (income) loss attributable to noncontrolling interests	115			(12		)	5			(611		)	(80		)	79
NET INCOME (LOSS) ATTRIBUTABLE TO FORESTAR GROUP INC.	$	(164,216	)	$	5,227		$	(206,881	)	$	28,383		$	(4,376	)	$	(8,158	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic	34,299			35,498			34,248			35,437			34,302			34,168
Diluted	34,299			43,868			34,248			43,750			34,302			34,168
NET INCOME (LOSS) PER COMMON SHARE
Basic	$	(4.79	)	$	0.12		$	(6.04	)	$	0.66		$	(0.13	)	$	(0.24	)
Diluted	$	(4.79	)	$	0.12		$	(6.04	)	$	0.65		$	(0.13	)	$	(0.24	)
TOTAL COMPREHENSIVE INCOME (LOSS)	$	(164,216	)	$	5,227		$	(206,881	)	$	28,383		$	(4,376	)	$	(8,158	)

Please read the notes to consolidated financial statements.

~~Table of Contents~~

FORESTAR GROUP INC.

Consolidated Statements of Cash Flows

(Unaudited)


	First Nine Months						First Quarter
	2015			2014			2016			2015
	(In thousands)						(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income (loss)	$	(206,886	)	$	28,994		$	(4,296	)	$	(8,237	)
Adjustments:
Depreciation, depletion and amortization	36,780			29,109			4,785			11,325
Change in deferred income taxes	39,106			10,649			—			(4,359		)
Equity in earnings of unconsolidated ventures	(11,538		)	(3,965		)	(47		)	(3,045		)
Distributions of earnings of unconsolidated ventures	7,343			2,817			1,304			2,845
Share-based compensation	5,531			4,523			1,380			3,342
Real estate cost of sales	33,575			59,251			12,841			9,884
Dry hole and unproved leasehold impairment charges	46,722			11,541			—			86
Real estate development and acquisition expenditures, net	(81,055		)	(82,864		)	(14,794		)	(34,769		)
Reimbursements from utility and improvement districts	8,285			8,554			306			4,130
Other changes in real estate	338			3,148
Changes in deferred income	(191		)	102
Asset impairments	91,146			94
Gain on sale of assets	(265		)	(27,977		)	(2,604		)	(1,176		)
Other	2,243			1,603			1,820			1,730
Changes in:
Notes and accounts receivable	9,395			(6,300		)	13,979			7,016
Prepaid expenses and other	3,106			4,232			(660		)	2,695
Accounts payable and other accrued liabilities	(2,300		)	(3,249		)	(6,702		)	(15,644		)
Income taxes	3,625			(3,876		)	(2,303		)	5,411
Net cash provided by (used for) operating activities	(15,040		)	36,386			5,009			(18,766		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, equipment, software, reforestation and other	(10,882		)	(13,583		)	(3,501		)	(2,809		)
Oil and gas properties and equipment	(47,043		)	(65,661		)	(426		)	(23,718		)
Acquisition of partner's interest in unconsolidated multifamily venture, net of cash	—			(20,155		)
Investment in unconsolidated ventures	(23,908		)	(5,016		)	(3,019		)	(831		)
Proceeds from sales of assets	13,571			19,885			56,828			2,000
Return of investment in unconsolidated ventures	7,783			1,601			1,567			655
Net cash used for investing activities	(60,479		)	(82,929		)
Net cash provided by (used for) investing activities							51,449			(24,703		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of senior secured notes, net	—			241,947
Payments of debt	(7,527		)	(222,468		)	(11,185		)	(2,463		)
Additions to debt	7,105			17,169			1,307			3,119
Deferred financing fees	(153		)	(3,114		)	—			(6		)
Distributions to noncontrolling interests, net	(703		)	(1,070		)	(171		)	(338		)
Purchase of noncontrolling interests	—			(7,971		)
Exercise of stock options	31			1,197			—			14
Payroll taxes on issuance of stock-based awards	(722		)	(1,024		)	(205		)	(723		)
Excess income tax benefit from share-based compensation	1			176			—			1
Net cash provided by (used for) financing activities	(1,968		)	24,842			(10,254		)	(396		)

Net decrease in cash and cash equivalents	(77,487		)	(21,701		)
Net increase (decrease) in cash and cash equivalents							46,204			(43,865		)
Cash and cash equivalents at beginning of period	170,127			192,307			96,442			170,127
Cash and cash equivalents at end of period	$	92,640		$	170,606		$	142,646		$	126,262

Please read the notes to consolidated financial statements.

~~Table of Contents~~

FORESTAR GROUP INC.

Notes to Consolidated Financial Statements

(Unaudited)

Note 1—Basis of Presentation

Our consolidated financial statements include the accounts of Forestar Group Inc., all subsidiaries, ventures and other entities in which we have a controlling interest. We account for our investment in other entities in which we have significant influence over operations and financial policies using the equity method. We eliminate all material intercompany accounts and transactions. Noncontrolling interests in consolidated pass-through entities are recognized before income taxes.

We prepare our unaudited interim financial statements in accordance with U.S. generally accepted accounting principles and Securities and Exchange Commission requirements for interim financial statements. As a result, they do not include all the information and disclosures required for complete financial statements. However, in our opinion, all adjustments considered necessary for a fair presentation have been included. Such adjustments consist only of normal recurring items unless otherwise noted. We make estimates and assumptions about future events. Actual results can, and probably will, differ from those we currently estimate including those principally related to allocating costs to real estate, measuring long-lived assets for impairment, oil and gas revenue accruals, capital expenditure and lease operating expense accruals associated with our oil and gas production activities, oil and gas reserves and depletion of our oil and gas properties. These interim operating results are not necessarily indicative of the results that may be expected for the entire year. For further information, please read the financial statements included in our ~~2014~~2015 Annual Report on Form 10-K.

Note 2—New and Pending Accounting Pronouncements

~~Pending~~Adoption of New Accounting Standards

~~In May 2014, the FASB issued Accounting Standards Update (ASU) 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. Early adoption is not permitted. The updated standard becomes effective for annual and interim periods beginning after December 15, 2016. In July 2015, the FASB decided to defer the effective date of the new standard by one year. This deferral results in the new standard being effective after December 15, 2017. We have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our earnings, financial position and disclosures.

~~In February 2015, the FASB issued ASU 2015-02,~~ ~~Consolidation: Amendments to the Consolidation Analysis (Topic 810)~~, requiring entities to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. The revised consolidation model: (1) modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, (2) eliminates the presumption that a general partner should consolidate a limited partnership, (3) affects the consolidation analysis of reporting entities that are involved with VIEs, and (4) provides a scope exception from consolidation guidance for reporting entities with interests in certain legal entities. The updated standard is effective for financial statements issued for annual and interim periods beginning after December 15, 2015. Early adoption is permitted. The updated standard may be applied retrospectively or using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. We are currently evaluating the effect that the updated standard will have on our earnings, financial position and disclosures.

In April 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, as part of its initiative to reduce complexity in accounting standards. To simplify presentation of debt issuance costs, the amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. In August 2015, the FASB issued ASU 2015-15, Interest-Imputation of Interest (Subtopic 835-30), Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update), which allows an entity to defer and present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The updated standards are effective for financial statements issued for annual and interim periods beginning after December 15, 2015. We adopted ASU 2015-03 in first quarter 2016 and prior period amounts have been reclassified to conform to the current period presentation. As of December 31, 2015, $8,267,000 of debt issuance costs were reclassified in the consolidated balance sheet from other assets to debt. The ~~updated standards are~~adoption did not ~~expected to materially~~ impact our consolidated financial position, results of operations or ~~disclosures.~~cash flows. As permitted under this guidance, we will continue to present debt issuance costs associated with revolving-debt agreements as other assets.

In ~~April~~February 2015, the FASB issued ASU ~~2015-05,~~2015-02, ~~Customer's Accounting~~Consolidation: Amendments to the Consolidation Analysis (Topic 810), requiring entities to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. The revised consolidation model: (1) modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, (2) eliminates the presumption that a general partner should consolidate a limited partnership, (3) affects the consolidation analysis of reporting entities that are involved with VIEs, and (4) provides a scope exception from consolidation guidance for ~~Fees Paid~~reporting entities with interests in ~~a Cloud Computing Arrangement (Subtopic 350-40),~~ ~~in order to provide clarification on whether a cloud computing arrangement includes a software license. If a~~

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software license is included, the customer should account for the license consistent with its accounting of other software licenses. If a software license is not included, the arrangement should be accounted for as a service contract.certain legal entities. The ~~update~~updated standard is effective for ~~reporting~~financial statements issued for annual and interim periods beginning after December 15, 2015. The adoption of this guidance, which was applied retrospectively, had no impact to the consolidated financial statements.

Pending Accounting Standards

In May 2014, the FASB issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. Early adoption is not permitted. The updated standard becomes effective for annual and interim periods beginning after December 15, 2016. In July 2015, the FASB decided to defer the effective date of the new standard by one year, to December 15, 2017. We

have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our earnings, financial position and disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), in order to provide increased transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The updated standard is effective for financial statements issued for annual periods beginning after December 15, 2019 and interim periods within fiscal years beginning after December 31, 2020 with early adoption permitted. We are currently evaluating the effect that the updated standard will have on our earnings, financial position and disclosures.

In ~~June 2015,~~March 2016, the FASB issued ASU ~~2015-10,~~2016-09, ~~Technical Corrections and Updates.~~ Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, as part of its Simplification Initiative. The ~~amendments~~areas for simplification in this ~~update cover a wide range~~Update involve several aspects of ~~topics in~~ the ~~codification and are generally categorized~~accounting for share-based payment transactions, including income tax consequences, classification of awards as ~~follows: Amendments Related to Differences between Original Guidance~~either equity or liabilities, and the ~~Codification; Guidance Clarification and Reference Corrections; Simplification; and, Minor Improvements.~~classification on the statement of cash flows. The ~~amendments are~~updated standard becomes effective for ~~fiscal years~~annual and interim periods ~~within those fiscal years,~~ beginning after December ~~15, 2015. Early adoption is permitted. The adoption of this~~31, 2016. We are currently evaluating the effect that the updated standard ~~is not expected to impact~~will have on our earnings, financial position ~~or results of operations.~~and disclosures.

Note 3—Real Estate

Real estate consists of:


	Third Quarter-End 2015							Year-End 2014							First Quarter-End 2016						Year-End 2015
	Carrying Value		Accumulated Depreciation			Net Carrying Value		Carrying Value		Accumulated Depreciation			Net Carrying Value		Carrying Value		Accumulated Depreciation		Net Carrying Value		Carrying Value		Accumulated Depreciation			Net Carrying Value
	(In thousands)														(In thousands)
Entitled, developed and under development projects	$	359,532	$	—		$	359,532	$	321,273	$	—		$	321,273	$	352,369	$	—	$	352,369	$	352,141	$	—		$	352,141
Undeveloped land (includes land in entitlement)	93,824		—			93,824		93,182		—			93,182		96,875		—		96,875		98,181		—			98,181
Commercial
Radisson Hotel	62,693		(28,396		)	34,297		59,773		(29,062		)	30,711
Harbor Lakes golf course and country club	—		—			—		2,054		(1,508		)	546
Radisson Hotel & Suites ^(a)															—		—		—		62,889		(29,268		)	33,621
Income producing properties
Eleven	53,906		(2,312		)	51,594		53,958		(576		)	53,382
Midtown	34,952		(1,399		)	33,553		33,293		(231		)	33,062
Eleven ^(a)															—		—		—		53,896		(2,861		)	51,035
Dillon ^(a)	18,120		—			18,120		15,203		—			15,203		—		—		—		19,987		—			19,987
Music Row ^(a)	8,483		—			8,483		7,675		—			7,675
Music Row ^(b)															—		—		—		9,947		—			9,947
Downtown Edge	12,335		—			12,335		11,856		—			11,856		12,991		—		12,991		12,706		—			12,706
West Austin	9,075		—			9,075		8,866		—			8,866		9,118		—		9,118		9,097		—			9,097
	$	652,920	$	(32,107	)	$	620,813	$	607,133	$	(31,377	)	$	575,756	$	471,353	$	—	$	471,353	$	618,844	$	(32,129	)	$	586,715

~~_________________________~~___________________


^(a)	~~Construction~~ Classified as assets held for sale at first quarter-end 2016. Please see Note 5—Held for Sale and Note 19—Subsequent Events.


^(b)	Sold in ~~progress at third quarter-end 2015.~~first quarter 2016.

In first quarter 2016, we sold Music Row, a planned 230-unit multifamily property that was under construction in Nashville, for $14,703,000 and recognized a gain of $3,968,000. In addition, in first quarter 2016, we classified $105,987,000 in non-core real estate assets, principally the Radisson Hotel & Suites and Eleven and Dillon multifamily properties, as held for sale as result of our plan to market and sell these assets.

Our estimated costs of assets for which we expect to be reimbursed by utility and improvement districts were ~~$67,925,000~~$69,770,000 at ~~third~~first quarter-end~~2015~~ 2016 and ~~$65,212,000~~$67,554,000 at year-end ~~2014~~,2015, including ~~$21,438,000~~$22,357,000 at ~~third~~first quarter-end ~~2015~~2016 and ~~$31,913,000~~$22,302,000 at year-end ~~2014~~2015 related to our Cibolo Canyons project near San Antonio, Texas. In first ~~nine months 2015,~~quarter 2016, we have collected ~~$7,860,000~~$306,000 in reimbursements that were previously submitted to these districts. At ~~third~~first quarter-end ~~2015,~~2016, our ~~inception to-date~~inception-to-date submitted and approved reimbursements for the Cibolo Canyons project were $54,376,000 of which we have collected $34,703,000. These costs are principally for water, sewer and other infrastructure assets that we have incurred and submitted or will submit to utility or improvement districts for approval and reimbursement. We expect to be reimbursed by utility and improvement districts when these districts achieve adequate tax basis or otherwise have funds available to support payment.

~~Table of Contents~~

Note 4—Oil and Gas Properties and Equipment, net

Net capitalized costs, utilizing the successful efforts method of accounting, related to our oil and gas producing activities follows:

Third
Quarter-End Year-End
2015 2014
(In thousands)
Unproved leasehold interests $ 44,387
$ 90,446
Proved oil and gas properties 133,246
221,299
Total costs 177,633
311,745
Less: accumulated depreciation, depletion and amortization (55,858 ) (48,252 )
$ 121,775
$ 263,493

We review unproved oil and gas properties for impairment based on our current exploration plans and proved oil and gas properties by comparing the expected undiscounted future cash flows at a producing field level to the unamortized capitalized cost of the asset.

In third quarter 2015, we recognized $81,240,000 in non-cash impairment charges of which $65,382,000 is related to our proved oil and gas properties, primarily in North Dakota, Nebraska and Kansas and $15,858,000 is related to our unproved leasehold interests primarily in North Dakota. These non-cash impairment charges are a result of continued decline in oil prices and our current exploration plans. West Texas Intermediate (WTI) oil prices (the principal benchmark price for our oil sales), declined approximately 24 percent during third quarter 2015. Impairment charges are included in cost of oil and gas producing activities on our consolidated statements of income and comprehensive income.

Third quarter 2015 non-cash impairment charges included $1,361,000 of write-down associated with certain producing properties that met the assets held for sale criteria. Carrying value of these assets was adjusted to fair value and $1,534,000 were reclassified from oil and gas properties to assets held for sale which is included in other assets on our consolidated balance sheet. Upon classification as held for sale, long-lived assets are no longer depreciated or depleted, and a measurement for impairment is performed to identify and expense any excess of carrying value over fair value less estimated costs to sell.



	First Quarter-End			Year-End
	2016			2015
	(In thousands)
Unproved leasehold interests	$	11,453		$	19,441
Proved oil and gas properties	75,673			119,414
Total costs	87,126			138,855
Less: accumulated depreciation, depletion and amortization	(44,746		)	(58,242		)
	$	42,380		$	80,613

In first nine months 2015, we recognized non-cash impairment charges of $36,768,000 on our unproved leasehold interests and $90,417,000 on our proved properties principally due to a significant decline in oil prices, drilling results, a change in our plans to develop acreage and increased likelihood that certain non-core oil and gas assets will be sold. Dry hole costs in first nine months 2015 were $9,952,000, which includes a $9,674,000 charge in second quarter 2015 primarily associated with an exploratory well in Oklahoma. In addition, in second quarter 2015 we expensed $917,000 of capitalized costs related to pre-drilling activities associated with non-core oil and gas properties in Oklahoma.

~~In first nine months~~ ~~2015~~,2016, we recorded a net loss of ~~($1,320,000)~~$10,977,000 on the sale of ~~27,662~~190,960 net mineral acres leased from others and ~~the disposition of 29~~185 gross (5(66 net) producing oil and gas wells in Nebraska, ~~Texas, Colorado,~~Kansas, Oklahoma and North Dakota ~~and Oklahoma~~ for total sales proceeds of ~~$13,111,000.~~$32,227,000, which includes $3,269,000 in reimbursement of capital costs incurred on in-progress wells that were assumed by the buyer. A significant portion of the net loss on sale, $7,244,000, is related to write-off of allocated goodwill to sold producing oil and gas properties.

Note 5—Held for Sale

At first quarter-end 2016, Radisson Hotel & Suites in Austin, Eleven, a 257-unit multifamily property in Austin, Dillon, a planned 379-unit multifamily property in Charlotte and certain oil and gas properties were classified as held for sale.

The major classes of assets and liabilities of the properties held for sale at first quarter-end 2016 are as follows:



	First Quarter-End
	2016
Assets Held for Sale:	(In thousands)
Real estate, net of accumulated depreciation of $32,945	$	105,987
Oil and gas properties and equipment, net of accumulated depletion of $1,162	401
Prepaid expenses	150
Goodwill and other intangible assets	10
	$	106,548

Liabilities Held for Sale:
Other accrued expenses	$	74
Other liabilities	677
	$	751

Note 6—Goodwill and Other Intangible Assets

Carrying value of goodwill and other intangible assets follows:


	Third Quarter-End		Year-End		First Quarter-End		Year-End
	2015		2014		2016		2015
	(In thousands)				(In thousands)
Goodwill	$	61,452	$	63,423	$	53,920	$	61,164
Identified intangibles, net	1,988		2,708		1,941		1,964
	$	63,440	$	66,131	$	55,861	$	63,128

Goodwill related to our oil and gas properties is ~~$57,578,000~~$50,046,000 and ~~$59,549,000~~$57,290,000 at ~~third~~first quarter-end ~~2015~~2016 and year-end ~~2014.~~2015. Goodwill associated with our water resources initiatives is $3,874,000 at ~~third~~first quarter-end ~~2015~~2016 and year-end ~~2014.~~2015. The change in goodwill for oil and gas properties is related to goodwill allocated to properties sold or held for sale inat first ~~nine months 2015.~~quarter-end 2016.

~~Table of Contents~~

Identified intangibles include $1,681,000 in indefinite lived groundwater leases associated with our water resources initiatives and $~~307,000~~260,000 related to patents with definite lives associated with the Calliope Gas Recovery System, a process to increase natural gas production.

Note 6—7—Equity

A reconciliation of changes in equity at ~~third~~first quarter-end ~~2015~~2016 follows:


	Forestar Group Inc.			Noncontrolling Interests			Total			Forestar Group Inc.			Noncontrolling Interests			Total
	(In thousands)									(In thousands)
Balance at year-end 2014	$	707,202		$	2,540		$	709,742
Balance at year-end 2015										$	501,600		$	2,515		$	504,115
Net income (loss)	(206,881		)	(5		)	(206,886		)	(4,376		)	80			(4,296		)
Distributions to noncontrolling interests	—			(703		)	(703		)	—			(171		)	(171		)
Other (primarily share-based compensation)	6,252			—			6,252			820			—			820
	$	506,573		$	1,832		$	508,405		$	498,044		$	2,424		$	500,468

Note 7—8—Investment in Unconsolidated Ventures

At ~~third~~first quarter-end ~~2015~~2016, we have ownership interests in 2018 ventures that we account for using the equity method.

