Forestar Group Inc. - FORM 8-K - EX-99.1

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Exhibit 99.1

NEWS
RELEASE_____________________

FOR IMMEDIATE RELEASE
CONTACT: Chris L. Nines

(512) 433-5210

FORESTAR GROUP INC. REPORTS FULL YEAR
AND FOURTH QUARTER 2010 RESULTS

AUSTIN, TEXAS, February 1, 2011—Forestar Group Inc. (NYSE: FOR) today reported full year 2010 net income of $5.1 million, or $0.14 per diluted share, compared with full year 2009 net income of $59.1 million, or $1.64 per diluted share. Full year 2010 results include an after-tax gain of $0.51 per diluted share from the sale of almost 24,000 acres of timberland, compared with an after-tax gain of $1.82 per diluted share from the sale of about 95,000 acres of timberland in 2009.

The company reported fourth quarter 2010 net income of $2.4 million, or $0.07 per diluted share, compared with a net loss of ($7.4) million, or ($0.21) per basic share in fourth quarter 2009. Fourth quarter 2010 results include an after-tax gain of $0.24 per diluted share, from the sale of over 9,800 acres of timberland for approximately $16.2 million.

“During 2010 we continued to make good progress executing our strategy and strategic initiatives designed to enhance shareholder value,” said Jim DeCosmo, president and chief executive officer of Forestar.

Mr. DeCosmo noted that the company’s 2010 highlights included:

	•		Selling approximately 24,000 acres of timberland for $38.8 million

	•		Leasing over 16,900 net mineral acres to oil and gas companies for exploration and production activities

	•		Entitling two projects which include over 1,000 acres, representing over 2,500 residential lots and 75 commercial acres

	•		Repurchasing over one million shares of our common stock

	•		Acquiring multifamily project in Houston, Texas with tax deferred 1031 timberland sales proceeds and non-recourse borrowings

	•		Acquiring water resources company focused on providing sustainable ground water solutions to central Texas and the Interstate-35 growth corridor

	•		Opening of J.W. Marriott’s resort at Cibolo Canyons, entitling Forestar to receive revenues related to hotel occupancy and sales taxes through 2034 from the 1,002 room hotel and golf resort

Forestar manages its operations through three business segments:

	§		Real estate,

	§		Mineral resources, and

	§		Fiber resources

At year-end 2010, our real estate segment includes over 220,000 acres of land owned directly or through ventures located in nine states and twelve markets. Mineral resources include approximately 606,000 net acres of oil and gas mineral interests located principally in Texas, Louisiana, Alabama, and Georgia. Also included is a 45% nonparticipating royalty interest in groundwater produced or withdrawn for commercial purposes from approximately 1.4 million acres in Texas, Louisiana, Georgia and Alabama and about 17,800 acres of ground water leases in central Texas. Fiber resources include the sale of wood fiber and management of our recreational leases.

REAL ESTATE


	4th Qtr.			4th Qtr.			3rd Qtr.			Full Year			Full Year
Segment (Loss) Earnings	2010			2009			2010			2010			2009
($ in Millions)		($5.5	)		($2.5	)		($1.9	)		($4.6	)	$	3.2

Real estate segment results include undeveloped land sales of approximately $2.8 million and $20.1 million in fourth quarter and full year 2010, compared with $10.2 million and $46.6 million in fourth quarter and full year 2009.

Fourth quarter 2010 real estate segment results include the sale of 625 acres of commercial and residential land for approximately $20 million at our Summer Creek Ranch venture project located near Fort Worth, Texas. This sale generated earnings of $6.3 million and net cash flow of $10.1 million to Forestar.

Fourth quarter 2010 real estate segment results include non-cash impairment charges of approximately $10.4 million primarily associated with residential development projects located near Atlanta, Georgia and Fort Worth, Texas and a commercial real estate tract held in a venture near the Texas Gulf Coast. Full year 2010 real estate segment results include non-cash impairment charges of approximately $11.3 million compared with $10.6 million in 2009.

MINERAL RESOURCES


	4th Qtr.		4th Qtr.		3rd Qtr.		Full Year		Full Year
Segment Earnings	2010		2009		2010		2010		2009
($ in Millions)	$	6.1	$	3.3	$	6.2	$	22.8	$	32.4

Fourth quarter 2010 mineral resources segment earnings include almost $2 million in bonus payments associated with leasing almost 5,200 net mineral acres for $371 per acre. In addition, fourth quarter 2010 mineral resources segment earnings include over $1.1 million from the extension of an existing 3,200 acre mineral lease.

Full year 2010 mineral resources segment earnings include approximately $7.7 million in lease bonus payments compared with $21.3 million in 2009.

FIBER RESOURCES


	4th Qtr.		4th Qtr.		3rd Qtr.		Full Year		Full Year
Segment Earnings	2010		2009		2010		2010		2009
($ in Millions)	$	1.2	$	1.4	$	1.4	$	5.0	$	9.6

During 2010 Forestar generated approximately $6.5 million in revenues from the sale of over 537,000 tons of fiber, the majority of which was sold to Temple-Inland Inc. at market prices. Sales of fiber in 2010 were impacted by the sale of over 140,000 acres of timberland associated with our strategic initiatives and retail land sales program since first quarter 2009, and postponing harvest plans on about 55,000 acres currently held for sale.

SUMMARY

“Market conditions for our businesses remain mixed. Nationally, demand for housing continues to be negatively impacted by low consumer confidence, high unemployment, reduced credit availability and concerns over the economy, even with mortgage rates near historic lows and improved housing affordability. Despite these challenging market conditions, we firmly believe that our real estate assets are well positioned in many of the healthier markets in Texas. In addition, although lower natural gas prices have reduced overall market demand for new mineral leases and capital available for drilling, we have benefitted from higher oil prices and their impact on leasing interest in oil rich formations in our basins, resulting in recent leasing activity in Louisiana. Going forward, our mineral resources business is well positioned and located in some of the most active oil and gas basins in the continental U.S.

“Enduring and progressing through one of the most severe economic downturns in recent history, we believe the execution of our strategy and near-term strategic initiatives have Forestar well positioned for the future. Forestar is a real estate and natural resources company with a vision for every acre. This vision supports our strategy which is committed to recognizing and responsibly delivering the greatest value from every acre and growing through strategic and disciplined investments. This vision, combined with our competitive portfolio of assets, a strong balance sheet, and an experienced management team, have Forestar poised to benefit from improving economic conditions and to maximize the value of every acre we invest in,” concluded Mr. DeCosmo.

The Company will host a conference call on February 2, 2011 at 10:00 am ET to discuss results of fourth quarter and full year 2010. The meeting may be accessed through webcast or by conference call. The webcast may be accessed through Forestar’s Internet site at www.forestargroup.com. To access the conference call, listeners calling from North America should dial 1-866-356-3095 at least 15 minutes prior to the start of the meeting. Those wishing to access the call from outside North America should dial 1-617-597-5391. The password is Forestar. Replays of the call will be available for two weeks following the completion of the live call and can be accessed at 1-888-286-8010 in North America and at 1-617-801-6888 outside North America. The password for the replay is 14712043.

About Forestar Group

Forestar Group Inc. operates in three business segments: real estate, mineral resources and fiber resources. The real estate segment owns directly or through ventures over 220,000 acres of real estate located in nine states and twelve markets in the U.S. The real estate segment has 18 real estate projects representing over 29,600 acres currently in the entitlement process, and 76 entitled, developed and under development projects in seven states and eleven markets encompassing over 16,000 acres, comprised of over 27,400 planned residential lots and almost 2,400 commercial acres. The mineral resources segment manages about 606,000 net acres of oil and gas mineral interests. The fiber resources segment includes the sale of wood fiber and management of our recreational leases. The company also has a 45% nonparticipating royalty interest in groundwater produced or withdrawn for commercial purposes from approximately 1.4 million acres in Texas, Louisiana, Georgia and Alabama and about 17,800 acres of ground water leases in Central Texas. Forestar’s address on the World Wide Web is www.forestargroup.com.

Forward-looking Statements

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

FORESTAR GROUP INC.
(UNAUDITED)

Business Segments


	Fourth Quarter						Full Year
	2010			2009			2010			2009
	(In thousands,						(In thousands,
	except per share)						except per share)
Revenues
Real estate	$	14,333		$	24,281		$	68,269		$	94,436
Mineral resources		6,403			4,489			24,790			36,256
Fiber resources		2,116			2,631			8,301			15,559

Total revenues	$	22,852		$	31,401		$	101,360		$	146,251


Segment (loss) earnings
Real estate	$	(5,517	)	$	(2,459	)	$	(4,634	)	$	3,182
Mineral resources		6,143			3,337			22,783			32,370
Fiber resources		1,158			1,343			5,058			9,622