In first quarter 2016, we sold our interest in FMF Peakview LLC (360⁰), a 304-unit multifamily joint venture in Denver, and recognized a gain of $9,613,000 which is included in gain on sale of assets.

Combined summarized balance sheet information for our ventures accounted for using the equity method follows:


	Venture Assets				Venture Borrowings^(a)				Venture Equity						Our Investment				Venture Assets				Venture Borrowings^(a)				Venture Equity				Our Investment
	Third Quarter-End		Year-End		Third Quarter-End		Year-End		Third Quarter-End			Year-End			Third Quarter-End		Year-End		First Quarter-End		Year-End		First Quarter-End		Year-End		First Quarter-End		Year-End		First Quarter-End		Year-End
	2015		2014		2015		2014		2015			2014			2015		2014		2016		2015		2016		2015		2016		2015		2016		2015
	(In thousands)																		(In thousands)
242, LLC ^(b)	$	27,647	$	33,021	$	—	$	6,940	$	25,822		$	21,789		$	12,239	$	10,098	$	26,534	$	26,687	$	180	$	—	$	24,577	$	24,877	$	11,617	$	11,766
CL Ashton Woods, LP ^(c)	8,453		13,269		—		—		5,671			11,453			2,620		6,015		4,641		7,654		—		—		3,451		6,084		1,653		3,615
CL Realty, LLC	8,246		7,960		—		—		8,084			7,738			4,042		3,869		7,761		7,872		—		—		7,709		7,662		3,854		3,831
CREA FMF Nashville LLC ^(b)	57,193		40,014		49,960		29,660		4,780			5,987			4,309		5,516		56,348		57,820		36,832		50,845		17,940		4,291		3,649		3,820
Elan 99, LLC	25,572		10,070		5,726		1		15,885			9,643			14,297		8,679		44,363		34,192		23,352		14,587		15,429		15,838		13,886		14,255
FOR/SR Forsyth LLC	6,300		—		—		—		6,300			—			5,670		—		6,950		6,500		—		—		6,950		6,500		6,255		5,850
FMF Littleton LLC	43,828		26,953		15,665		—		24,585			24,435			6,324		6,287		59,433		52,376		26,706		22,347		24,200		24,370		6,228		6,270
FMF Peakview LLC	48,984		43,638		29,426		23,070		16,924			17,464			3,467		3,575		—		48,869		—		30,485		—		16,828		—		3,447
HM Stonewall Estates, Ltd ^(c)	3,054		3,750		—		669		3,054			3,081			1,822		1,752		1,798		2,842		—		—		1,798		2,842		1,034		1,294
LM Land Holdings, LP ^(c)	33,397		25,561		8,015		4,448		23,679			18,500			11,033		9,322		25,479		31,984		4,270		7,728		20,619		22,751		9,808		9,664
MRECV DT Holdings LLC	3,899		—		—		—		3,899			—			3,510		—		4,215		4,215		—		—		4,215		4,215		3,793		3,807
MRECV Edelweiss LLC	2,000		—		—		—		2,000			—			1,800		—		2,404		2,237		—		—		2,404		2,237		2,170		2,029
MRECV Juniper Ridge LLC	1,796		—		—		—		1,796			—			1,616		—		4,022		3,006		—		—		4,021		3,006		3,645		2,730
MRECV Meadow Crossing II LLC																			2,187		728		—		—		2,187		728		1,982		655
Miramonte Boulder Pass, LLC	12,429		—		5,360		—		5,533			—			5,403		—		13,160		12,627		6,320		5,869		5,349		5,474		5,287		5,349
PSW Communities, LP	14,060		16,045		6,880		10,515		6,557			4,415			4,123		3,924
Temco Associates, LLC	5,813		11,756		—		—		5,232			11,556			2,616		5,778		5,295		5,284		—		—		5,181		5,113		2,590		2,557
Other ventures^(d)	6,605		8,453		22,956		26,944		(31,306		)	(25,614		)	434		190		4,167		4,174		2,202		2,242		1,958		1,922		1,562		1,514
	$	309,276	$	240,490	$	143,988	$	102,247	$	128,495		$	110,447		$	85,325	$	65,005	$	268,757	$	309,067	$	99,862	$	134,103	$	147,988	$	154,738	$	79,013	$	82,453

~~Table of Contents~~

Combined summarized income statement information for our ventures accounted for using the equity method follows:


	Venture Revenues								Venture Earnings (Loss)												Our Share of Earnings (Loss)												Venture Revenues				Venture Earnings (Loss)						Our Share of Earnings (Loss)
	Third Quarter				First Nine Months				Third Quarter						First Nine Months						Third Quarter						First Nine Months						First Quarter				First Quarter						First Quarter
	2015		2014		2015		2014		2015			2014			2015			2014			2015			2014			2015			2014			2016		2015		2016			2015			2016			2015
	(In thousands)																																(In thousands)
242, LLC ^(b)	$	2,884	$	88	$	20,583	$	1,563	$	1,161		$	(32	)	$	9,034		$	448		$	597		$	(15	)	$	4,642		$	236		$	—	$	5,331	$	(300	)	$	3,464		$	(150	)	$	1,766
CL Ashton Woods, LP ^(c)	3,958		790		6,369		1,859		1,341			277			2,719			573			1,849			373			3,405			826			696		1,350		367			527			439			678
CL Realty, LLC	205		413		674		1,240		103			294			346			846			52			147			174			423			133		279		47			160			23			80
CREA FMF Nashville LLC ^(b)	442		—		477		—		(991		)	—			(1,207		)	(25		)	(991		)	—			(1,207		)	(25		)	901		6		(571		)	(113		)	(171		)	(113		)
Elan 99, LLC	—		—		—		—		—			—			(2		)	—			—			—			(2		)	—			20		—		(410		)	(2		)	(369		)	(2		)
FMF Littleton LLC	6		—		6		—		(152		)	—			(152		)	—			(38		)	—			(38		)	—			321		—		(170		)	—			(42		)	—
FMF Peakview LLC	628		3		1,280		3		(286		)	(109		)	(1,020		)	(261		)	(58		)	(21		)	(204		)	(52		)	939		186		(248		)	(482		)	(50		)	(96		)
FOR/SR Forsyth LLC	—		—		—		—		—			—			—			—			—			—			—			—			—		—		—			—			—			—
HM Stonewall Estates, Ltd ^(c)	921		292		2,590		1,727		480			91			1,292			613			157			36			730			245			4,063		1,058		220			515			103			230
LM Land Holdings, LP^(c)	1,857		4,604		8,154		13,897		1,391			3,397			5,179			10,368			423			1,200			1,710			3,097			1,000		1,976		640			1,250			144			364
MRECV DT Holdings LLC	—		—		—		—		167			—			167			—			—			—			—			—			98		—		98			—			88			—
MRECV Edelweiss LLC	—		—		—		—		125			—			125			—			65			—			65			—			87		—		87			—			78			—
MRECV Juniper Ridge LLC	—		—		—		—		105			—			105			—			—			—			—			—			3		—		3			—			3			—
MRECV Meadow Crossing II LLC																																	—		—		34			—			(31		)	—
Miramonte Boulder Pass, LLC	—		—		—		—		(92		)	—			(141		)	—			(46		)	—			(71		)	—			—		—		(125		)	—			(62		)	—
PSW Communities, LP	5,145		—		21,214		—		613			(11		)	3,141			(231		)	127			(9		)	1,088			(204		)	—		2,427		—			195			—			173
Temco Associates, LLC	8,019		79		9,163		793		1,618			42			2,077			158			809			21			1,039			79			99		58		67			(1		)	34			—
Other ventures^(d)	71		2,427		3,772		3,546		242			386			(16		)	(454		)	(37		)	284			207			(660		)	—		3,701		26			(203		)	10			(35		)
	$	24,136	$	8,696	$	74,282	$	24,628	$	5,825		$	4,335		$	21,647		$	12,035		$	2,909		$	2,016		$	11,538		$	3,965		$	8,360	$	16,372	$	(235	)	$	5,310		$	47		$	3,045

_____________________


^(a)	Total includes current maturities of ~~$72,637,000~~$8,524,000 at ~~third~~first quarter-end~~2015~~, 2016, of which ~~$40,902,000~~$6,320,000 is non-recourse to us, and ~~$65,795,000~~$39,590,000 at year-end ~~2014~~,2015, of which ~~$42,566,000~~$6,798,000 is non-recourse to us.


^(b)	Includes unamortized deferred gains on real estate contributed by us to ventures. We recognize deferred gains as income as real estate is sold to third parties. Deferred gains of ~~$1,496,000~~$1,496,000 are reflected as a reduction to our investment in unconsolidated ventures at ~~third~~first quarter-end~~2015~~. 2016.


^(c)	Includes unrecognized basis difference of ~~$588,000~~$30,000 which is reflected as a reduction of our investment in unconsolidated ventures at ~~third~~first quarter-end~~2015~~. 2016. The difference will be accreted as income or expense over the life of the investment and included in our share of earnings (loss) from the respective ventures.


^(d)	Our investment in other ventures reflects our ownership interests, excluding venture losses that exceed our investment where we are not obligated to fund those losses. Please read Note ~~16—~~17—Variable Interest Entities for additional information.

In first ~~nine months~~ ~~2015~~,quarter 2016, we invested ~~$23,908,000~~$3,019,000 in these ventures and received ~~$15,126,000~~$2,871,000 in distributions. In first ~~nine months~~ ~~2014~~,quarter 2015, we invested ~~$5,016,000~~$831,000 in these ventures and received ~~$4,418,000~~$3,500,000 in distributions. Distributions include both return of investments and distribution of earnings.

~~Table of Contents~~

Note 8—9—Receivables

Receivables consist of:


	Third Quarter-End			Year-End			First Quarter-End			Year-End
	2015			2014			2016			2015
	(In thousands)						(In thousands)
Funds held by qualified intermediary for potential 1031 like-kind exchange							$	—		$	14,703
Oil and gas revenue accruals	$	5,825		$	7,293		2,374			3,745
Other receivables and accrued interest	4,146			6,505			5,244			2,448
Oil and gas joint interest billing receivables	1,439			5,738			777			867
Other loans secured by real estate, average interest rates of 11.12% at third quarter-end 2015 and 4.41% at year-end 2014	2,045			1,737
Loan secured by real estate	—			3,574
Other loans secured by real estate, average interest rates of 12.52% at first quarter-end 2016 and 11.31% at year-end 2015							1,485			2,130
	13,455			24,847			9,880			23,893
Allowance for bad debts	(243		)	(258		)	(203		)	(237		)
	$	13,212		$	24,589		$	9,677		$	23,656

In second quarter 2011, we acquired a non-performing loan that was secured by a lien on developed and undeveloped real estate located near Houston designated for single-family residential and commercial development.In first quarter ~~2015, the loan was paid in full and~~2016, we received ~~principal payments~~funds previously held by a qualified intermediary because we did not complete an intended like-kind exchange related to a 2015 sale of ~~$4,394,000~~ ~~and interest payments~~6,915 acres of ~~$49,000~~.

~~Estimated accretable yield follows:~~

Third
Quarter-End
2015
(In thousands)
Beginning of period (year-end 2014) $ 839
Change in accretable yield due to change in timing of estimated cash flows 30
Interest income recognized (in first nine months 2015) (869 )
End of period $ —
undeveloped land.

Other loans secured by real estate generally are secured by a deed of trust and due within three years.

Note 9—10—Debt

Debt^(a) consists of:


	Third Quarter-End		Year-End		First Quarter-End		Year-End
	2015		2014		2016		2015
	(In thousands)				(In thousands)
8.50% senior secured notes due 2022	$	250,000	$	250,000	$	216,495	$	224,647
3.75% convertible senior notes due 2020, net of discount	105,672		103,194		105,798		104,719
6.00% tangible equity unit notes, net of discount	10,899		17,154		6,552		8,666
Secured promissory notes — average interest rates of 3.19% at third quarter-end 2015 and 3.17% at year-end 2014	15,400		15,400
Other indebtedness — interest rates ranging from 2.25% to 5.50%	53,324		46,996
Secured promissory notes — average interest rates of 3.43% at first quarter-end 2016 and 3.42% at year-end 2015					15,400		15,400
Other indebtedness — interest rates ranging from 2.44% to 5.50%					28,514		28,083
	$	435,295	$	432,744	$	372,759	$	381,515

___________________


^(a)	At first quarter-end 2016 and year-end 2015, $7,953,000 and $8,267,000 of unamortized deferred financing fees are deducted from our outstanding debt.

Our debt agreements contain financial covenants customary for such agreements including minimum levels of interest coverage and limitations on leverage. On ~~September~~December 30, 2015, we ~~received a waiver of the consolidated tangible net worth maintenance covenant requirement of~~amended our senior secured credit facility to reduce the interest coverage ratio from 2.50:1.0 to 2.25:1.0 for ~~third~~the quarter ending December 31, 2015 and ~~amended~~March 31, 2016. Thereafter, the ~~consolidated tangible net worth maintenance covenant requirement~~interest coverage ratio returns to an amount equal to 80 percent of the actual consolidated tangible net worth as calculated using the September 30, 2015 financial statements. The amendment provides us with additional flexibility given the on-going volatility and continued decline in oil prices, which resulted in approximately $81,240,000 of additional non-cash asset impairment charges in the oil and gas segment in third quarter 2015.2.50:1.0. At ~~third~~first quarter-end ~~2015,~~2016, we were in compliance with the financial covenants of these agreements.

At ~~third~~first quarter-end ~~2015,~~2016, our senior secured credit facility provides for a $300,000,000 revolving line of credit maturing May 15, 2017 (with two one-year extension options). The revolving line of credit may be prepaid at any time without penalty.

~~Table of Contents~~

The revolving line of credit includes a $100,000,000 sublimit for letters of credit, of which $~~16,184,000~~15,817,000 is outstanding at ~~third~~first quarter-end ~~2015~~2016. Total borrowings under our senior secured credit facility (including the face amount of letters of credit) may not exceed a borrowing base formula. At ~~third~~first quarter-end ~~2015~~2016, we had ~~$283,816,000~~$265,199,000 in net unused borrowing capacity under our senior secured credit facility.

Under the terms of our senior secured credit facility, at our option we can borrow at LIBOR plus 4.0 percent or at the alternate base rate plus 3.0 percent. The alternate base rate is the highest of (i) KeyBank National Association’s base rate, (ii) the federal funds effective rate plus 0.5 percent or (iii) 30 day LIBOR plus 1 percent. Borrowings under the senior secured credit facility are or may be secured by (a) mortgages on the timberland, high value timberland and portions of raw entitled land, as well as pledges of other rights including certain oil and gas operating properties, (b) assignments of current and future leases, rents and contracts, (c) a security interest in our primary operating account, (d) a pledge of the equity interests in current and future material operating subsidiaries and most of our majority-owned joint venture interests, or if such pledge is not

permitted, a pledge of the right to distributions from such entities, and (e) a pledge of certain reimbursements payable to us from special improvement district tax collections in connection with our Cibolo Canyons project. The senior secured credit facility provides for releases of real estate and other collateral provided that borrowing base compliance is maintained.

Our debt agreements contain financial covenants customary for such agreements including minimum levels of interest coverage and limitations on leverage. At ~~third~~first quarter-end 2016, our tangible net worth requirement was $379,044,000 plus 85 percent of the aggregate net proceeds received by us from any equity offering, plus 75 percent of all positive net income, on a cumulative basis. At first quarter-end 2016, there were no adjustments to the tangible net worth requirement for net proceeds from equity offerings or positive net income on a cumulative basis. The tangible net worth requirement is recalculated on a quarterly basis.

We may elect to make distributions to stockholders so long as the total leverage ratio is less than 40 percent, the interest coverage ratio is greater than 3.0:1.0 and available liquidity is not less than $125,000,000. Effective December 30, 2015,, the senior secured credit facility was amended to provide that we may make distributions in an aggregate amount not to exceed $50,000,000 to be funded from up to 65% of the net proceeds from sales of multifamily properties and non-core assets, such as the Radisson Hotel & Suites in Austin, and any oil and gas properties. The amendment provides us the flexibility to repurchase stock or pay a special dividend should our Board of Directors determine that we should do so, though no such decisions have been made at this time.

In first quarter 2016, we purchased $8,600,000 principal amount of 8.50% Senior Secured Notes (Notes) at 99% of face value, resulting in a gain of $127,000 on the early extinguishment of the Notes, offset by the write-off of unamortized debt issuance costs of $225,000 allocated to the Notes.

At first quarter-end 2016, secured promissory notes represent a ~~$15,400,000~~$15,400,000 loan collateralized by a 413 guest room hotel located in Austin with a carrying value of ~~$34,297,000~~.$33,415,000 classified as assets held for sale. Other indebtedness principally represents ~~$48,103,000~~a $23,936,000 of senior secured ~~loans~~loan for ~~two wholly-owned multifamily properties,~~ our 257-unit multifamily project in Austin ~~and our 354-unit multifamily property near Dallas. The combined~~with a carrying value of ~~these two multifamily properties is $85,147,000~~$50,527,000 classified as assets held for sale at ~~third~~first quarter-end~~2015~~. 2016.

At ~~third~~first quarter-end ~~2015~~2016 and year-end ~~2014~~2015, we have ~~$12,407,000~~$7,953,000 and ~~$15,168,000~~$8,267,000 in unamortized deferred financing fees which are deducted from our debt. In addition, at first quarter-end 2016 and year-end 2015, unamortized deferred financing fees related to our senior secured credit facility included in other ~~assets.~~assets was $2,264,000 and $2,768,000. Amortization of deferred financing fees was ~~$2,992,000~~$927,000 and ~~$3,089,000~~$1,156,000 in first ~~nine months~~ ~~2015~~quarter 2016 and ~~2014~~2015 and is included in interest expense.

Note ~~10—~~11—Fair Value

Fair value is the exchange price that would be the amount received for an asset or paid to transfer a liability in an orderly transaction between market participants. In arriving at a fair value measurement, we use a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable. The three levels of inputs used to establish fair value are the following:

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.

Non-financial assets measured at fair value on a non-recurring basis principally include real estate assets, oil and gas properties, assets held for sale, goodwill and other intangible assets, which are measured for impairment.

InAt first ~~nine months 2015, we recognized proved~~quarter-end 2016, Radisson Hotel & Suites in Austin, Eleven, a 257-unit multifamily property in Austin, Dillon, a planned 379-unit multifamily property in Charlotte, and certain oil and gas properties ~~non-cash~~were classified as held for sale. We record impairment charges of $90,417,000 principally due to a significant decline in oil and gas prices and an increased likelihood that certain non-core oil and gas assets will be sold. The fair value of these properties was determined using Level 3 inputs and the income valuation method. We used a discount rate of ten percent as of third quarter-end 2015 which is commensurate with current market and risk conditions associated with realizing the expected cash flows projectedlosses for ~~these investments. Fair value of~~ assets held for sale ~~was based on net realizable value less cost to sell. Fair~~if the fair value of ~~certain unproved leasehold interests that were impaired was based on market comparables.~~

the assets held for sale net of estimated selling costs is less than the carrying amount. In first ~~nine months 2015,~~quarter 2016, we ~~recognized real estate non-cash asset~~did not record any impairment of $729,000, of which $504,000 was recognized in first quarter 2015 related to a residential development with golf course and country club property located near Fort Worth which was sold in April 2015 and $225,000 was recognized in second quarter 2015 related to an owned project near Atlanta where the remaining lots were sold in August 2015.losses on our assets held for sale.

~~Table of Contents~~

Non-financial assets measured at fair value on a non-recurring basis are as follows:


	Third Quarter-End 2015								Year-End 2014								First Quarter-End 2016								Year-End 2015
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(In thousands)																(In thousands)
Non-Financial Assets and Liabilities:
Real estate	$	—	$	—	$	—	$	—	$	—	$	970	$	—	$	970	$	—	$	—	$	—	$	—	$	—	$	—	$	641	$	641
Proved oil and gas properties	$	—	$	—	$	80,551	$	80,551	$	—	$	—	$	3,655	$	3,655	$	—	$	—	$	—	$	—	$	—	$	—	$	39,000	$	39,000
Unproved leasehold interests	$	—	$	1,226	$	11,489	$	12,715	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	18,219	$	18,219
Assets held for sale - oil and gas properties	$	—	$	1,534	$	—	$	1,534	$	—	$	—	$	—	$	—

We elected not to use the fair value option for cash and cash equivalents, accounts receivable, other current assets, variable debt, accounts payable and other current liabilities. The carrying amounts of these financial instruments approximate their fair values due to their short-term nature or variable interest rates. We determine the fair value of fixed rate financial instruments using quoted prices for similar instruments in active markets.

Information about our fixed rate financial instruments not measured at fair value follows:

Third Quarter-End 2015 Year-End 2014

Carrying
Amount

Fair
Value

Carrying
Amount

Fair
Value

Valuation
Technique
(In thousands)
Loan secured by real estate $ —
$ —
$ 3,574
$ 4,859
Level 2
Fixed rate debt $ (366,571 ) $ (357,857 ) $ (370,348 ) $ (359,131 ) Level 2



	First Quarter-End 2016						Year-End 2015
	Carrying Amount			Fair Value			Carrying Amount			Fair Value			Valuation Technique
	(In thousands)
Fixed rate debt	$	(336,298	)	$	(310,236	)	$	(346,090	)	$	(321,653	)	Level 2

Note ~~11—~~12—Capital Stock

~~In first quarter 2015, we accelerated the expiration date of our shareholder rights plan from December 11, 2017 to March 13, 2015, resulting in termination of the plan.~~

Please read Note ~~17—~~18—Share-Based and Long-Term Incentive Compensation for information about additional shares of common stock that could be issued under terms of our share-based compensation plans.

At ~~third~~first quarter-end ~~2015~~2016, personnel of former affiliates held options to purchase ~~501,000~~243,000 shares of our common stock. The options have a weighted average exercise price of $~~28.62~~30.27 and a weighted average remaining contractual term of less than one year. At ~~third~~first quarter-end ~~2015~~2016, the options have an aggregate intrinsic value of $0.

Note ~~12—~~13—Net Income (Loss) per Share

Basic and diluted earnings per share is computed using the two-class method. The two-class method is an earnings allocation formula that determines net income per share for each class of common stock and participating security. We have determined that our 6.00% tangible equity units (Units) are participating securities. Per share amounts are computed by dividing earnings available to common shareholders by the weighted average shares outstanding during each period. In periods with a net loss, no such adjustment is made to earnings as the holders of the participating securities have no obligation to fund losses.

~~Table of Contents~~

Due to a net loss in ~~third~~first quarter 2016 and ~~first nine months~~ 2015, as the effect of potentially dilutive securities would be anti-dilutive, basic and diluted loss per share are the same. The computations of basic and diluted earnings per share are as follows:


	Third Quarter						First Nine Months						First Quarter
	2015			2014			2015			2014			2016			2015
	(In thousands)												(In thousands)
Numerator:
Consolidated net income (loss)	$	(164,331	)	$	5,239		$	(206,886	)	$	28,994		$	(4,296	)	$	(8,237	)
Less: Net (income) loss attributable to noncontrolling interest	115			(12		)	5			(611		)	(80		)	79
Earnings (loss) available for diluted earnings per share	$	(164,216	)	$	5,227		$	(206,881	)	$	28,383		$	(4,376	)	$	(8,158	)
Less: Undistributed net income allocated to participating securities	—			(947		)	—			(5,151		)	—			—
Earnings (loss) available to common shareholders for basic earnings per share	$	(164,216	)	$	4,280		$	(206,881	)	$	23,232		$	(4,376	)	$	(8,158	)

Denominator:
Weighted average common shares outstanding — basic	34,299			35,498			34,248			35,437			34,302			34,168
Weighted average common shares upon conversion of participating securities ^(a)	—			7,857			—			7,857			—			—
Dilutive effect of stock options, restricted stock and equity-settled awards	—			513			—			456			—			—
Total weighted average shares outstanding — diluted	34,299			43,868			34,248			43,750			34,302			34,168
Anti-dilutive awards excluded from diluted weighted average shares	10,933			1,959			10,835			2,171			10,468			10,743

~~___________________~~


^(a)	Our earnings per share calculation reflects the weighted average shares issuable upon settlement of the prepaid stock purchase contract component of our 6.00% tangible equity units, issued November 27, 2013.

The actual number of shares we may issue upon settlement of the stock purchase contract will be between 6,547,800 shares (the minimum settlement rate) and 7,857,000 shares (the maximum settlement rate) based on the applicable market value, as defined in the purchase contract agreement associated with issuance of the Units.

We intend to settle the principal amount of our convertible senior notes (Convertible Notes) in cash upon conversion with only the amount in excess of par value of the Convertible Notes to be settled in shares of our common stock. Therefore, our calculation of diluted net income per share using the treasury stock method includes only the amount, if any, in excess of par value of the Convertible Notes. As such, the Convertible Notes have no impact on diluted net income per share until the price of our common stock exceeds the $24.49 conversion price of the Convertible Notes. The average price of our common stock in ~~third~~first quarter ~~2015~~2016 did not exceed the conversion price which resulted in no additional diluted outstanding shares.

Note ~~13—~~14—Income Taxes

~~Our provision for income taxes including the impact of deferred tax asset valuation allowance is as follows:~~

Third Quarter First Nine Months
2015 2014 2015 2014
(In thousands)
Current income tax benefit (expense) $ (27 ) $ (200 ) $ (27 ) $ (4,815 )
Deferred income tax benefit (expense) 34,678
(2,555 ) 60,844
(10,649 )
Deferred tax asset valuation allowance benefit (expense) (98,887 ) —
(99,950 ) —
Income tax benefit (expense) $ (64,236 ) $ (2,755 ) $ (39,133 ) $ (15,464 )

Our effective tax rate was ~~64 percent in third quarter 2015 and 23~~38 percent in first ~~nine months 2015. Excluding the impact~~quarter 2016, which includes a three percent benefit for a partial release of our valuation allowance ~~our effective tax rate was~~and a 35five percent ~~benefit in third quarter 2015~~detriment for goodwill due to the sale of oil and ~~36 percent benefit in first nine months 2015.~~gas assets. Our effective tax rate was 35 percent in ~~third~~first quarter 2015, which included a two percent benefit for noncontrolling interests and ~~first nine months 2014.~~a two percent detriment for share-based compensation benefits that will not be realized. Our effective tax rates also include the effect of state income taxes, ~~noncontrolling interests,~~ nondeductible itemsand benefits of percentage depletion.

~~We assess~~At first quarter-end 2016 and year-end 2015, we have a valuation allowance for our deferred tax assets of $95,389,000 and $97,068,000 for the portion of the deferred tax assets that we have determined is more likely than not to be unrealizable.

In determining our valuation allowance, we assessed available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax asset. ~~In determining our valuation allowance, a~~A significant piece of objective ~~negative~~ evidence evaluated was the cumulative loss incurred over the three-year period ended ~~September 30, 2015,~~March 31, 2016, principally driven by impairments of oil and gas ~~assets.~~properties in 2015. Such evidence limits our ability to consider other subjective evidence, such as our projected future taxable income.

~~Table of Contents~~

~~estimates of future taxable income are reduced or increased or if objective~~ negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence, such as our projected future taxable income.

Note ~~14—~~15—Commitments and Contingencies

Litigation

We are involved in various legal proceedings that arise from time to time in the ordinary course of doing business and believe that adequate reserves have been established for any probable losses. We do not believe that the outcome of any of these proceedings should have a significant adverse effect on our financial position, long-term results of operations or cash flows. However, it is possible that charges related to these matters could be significant to our results or cash flows in any one accounting period.

On October 4, 2014, James Huffman, a former director and CEO of CREDO Petroleum Corporation (Credo), which we acquired in 2012 and is now known as Forestar Petroleum Corporation, filed Huffman vs. Forestar Petroleum Corporation, Case Number 14CV33811, Civil Division, District Court for the City and County of Denver, Colorado. Prior to his retirement from Credo, Huffman participated in an employee compensation program under which he received overriding royalty interests (ORRI) in certain leases or wells in which Credo had an interest. Huffman claims entitlement to ORRI on nearly all North Dakota leases, none of which were assigned by Credo to Huffman prior to his retirement, and to ORRI on several Kansas and Nebraska leases. Huffman is seeking to have ORRI assigned to him. We believe Huffman’s claims are without merit and are vigorously defending the case. We are unable to estimate a possible loss or range of possible loss for this matter because of, among other factors, (i) significant unresolved questions of fact, including the time period covered by Huffman’s claims, (ii) discovery remaining to be conducted by both parties; (iii) impact of our counterclaims against Huffman, and (iv) any other factors that may have a material effect on the litigation.

Environmental

Environmental remediation liabilities arise from time to time in the ordinary course of doing business, and we believe we have established adequate reserves for any probable losses that we can reasonably estimate. We own 288 acres near Antioch, California, portions of which were sites of a former paper manufacturing operation that are in remediation. We have received certificates of completion on all but one 80 acre tract, a portion of which includes subsurface contamination. In ~~third~~first quarter ~~2015,~~2016, we increased our reserves for environmental remediation by ~~$388,000~~$86,000 due to additional testing and remediation requirements by state regulatory agencies. We estimate the remaining cost to complete remediation activities will be ~~approximately~~ $~~600,000~~678,000, which is included in other accrued expenses. It is possible that remediation or monitoring activities could be required in addition to those included within our estimate, but we are unable to determine the scope, timing or extent of such activities.

We have asset retirement obligations related to the abandonment and site restoration requirements that result from the acquisition, construction and development of oil and gas properties. We record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. Accretion expense related to the asset retirement obligation and depletion expense related to capitalized asset retirement cost is included in cost of oil and gas producing ~~activities on our consolidated statements of income and comprehensive income.~~activities. At ~~third~~first quarter-end ~~2015~~2016 and year-end ~~2014,~~2015, our asset retirement obligation was $~~1,748,000~~974,000 and ~~$1,807,000,~~$1,758,000, of which $230,000 is included in liabilities held for sale at first quarter-end 2016 and the remaining balance in other liabilities.

~~Unallocated Severance-related~~Non-Core Assets Restructuring Costs

In connection with ~~the departures~~key initiatives to reduce costs across our entire organization and exit non-core assets, we incurred and paid severance costs related to workforce reductions of $1,422,000 in our ~~former Chief Executive Officer~~real estate segment, $164,000 in our other natural resources segment and ~~Chief Financial Officer~~$486,000 in ~~September 2015, we recorded one-time severance-related charges of $3,314,000 which are included in~~unallocated general and administrative expense on our consolidated statements of income and comprehensive income. Approximately $2,721,000 of these severance-related charges will be paid in fourth quarter 2015 with the balance to be paid in 2016.

~~Oil and Gas Restructuring Costs~~

expense. In ~~connection with review of strategic alternatives with respect to our oil and gas business that was announced in December 2014,~~addition, we offered retention bonuses to certain key personnel provided they ~~remain~~remained our employees through ~~December 2015~~. completion of sale transactions. We are expensing retention bonus costs over the estimated retention period. In first nine months 2015, we incurred severance expenses related to staff reductions, paid a portion of the December 2014 accrual under written severance agreements and incurred costs associated with closure of our Fort Worth office. Office closure costs include a $1,750,000 lease termination charge and $391,000 for write off of leasehold improvements which were partially offset by a deferred lease credit of $364,000. These restructuring costs are included in other operating expense on our consolidated statements of income and comprehensive income. We may incur additional costs related to our strategic initiatives associated with lowering capital expenditures and operating costs in our oil and gas segment.expense.

~~Table of Contents~~

The following table summarizes activity related to liabilities associated with our ~~oil and gas~~ restructuring activities in first ~~nine months 2015:~~quarter 2016:


	Employee-Related Costs			Lease Termination Charge			Total			Severance Costs			Retention Bonuses			Total
	(In thousands)									(In thousands)
Balance at year-end 2014	$	(2,367	)	$	—		$	(2,367	)
Balance at year-end 2015										$	(1,049	)	$	—		$	(1,049	)
Additions	(1,979		)	(1,750		)	(3,729		)	(2,072		)	(491		)	(2,563		)
Payments	2,047			1,750			3,797			3,121			77			3,198
Balance at third quarter-end 2015	$	(2,299	)	$	—		$	(2,299	)
Balance at first quarter-end 2016										$	—		$	(414	)	$	(414	)

Note ~~15—~~16—Segment Information

We manage our operations through three segments: real estate, oil and gas and other natural resources. Real estate secures entitlements and develops infrastructure on our lands for single-family residential and mixed-use communities, and manages our undeveloped land, commercial and income producing properties, primarily a hotel and our multifamily investments. Oil and gas is an independent oil and gas exploration, development and production operation and manages our owned and leased mineral interests. Other natural resources manages our timber, recreational leases and water resource initiatives.

Total assets allocated by segment are as follows:


	Third Quarter-End		Year-End		First Quarter-End		Year-End
	2015		2014		2016		2015
	(In thousands)				(In thousands)
Real estate	$	713,912	$	654,774	$	666,726	$	691,238
Oil and gas	191,328		342,703		97,346		144,436
Other natural resources	20,034		22,531		19,025		19,106
Assets not allocated to segments ^(a)	115,942		238,191		164,955		117,466
	$	1,041,216	$	1,258,199	$	948,052	$	972,246

_________________________

^(a)

Assets not allocated to segments at ~~third~~first quarter-end 2016 principally consist of cash and cash equivalents of $142,646,000 and an income tax receivable of $14,359,000. Assets not allocated to segments at year-end 2015 principally consist of cash and cash equivalents of $~~92,640,000~~96,442,000 and ~~a net deferred~~an income tax ~~asset~~receivable of ~~$1,118,000. Assets not allocated to segments at year-end~~ ~~2014~~ ~~principally consist of cash and cash equivalents of~~ ~~$170,127,000~~ ~~and a net deferred tax asset of~~ ~~$40,624,000~~.$12,056,000.

We evaluate performance based on segment earnings (loss) before unallocated items and income taxes. Segment earnings (loss) consist of operating income, equity in earnings (loss) of unconsolidated ventures, gain on sales of assets, interest income on loans secured by real estate and net (income) loss attributable to noncontrolling interests. Items not allocated to our business segments consist of general and administrative expense, share-based and long-term incentive compensation, gain on sale of strategic timberland, interest expense and other corporate non-operating income and expense. The accounting policies of the segments are the same as those described in Note 1—Basis of Presentation. Our revenues are derived from U.S. operations and all of our assets are located in the U.S. In ~~third~~first quarter ~~2015~~2016, no single customer accounted for more than ten percent of our total revenues.

~~Table of Contents~~

Segment revenues and earnings are as follows:


	Third Quarter						First Nine Months						First Quarter
	2015			2014			2015			2014			2016			2015
	(In thousands)												(In thousands)
Revenues:
Real estate	$	27,957		$	32,445		$	100,196		$	153,098		$	36,098		$	32,830
Oil and gas	13,485			24,145			42,835			66,076			5,352			13,185
Other natural resources	1,726			2,250			5,372			7,284			438			1,790
Total revenues	$	43,168		$	58,840		$	148,403		$	226,458		$	41,888		$	47,805
Segment earnings (loss):
Real estate	$	5,154		$	15,987		$	29,747		$	66,859		$	20,224		$	9,066
Oil and gas	(86,192		)	6,002			(146,000		)	16,331			(12,441		)	(2,941		)
Other natural resources	(77		)	669			(511		)	2,220			(581		)	(391		)
Total segment earnings (loss)	(81,115		)	22,658			(116,764		)	85,410			7,202			5,734
Items not allocated to segments ^(a)	(18,865		)	(14,676		)	(50,984		)	(41,563		)	(14,204		)	(18,251		)
Income (loss) before taxes attributable to Forestar Group Inc.	$	(99,980	)	$	7,982		$	(167,748	)	$	43,847		$	(7,002	)	$	(12,517	)

_________________________


^(a)	Items not allocated to segments consist of:


	Third Quarter						First Nine Months						First Quarter
	2015			2014			2015			2014			2016			2015
	(In thousands)												(In thousands)
General and administrative expense	$	(8,343	)	$	(5,190	)	$	(19,540	)	$	(15,924	)	$	(4,973	)	$	(6,020	)
Shared-based and long-term incentive compensation expense	(2,245		)	(991		)	(5,726		)	(4,523		)	(1,544		)	(3,458		)
Interest expense	(8,315		)	(8,634		)	(25,851		)	(21,507		)	(7,639		)	(8,821		)
Other corporate non-operating income	38			139			133			391			(48		)	48
	$	(18,865	)	$	(14,676	)	$	(50,984	)	$	(41,563	)	$	(14,204	)	$	(18,251	)

Note ~~16—~~17—Variable Interest Entities

We participate in real estate ventures for the purpose of acquiring and developing residential, multifamily and mixed-use communities in which we may or may not have a controlling financial interest. Generally accepted accounting principles require consolidation of Variable Interest Entities (VIEs) in which an enterprise has a controlling financial interest and is the primary beneficiary. A controlling financial interest will have both of the following characteristics: (a) the power to direct the VIE activities that most significantly impact economic performance and (b) the obligation to absorb the VIE losses and right to receive benefits that are significant to the VIE. We examine specific criteria and use judgment when determining whether we are the primary beneficiary and must consolidate a VIE. We perform this review initially at the time we enter into venture agreements and continuously reassess to see if we are the primary beneficiary of a VIE.

At ~~third~~first quarter-end ~~2015~~2016, we have ~~four~~one ~~VIEs.~~VIE. We account for ~~these VIEs~~this VIE using the equity method since we are not the primary beneficiary. Although we have certain rights regarding major decisions, we do not have the power to direct the activities that are most significant to the economic performance of ~~these VIEs.~~the VIE. At ~~third~~first quarter-end ~~2015~~2016, ~~these VIEs have~~the VIE has total assets of $~~77,672,000~~4,161,000, substantially all of which represent developed and undeveloped real estate, and total liabilities of $~~97,828,000~~2,208,000, which includes $~~29,835,000~~2,203,000 of borrowings classified as current maturities. These amounts are included in the summarized balance sheet information for ventures accounted for using the equity method in Note 7—8—Investment in Unconsolidated Ventures. At ~~third~~first quarter-end ~~2015~~2016, our investment in ~~these VIEs~~the VIE is $~~8,822,000~~1,558,000 and is included in investment in unconsolidated ventures. In first ~~nine months~~quarter ~~2015~~2016, we contributed $~~111,000~~44,000 to ~~these VIEs.~~this VIE. Our maximum exposure to loss related to ~~one of these VIEs~~the VIE is ~~estimated at~~ $~~3,808,000~~3,766,000, which exceeds our investment as we have a nominal general partner interest and could be held responsible for its liabilities. The maximum exposure to loss represents the maximum loss that we could be required to recognize assuming all the ventures’ assets (principally real estate) are worthless, without consideration of the probability of a loss or of any actions we may take to mitigate any such loss.