Total segment earnings		1,784			2,221			23,207			45,174
Items not allocated to segments
General and administrative (a)		(3,903	)		(4,649	)		(17,341	)		(22,399	)
Share-based compensation		(4,226	)		(4,281	)		(11,596	)		(11,998	)
Gain on sale of assets		13,166			—			28,607			104,047
Interest expense		(3,884	)		(4,806	)		(16,446	)		(20,459	)
Other non-operating income		474			(7	)		1,164			375

Income before taxes		3,411			(11,522	)		7,595			94,740
Income tax (expense) benefit		(963	)		4,128			(2,470	)		(35,633	)

Net income attributable to Forestar Group Inc.	$	2,448		$	(7,394	)	$	5,125		$	59,107


Net income per common share:
Basic	$	0.07		$	(0.21	)	$	0.14		$	1.65
Diluted	$	0.07		$	(0.21	)	$	0.14		$	1.64

Weighted average common shares outstanding:
Basic		35.2			35.9			35.8			35.8
Diluted		35.8			35.9			36.4			36.1


	At Year-End
	2010		2009
Supplemental Financial Information:	(In thousands)
Borrowings under credit facility		125,000		125,000
Other debt (b)		96,589		91,626

Total debt	$	221,589	$	216,626


(a)		Full year 2009 general and administrative costs include approximately $3.2 million paid to outside advisors regarding an evaluation by our Board of Directors of an unsolicited shareholder proposal.

(b)		Consists principally of consolidated venture non-recourse debt.

FORESTAR GROUP INC.
REAL ESTATE SEGMENT
PERFORMANCE METRICS


	Fourth Quarter				Full Year
	2010		2009		2010		2009
REAL ESTATE
Owned, Consolidated & Equity Method Ventures:
Residential Lots Sold		187		202		804		642
Revenue per Lot Sold	$	49,100	$	45,000	$	49,500	$	55,200
Commercial Acres Sold		1.1		0.3		17.8		5.9
Revenue per Commercial Acre Sold	$	174,100	$	87,000	$	90,100	$	263,800
Undeveloped Acres Sold		1,100		3,200		5,800		18,200
Revenue per Acre Sold	$	2,600	$	3,100	$	3,500	$	2,600
Owned & Consolidated Ventures:
Residential Lots Sold		86		169		442		483
Revenue per Lot Sold	$	59,200	$	45,300	$	55,100	$	53,500
Commercial Acres Sold		1.1		—		2.4		1.8
Revenue per Commercial Acre Sold	$	174,100		—	$	146,000	$	433,400
Undeveloped Acres Sold		1,100		3,200		5,800		18,200
Revenue per Acre Sold	$	2,600	$	3,100	$	3,500	$	2,600
Ventures Accounted For Using the Equity Method:
Residential Lots Sold		101		33		362		159
Revenue per Lot Sold	$	40,500	$	43,100	$	42,600	$	60,600
Commercial Acres Sold		—		0.3		15.4		4.1
Revenue per Commercial Acre Sold		—	$	87,000	$	81,300	$	188,100
Undeveloped Acres Sold		—		—		—		1
Revenue per Acre Sold		—		—		—	$	10,000

FOURTH QUARTER 2010
REAL ESTATE PIPELINE


			In				Developed &
			Entitlement				Under		Total
Real Estate	Undeveloped		Process		Entitled		Development		Acres*
Undeveloped Land Owned		167,478								174,455
Ventures		6,977

Residential Owned				26,869		7,889		617		40,539
Ventures						4,532		632

Commercial Owned				2,801		1,095		539		5,165
Ventures						489		241

Total Acres		174,455		29,670		14,005		2,029		220,159


Estimated Residential Lots						23,881		3,533		27,414


*		In addition, Forestar owns a 58% interest in a venture which controls approximately 16,000 acres of undeveloped land in Georgia.