~~Table of Contents~~

Note ~~17—~~18—Share-Based and Long-Term Incentive Compensation

Share-based and long-term incentive compensation expense consists of:


	Third Quarter					First Nine Months						First Quarter
	2015		2014			2015			2014			2016		2015
	(In thousands)											(In thousands)
Cash-settled awards	$	146	$	(801	)	$	(1,005	)	$	(1,996	)	$	619	$	296
Equity-settled awards	1,654		1,307			4,569			4,897			479		1,997
Restricted stock	16		22			13			101			6		17
Stock options	388		463			1,954			1,521			276		1,032
Total share-based compensation	2,204		991			5,531			4,523			1,380		3,342
Deferred cash	41		—			195			—			164		116
	$	2,245	$	991		$	5,726		$	4,523		$	1,544	$	3,458

Share-based and long-term incentive compensation expense is included in:


	Third Quarter					First Nine Months				First Quarter
	2015		2014			2015		2014		2016		2015
	(In thousands)									(In thousands)
General and administrative expense	$	1,124	$	(50	)	$	2,970	$	1,217	$	1,506	$	2,122
Other operating expense	1,121		1,041			2,756		3,306		38		1,336
	$	2,245	$	991		$	5,726	$	4,523	$	1,544	$	3,458

Share-Based Compensation

In first quarter ~~2015~~2016, we granted ~~89,900 cash-settled stock appreciation rights~~174,419 equity-settled awards and 598,600 equity-settled awards. Cash-settled stock appreciation rights have a ten-year term, generally become exercisable ratably over four years and provide for accelerated or continued vesting upon retirement, death, or disability or if there is a change in control. Equity-settled awards granted to employees include market-leveraged stock units (MSUs) and stock options. Equity-settled MSUs will be settled in common stock based upon our stock price performance over three years from the date of grant. Stock options have a ten-year term, generally become exercisable ratably over four years and provide for accelerated or continued vesting upon retirement, death, or disability or if there is a change in control. Equity-settled awards in the form of restricted stock units ~~granted to our directors are fully vested at the time of grant and are issued upon retirement.~~

~~In third quarter 2015, we granted 141,300 stock option awards in connection with management promotions. These awards have a ten-year term,~~which vest ratably over three years and ~~are exercisable only when our stock price exceeds $17.50 per share. We also granted 24,200 cash-settled restricted stock units which vest after three years and~~ provide for accelerated ~~or continued~~ vesting upon retirement, disability, death, ~~disability~~ or if there is a change in control. In addition, ~~36,100 cash-settled~~in first quarter 2016, we granted 69,760 restricted stock units ~~were awarded~~ to ~~certain key employees as retention grants.~~our board of directors which vest 25 percent at grant date and 25 percent at each subsequent quarterly board meeting and a stock option grant to acquire 20,000 shares of common stock for each of the two new directors, of which 6,500 shares vest on the first and second anniversary of the date of grant and the remaining 7,000 shares vest on the third anniversary of the date of grant. The option term is ten years. Expense associated with annual restricted stock units and non-qualified stock options to our board of directors is included in share-based compensation expense.

Excluded from share-based compensation expense in the table above are fees earned by our board of directors in the amount of $265,000 and $285,000 in first quarter 2016 and 2015 for which they elected to defer payment until retirement in the form of share-settled units. These ~~awards vest over three years~~expenses are included in general and ~~are not eligible for retirement acceleration.~~administrative expense.

The fair value of awards granted to retirement eligible employees expensed at the date of grant was $~~517,000~~600,000 and $~~760,000~~517,000 in first ~~nine months~~quarter ~~2015~~2016 and ~~2014~~2015. Unrecognized share-based compensation expense related to non-vested equity-settled awards, restricted stock and stock options is ~~$6,160,000~~$3,879,000 at ~~third~~first quarter-end ~~2015~~2016.

In first ~~nine months~~quarter ~~2015~~2016 and ~~2014~~2015, we issued ~~159,867~~165,167 and ~~211,333~~157,201 shares out of our treasury stock associated with vesting of stock-based awards or exercise of stock options, net of ~~48,636~~23,691 and ~~54,272~~48,636 shares withheld having a value of $~~722,000~~205,000 and $~~1,024,000~~723,000 for payroll taxes in connection with vesting of stock-based awards or exercise of stock options.

Long-Term Incentive Compensation

In first quarter 2016 and 2015, we granted $620,000 and $587,000 of long-term incentive compensation in the form of deferred cash compensation. ~~Deferred~~The 2016 deferred cash ~~will be paid out after the earlier of three~~awards vest annually over two years, ~~or the employee's retirement eligibility date~~ and the ~~expense~~2015 deferred cash awards vest after three years. Both awards provide for accelerated vesting upon retirement, disability, death, or if there is a change in control. Expense associated with deferred cash awards is recognized ratably over the vesting period. The accrued liability was ~~$195,000~~$319,000 and $225,000 at ~~third~~first quarter-end ~~2015~~2016 and year-end 2015 and is included in other liabilities.

Note ~~18—~~19—Subsequent ~~Event~~Events

On ~~October 16, 2015,~~April 18, 2016, we ~~obtained~~sold Eleven, a ~~senior secured construction loan in the amount of $52,000,000 from PNC Bank, National Association to finance the construction of a 379-unit~~257-unit multifamily project ~~(Dillon) located~~ in ~~Charlotte,~~Austin for $60,150,000. The transaction generated net proceeds of $35,150,000 after closing costs and prorations and payoff of the related debt of $23,936,000.

On May 4, 2016, we sold Radisson Hotel & Suites in Austin for $130,000,000. The transaction generated net proceeds of $112,000,000 after closing costs and prorations and payoff of the related debt of $15,400,000.

On May 6, 2016, we sold our remaining Bakken/Three Forks oil and gas properties for $50,000,000. Net proceeds after closing costs and prorations were $46,525,000. In second quarter 2016, we expect to incur an additional loss related to this transaction due to allocation of goodwill on a relative fair value basis to these assets. With this transaction, we have completely exited our oil and gas working interest assets in North Dakota.

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Carolina. The loan is secured by a lien on the land and improvements to be constructed, and by a collateral assignment of present and future leases and rents. The loan bears interest at the LIBOR rate plus 2.20 percent, payable monthly, has an initial term of 48 months and may be extended for two additional 12-month periods following the initial term, subject to payment of extension fees and fulfillment of specified conditions.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our ~~2014~~2015 Annual Report on Form 10-K. Unless otherwise indicated, information is presented as of ~~third~~first quarter-end ~~2015~~2016, and references to acreage owned includes all acres owned by ventures regardless of our ownership interest in a venture.

Forward-Looking Statements

This Quarterly Report on Form 10-Q and other materials we have filed or may file with the Securities and Exchange Commission contain “forward-looking statements” within the meaning of the federal securities laws. These forward-looking statements are identified by their use of terms and phrases such as “believe,” “anticipate,” “could,” “estimate,” “likely,” “intend,” “may,” “plan,” “expect,” and similar expressions, including references to assumptions. These statements reflect our current views with respect to future events and are subject to risks 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. Factors and uncertainties that might cause such differences include, but are not limited to:

general economic, market or business conditions in Texas or Georgia, where our real estate activities are concentrated, or on a national or global scale;

our ability to achieve some or all of our ~~strategic~~key initiatives;

the opportunities (or lack thereof) that may be presented to us and that we may pursue;

our ability to hire and retain key personnel;

future residential ~~multifamily~~ or commercial entitlements, development approvals and the ability to obtain such approvals;

obtaining approvals of reimbursements and other payments from special improvement districts and the timing of such payments;

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, impairment of long-lived assets, income taxes, share-based compensation, oil and gas reserves, revenues, capital expenditures and lease operating expense accruals associated with our non-core oil and gas working interests, and depletion of our non-core oil and gas properties;

the levels of resale housing inventory ~~and potential impact of foreclosures~~ in our mixed-use development projects and the regions in which they are located;

fluctuations in costs and expenses, including impacts from shortages in materials or labor;

demand for new housing, which can be affected by a number of factors including the availability of mortgage credit, job growth and fluctuations in commodity prices;

demand for multifamily communities, which can be affected by a number of factors including local markets and economic conditions;

competitive actions by other companies;

changes in governmental policies, laws or regulations and actions or restrictions of regulatory agencies;

risks associated with oil and gas exploration, drilling and production activities;

fluctuations in oil and gas commodity prices;

~~our ability to fully realize our deferred tax assets is dependent upon generating future taxable income, executing tax planning strategies, and reversals of existing taxable temporary differences;~~

government regulation of exploration and production technology, including hydraulic fracturing;

~~the results of financing efforts, including our ability to obtain financing with favorable terms, or at all;~~

our ability to make interest and principal payments on our debt or amend and satisfy the other covenants contained in our senior secured credit facility, indentures and other debt agreements;

our partners’ ability to fund their capital commitments and otherwise fulfill their operating and financial obligations;

the effect of limitations, restrictions and natural events on our ability to harvest and deliver timber;

inability to obtain permits for, or changes in laws, governmental policies or regulations affecting, water withdrawal or usage;

the final resolutions or outcomes with respect to our contingent and other liabilities related to our ~~business; and~~

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~~our ability to execute our growth strategy and deliver acceptable returns from acquisitions and other investments.~~business.

Other factors, including the risk factors described in Item 1A of our ~~2014~~2015 Annual Report on Form 10-K, may also cause actual results to differ materially from those projected by our forward-looking statements. New factors emerge from time to time and it is not possible for us to predict all such factors, nor can we assess the impact of any such factor on our business or

the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement.

Any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by law, we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.

Key Initiatives

Reducing costs across our entire organization;

Reviewing entire portfolio of assets;

Reviewing capital structure; and

Providing additional information.

Results of Operations

A summary of our consolidated results by business segment follows:


	Third Quarter						First Nine Months						First Quarter
	2015			2014			2015			2014			2016			2015
	(In thousands)												(In thousands)
Revenues:
Real estate	$	27,957		$	32,445		$	100,196		$	153,098		$	36,098		$	32,830
Oil and gas	13,485			24,145			42,835			66,076			5,352			13,185
Other natural resources	1,726			2,250			5,372			7,284			438			1,790
Total revenues	$	43,168		$	58,840		$	148,403		$	226,458		$	41,888		$	47,805
Segment earnings (loss):
Real estate	$	5,154		$	15,987		$	29,747		$	66,859		$	20,224		$	9,066
Oil and gas	(86,192		)	6,002			(146,000		)	16,331			(12,441		)	(2,941		)
Other natural resources	(77		)	669			(511		)	2,220			(581		)	(391		)
Total segment earnings (loss)	(81,115		)	22,658			(116,764		)	85,410			7,202			5,734
Items not allocated to segments:
General and administrative expense	(8,343		)	(5,190		)	(19,540		)	(15,924		)	(4,973		)	(6,020		)
Share-based and long-term incentive compensation expense	(2,245		)	(991		)	(5,726		)	(4,523		)	(1,544		)	(3,458		)
Interest expense	(8,315		)	(8,634		)	(25,851		)	(21,507		)	(7,639		)	(8,821		)
Other corporate non-operating income	38			139			133			391			(48		)	48
Income (loss) before taxes	(99,980		)	7,982			(167,748		)	43,847			(7,002		)	(12,517		)
Income tax benefit (expense)	(64,236		)	(2,755		)	(39,133		)	(15,464		)
Net income (loss) attributable to Forestar Group Inc.	$	(164,216	)	$	5,227		$	(206,881	)	$	28,383
Income tax benefit													2,626			4,359
Net loss attributable to Forestar Group Inc.													$	(4,376	)	$	(8,158	)

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Significant aspects of our results of operations follow:

~~Third~~First Quarter ~~and First Nine Months2015~~2016

~~Third~~First quarter 2015 real estate earnings declined principally due to a $7,610,000 gain in third quarter 2014 associated with the acquisition of our partner's interest in the Eleven multifamily venture, decreased residential lot sales activity and $1,757,000 of interest income in third quarter 2014 related to a loan secured by a mixed-use real estate community in Houston. First nine months 20152016 real estate segment earnings ~~declined principally due to lower undeveloped land sales,~~benefited from a ~~$10,476,000~~$9,613,000 gain in second quarter 2014 associated with a non-monetary exchange of leasehold timber rights for 5,400 acres of undeveloped land with a partner in a consolidated venture, a $7,610,000 gain in third quarter 2014 associated with the ~~acquisition~~sale of our ~~partner's~~ interest in the ~~Eleven~~360°, a 304-unit multifamily joint venture ~~decreased residential lot sales activity~~in Denver, and ~~$1,757,000 interest income~~a $3,968,000 gain associated with sale of Music Row, a wholly-owned multifamily property under construction in ~~third~~Nashville, both as result of our announced plan to opportunistically exit our multifamily portfolio of assets.

First quarter ~~2014 related to a loan secured by a mixed-use real estate community in Houston.~~

Third quarter 2015 oil and gas segment earnings were down compared with third quarter 2014 principally due to non-cash asset impairment charges of $81,240,000, of which $65,382,000 is related to proved oil and gas properties and $15,858,000 is related to unproved leasehold interests, principally driven by current and projected future lower oil and gas prices. In addition, lower realized oil and gas prices negatively impacted results despite an increase in production volumes, which were partially offset by lower operating costs. First nine months 20152016 oil and gas segment results ~~include $138,054,000~~were down compared with first quarter 2015 due to a $10,977,000 loss associated with the sale of ~~non-cash charges, which include impairments of $90,417,000 for proved~~non-core oil and gas properties principally located in Oklahoma, Kansas, Nebraska and $36,768,000 for unproved leasehold interests, and exploratory dry hole costs and pre-drilling costs of $10,869,000. First nine months 2015 results also include $1,979,000 of employee severance and retention bonus costs as part of our initiative to significantly reduce oil and gas operating costs and a lease termination charge of $1,750,000 associated with the closure of our office in Fort Worth, Texas.

~~General and administrative expense increased principally~~North Dakota as a result of ~~one-time severance-related charges of $3,314,000 related~~our announced plan to ~~departures of our former Chief Executive officer (CEO)~~exit non-core oil and ~~Chief Financial Officer (CFO).~~gas working interests.

Current Market Conditions

~~Sales of new~~New U.S. single-family ~~homes were 468,000 units in September 2015,~~home starts ended March 2016 at 764,000 on a seasonally adjusted ~~annualized~~ basis, ~~up two~~nearly 23 percent ~~compared with September 2014,~~above year-ago levels but ~~down over 11 percent compared with the downwardly-revised August 2015 results, representing the lowest level of new homes sales since November 2014, indicating the housing recovery remains tentative.~~below historical levels. Inventories of new homes are ~~at or below historical~~near historically low levels in many areas. In addition, declining finished lot inventories and limited supply of economically developable raw land has ~~resulted in~~increased demand for our developed lots. However, national and global economic weakness and uncertainty, and a restrictive mortgage lending environment continue to threaten a robust recovery in the housing market, despite low interest rates. Multifamily market conditions continue to be strong, with many markets experiencing healthy occupancy levels and positive rent growth. This improvement has been driven primarily by limited housing inventory, reduced single-family mortgage credit availability, and the increased propensity to rent among the 18 to 34 year old demographic of the U.S. population.

Global supply and demand fundamentals for crude oil at the end of March 2016 remained out of balance with high global and domestic inventories and slower global growth. West Texas Intermediate (WTI) oil prices averaged $33.18 per Bbl in first quarter 2016, nearly 32 percent lower than in first quarter 2015. Estimates for global demand growth continue to be tempered and could extend the global supply glut, resulting in an extended period of low crude oil prices at third quarter-end 2015 declined over 50 percent compared with third quarter-end 2014, driven by a combination of lower worldwide economic growth, record inventory levels and concern over higher oil exports from Iran. In response to the significant decline in crude oil prices, exploration and development activity in the U.S. has declined sharply, however production has remained at historically high levels, aided by increased drilling efficiencies and lower costs. U.S. production continues to be liquids focused principally due to the premium price of oil over gas when comparing energy equivalency and current estimates of domestic gas producing supplies are believed to be sufficient.

pricing. Henry Hub natural gas prices ~~at third quarter-end 2015 were down approximately 40~~in first quarter 2016 averaged $2.00/MMBtu, 31 percent ~~compared with third quarter-end 2014, and remain significantly~~ lower than ~~realized prices over~~first quarter 2015 and the ~~last decade. The decline in natural~~lowest first quarter average since 1999. Natural gas ~~prices is principally driven by higher~~ inventories ~~which are 35 percent higher than year ago levels, and modestly~~ended winter withdrawal above the previous ~~five year average. Despite low prices, natural gas~~end of March record high in 2012 due to warmer-than-normal temperatures and continued high production ~~in the U.S. remains high, driven by continued improvements in drilling efficiency and lower operating costs, which is expected to result in additional inventory growth.~~volumes.

Business Segments

We manage our operations through three business segments:

Real estate,

Oil and gas, and

Other natural resources.

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We evaluate performance based on segment earnings (loss) before unallocated items and income taxes. Segment earnings (loss) consist of operating income, equity in earnings (loss) of unconsolidated ventures, gain on sales of assets, interest income on loans secured by real estate and net (income) loss attributable to noncontrolling interests. Items not allocated to our business segments consist of general and administrative expense, share-based and long-term incentive compensation, gain on sale of strategic timberland, interest expense and other corporate non-operating income and expense. The accounting policies of the segments are the same as those described in the accounting policy note to the consolidated financial statements.

We operate in cyclical industries. Our operations are affected to varying degrees by supply and demand factors and economic conditions including changes in interest rates, availability of mortgage credit, consumer and home builder sentiment, new housing starts, real estate values, employment levels, changes in the market prices for oil, gas and timber, and the overall strength or weakness of the U.S. economy.

Real Estate

We own directly or through ventures ~~approximately~~ ~~106,000~~interests in 57 residential and mixed-use projects comprised of 7,000 acres of real estate located in 1211 states and 15 markets. Our real estate segment secures entitlements and develops infrastructure on our lands, primarily for single-family residential and mixed-use communities. We own approximately ~~82,000~~87,000 acres of non-core timberland and undeveloped land in a broad area around Atlanta, Georgia, with the balance located primarily in Texas. We target investments principally in our strategic growth corridors, regions across the southern half of the United States that possess key demographic and growth characteristics that we believe make them attractive for long-term real estate investment. We own and manage our projects either directly or through ventures. Our real estate segment revenues are principally derived from the sales of residential single-family lots and tracts, undeveloped land and commercial real estate and from the operation of income producing properties, primarily a hotel and multifamily properties.

A summary of our real estate results follows:


	Third Quarter						First Nine Months						First Quarter
	2015			2014			2015			2014			2016			2015
	(In thousands)												(In thousands)
Revenues	$	27,957		$	32,445		$	100,196		$	153,098		$	36,098		$	32,830
Cost of sales	(16,368		)	(20,053		)	(55,860		)	(88,262		)	(18,424		)	(18,054		)
Operating expenses	(9,831		)	(7,604		)	(29,107		)	(24,994		)	(11,088		)	(9,602		)
	1,758			4,788			15,229			39,842			6,586			5,174
Interest income	24			1,757			1,629			6,068			122			869
Gain on sale of assets	425			7,610			1,585			18,086			13,581			—
Equity in earnings of unconsolidated ventures	2,832			1,844			11,299			3,474			15			2,944
Less: Net (income) loss attributable to noncontrolling interests	115			(12		)	5			(611		)	(80		)	79
Segment earnings	$	5,154		$	15,987		$	29,747		$	66,859		$	20,224		$	9,066

Revenues in our owned and consolidated ventures consist of:


	Third Quarter				First Nine Months				First Quarter
	2015		2014		2015		2014		2016		2015
	(In thousands)								(In thousands)
Residential real estate	$	15,488	$	20,714	$	57,630	$	89,876	$	17,045	$	18,322
Commercial real estate	60		166		2,914		946		2,655		1,377
Undeveloped land	2,157		2,021		6,922		29,031		5,703		2,015
Commercial and income producing properties	9,588		9,378		31,566		30,361		9,690		10,869
Other	664		166		1,164		2,884		1,005		247
	$	27,957	$	32,445	$	100,196	$	153,098	$	36,098	$	32,830

Residential real estate revenues principally consist of the sale of single-family lots to local, regional and national homebuilders. ~~Revenues decreased~~Residential lot sales volume in ~~third~~first quarter 2016 was comparable with first quarter 2015, ~~compared with third quarter 2014 primarily due~~however, average price per lot sold was down 8 percent. Commercial real estate revenues principally consist of the sale of tracts to ~~lower residential lot sales caused by~~commercial developers that specialize in the construction and ~~inspection delays associated with abnormally wet weather conditions in second~~operation of income producing properties such as apartments, retail centers, or office buildings.