FORESTAR GROUP INC.
MINERAL RESOURCES SEGMENT
PERFORMANCE METRICS


	Fourth Quarter				Full Year
	2010		2009		2010		2009
MINERAL RESOURCES
Leasing Activity
Acres Leased		5,200		720		16,900		25,800
Average Bonus / Acre	$	371	$	662	$	457	$	827
Delay Rental Revenues	$	84,000	$	210,300	$	2,167,600	$	2,530,100
Royalties¹
Natural Gas Production (MMcf)		504.8		525.4		1,796.4		1,493.7
Average Natural Gas Price ($ / Mcf)	$	3.94	$	3.18	$	4.26	$	4.10
Oil Production (Barrels)		27,800		28,000		115,400		107,200
Average Oil Price ($ / Barrel)	$	74.84	$	70.02	$	73.09	$	56.85

MMcfe Production²		671.8		693.5		2,489.1		2,136.9
Average Price ($ / MMcfe)	$	6.06	$	5.24	$	6.46	$	5.72
Well Activity³
Net Acres Held By Production		29,700		26,900		29,700		26,900
Wells Drilled		3		12		29		30
Active Wells		494		472		494		472


¹		Includes our share of activity from a venture in which we own a 50% interest. Our share of venture natural gas production activity is 227 MMcf and 573 MMcf in fourth quarter and full year 2010, and 61 MMcf and 82 MMcf in fourth quarter and full year 2009.

²		MMcfe — Million Cubic Feet Equivalent (converting oil to natural gas at 6 Mcfe / Bbl)

³		Wells are owned and operated by third-party lessees / operators

FOURTH QUARTER 2010
MINERAL RESOURCES PIPELINE¹

Forestar’s mineral resources segment includes approximately 606,000 net mineral acres principally located in Texas, Louisiana, Alabama and Georgia.


	Available				Held by
State	for Lease		Leased²		Production²		Total
Texas		157,000		70,000		25,000		252,000
Louisiana		120,000		18,000		5,000		143,000
Georgia		168,000		—		—		168,000
Alabama		40,000		—		—		40,000
California		1,000		—		—		1,000
Colorado		1,000		—		—		1,000
Indiana		1,000		—		—		1,000

Total		488,000		88,000		30,000		606,000


¹		Includes ventures

²		Acres leased and held by production exclude 382 net mineral acres leased and 26 net mineral acres held by production in Colorado

FORESTAR GROUP INC.
FIBER RESOURCES SEGMENT
PERFORMANCE METRICS


	Fourth Quarter				Full Year
	2010		2009		2010		2009
FIBER RESOURCES
Fiber Sales *
Pulpwood Tons Sold		97,300		143,300		392,900		810,100
Average Pulpwood Price / Ton	$	8.77	$	9.76	$	9.93	$	8.53
Sawtimber Tons Sold		53,400		40,900		144,300		331,300
Average Sawtimber Price / Ton	$	15.75	$	18.93	$	17.94	$	19.82

Total Tons Sold		150,700		184,200		537,200		1,141,400
Average Price / Ton	$	11.24	$	11.80	$	12.08	$	11.81

Recreational Activity
Average Acres Leased		201,800		211,200		208,100		249,200
Average Lease Rate / Acre	$	8.31	$	8.36	$	8.32	$	8.25


*		The majority of our fiber sales were to Temple-Inland Inc. at market prices.

Note: Sales of fiber in fourth quarter and full year 2010 were impacted by the sale of over 140,000 acres of timberland associated with our strategic initiatives and retail land sales program since first quarter 2009, and postponing harvest plans on about 55,000 acres currently held for sale.

FORESTAR GROUP INC.
PROJECTS IN ENTITLEMENT

A summary of projects in the entitlement process^(a) at year-end 2010 follows:


		Project
Project	County	Acres^(b)
California
Hidden Creek Estates	Los Angeles		700
Terrace at Hidden Hills	Los Angeles		30

Georgia
Ball Ground	Cherokee		500
Burt Creek	Dawson		970
Crossing	Coweta		230
Dallas Highway	Haralson		1,060
Fincher Road	Cherokee		3,890
Fox Hall	Coweta		960
Garland Mountain	Cherokee/Bartow		350
Home Place	Coweta		1,510
Martin’s Bridge	Banks		970
Mill Creek	Coweta		770
Serenity	Carroll		440
Waleska	Cherokee		150
Wolf Creek	Carroll/Douglas		12,230
Yellow Creek	Cherokee		1,060

Texas
Lake Houston	Harris/Liberty		3,700
San Jacinto	Montgomery		150


Total			29,670


^(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.