In first quarter 2015. Decrease in revenues in first nine months 2015 compared with first nine months 2014 is primarily due to lower residential lot sales and reduced undeveloped land sales. In addition, in first nine months 2015,2016, we sold 1,002 acres of residential tracts for $4,659,000 which generated segment earnings of $1,499,000, compared to 910 acres of residential tracts for $6,567,000 which generated segment earnings of $2,678,000 in first nine months 2014.

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~~In first nine months 2015, we sold 2,378~~1,972 acres of undeveloped land for ~~$6,922,000,~~$5,703,000, or approximately ~~$2,911~~$2,892 per acre, generating approximately ~~$5,242,000~~$4,314,000 in segment earnings, as compared with ~~12,916~~731 acres sold for ~~$29,031,000~~$2,015,000 or approximately ~~$2,248~~$2,758 per acre, generating approximately ~~$22,257,000~~$1,364,000 in segment earnings in first ~~nine months 2014.~~quarter 2015.

Commercial and income producing properties revenue ~~include~~includes revenues from hotel room sales and other guest services, rental revenues from our operating multifamily properties and reimbursement for costs paid to subcontractors plus development and construction fees from certain multifamily projects. ~~Third~~First quarter 2016 and ~~first nine months~~ 2015 ~~include $1,449,000~~includes $199,000 and ~~$6,003,000~~$2,029,000 in construction revenues associated with one multifamily joint venture fixed fee contract as general contractor. The construction of this multifamily joint venture project ~~is expected~~was completed in first quarter 2016. Development fee revenues in first quarter 2016 and 2015 were $1,298,000 and $407,000. The increase in development fee revenues in first quarter 2016 was related to ~~be substantially completed by year-end 2015. Revenues associated~~contingent development fee earned on the 360° multifamily venture project upon completion of construction in accordance with ~~multifamily construction contracts for~~ ~~third quarter~~ ~~and first nine months 2014 were $2,865,000 and $9,559,000.~~the joint venture agreement. Rental revenues from our multifamily operating properties for ~~third~~first quarter 2016 and ~~first nine months~~ 2015 were ~~$2,347,000~~$1,313,000 and ~~$6,150,000~~$1,762,000. The decrease in rental revenues from our multifamily operating properties in first quarter 2016 when compared with ~~$40,000 and $48,000 in third~~first quarter ~~and first nine months 2014,~~2015 was primarily due to the ~~substantial completion~~fourth quarter 2015 sale of ~~the Eleven multifamily project at the end of second quarter 2014 and acquiring our partner's interest in the multifamily venture in third quarter 2014. In addition, our~~ Midtown Cedar Hill, a 354-unit multifamily ~~project~~property we developed near ~~Dallas was substantially completed~~Dallas. Revenues from hotel room sales and other guest services were $6,880,000 and $6,672,000 in ~~second~~first quarter ~~2015~~2016 and 2015.

The increase in other revenues in first quarter 2016 is ~~91 percent occupied at third quarter-end 2015. Midtown Cedar Hill is under contract for sale~~primarily associated with ~~closing scheduled for late December 2015.~~easement revenues associated with our undeveloped land.

Units sold consist of:


	Third Quarter				First Nine Months				First Quarter
	2015		2014		2015		2014		2016		2015
Owned and consolidated ventures:
Residential lots sold	186		286		699		1,603		248		242
Revenue per lot sold	$	76,232	$	72,352	$	73,287	$	52,052	$	68,696	$	73,064
Commercial acres sold	3		—		27		3		8		4
Revenue per commercial acre sold	$	28,037	$	—	$	109,802	$	96,774	$	331,033	$	329,863
Undeveloped acres sold	744		637		2,378		12,916		1,972		731
Revenue per acre sold	$	2,900	$	3,179	$	2,911	$	2,248	$	2,892	$	2,758
Ventures accounted for using the equity method:
Residential lots sold	115		37		410		231		36		47
Revenue per lot sold	$	77,256	$	83,711	$	77,973	$	70,325	$	81,643	$	92,551
Commercial acres sold	—		4		29		4		—		29
Revenue per commercial acre sold	$	—	$	589,203	$	311,995	$	589,203	$	—	$	312,237
Undeveloped acres sold	3,872		—		4,217		258		—		—
Revenue per acre sold	$	2,053	$	—	$	2,129	$	2,306	$	—	$	—

Cost of sales in ~~third~~first quarter 2016 and ~~first nine months~~ 2015 include ~~$2,083,000~~$526,000 and ~~$7,209,000~~$2,434,000 related to multifamily construction contract costs we incurred as general contractor and paid to subcontractors associated with our development of a multifamily venture property near Denver ~~compared with $4,649,000 and $13,690,000 associated with two multifamily venture properties in third quarter and first nine months 2014, of~~ which ~~one~~ was completed in ~~second~~first quarter ~~2014.~~2016. Included in multifamily construction contract costs are charges of ~~$634,000~~$327,000 and ~~$1,206,000~~$405,000 in ~~third~~first quarter 2016 and ~~first nine months~~ 2015 reflecting estimated cost increases associated with our fixed fee contracts as general ~~contractor for one multifamily venture property compared with charges of $1,784,000 and $4,131,000 associated with two multifamily venture properties in~~ ~~third quarter~~ ~~and first nine months 2014.~~contractor. Cost of sales in first ~~nine months~~quarter 2015 also includes ~~$729,000~~$504,000 of non-cash asset impairment charges ~~of which $504,000 was recognized in first quarter 2015~~ associated with a residential development with golf course and country club property located near Fort Worth which was sold in April ~~2015 and $225,000 was recognized in second quarter 2015 related to one owned project near Atlanta where the remaining lots were sold in August~~ 2015.

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Operating expenses consist of:


	Third Quarter				First Nine Months				First Quarter
	2015		2014		2015		2014		2016		2015
	(In thousands)								(In thousands)
Employee compensation and benefits	$	2,166	$	2,605	$	6,492	$	8,118	$	3,687	$	2,299
Property taxes	2,154		1,558		6,991		5,043		2,027		2,114
Professional services	1,093		807		3,629		4,218		1,205		1,434
Depreciation and amortization	2,125		725		5,854		2,068		856		1,724
Other	2,293		1,909		6,141		5,547		3,313		2,031
	$	9,831	$	7,604	$	29,107	$	24,994	$	11,088	$	9,602

The increase in ~~operating expenses for third~~employee compensation and benefits expense in first quarter ~~and first nine months 2015~~2016 is principally related to ~~increase~~$1,422,000 of severance costs incurred as a result of our key initiatives to reduce costs across our entire organization and classifying our multifamily portfolio as non-core and our announced plan to exit these assets. The decrease in depreciation and amortization ~~and property taxes associated with~~in first quarter 2016 is primarily due to the ~~Eleven multifamily project which was completed in second~~fourth quarter ~~2014 and~~2015 sale of Midtown Cedar Hill multifamily project, ~~which was substantially completed in second quarter 2015. In third quarter 2014, we acquired~~ full ~~ownership~~amortization of ~~the~~in-place leases associated with Eleven multifamily project and discontinuing depreciation of the Radisson Hotel & Suites and Eleven multifamily project due to first quarter 2016 classification as assets held for sale. Other operating expense in ~~Austin in which~~first quarter 2016 includes $1,058,000 of pre-acquisition costs related to multifamily projects that we ~~previously held a 25 percent equity interest.~~no longer intend to pursue.

Interest income principally represents earnings from a loan secured by a mixed-use real estate community in Houston that was paid in full in first quarter 2015 and interest income received on reimbursements from utility and improvement districts.

InGain on sale of assets in first ~~nine months 2015, we recorded~~quarter 2016 includes a gain of ~~$1,585,000,~~$9,613,000 related to sale of our interest in 360°, a 304-unit multifamily joint venture in Denver for $13,917,000, of which ~~$1,160,000~~$750,000 was ~~associated with~~held in escrow and the ~~reduction~~gain deferred until completion of ~~a surety bond in connection with the Cibolo Canyons Special Improvement District (CCSID) bond offering in 2014~~certain construction related post-closing obligations and $425,000 of excess hotel occupancy and sales and use tax pledged revenues from CCSID after their payments to the debt service fund. In first nine months 2014, $18,086,000 of gain includes a $10,476,000$3,968,000 gain associated with sale of Music Row, a ~~non-monetary exchange of leasehold timber rights on approximately 10,300 acres~~wholly-owned multifamily property under construction in Nashville for ~~5,400 acres of undeveloped land with~~$14,703,000, both as a ~~partner in a consolidated venture and a $7,610,000 gain associated with the acquisition~~result of our ~~partner's interest in the Eleven~~announced plan to opportunistically exit our multifamily ~~venture.~~portfolio of assets.

Increase in equity earnings from our unconsolidated ventures in third quarter 2015 compared with third quarter 2014 is primarily due to sale of 3,872 acres of undeveloped land for $2,053 per acre from a venture in Atlanta, Georgia which generated equity earnings of $1,007,000. IncreaseDecrease in equity earnings from our unconsolidated ventures in first ~~nine months 2015~~quarter 2016 compared with first ~~nine months 2014~~quarter 2015 is primarily ~~related~~due to ~~increased~~lower residential lot sales ~~activity associated with two projects in Houston, Texas~~ and ~~increased undeveloped land sales associated with a venture in Atlanta, Georgia.~~

~~Information about our~~no commercial real estate ~~projects and our real estate ventures follows:~~

sales activity.

Third
Quarter-End
2015 2014
Owned and consolidated ventures:
Entitled, developed and under development projects
Number of projects 67
65
Residential lots remaining 14,695
14,772
Commercial acres remaining 1,721
1,722
Undeveloped land and land in the entitlement process
Number of projects 11
11
Acres in entitlement process 24,430
24,430
Acres undeveloped 70,291
78,918
Ventures accounted for using the equity method:
Ventures’ entitled, developed and under development projects
Number of projects 13
8
Residential lots remaining 2,672
2,984
Commercial acres remaining 182
236
Ventures’ undeveloped land and land in the entitlement process
Acres undeveloped 478
5,073

We underwrite development projects based on a variety of assumptions incorporated into our development plans, including the timing and pricing of sales and leasing and costs to complete development. Our development plans are periodically reviewed in comparison to our return projections and expectations, and we may revise our plans as business conditions warrant. If as a result of changes to our development plans the anticipated future net cash flows are reduced such

~~Table of Contents~~

that our basis in a project is not fully recoverable, we may be required to recognize a non-cash impairment charge for such project.

Our net investment in owned and consolidated real estate by geographic location follows:


State	Entitled, Developed, and Under Development Projects		Undeveloped Land and Land in Entitlement Process		Commercial and Income Producing Properties		Total		Entitled, Developed, and Under Development Projects		Undeveloped Land and Land in Entitlement Process		Commercial and Income Producing Properties		Total
	(In thousands)								(In thousands)
Texas	$	264,963	$	5,710	$	140,853	$	411,526	$	264,766	$	5,710	$	22,109	$	292,585
Georgia	13,827		62,992		—		76,819		5,383		65,753		—		71,136
California	8,915		24,219		—		33,134		8,915		25,033		—		33,948
North Carolina	12,333		95		18,121		30,549
North & South Carolina									12,509		135		—		12,644
Colorado	25,356		618		—		25,974		24,040		6		—		24,046
Tennessee	17,936		140		8,483		26,559		15,524		—		—		15,524
Other	16,202		50		—		16,252		21,232		238		—		21,470
	$	359,532	$	93,824	$	167,457	$	620,813	$	352,369	$	96,875	$	22,109	$	471,353

Oil and Gas

Our oil and gas segment is focused on maximizing the value from our owned oil and gas mineral interests through promoting exploration, development and production ~~of oil~~activities by increasing acreage leased, lease rates and ~~gas on our mineral and leasehold~~royalty interests.

We lease portions of our 590,000 owned net mineral acres located principally in Texas, Louisiana, Georgia and Alabama to other oil and gas companies in return for a lease bonus, delay rentals and a royalty interest. At ~~third~~first quarter-end ~~2015,~~2016, we have about ~~22,000~~15,000 net acres leased to others, about ~~36,000~~40,000 net acres leased to others that are held by production related to our owned mineral interests and ~~532~~533 gross ~~productive~~ wells operated by others on our owned mineral acres. ~~Most leases~~

In addition, we are ~~for a three to five year term although all or a portion of a lease may be extended as long as actual production is occurring.~~

At ~~third quarter-end2015~~,focused on exiting our ~~leasehold interests include~~ ~~324,000~~ ~~net mineral acres leased from others~~non-core working interest oil and gas assets, principally located in Nebraska and Kansas primarily targeting the Lansing-Kansas City formation, in Oklahoma targeting various formations in the Anadarko Basin, in the Texas Panhandle primarily targeting the Tonkawa and Cleveland formations and in North Dakota primarily targeting the Bakken and Three Forks formations. Our leasehold interests include ~~9,000~~ ~~net mineral acres~~ in the Bakken/Three Forks ~~formation. We have~~ ~~45,000~~ ~~net acres~~ of ~~leasehold interests held by production~~North Dakota and ~~382 gross~~Lansing - Kansas City formation of Nebraska and Kansas. In first quarter 2016, we sold our remaining Nebraska and Kansas oil and gas properties for $21,000,000 and sold certain oil and gas properties in North Dakota for $9,499,000 which includes $3,269,000 in reimbursement of capital costs incurred on in-progress wells that were assumed by the buyer. On May 6, 2016 we sold our our remaining Bakken/Three Forks oil and gas properties for $50,000,000. Net proceeds after purchase price adjustments were $46,525,000 and with the close of this transaction we have completely exited our oil and gas working ~~interest ownership, of which 129 are operated by us.~~interests in North Dakota.

A summary of our oil and gas results follows:


	Third Quarter						First Nine Months						First Quarter
	2015			2014			2015			2014			2016			2015
	(In thousands)												(In thousands)
Revenues	$	13,485		$	24,145		$	42,835		$	66,076		$	5,352		$	13,185
Cost of oil and gas producing activities	(95,553		)	(18,470		)	(177,236		)	(48,016		)	(5,194		)	(11,542		)
Operating expenses	(2,017		)	(3,164		)	(10,499		)	(11,235		)	(1,654		)	(5,856		)
	(84,085		)	2,511			(144,900		)	6,825			(1,496		)	(4,213		)
Gain (loss) on sale of assets	(2,174		)	3,335			(1,320		)	9,041			(10,977		)	1,176
Equity in earnings of unconsolidated ventures	67			156			220			465			32			96
Segment earnings (loss)	$	(86,192	)	$	6,002		$	(146,000	)	$	16,331		$	(12,441	)	$	(2,941	)

Revenues consist of:


	Third Quarter				First Nine Months				First Quarter
	2015		2014		2015		2014		2016		2015
	(In thousands)								(In thousands)
Oil production ^(a)	$	11,691	$	22,053	$	37,453	$	59,057	$	4,522	$	11,304
Gas production	1,174		1,913		4,078		5,694		749		1,516
Other (principally lease bonus and delay rentals)	620		179		1,304		1,325		81		365
	$	13,485	$	24,145	$	42,835	$	66,076	$	5,352	$	13,185

~~Table of Contents~~

_________________________


^(a)	Oil production includes revenues from oil, condensate and natural gas liquids (NGLs).

In ~~third~~first quarter ~~and first nine months~~ ~~2015~~2016, oil and gas production revenues decreased principally as a result of lower oil and gas prices ~~despite an increase in~~and lower production volumes due to selling producing oil and gas ~~production volumes~~properties as ~~compared with 2014.~~result of our exiting non-core working interest assets. The decline in oil prices negatively impacted revenues by ~~$14,338,000~~$2,623,000 and ~~$41,030,000~~the decline in ~~third~~oil volumes negatively impacted revenues by $4,160,000 in first quarter ~~and first nine months 2015 as~~2016 when compared with ~~the previous year. This decline was partially offset by a $3,977,000 and $19,418,000 increase in revenues as a result of higher oil production volumes in third~~first quarter ~~and first nine months 2015, respectively.~~2015. The decline in gas prices negatively impacted revenues by ~~$971,000~~$303,000 and ~~$2,525,000~~the decline in ~~third quarter and first nine months 2015, partially offset by a $231,000 and $916,000 increase in revenues as a result of increased~~ gas production volumes negatively impacted revenues by $463,000 in ~~third~~first quarter ~~and first nine months 2015 as~~2016 when compared with ~~the previous year.~~first quarter 2015.

Other revenues include ~~$996,000~~$74,000 in lease bonuses received from leasing ~~3,300 net mineral acres owned in Texas and Louisiana during the first nine months 2015 as compared with $1,236,000 in lease bonuses received from leasing approximately 3,900~~366 net mineral acres owned in Texas and Louisiana in ~~2014.~~first quarter 2016 compared with $279,000 lease bonus revenues received from leasing 800 net mineral acres in Texas and Louisiana in first quarter 2015.

Cost of oil and gas producing activities consists of:


	Third Quarter				First Nine Months				First Quarter
	2015		2014		2015		2014		2016		2015
	(In thousands)								(In thousands)
Depletion and amortization	$	8,970	$	8,098	$	23,853	$	19,907	$	1,752	$	7,204
Production costs	4,950		5,389		14,341		13,694		3,329		4,102
Exploration costs	242		4,029		10,536		12,008		42		168
Non-cash impairment of proved oil and gas properties and unproved leasehold interests	81,240		735		127,185		2,074		—		7
Other	151		219		1,321		333		71		61
	$	95,553	$	18,470	$	177,236	$	48,016	$	5,194	$	11,542

Cost of oil and gas producing activities ~~increased~~decreased in ~~third~~first quarter 2016 when compared with first quarter 2015 ~~principally~~primarily due to lower depletion and amortization expense as a result of ~~non-cash impairment charges of $65,382,000 for proved~~our key initiatives to exit non-core oil and gas properties and ~~$15,858,000 for unproved leasehold interests principally in North Dakota, Oklahoma, Nebraska and Kansas. Cost of oil and gas producing activities in first nine months 2015 includes~~lower basis due to previously recorded non-cash impairment charges of $90,417,000 for proved oil and gas properties, $36,768,000 for unproved leasehold interests principally in North Dakota, Oklahoma, Nebraska and Kansas and exploratory dry hole and pre-drilling costs of $10,869,000 related to oil and gas properties in Oklahoma. We may incur additional near-term impairments due to continuation of declining oil and gas prices, changes in production rates, future development costs and levels of proved reserves. First nine months 2014 included non-cash impairment charges of $2,074,000 associated with expiring leasehold interests related to our unproved leasehold interests. In third quarter and first nine months 2015, cost of oil and gas producing activities were also affected by an increase in depletion expenses due to higher oil and gas production volumes, as compared with 2014.charges. Depletion and amortization represent ~~the~~ non-cash ~~cost~~costs of producing oil and gas associated with our working interests and is computed based on the units of production method.

Exploration costs principally represent exploratory dry hole costs, geological and geophysical and seismic study costs. Dry hole costs in first nine months 2015 were $9,952,000, which includes a $9,674,000 charge in second quarter 2015 primarily associated with an exploratory well in Oklahoma. Dry hole costs in first nine months 2014 were $9,467,000, which includes $4,938,000 primarily in Kansas and Nebraska, $2,338,000 associated with an exploratory well in Oklahoma and $2,191,000 in east Texas.

Production costs principally represent lease operating expenses associated with producing working interest wells and our share of production severance taxes related to both our royalty and working interests.

~~Table of Contents~~

Oil and gas produced and average unit prices related to our royalty and working interests follows:


	Third Quarter				First Nine Months				First Quarter
	2015		2014		2015		2014		2016		2015
Consolidated entities:
Oil production (barrels)	278,900		250,500		810,800		632,800		162,000		269,900
Average oil price per barrel	$	40.66	$	86.13	$	44.61	$	90.73	$	26.86	$	40.18
NGL production (barrels)	30,400		11,500		81,300		38,500		23,600		23,700
Average NGL price per barrel	$	11.52	$	41.12	$	15.80	$	42.56	$	7.22	$	19.28
Total oil production (barrels), including NGLs	309,300		262,000		892,100		671,300		185,600		293,600
Average total oil price per barrel, including NGLs	$	37.80	$	84.16	$	41.98	$	87.97	$	24.36	$	38.50
Gas production (millions of cubic feet)	505.0		450.6		1,502.0		1,293.8		382.4		478.1
Average price per thousand cubic feet	$	2.33	$	4.25	$	2.72	$	4.40	$	1.96	$	3.17
Our share of ventures accounted for using the equity method:
Gas production (millions of cubic feet)	46.8		49.1		129.2		152.3		37.3		42.3
Average price per thousand cubic feet	$	2.19	$	4.21	$	2.61	$	4.07	$	1.78	$	3.30
Total consolidated and our share of equity method ventures:
Oil production (barrels)	278,900		250,500		810,800		632,800		162,000		269,900
Average oil price per barrel	$	40.66	$	86.13	$	44.61	$	90.73	$	26.86	$	40.18
NGL production (barrels)	30,400		11,500		81,300		38,500		23,600		23,700
Average NGL price per barrel	$	11.52	$	41.12	$	15.80	$	42.56	$	7.22	$	19.28
Total oil production (barrels), including NGLs	309,300		262,000		892,100		671,300		185,600		293,600
Average total oil price per barrel, including NGLs	$	37.80	$	84.16	$	41.98	$	87.97	$	24.36	$	38.50
Gas production (millions of cubic feet)	551.8		499.7		1,631.2		1,446.1		419.7		520.4
Average price per thousand cubic feet	$	2.31	$	4.24	$	2.71	$	4.37	$	1.94	$	3.18
Total BOE (barrel of oil equivalent) ^(a)	401,200		345,400		1,163,900		912,400		255,600		380,400
Average price per barrel of oil equivalent	$	32.32	$	70.00	$	35.97	$	71.65	$	20.89	$	34.07

_________________________


^(a)	Gas is converted to barrels of oil equivalent (BOE) using a conversion of six Mcf to one barrel of oil.

Operating expenses consist of:


	Third Quarter				First Nine Months				First Quarter
	2015		2014		2015		2014		2016		2015
	(In thousands)								(In thousands)
Employee compensation and benefits	$	1,186	$	2,291	$	5,240	$	7,305	$	827	$	2,621
Professional and consulting services	250		156		1,422		833		414		707
Depreciation	246		241		728		756		85		211
Other	335		476		3,109		2,341		328		2,317
	$	2,017	$	3,164	$	10,499	$	11,235	$	1,654	$	5,856

~~Operating~~The decrease in operating expenses ~~decreased~~ in ~~third~~first quarter 2016 compared with first quarter 2015 ~~compared with third quarter 2014~~is primarily due to ~~lower staffing~~our key initiative to reduce costs ~~as a result of a~~across our entire organization and corresponding reduction in our ~~workforce and initiatives to reduce oil and gas operating expenses, offset by $406,000 of retention bonus expense.~~workforce. First ~~nine months~~quarter 2015 operating expenses includes ~~restructuring costs of~~ $1,750,000 for a lease termination charge associated with closing our office in Fort Worth, Texas and ~~$1,979,000~~$1,068,000 of employee severance and retention costs. ~~These restructuring costs were partially offset by lower staffing costs as result of a reduction in our workforce and initiatives to reduce oil and gas operating expenses.~~

In first ~~nine months 2015,~~quarter 2016, we recorded a net loss of ~~($1,320,000)~~$10,977,000 on the sale of ~~27,662 net~~190,960 mineral acres leased from others ~~in Nebraska~~ and ~~North Dakota and the disposition of 29~~185 gross (5(66 net) producing oil and gas wells primarily in ~~Texas,~~Nebraska, Kansas, Oklahoma and North Dakota ~~Nebraska, Oklahoma and Colorado~~ for total sales proceeds of ~~$13,111,000. In first nine months 2014, we recorded a total gain~~$32,227,000. A significant portion of ~~$9,041,000 in conjunction with~~ the net loss on sale, $7,244,000, is related to write-off of ~~102 gross (7 net)~~allocated goodwill to sold producing oil and gas ~~wells in Oklahoma and~~properties. In first quarter 2015, we recorded a gain of $1,176,000 related to the sale of ~~571~~290 net mineral acres leased from others in North ~~Dakota.~~Dakota for approximately $2,000,000.

~~Table of Contents~~

Other Natural Resources

Our other natural resources segment manages our timber holdings, recreational leases and water resource initiatives. At ~~third~~first quarter-end ~~2015~~2016, we have about ~~95,000~~87,000 real estate acres with timber we own directly or through ventures, primarily in Georgia and Texas. Our other natural resources segment revenues are principally derived from the sales of wood fiber from our land and leases for recreational uses. We have water interests in approximately 1.5 million acres, including a 45 percent nonparticipating royalty interest in groundwater produced or withdrawn for commercial purposes or sold from 1.4 million acres in Texas, Louisiana, Georgia and Alabama, and approximately 20,000 acres of groundwater leases in central Texas.

A summary of our other natural resources results follows:


	Third Quarter						First Nine Months						First Quarter
	2015			2014			2015			2014			2016			2015
	(In thousands)												(In thousands)
Revenues	$	1,726		$	2,250		$	5,372		$	7,284		$	438		$	1,790
Cost of sales	(819		)	(711		)	(2,599		)	(2,288		)	(385		)	(920		)
Operating expenses	(994		)	(1,051		)	(3,303		)	(3,652		)	(634		)	(1,266		)
	(87		)	488			(530		)	1,344			(581		)	(396		)
Gain on sale and partial termination of timber lease	—			165			—			850
Equity in earnings of unconsolidated ventures	10			16			19			26			—			5
Segment earnings (loss)	$	(77	)	$	669		$	(511	)	$	2,220		$	(581	)	$	(391	)

Revenues consist of:


	Third Quarter				First Nine Months				First Quarter
	2015		2014		2015		2014		2016		2015
	(In thousands)								(In thousands)
Fiber	$	1,403	$	1,770	$	4,039	$	5,514	$	151	$	1,245
Water	100		250		400		1,000		—		100
Recreational leases and other	223		230		933		770		287		445
	$	1,726	$	2,250	$	5,372	$	7,284	$	438	$	1,790

Fiber sold consists of:


	Third Quarter				First Nine Months				First Quarter
	2015		2014		2015		2014		2016		2015
Pulpwood tons sold	45,600		71,500		109,100		157,900		5,300		27,500
Average pulpwood price per ton	$	9.89	$	11.18	$	9.41	$	11.00	$	8.73	$	8.63
Sawtimber tons sold	14,400		21,500		53,800		100,000		3,200		20,100
Average sawtimber price per ton	$	20.41	$	21.31	$	21.22	$	22.38	$	21.02	$	21.50
Total tons sold	60,000		93,000		162,900		257,900		8,500		47,600
Average stumpage price per ton ^(a)	$	12.41	$	13.52	$	13.31	$	15.41	$	13.30	$	14.07

_________________________


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

Water revenues are associated with a groundwater reservation agreement with Hays County, Texas, which commenced in ~~third quarter~~ 2013 and was terminated in second quarter 2015.

Information about our recreational leases follows:


	Third Quarter				First Nine Months				First Quarter
	2015		2014		2015		2014		2016		2015
Average recreational acres leased	97,000		107,800		99,900		111,400		87,500		109,700
Average price per leased acre	$	8.93	$	8.66	$	9.18	$	9.17	$	9.39	$	8.66

Cost of sales principally includes non-cash cost of timber cut and sold and delay rental payments paid to others related to groundwater leases in central Texas.

~~Table of Contents~~

Operating expenses consist of:


	Third Quarter				First Nine Months				First Quarter
	2015		2014		2015		2014		2016		2015
	(In thousands)								(In thousands)
Employee compensation and benefits	$	511	$	602	$	1,754	$	1,711	$	301	$	683
Professional and consulting services	307		230		955		1,437		211		349
Other	176		219		594		504		122		234
	$	994	$	1,051	$	3,303	$	3,652	$	634	$	1,266

The decrease in operating expenses in first quarter 2016 when compared with first quarter 2015 is primarily due to our key initiative to reduce costs across entire organization and corresponding reduction in our workforce. Employee compensation and benefits includes $164,000 in severance costs incurred in first quarter 2016. Operating expenses associated with our water resources initiatives for ~~third~~first quarter 2016 and ~~first nine months~~ 2015 were ~~$516,000~~$297,000 and ~~$1,792,000 compared with $449,000 and $2,120,000 in third quarter and first nine months 2014.~~

Gain on sale and partial termination of timber lease in first nine months 2014 includes a $685,000 gain associated with partial termination of a timber lease related to the sale of 697 acres of undeveloped land in Georgia from a consolidated venture recorded in second quarter 2014 and a $165,000 gain in third quarter 2014 associated with the sale of water rights associated with a real estate project in Colorado.$750,000.

Items Not Allocated to Segments

Unallocated items represent income and expenses managed on a company-wide basis and include general and administrative expenses, share-based and long-term incentive compensation, interest expense and other corporate non-operating income and expense. General and administrative expenses principally consist of accounting and finance, tax, legal, human resources, internal audit, information technology and our board of directors. These functions support all of our business segments and are not allocated.

General and administrative expense

General and administrative expenses consist of:


	Third Quarter				First Nine Months				First Quarter
	2015		2014		2015		2014		2016		2015
	(In thousands)								(In thousands)
Employee compensation and benefits	$	5,385	$	2,447	$	9,582	$	7,173	$	2,585	$	2,208
Professional and consulting services	1,346		935		4,595		3,301		946		1,668
Facility costs	216		229		670		705		230		233
Depreciation and amortization	133		168		464		463		119		181
Insurance costs	178		201		493		716		186		151
Other	1,085		1,210		3,736		3,566		907		1,579
	$	8,343	$	5,190	$	19,540	$	15,924	$	4,973	$	6,020

The decrease in general and administrative expense in first quarter 2016 when compared with first quarter 2015 is primarily due to our key initiative to reduce costs across entire organization. Employee compensation and benefits includes $486,000 in ~~third~~severance costs incurred in first quarter 2016.

Share-based and ~~first nine months 2015 includes $3,314,000 of one-time severance-related charges related~~long-term incentive compensation expense

Our share-based compensation expense principally fluctuates due to ~~departure~~a portion of our ~~former CEO~~awards being cash-settled and ~~CFO under employment~~as a result are affected by changes in market price of our common stock. The decrease in share-based compensation expense in first quarter 2016 when compared with first quarter 2015 is primarily due to decrease in new grants awarded to employees, decrease in annual restricted stock grants to our Board of Directors and ~~separation agreements,~~decrease in value of cash-settled awards paid in first quarter 2016 due to decrease in market price of our common stock by over 20 percent from year-end 2015 to settlement date. These decreases were somewhat offset by an increase of over 19 percent in our stock price since year-end 2015 and its impact on cash-settled awards.

Interest expense

The decrease in interest expense in first quarter 2016 when compared with first quarter 2015 is primarily due to decrease in debt outstanding associated with retirement of $8,600,000 and $19,440,000 of 8.50% Senior Secured Notes (Notes) in first quarter 2016 and fourth quarter 2015 and due to our payment in full of a $24,166,000 loan secured by Midtown Cedar Hill, which ~~approximately $2,721,000 will be paid~~we sold in fourth quarter ~~2015 with~~2015. First quarter 2016 debt retirement resulted in a gain of $127,000

on early extinguishment, offset by the ~~balance~~write-off of unamortized debt issuance costs of $225,000 allocated to ~~be paid~~the Notes. Net loss on early extinguishment of debt was $98,000 in ~~2016.~~first quarter 2016 which is reported in other non-operating income.

Income Taxes

~~Our provision for income taxes including the impact of deferred tax asset valuation allowance is as follows:~~

Our effective tax rate was ~~64 percent in third quarter 2015 and 23~~38 percent in first ~~nine months 2015. Excluding the impact~~quarter 2016, which includes a three percent benefit for a partial release of our valuation allowance ~~our effective tax rate was 35~~and a five percent ~~benefit in third quarter 2015~~detriment for goodwill due to the sale of oil and ~~36 percent benefit in first nine months 2015.~~gas assets. Our effective tax rate was 35 percent in ~~third~~first quarter 2015, which included a two percent benefit for noncontrolling interests and ~~first nine months 2014.~~a two percent detriment for share-based compensation benefits that will not be realized. Our effective tax rates also include the effect of state income taxes, ~~noncontrolling interests,~~ nondeductible itemsand benefits of percentage depletion.

~~Table~~At first quarter-end 2016 and year-end 2015, we have a valuation allowance for our deferred tax assets of ~~Contents~~$95,389,000 and $97,068,000 for the portion of the deferred tax assets that we have determined is more likely than not to be unrealizable.

~~We assess~~In determining our valuation allowance, we assessed available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax asset. ~~In determining our valuation allowance, a~~A significant piece of objective ~~negative~~ evidence evaluated was the cumulative loss incurred over the three-year period ended ~~September 30, 2015,~~March 31, 2016, principally driven by impairments of oil and gas ~~assets.~~properties in 2015. Such evidence limits our ability to consider other subjective evidence, such as our projected future taxable income.

~~A valuation allowance was recorded for the portion of our deferred tax asset that we believe is more likely than not to be unrealizable at third quarter-end 2015.~~ The amount of the deferred tax asset considered realizable ~~however,~~ could be adjusted if ~~estimates of future taxable income are reduced or increased or if objective~~ negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence, such as our projected future taxable income.

Capital Resources and Liquidity

Sources and Uses of Cash

We operate in cyclical industries and our cash flows fluctuate accordingly. Our principal sources of cash are proceeds from the sale of real estate and timber, the cash flow from oil and gas and income producing properties, borrowings and reimbursements from utility and improvement districts. Our principal cash requirements are for the acquisition and development of real estate and investment in oil and gas leasing and production activities, either directly or indirectly through ventures, taxes, interest and compensation. Operating cash flows are affected by the timing of the payment of real estate development expenditures and the collection of proceeds from the eventual sale of the real estate, the timing of which can vary substantially depending on many factors including the size of the project, state and local permitting requirements and availability of utilities, and by the timing of oil and gas leasing and production activities. Working capital varies based on a variety of factors, including the timing of sales of real estate and timber, oil and gas leasing and production activities, collection of receivables, reimbursement from utility and improvement districts and the payment of payables and expenses.

We regularly evaluate alternatives for managing our capital structure and liquidity profile in consideration of expected cash flows, growth and operating capital requirements and capital market conditions. We may, at any time, be considering or be in discussions with respect to the purchase or sale of our common stock, debt securities, convertible securities or a combination thereof.

Cash Flows from Operating Activities

Cash flows from our real estate acquisition and development activities, undeveloped land sales, commercial and income producing properties, timber sales, income from oil and gas properties, recreational leases and reimbursements from utility and improvement districts are classified as operating cash flows.

In first ~~nine months~~quarter ~~2015~~2016, net cash ~~used for~~provided by operating activities was $~~15,040,000~~5,009,000. The ~~decrease~~increase in cash provided by operating activities year over year is primarily due to lower ~~residential lot sales activity and a decrease in undeveloped land sales. In addition, our~~ real estate development and acquisition expenditures ~~were $81,055,000 exceeding $33,575,000~~ of ~~real estate cost of sales.~~$14,794,000. In first ~~nine months~~quarter ~~2014~~2015, net cash ~~provided by~~used for operating activities was ~~$36,386,000~~$18,766,000 principally due to ~~increased~~lower residential lot sales and undeveloped land sales ~~activity. This is partially offset by $82,864,000 of~~activity and $34,769,000 in real estate development and acquisition expenditures exceeding ~~$59,251,000~~$9,884,000 of real estate cost of sales.

Cash Flows from Investing Activities

Capital contributions to and capital distributions from unconsolidated ventures, costs incurred to acquire, develop and construct multifamily projects that will be held as commercial operating properties upon stabilization as investment property, business acquisitions and investment in oil and gas properties and equipment are classified as investing activities. In addition, proceeds from the sale of property and equipment, software costs and expenditures related to reforestation activities are also classified as investing activities.

In first ~~nine months~~quarter 2016, net cash provided by investing activities was $51,449,000 principally a result of sales proceeds of $56,828,000, of which $28,958,000 are from sale of certain oil and gas properties and $27,870,000 are proceeds from sale of our interest in 360⁰, a 304-unit multifamily joint venture in Denver, and the sale of Music Row, a wholly-owned multifamily property under construction in Nashville, for $14,703,000. In first quarter 2015, net cash used for investing activities was ~~$60,479,000~~$24,703,000 principally due to ~~our~~ investment of ~~$47,043,000~~$23,718,000 in oil and gas properties and equipment associated with ~~our~~ previously committed ~~capital investments related to~~ exploration and production ~~operations. In addition, we invested $10,882,000~~operations and investment of $2,809,000 in property and equipment, software and reforestation, of which ~~$5,757,000 is related to capital expenditures for our 413 guest room hotel in Austin. In first nine months~~ ~~2014, net cash used in investing activities~~$2,357,000 was $82,929,000 principally due to our investment of $65,661,000 in oil and gas properties and equipment associated with our exploration and production operations and purchase of our partner's interest in our 257-unit multifamily

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~~property in Austin for $20,155,000, net of cash. In addition, we invested $13,583,000 in property and equipment, software and reforestation, of which $6,440,000 is~~ related to capital expenditures on our 413 guest room hotel in Austin, ~~and $4,954,000 is related to water wells development, and a net investment in unconsolidated ventures of $3,415,000. These were~~ partially offset by proceeds of ~~$17,017,000~~$2,000,000 related to sale of certain oil and gas properties in North ~~Dakota and Oklahoma.~~Dakota.

Cash Flows from Financing Activities

In first ~~nine months~~quarter 2016, net cash used for financing activities was $10,254,000 principally due to retirement of $8,600,000 of our 8.5% senior secured notes and $2,250,000 of payments related to amortizing notes assoicated with our tangible equity units. In first quarter 2015, net cash used for financing activities was ~~$1,968,000~~$396,000 principally due to payroll taxes on share-settled equity awards and distributions to noncontrolling ~~interests. In first nine months 2014, net~~interests, offset by cash flows provided by ~~financing activities was $24,842,000 principally due~~net additions to net proceeds of $241,947,000 from the issuance of 8.5% senior secured notes, partially offset by debt payments of $222,468,000, of which $200,000,000 is related to retirement of the term loan associated with our senior secured credit facility, $7,200,000 is related to payments of our amortizing notes associated with our tangible equity units, $2,878,000 is related to debt outstanding for our Lantana partnerships and the remaining associated with payment of other indebtedness.debt.

Real Estate Acquisition and Development Activities

We secure entitlements and develop infrastructure, primarily for single family residential and mixed-use communities. ~~We also develop and own directly or through ventures multifamily communities as income producing properties, primarily in our target markets.~~

We categorize real estate development and acquisition expenditures as operating activities on the statement of cash flows. These development and acquisition expenditures include costs for development of residential lots and ~~mixed-used communities and multifamily community projects that will be marketed for sale upon stabilization.~~mixed-use communities.

In first ~~nine months 2015,~~quarter 2016, real estate development and acquisition expenditures were ~~$81,055,000 which includes the acquisition of four new community development sites for $24,387,000 and~~$14,794,000 entirely related to real estate development costs ~~of $56,668,000.~~as we made no community development site acquisitions in first quarter 2016.