FORESTAR GROUP INC.
REAL ESTATE PROJECTS

A summary of our entitled,^(a) developed & under development projects at year-end 2010 follows:


					Residential Lots^(c)				Commercial Acres^(d)
					Lots Sold				Acres Sold
		Interest			Since		Lots		Since		Acres
Project	County	Owned^(b)			Inception		Remaining		Inception		Remaining
Projects we own
California
San Joaquin River	Contra Costa/Sacramento		100	%		—		—		—		288

Colorado
Buffalo Highlands	Weld		100	%		—		164		—		—
Johnstown Farms	Weld		100	%		115		494		2		8
Pinery West	Douglas		100	%		—		—		—		115
Stonebraker	Weld		100	%		—		603		—		13
Westlake Highlands	Jefferson		100	%		21		—		—		—
Texas
Arrowhead Ranch	Hays		100	%		—		259		—		6
Caruth Lakes	Rockwall		100	%		310		339		—		—
Cibolo Canyons	Bexar		100	%		640		775		64		157
Harbor Lakes	Hood		100	%		201		248		2		12
Hunter’s Crossing	Bastrop		100	%		340		150		38		71
La Conterra	Williamson		100	%		76		424		—		58
Maxwell Creek	Collin		100	%		700		299		10		—
Oak Creek Estates	Comal		100	%		69		578		13		—
The Colony	Bastrop		100	%		412		734		22		31
The Gables at North Hill	Collin		100	%		199		84		—		—
The Preserve at Pecan Creek	Denton		100	%		306		512		—		9
The Ridge at Ribelin Ranch	Travis		100	%		—		—		179		16
Westside at Buttercup Creek	Williamson		100	%		1,318		196		66		—
Other projects (9)	Various		100	%		1,554		18		197		24
Georgia
Towne West	Bartow		100	%		—		2,674		—		121
Other projects (13)	Various		100	%		—		2,934		—		705
Missouri and Utah
Other projects (2)	Various		100	%		458		96		—		—

						6,719		11,581		593		1,634

Projects in entities we consolidate
Texas
City Park	Harris		75	%		1,134		177		50		115
Lantana	Denton		55	% ^(e)		593		1,639		—		—
Light Farms	Collin		65	%		—		2,868		—		—
Stoney Creek	Dallas		90	%		107		647		—		—
Timber Creek	Collin		88	%		—		614		—		—
Other projects (5)	Various		Various			953		254		26		25

						2,787		6,199		76		140

Total owned and consolidated						9,506		17,780		669		1,774
Projects in ventures that we account for using the equity method
Georgia
Seven Hills	Paulding		50	%		636		445		26		113
The Georgian	Paulding		38	%		288		1,097		—		—
Other projects (4)	Various		Various			1,820		77		3		—
Texas
Bar C Ranch	Tarrant		50	%		232		967		—		—
Entrada	Travis		50	%		—		821		—		3
Fannin Farms West	Tarrant		50	%		309		72		—		15
Harper’s Preserve	Montgomery		50	%		—		1,722		—		72
Lantana	Denton		Various	^(e)		1,436		116		14		76
Long Meadow Farms	Fort Bend		19	%		693		1,390		87		133
Southern Trails	Brazoria		40	%		452		575		—		—
Stonewall Estates	Bexar		25	%		261		121		—		—
Summer Creek Ranch	Tarrant		50	%		796		478		—		71
Summer Lakes	Fort Bend		50	%		345		778		56		—
Village Park	Collin		50	%		356		211		3		2
Waterford Park	Fort Bend		50	%		—		210		—		90
Other projects (2)	Various		Various			296		228		—		15
Florida
Other projects (3)	Various		Various			519		326		—		—

Total in ventures						8,439		9,634		189		590

Combined Total						17,945		27,414		858		2,364


^(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 and/or accounted for using the equity method.

^(c)		Lots are for the total project, regardless of our ownership interest. Lots remaining represent vacant developed lots, lots under development and future planned lots and are subject to change based on business plan revisions.


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

^(e)		The Lantana project consists of a series of 18 partnerships in which our voting interests range from 25% to 55%. We account for three of these partnerships using the equity method and we consolidate the remaining partnerships.

A summary of our significant commercial and income producing properties at year-end 2010 follows:

Interest

Project

County

Market

Owned^(a)

Type

Description

Radisson Hotel

Travis

Austin

100

Hotel

413 guest rooms and suites

Palisades West

Travis

Austin

Office

375,000 square feet

Las Brisas

Williamson

Austin

Multifamily

414 unit luxury apartment

Broadstone Memorial

Harris

Houston

100

Multifamily

401 unit luxury apartment


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

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