Oil and Gas Drilling and Other Exploration and Development Activities

~~At third quarter-end 2015, we had working interests in 382 gross active wells.~~

Our planned expenditures for ~~2015~~2016 are expected to be significantly lower compared with ~~2014~~2015 based on our plan to exit non-core oil and ~~are primarily related to existing well commitments in the Bakken/Three Forks formation of North Dakota.~~gas assets. In first ~~nine months 2015,~~quarter 2016, drilling and completion activity was primarily related to existing well commitments with 32 gross Bakken/Three Forks wells generating initial production and two wells waiting on completion. In addition, in first nine months 2015, we have elected to participate as a non-operator in eight new gross wells for $6,664,000 in the Bakken/Three Forks formation of North Dakota.settling capital expenditures accrued at year-end 2015. Regional allocation of our capital expenditures for drilling and completion activities in first ~~nine months 2015~~quarter 2016 is shown below:

First Nine Months
2015
(In thousands)
Bakken and Three Forks formations of North Dakota $ 27,592
Lansing - Kansas City formation of Nebraska and Kansas 3,184
Other formations principally in Oklahoma 16,267
$ 47,043



	First Quarter
	2016
	(In thousands)
Bakken and Three Forks formations of North Dakota	$	395
Other, principally in Nebraska	17
	$	412

~~Our accrued~~Accrued capital expenditures for drilling and completion costs at ~~third~~first quarter-end ~~2015~~2016 were ~~$6,979,000~~$3,677,000 and are included in other accrued ~~expenses in our consolidated balance sheets.~~expenses. These oil and gas property additions will be reflected as cash used for investing activities in the period the accrued payables are settled. Of the $47,043,000 of capital expenditures that we incurred and paid in first nine months 2015 for drilling and completion activities, $40,757,000 was related to settling year-end 2014 accrued capital expenditures and payment of 2014 well commitments that were completed as of third quarter-end 2015.

~~Our~~ ~~2015~~ projected capital expenditures are subject to various conditions, including third-party operator drilling plans, oilfield services and equipment availability, commodity prices and drilling results. Other factors that could cause us to adjust our projections include changes in commodity prices, service or material costs, opportunities, changes in conditions, or the performance of wells. We will continue to assess the gas and oil price environment along with our liquidity position and may increase or decrease our capital expenditure budget for exploration, development, or acquisition opportunities accordingly.

Liquidity

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At ~~third~~first quarter-end ~~2015~~2016, our senior secured credit facility provides for a $300,000,000 revolving line of credit maturing May 15, 2017 (with two one-year extension options). The revolving line of credit may be prepaid at any time without penalty. The revolving line of credit includes a $100,000,000 sublimit for letters of credit, of which ~~$16,184,000~~$15,817,000 is outstanding at ~~third~~first quarter-end ~~2015~~2016. Total borrowings under our senior secured credit facility (including the face amount of letters of credit) may not exceed a borrowing base formula.

At ~~third~~first quarter-end ~~2015~~2016, net unused borrowing capacity under our senior secured credit facility is calculated as follows:


	Senior Credit Facility			Senior Credit Facility
	(In thousands)			(In thousands)
Borrowing base availability	$	300,000		$	281,016
Less: borrowings	—			—
Less: letters of credit	(16,184		)	(15,817		)
	$	283,816		$	265,199

Our net unused borrowing capacity during ~~third~~first quarter ~~2015~~2016 ranged from a high of ~~$284,511,000~~$284,426,000 to a low of ~~$283,816,000.~~$265,199,000. Certain non-core assets support the borrowing base under our senior secured credit facility so we expect our borrowing capacity to be reduced as non-core assets are sold over time. This facility is used primarily to fund our operating cash needs, which fluctuate due to timing of residential and commercial real estate sales, undeveloped land sales, oil and gas leasing, exploration and production activities and mineral lease bonus payments received, timber sales, reimbursements from utility and improvement districts, payment of payables and expenses and capital expenditures.

The following table details our compliance with the financial covenants calculated as provided in the senior credit facility:



Financial Covenant	Requirement	~~Third~~First Quarter-End ~~2015~~2016
Interest Coverage Ratio ^(a)	≥~~2.50:~~2.25:1.0	~~2.67:~~3.18:1.0
Total Leverage Ratio ^(b)	≤50%	~~42.1~~40.1	%
Tangible Net Worth ^(c)	≥$379.0 million	$~~473.8~~474.9 million

___________________________________


^(a)	Calculated as EBITDA (earnings before interest, taxes, depreciation, depletion and amortization), plus non-cash compensation expense, plus other non-cash expenses, divided by interest expense excluding loan fees. This covenant is applied at the end of each quarter on a rolling four quarter basis.

^(b)

Calculated as total funded debt divided by adjusted asset value. Total funded debt includes indebtedness for borrowed funds, secured liabilities, reimbursement obligations with respect to letters of credit or similar instruments, and our pro-rata share of joint venture debt outstanding. Adjusted asset value is defined as the sum of unrestricted cash and cash equivalents, timberlands, high value timberlands, raw entitled lands, entitled land under development, minerals business, Credo asset value, special improvement district receipts (SIDR) reimbursements value and other real estate owned at book value without regard to any indebtedness and our pro rata share of joint ventures’ book value without regard to any indebtedness. This covenant is applied at the end of each quarter.

^(c)

Calculated as the amount by which consolidated total assets (excluding Credo acquisition goodwill over $50,000,000) exceeds consolidated total liabilities. At ~~third~~first quarter-end ~~2015,~~2016, the requirement is $379,044,000 computed as: $379,044,000 plus 85 percent of the aggregate net proceeds received by us from any equity offering, plus 75 percent of all positive net income, on a cumulative basis. This covenant is applied at the end of each quarter.

To make additional discretionary investments, acquisitions, or distributions, we must maintain available liquidity equal to 10 percent of the aggregate commitments in place. At ~~third~~first quarter-end~~2015~~, 2016, the minimum liquidity requirement was ~~$30,000,000~~,$30,000,000, compared with ~~$372,623,000~~$402,602,000 in actual available liquidity based on the unused borrowing capacity under our senior secured credit facility plus unrestricted cash and cash equivalents. The failure to maintain such minimum liquidity does not constitute a default or event of default of our senior secured credit facility.

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Discretionary investments in community development may be restricted in the event that the revenue/capital expenditure ratio is less than or equal to 1.0x. At ~~third~~first quarter-end ~~2015~~2016, the revenue/capital expenditure ratio was ~~1.7x.~~2.0x. Revenue is defined as total gross revenues (excluding revenues attributed to Credo and multifamily properties), plus our pro rata share of the operating revenues from unconsolidated ventures. Capital expenditures are defined as consolidated development and acquisition expenditures (excluding investments related to Credo and multifamily properties), plus our pro rata share of unconsolidated ventures’ development and acquisition expenditures.

In addition, we may elect to make distributions so long as the total leverage ratio is less than 40 percent, the interest coverage is greater than 3.0:1.0 and available liquidity is not less than $125,000,000. At ~~third quarter-end~~Effective December 30, 2015,, the senior secured credit facility was amended to provide that we may make distributions in an aggregate amount not to exceed $50,000,000 to be funded from up to 65% of the net proceeds from sales of multifamily properties and non-core assets, such as Radisson Hotel & Suites in Austin, and any oil and gas properties. The amendment provides us the flexibility to repurchase stock or pay a special dividend should our ~~total leverage ratio exceeded 40 percent and our interest coverage ratio was below 3.0:1.0, and as a result~~Board or Directors determine that we ~~are prohibited from making restricted payments, which includes purchases of our common stock, until the foregoing conditions are satisfied.~~should do so, though no such decisions have been made at this time.

Contractual Obligations and Off-Balance Sheet Arrangements

In 2014, FMF Littleton LLC, an equity method venture in which we own a 25 percent interest, obtained a senior secured construction loan in the amount of $46,384,000 to develop a 385-unit multifamily project located in Littleton, Colorado. The outstanding balance was ~~$15,665,000~~$26,706,000 at ~~third~~first quarter-end ~~2015~~2016. We provided the lender with a guaranty of completion of the improvements; a guaranty for repayment of 25 percent of the principal balance and unpaid accrued interest; and a standard nonrecourse carve-out guaranty. The principal guaranty will reduce from 25 percent of principal to ten percent upon achievement of certain conditions.

In 2014, CREA FMF Nashville LLC, an equity method venture with Massachusetts Mutual Life Insurance Co. (MassMutual) in which we own a 30 percent interest, obtained a senior secured construction loan in the amount of $51,950,000 to develop a 320-unit multifamily project located in Nashville, Tennessee. The outstanding balance at ~~third~~first quarter-end ~~2015~~2016 was $49,960,000. MassMutual is obligated to make a capital contribution to the venture in an amount equal to its equity commitment under the construction loan in an amount not to exceed $14,220,000. Such capital contribution shall be paid upon the earlier of (i) March 16, 2016 (ii) two months after the issuance of final certificates of occupancy with respect to the entire project, or (iii) ten business days after the date on which the long-term credit rating of MassMutual is less than AA- from Standard & Poor's or A1 from Moody's.$36,832,000. We provided the lender with a guaranty of completion of the improvements; a guaranty for repayment of 25 percent of the principal balance and unpaid accrued interest; and a standard nonrecourse carve-out guaranty. The principal guaranty will reduce from 25 percent of principal to zero percent upon achievement of certain conditions.

In 2012, FMF Peakview LLC, an equity method venture in which we own a 20 percent interest, obtained a senior secured construction loan in the amount of $31,550,000 to develop a 304-unit multifamily property in Denver. The outstanding balance at ~~third quarter-end2015~~ ~~was~~ ~~$29,426,000. We provided the lender with a construction completion guaranty, a repayment guaranty for 25 percent of the principal and unpaid accrued interest, and a standard non-recourse carve-out guaranty.~~

Cibolo Canyons—San Antonio, Texas

Cibolo Canyons consists of the JW Marriott ^® San Antonio Hill Country Resort & Spa development owned by third parties and a mixed-use development we own. We have $~~58,736,000~~57,887,000 invested in Cibolo Canyons at ~~third~~first quarter-end ~~2015~~2016, all of which is related to the mixed-use development.

Resort Hotel, Spa and Golf Development

In 2007, we entered into agreements to facilitate third party construction and ownership of the JW Marriott ^® San Antonio Hill Country Resort & Spa (the Resort), which includes a 1,002 room destination resort and two PGA Tour ^® Tournament Players Club ^® (TPC) golf courses.

In exchange for our commitment to the Resort, the third party owners assigned to us certain rights under an agreement between the third party owners and a legislatively created Cibolo Canyons Special Improvement District (CCSID). This agreement includes the right to receive from CCSID 9 percent of hotel occupancy revenues and 1.5 percent of other resort sales revenues collected as taxes by CCSID through 2034. The amount we receive will be net of annual ad valorem tax reimbursements by CCSID to the third party owners of the resort through 2020. In addition, these payments will be net of debt service on bonds issued by CCSID collateralized by hotel occupancy tax (HOT) and other resort sales tax through 2034.

The amounts we collect under this agreement are dependent on several factors including the amount of revenues generated by and ad valorem taxes imposed on the Resort and the amount of debt service incurred by CCSID.

In 2014, we received $50,550,000 from CCSID principally related to its issuance of $48,900,000 HOT and Sales and Use Tax Revenue Bonds, resulting in recovery of our full Resort investment. These bonds are obligations solely of CCSID and are

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payable from HOT and sales and use taxes levied on the Resort by CCSID. To facilitate the issuance of the bonds, we provided a $6,846,000 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 Resort to assign its senior rights to us in exchange for consideration provided by us, including a surety bond to be drawn if CCSID tax collections are not sufficient to support ad valorem tax rebates payable. The surety bond has a balance of $7,850,000 at first quarter-end 2016. The surety bond will decrease as CCSID makes annual ad valorem tax rebate payments, which obligation is scheduled to be retired in full by 2020. All future receipts are expected to be recognized as gains in the period collected. In first nine months 2015, we recorded a gain of $1,585,000, of which $1,160,000 was associated with the reduction of the surety bond in connection with the CCSID bond offering in 2014 and $425,000 of excess hotel occupancy and sales and use tax pledged revenues from CCSID after their payments to the debt service fund.

Mixed-Use Development

The mixed-use development we own consists of 2,100 acres planned to include approximately 1,769 residential lots and 150 commercial acres designated for multifamily and retail uses, of which ~~954~~1,026 lots and 130 commercial acres have been sold through ~~third~~first quarter-end ~~2015~~2016.

In 2007, we entered into an agreement with CCSID providing for reimbursement of certain infrastructure costs related to the mixed-use development. Reimbursements are subject to review and approval by CCSID and unreimbursed amounts accrue interest at 9.75 percent. CCSID’s funding for reimbursements is principally derived from its ad valorem tax collections and bond proceeds collateralized by ad valorem taxes, less debt service on these bonds and annual administrative and public service expenses.

Because the amount of each reimbursement is dependent on several factors, including CCSID approval and CCSID having an adequate tax base to generate funds that can be used to reimburse us, there is uncertainty as to the amount and timing of reimbursements under this agreement. We expect to recover our investment from lot and tract sales and reimbursement of approved infrastructure costs from CCSID. We have not recognized income from interest due, but not collected. As these uncertainties are clarified, we will modify our accounting accordingly.

Through ~~third~~first quarter-end~~2015~~, 2016, we have submitted and were approved for reimbursement of approximately $54,376,000 of infrastructure costs, of which we have received reimbursements totaling $34,703,000. ~~We received $1,150,000 in reimbursements from CCSID in~~At first ~~nine months 2015. At third~~ quarter-end ~~2015,~~2016, we have $19,673,000 in pending reimbursements, excluding interest.

Critical Accounting Policies and Estimates

There have been no significant changes in our critical accounting policies or estimates from those disclosed in our ~~2014~~2015 Annual Report on Form 10-K.

New and Pending Accounting Pronouncements

Please read Note 2—New and Pending Accounting Pronouncements to the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Statistical and Other Data

A summary of our real estate projects in the entitlement process^(a) at ~~third~~first quarter-end ~~2015~~2016 follows:

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Project	County	Market	Project Acres ^(b)
California
Hidden Creek Estates	Los Angeles	Los Angeles	700
Terrace at Hidden Hills	Los Angeles	Los Angeles	30
~~Georgia~~
~~Ball Ground~~	~~Cherokee~~	~~Atlanta~~	~~500~~
~~Crossing~~	~~Coweta~~	~~Atlanta~~	~~230~~
~~Fincher Road~~	~~Cherokee~~	~~Atlanta~~	~~3,890~~
~~Garland Mountain~~	~~Cherokee/Bartow~~	~~Atlanta~~	~~350~~
~~Martin’s Bridge~~	~~Banks~~	~~Atlanta~~	~~970~~
~~Mill Creek~~	~~Coweta~~	~~Atlanta~~	~~770~~
~~Wolf Creek~~	~~Carroll/Douglas~~	~~Atlanta~~	~~12,230~~
~~Yellow Creek~~	~~Cherokee~~	~~Atlanta~~	~~1,060~~
Texas
Lake Houston	Harris/Liberty	Houston	3,700
Total			~~24,430~~4,430

_________________________

^(a)

A project is deemed to be in the entitlement process when customary steps necessary for the preparation of an application for governmental land-use approvals, like conducting pre-application meetings or similar discussions with governmental officials, have commenced, or an application has been filed. Projects listed may have significant steps remaining, and there is no assurance that entitlements ultimately will be received.


^(b)	Project acres, which are the total for the project regardless of our ownership interest, are approximate. The actual number of acres entitled may vary.

A summary of our non-core timberland and undeveloped land at first quarter-end 2016 follows:



		Acres
Timberland
Alabama		1,900
Georgia		45,500
Texas		14,300
Higher and Better Use Timberland
Georgia		19,800
Entitled Undeveloped Land
Georgia		5,100
Total		86,600

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A summary of activity within our active projects in the development process, which includes entitled ^(a), developed and under development real estate projects, at ~~third~~first quarter-end~~2015~~ 2016 follows:

Residential Lots ^(c)

Commercial Acres ^(d)
Project County
Interest
Owned ^(b)

Lots Sold
Since
Inception

Lots
Remaining

Acres Sold
Since
Inception

Acres
Remaining^(e)
Projects we own
California
San Joaquin River Contra Costa/Sacramento 100 % —
—
—
288
Colorado
Buffalo Highlands Weld 100 % —
164
—
—
Johnstown Farms Weld 100 % 281
313
2
3
Pinery West Douglas 100 % 86
—
20
106
Stonebraker Weld 100 % —
603
—
—
Georgia
Seven Hills Paulding 100 % 843
240
26
113
The Villages at Burt Creek Dawson 100 % —
1,715
—
57
West Oaks Cobb 100 % —
57
—
—
Other projects (17) Various 100 % 245
2,258
—
695
North & South Carolina
Habersham York 100 % 20
167
—
—
Walden Mecklenburg 100 % —
387
—
—
Tennessee
Beckwith Crossing Wilson 100 % —
99
—
—
Morgan Farms Williamson 100 % 86
87
—
—
Scales Williamson 100 % —
87
—
—
Weatherford Estates Williamson 100 % —
17
—
—
Texas
Arrowhead Ranch Hays 100 % —
381
—
11
Bar C Ranch Tarrant 100 % 366
739
—
—
Barrington Kingwood Harris 100 % 170
10
—
—
Cibolo Canyons Bexar 100 % 954
815
130
56
Harbor Lakes Hood 100 % 231
—
21
—
Hunter’s Crossing Bastrop 100 % 510
—
54
49
Imperial Forest Harris 100 % —
428
—
—
La Conterra Williamson 100 % 202
—
3
55
Lakes of Prosper Collin 100 % 151
136
4
—
Lantana Denton 100 % 1,220
544
14
—
Maxwell Creek Collin 100 % 941
60
10
—
Oak Creek Estates Comal 100 % 273
281
13
—
Parkside Collin 100 % 8
192
—
—
River's Edge Denton 100 % —
202
—
—
Stoney Creek Dallas 100 % 231
477
—
—
Summer Creek Ranch Tarrant 100 % 983
268
35
44
Summer Lakes Fort Bend 100 % 675
394
56
—
Summer Park Fort Bend 100 % 69
130
28
68
The Colony Bastrop 100 % 455
1,430
22
31
The Preserve at Pecan Creek Denton 100 % 587
195
—
7
Village Park Collin 100 % 567
—
3
2
Westside at Buttercup Creek Williamson 100 % 1,496
1
66
—
Other projects (7) Various 100 % 1,566
20
135
5
Other
Other projects (2) Various 100 % 543
320
—
—
13,759
13,217
642
1,590



				Residential Lots/Units		Commercial Acres
Project	County	Interest Owned ^(a)		Lots/Units Sold Since Inception	Lots/Units Remaining	Acres Sold Since Inception	Acres Remaining

Texas
Austin
Arrowhead Ranch	Hays	100	%	2	379	—	11
The Colony	Bastrop	100	%	461	1,423	22	31
Double Horn Creek	Burnet	100	%	96	3	—	—
Entrada ^(b)	Travis	50	%	—	821	—	—
Hunter’s Crossing	Bastrop	100	%	510	—	54	49
La Conterra	Williamson	100	%	202	—	3	55
Westside at Buttercup Creek	Williamson	100	%	1,496	1	66	—
				2,767	2,627	145	146
Corpus Christi
Caracol	Calhoun	75	%	13	61	—	14
Padre Island ^(b)	Nueces	50	%	—	—	—	15
Tortuga Dunes	Nueces	75	%	—	134	—	4
				13	195	—	33
Dallas-Ft. Worth
Bar C Ranch	Tarrant	100	%	384	721	—	—
Keller	Tarrant	100	%	—	—	1	—
Lakes of Prosper	Collin	100	%	157	130	4	—
Lantana	Denton	100	%	1,262	502	14	—
Maxwell Creek	Collin	100	%	959	42	10	—
Parkside	Collin	100	%	33	167	—	—
The Preserve at Pecan Creek	Denton	100	%	604	178	—	7
River's Edge	Denton	100	%	—	202	—	—
Stoney Creek	Dallas	100	%	271	425	—	—
Summer Creek Ranch	Tarrant	100	%	983	268	35	44
Timber Creek	Collin	88	%	—	601	—	—
Village Park	Collin	100	%	567	—	3	2
				5,220	3,236	67	53
Houston
Barrington Kingwood	Harris	100	%	176	4	—	—
City Park	Harris	75	%	1,312	156	58	107
Harper’s Preserve ^(b)	Montgomery	50	%	513	1,215	30	49
Imperial Forest	Harris	100	%	45	383	—	—
Long Meadow Farms ^(b)	Fort Bend	38	%	1,568	229	190	115
Southern Trails ^(b)	Brazoria	80	%	925	71	1	—
Spring Lakes	Harris	100	%	348	—	25	4
Summer Lakes	Fort Bend	100	%	739	330	56	—
Summer Park	Fort Bend	100	%	102	97	34	62
Willow Creek Farms II	Waller/Fort Bend	90	%	90	175	—	—
				5,818	2,660	394	337

~~Table of Contents~~

Residential Lots ^(c)

Commercial Acres ^(d)
Project County
Interest
Owned ^(b)

Lots Sold
Since
Inception

Lots
Remaining

Acres Sold
Since
Inception

Acres
Remaining^(e)
Projects in entities we consolidate
Texas
City Park Harris 75 % 1,311
504
52
113
Timber Creek Collin 88 % —
601
—
—
Willow Creek Farms II Waller/Fort Bend 90 % 90
175
—
—
Other projects (2) Various Various
10
198
—
18
1,411
1,478
52
131
Total owned and consolidated 15,170
14,695
694
1,721

Projects in ventures that we account for using the equity method
Texas
Entrada Travis 50 % —
821
—
—
Fannin Farms West Tarrant 50 % 324
—
—
—
Harper’s Preserve Montgomery 50 % 513
1,215
30
49
Lantana - Rayzor Ranch Denton 25 % 1,163
—
50
—
Long Meadow Farms Fort Bend 38 % 1,514
290
187
118
Southern Trails Brazoria 80 % 870
126
1
—
Stonewall Estates Bexar 50 % 363
27
—
—
Other projects (7) Various Various
—
193
—
15
Total in ventures 4,747
2,672
268
182
Combined total 19,917
17,367
962
1,903



				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	%	1,026	743	130	56
Oak Creek Estates	Comal	100	%	287	267	13	—
Olympia Hills	Bexar	100	%	742	12	10	—
Stonewall Estates ^(b)	Bexar	50	%	375	15	—	—
				2,430	1,037	153	56
Total Texas				16,248	9,755	759	625
Colorado
Denver
Buffalo Highlands	Weld	100	%	—	164	—	—
Johnstown Farms	Weld	100	%	281	313	2	3
Pinery West	Douglas	100	%	86	—	20	106
Stonebraker	Weld	100	%	—	603	—	—
				367	1,080	22	109
Georgia
Atlanta
Harris Place	Paulding	100	%	22	5	—	—
Montebello ^{(b) (c)}	Forsyth	90	%	—	220	—	—
Seven Hills	Paulding	100	%	870	210	26	113
West Oaks	Cobb	100	%	—	56	—	—
				892	491	26	113
North & South Carolina
Charlotte
Ansley Park	Lancaster	100	%	—	304	—	—
Habersham	York	100	%	41	146	—	6
Walden	Mecklenburg	100	%	—	387	—	—
				41	837	—	6
Raleigh
Beaver Creek ^(b)	Wake	90	%	6	187	—	—
				6	187	—	—
				47	1,024	—	6
Tennessee
Nashville
Beckwith Crossing	Wilson	100	%	12	87	—	—
Morgan Farms	Williamson	100	%	108	65	—	—
Vickery Park	Williamson	100	%	—	197	—	—
Weatherford Estates	Williamson	100	%	8	9	—	—
				128	358	—	—
Wisconsin
Madison
Juniper Ridge/Hawks Woods ^{(b) (c)}	Dane	90	%	—	215	—	—
Meadow Crossing II ^{(b) (c)}	Dane	90	%	—	172	—	—
				—	387	—	—



				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) (c)}	Pima	50	%	—	88	—	—
Dove Mountain	Pima	100	%	—	98	—	—
Oakland
San Joaquin River	Contra Costa/Sacramento	100	%	—	—	—	288
Kansas City
Somerbrook	Clay	100	%	173	222	—	—
Salt Lake City
Suncrest ^{(b) (d)}	Salt Lake	90	%	—	181	—	—
				173	589	—	288
Total				17,855	13,684	807	1,141

_________________________


^(a)	A project is deemed entitled when all major discretionary governmental land-use approvals have been received. Some projects may require additional permits and/or non-governmental authorizations for development.


^(b)	Interest owned reflects our net equity interest in the project, whether owned directly or indirectly. There are some projects that have multiple ownership structures within them. Accordingly, portions of these projects may appear as owned, consolidated or accounted for using the equity method.


^(c)(b)	~~Lots are~~Projects in ventures that we account for ~~the total~~using equity method.


^(c)	Venture project ~~regardless of our ownership interest. Lots remaining represent vacant developed lots, lots under development~~that develops and ~~future planned lots and are subject to change based on business plan revisions.~~sells homes.


^(d)	~~Commercial acres are for the total~~Venture project ~~regardless of our ownership interest,~~that develops and ~~are net developable acres, which may be fewer than the gross acres available in the project.~~


^(e)	~~Excludes acres associated with commercial~~sells lots and ~~income producing properties.~~homes.

A summary of our significant commercial and ~~mutifamily~~multifamily properties, excluding two multifamily sites, at ~~third~~first quarter-end~~2015~~ 2016 follows:

Project Market
Interest
Owned ^(a)
Type Acres Description
Radisson Hotel Austin 100 % Hotel 2
413 guest rooms and suites
Dillon ^(b)
Charlotte 100 % Multifamily 3
379-unit luxury apartment
Eleven Austin 100 % Multifamily 3
257-unit luxury apartment
Midtown Dallas 100 % Multifamily 13
354-unit luxury apartment
Music Row ^(b)
Nashville 100 % Multifamily 1
230-unit luxury apartment
Elan 99 ^(b)
Houston 90 % Multifamily 17
360-unit luxury apartment
Acklen ^(b)
Nashville 30 % Multifamily 4
320-unit luxury apartment
HiLine ^(b)
Denver 25 % Multifamily 18
385-unit luxury apartment
360° ^(b)
Denver 20 % Multifamily 4
304-unit luxury apartment

Project

Market

Interest

Owned ^(a)

Type

Acres

Description

Radisson Hotel & Suites ^(b)

Austin

100

Hotel

413 guest rooms and suites

Dillon ^(c)

Charlotte

100

Multifamily

379-unit luxury apartment

Eleven ^(d)

Austin

100

Multifamily

257-unit luxury apartment

Elan 99 ^(e)

Houston

Multifamily

360-unit luxury apartment

Acklen ^(e)

Nashville

Multifamily

320-unit luxury apartment

HiLine ^(e)

Denver

Multifamily

385-unit luxury apartment

_________________________


^(a)	Interest owned reflects our ~~total~~net equity interest in the project, whether owned directly or indirectly.


^(b)	~~Construction in progress.~~Sold on May 4, 2016 for $130.0 million.

^(c)Under contract to be sold and the transaction is expected to close in second quarter 2016.

^(d)Sold on April 18, 2016 for $60.2 million.

^(e)Construction in progress.

~~Table of Contents~~

Oil and Gas Owned Mineral Interests

A summary of our oil and gas owned mineral interests ^(a) at ~~third~~first quarter-end~~2015~~ 2016 follows:


State	Unleased	Leased ^(b)	��	Held By Production ^(c)	Total ^(d)	Unleased	Leased ^(b)	Held By Production ^(c)	Total ^(d)
		(Net acres)					(Net acres)
Texas	209,000	16,000		27,000	252,000	210,000	12,000	30,000	252,000
Louisiana	129,000	6,000		9,000	144,000	131,000	3,000	10,000	144,000
Georgia	152,000	—		—	152,000	152,000	—	—	152,000
Alabama	40,000	—		—	40,000	40,000	—	—	40,000
California	1,000	—		—	1,000	1,000	—	—	1,000
Indiana	1,000	—		—	1,000	1,000	—	—	1,000
	532,000	22,000		36,000	590,000	535,000	15,000	40,000	590,000

_________________________


^(a)	Includes ventures.


^(b)	Includes leases in primary lease term or for which a delay rental payment has been received. In the ordinary course of business, leases covering a significant portion of leased net mineral acres may expire from time to time in a single reporting period.


^(c)	Acres being held by production are producing oil or gas in paying quantities.


^(d)	Texas, Louisiana, California and Indiana net acres are calculated as the gross number of surface acres multiplied by our percentage ownership of the mineral interest. Georgia and Alabama net acres are calculated as the gross number of surface acres multiplied by our estimated percentage ownership of the mineral interest based on county sampling.

A summary of our Texas and Louisiana owned mineral acres ^(a) by county or parish at ~~third~~first quarter-end ~~2015~~2016 follows:



Texas		Louisiana
County	Net Acres	Parish	Net Acres
Trinity	46,000	Beauregard	79,000
Angelina	42,000	Vernon	39,000
Houston	29,000	Calcasieu	17,000
Anderson	25,000	Allen	7,000
Cherokee	24,000	Rapides	1,000
Sabine	23,000	Other	1,000
Red River	14,000		144,000
Newton	13,000
San Augustine	13,000
Jasper	12,000
Other	11,000
	252,000

_________________________


^(a)	Includes ventures.

~~Table of Contents~~

Oil and Gas Mineral Interests Leased

A summary of our net oil and gas mineral acres leased from others at ~~third~~first quarter-end ~~2015~~2016 follows:


State	Undeveloped	Held By Production^(a)	Total	Undeveloped	Held By Production^(a)	Total
Nebraska	227,000	11,000	238,000
Kansas	9,000	7,000	16,000
Oklahoma	14,000	17,000	31,000	—	200	200
Texas	10,000	1,000	11,000	1,000	—	1,000
North Dakota	4,000	5,000	9,000
North Dakota ^(b)				3,500	4,600	8,100
Other	15,000	4,000	19,000	17,400	3,700	21,100
	279,000	45,000	324,000	21,900	8,500	30,400

_________________________


^(a)	Excludes approximately 8,000 net acres of overriding royalty interests.


^(b)	Sold on May 6, 2016.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Sensitivity

Our interest rate risk is principally related to our variable-rate debt. Interest rate changes impact earnings due to the resulting increase or decrease in our variable-rate debt, which was ~~$68,724,000~~$44,414,000 at ~~third~~first quarter-end ~~2015~~2016.

The following table illustrates the estimated effect on our pre-tax income of immediate, parallel, and sustained shifts in interest rates for the next 12 months on our variable-rate debt at ~~third~~first quarter-end ~~2015~~2016. This estimate assumes that debt reductions from contractual payments will be replaced with short-term, variable-rate debt; however, that may not be the financing alternative we choose.


	Third Quarter-End			First Quarter-End
Change in Interest Rates	2015			2016
	(In thousands)			(In thousands)
2%	$	(1,257	)	$	(714	)
1%	$	(687	)	$	(266	)
(1)%	$	687		$	422
(2)%	$	1,374		$	843

Foreign Currency Risk

We have no exposure to foreign currency fluctuations.

Commodity Price Risk

We have exposure to commodity price fluctuations from our oil and gas production which can materially affect our revenues and cash flows. The prices we receive for our production depend on numerous factors beyond our control. Based on our first ~~nine months~~quarter ~~2015~~2016 production, a ~~10%~~10 percent decrease in our average realized oil and gas prices would have reduced our oil and gas production revenues by ~~$4,154,000.~~$527,000. To manage our exposure to commodity price risks associated with the sale of oil and gas, we may periodically enter into derivative hedging transactions for a portion of our estimated production. We do not have any commodity derivative positions outstanding at ~~third~~first quarter-end ~~2015~~2016.

Item 4. Controls and Procedures

(a) Disclosure Controls and Procedures

Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (or the Exchange Act)), as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act and are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is

~~Table of Contents~~

accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

We are involved directly or through ventures in various legal proceedings that arise from time to time in the ordinary course of doing business. We believe we have established adequate reserves for any probable losses and that the outcome of any of the proceedings should not have a material adverse effect on our financial position, long-term results of operations or cash flows. It is possible, however, that circumstances beyond our control or significant subsequent developments could result in additional charges related to these matters that could be significant to results of operations or cash flow in any single accounting period.

Item 1A. Risk Factors

There are no material changes from the risk factors disclosed in our ~~2014~~2015 Annual Report on Form ~~10-K, as supplemented by our prior period 2015 Quarterly Reports on Form 10-Q.~~10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities ^(a)

~~Period~~

~~Total~~

~~Number of~~

~~Shares~~

~~Purchased~~

~~Average~~

~~Price~~

~~Paid per~~

~~Share~~

~~Total Number~~

~~of Shares~~

~~Purchased as~~

~~Part of Publicly~~

~~Announced~~

~~Plans or~~

~~Programs~~

~~Maximum~~

~~Number of~~

~~Shares That~~

~~May Yet be~~

~~Purchased~~

~~Under the~~

~~Plans or~~

~~Programs~~

~~Month 7 (7/1/2015 — 7/31/2015)~~

—

~~3,506,668~~

~~Month 8 (8/1/2015 — 8/31/2015)~~

—

~~3,506,668~~

~~Month 9 (9/1/2015 — 9/30/2015)~~

—

~~3,506,668~~

—



Period	Total Number of Shares Purchased ^(b)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs
Month 1 (1/1/2016 — 3/31/2016)	—	$	—	—	3,506,668
Month 2 (2/1/2016 — 2/29/2016)	9,058	$	8.60	—	3,506,668
Month 3 (3/1/2016 — 3/31/2016)	14,633	$	8.68	—	3,506,668
	23,691	$	8.65	—

_________________________

^(a)

On February 11, 2009, we announced that our Board of Directors authorized the repurchase of up to 7,000,000 shares of our common stock. We have purchased 3,493,332 shares under this authorization, which has no expiration date. We have no repurchase plans or programs that expired during the period covered by the table above and no repurchase plans or programs that we intend to terminate prior to expiration or under which we no longer intend to make further purchases.


^(b)	Includes shares withheld to pay taxes in connection with vesting of restricted stock awards.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

~~Table of Contents~~



Exhibit		Description

~~3.1~~10.1		~~Certificate~~Purchase and Sale Agreement dated February 4, 2016, by and between Capital of ~~Amendment to Amended~~Texas Insurance Group Inc. and ~~Restated Certificate of Incorporation of the Company dated May 12, 2015.~~Austin Lakeside Hotel Owner LLC.

~~3.2~~10.2		~~Fifth Amendment to the Amended~~Director Nomination Agreement dated February 5, 2016, by and ~~Restated Bylaws of~~between the Company ~~(incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K filed with the Commission on September 28, 2015).~~

~~10.1~~		~~Limited Waiver~~ and Amendment regarding the Third Amended and Restated Revolving and Term Credit Agreement dated September 30, 2015, by and among the Company; Forestar (USA) Real Estate Group Inc. and certain of its wholly-owned subsidiaries signatory thereto; KeyBank National Association, as lender, swing line lender and agent; the lenders party thereto; and the other parties thereto (incoporatedCarlson Capital, L.P. (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the Commission on ~~October 6, 2015).~~

~~10.2~~		Construction Loan Agreement between FMF Morehead LLC and PNC Bank, National Association dated October 16, 2015 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Commission on October 21, 2015)February 8, 2016).

10.3		~~Employment~~Director Nomination Agreement dated February 5, 2016, by and between the Company and ~~Philip J. Weber dated October 21, 2015~~Cove Street Capital, LLC (incorporated by reference to Exhibit ~~10.1~~10.2 of the ~~Company’s~~Company's Current Report on Form 8-K filed with the Commission on ~~October 26, 2015)~~February 8, 2016).

10.4		~~Separation~~Purchase and Sale Agreement dated April 7, 2016, between Forestar Petroleum Corporation and ~~Release of All Claims between the Company and Christopher L. Nines dated October 21, 2015~~DW Slate, LLC (incorporated by reference to Exhibit ~~10.2~~10.1 of the ~~Company’s~~Company's Current Report on Form 8-K filed with the Commission on ~~October 26, 2015)~~April 11, 2016).

31.1		Certification of Chief Executive Officer pursuant to Exchange Act rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Exchange Act rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.1		The following materials from Forestar’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2015,~~March 31, 2016, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income and Comprehensive Income, (iii) Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated Financial Statements.

~~Table of Contents~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	FORESTAR GROUP INC.

Date: ~~November 6, 2015~~May 10, 2016	By:	/s/ Charles D. Jehl
		Charles D. Jehl
		Chief Financial Officer

	By:	/s/ Sabita C. Reddy
		Sabita C. Reddy
		Principal Accounting Officer

4341



PART I — FINANCIAL INFORMATION	3
Item 1. Financial Statements (Unaudited)	3
Consolidated Balance Sheets	3
Consolidated Statements of Income and Comprehensive Income	4
Consolidated Statements of Cash Flows	5
Notes to Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2019
Item 3. Quantitative and Qualitative Disclosures About Market Risk	4038
Item 4. Controls and Procedures	4038
PART II — OTHER INFORMATION	4139
Item 1. Legal Proceedings	4139
Item 1A. Risk Factors	4139
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4139
Item 3. Defaults Upon Senior Securities	4139
Item 4. Mine Safety Disclosures	4139
Item 5. Other Information	4139
Item 6. Exhibits	4139
SIGNATURES	4341



				Residential Lots ^(c)		Commercial Acres ^(d)
Project	County	Interest Owned ^(b)		Lots Sold Since Inception	Lots Remaining	Acres Sold Since Inception	Acres Remaining^(e)
Projects we own
California
San Joaquin River	Contra Costa/Sacramento	100	%	—	—	—	288
Colorado
Buffalo Highlands	Weld	100	%	—	164	—	—
Johnstown Farms	Weld	100	%	281	313	2	3
Pinery West	Douglas	100	%	86	—	20	106
Stonebraker	Weld	100	%	—	603	—	—
Georgia
Seven Hills	Paulding	100	%	843	240	26	113
The Villages at Burt Creek	Dawson	100	%	—	1,715	—	57
West Oaks	Cobb	100	%	—	57	—	—
Other projects (17)	Various	100	%	245	2,258	—	695
North & South Carolina
Habersham	York	100	%	20	167	—	—
Walden	Mecklenburg	100	%	—	387	—	—
Tennessee
Beckwith Crossing	Wilson	100	%	—	99	—	—
Morgan Farms	Williamson	100	%	86	87	—	—
Scales	Williamson	100	%	—	87	—	—
Weatherford Estates	Williamson	100	%	—	17	—	—
Texas
Arrowhead Ranch	Hays	100	%	—	381	—	11
Bar C Ranch	Tarrant	100	%	366	739	—	—
Barrington Kingwood	Harris	100	%	170	10	—	—
Cibolo Canyons	Bexar	100	%	954	815	130	56
Harbor Lakes	Hood	100	%	231	—	21	—
Hunter’s Crossing	Bastrop	100	%	510	—	54	49
Imperial Forest	Harris	100	%	—	428	—	—
La Conterra	Williamson	100	%	202	—	3	55
Lakes of Prosper	Collin	100	%	151	136	4	—
Lantana	Denton	100	%	1,220	544	14	—
Maxwell Creek	Collin	100	%	941	60	10	—
Oak Creek Estates	Comal	100	%	273	281	13	—
Parkside	Collin	100	%	8	192	—	—
River's Edge	Denton	100	%	—	202	—	—
Stoney Creek	Dallas	100	%	231	477	—	—
Summer Creek Ranch	Tarrant	100	%	983	268	35	44
Summer Lakes	Fort Bend	100	%	675	394	56	—
Summer Park	Fort Bend	100	%	69	130	28	68
The Colony	Bastrop	100	%	455	1,430	22	31
The Preserve at Pecan Creek	Denton	100	%	587	195	—	7
Village Park	Collin	100	%	567	—	3	2
Westside at Buttercup Creek	Williamson	100	%	1,496	1	66	—
Other projects (7)	Various	100	%	1,566	20	135	5
Other
Other projects (2)	Various	100	%	543	320	—	—
				13,759	13,217	642	1,590