NOTE 5. REVENUE RECOGNITION

The majority of our revenues are derived from the sale of delivered logs, manufactured wood products, residual by-products and real estate. We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers.

Performance Obligations

A performance obligation, as defined in ASC 606, is a promise in a contract to transfer a distinct good or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue at the point in time, or over the period, in which the performance obligation is satisfied.

Performance obligations associated with delivered log and residual sales are typically satisfied when the logs and residuals are delivered to our customers’ mills. Performance obligations associated with the sale of wood products are typically satisfied when the products are shipped (FOB shipping point) or upon delivery to our customer (FOB destination). Shipping and handling costs for all wood product and residual sales are accounted for as cost of goods sold.

ASC Topic 606 requires entities to consider significant financing components of contracts with customers, but allows for the use of a practical expedient when the period between satisfaction of a performance obligation and payment receipt is one year or less. Given the nature of our revenue transactions, we have elected to utilize this practical expedient. Substantially all of our performance obligations are satisfied as of a point in time. We have also elected to use the practical expedient to not disclose unsatisfied or partially satisfied performance obligations as all unsatisfied contracts are expected to be satisfied in less than one year.

Performance obligations associated with real estate sales are generally satisfied at a point in time when all conditions of closing have been met.

Contract Estimates

The transaction price for log and residual sales is determined using contractual rates applied to delivered volumes. The contractual rates are generally based on prevailing market prices and payment is generally due from customers within one month or less of delivery. For log and residual sales subject to long-term supply agreements, the transaction price is variable but is known at the time of delivery. For wood products sales, the transaction price is generally the amount billed to the customer based on the prevailing market price for the products shipped but may be reduced slightly for estimated cash discounts.

There are no significant contract estimates related to the real estate business.

Contract Balances

In general, a customer receivable is recorded as we ship and/or deliver wood products, logs and residuals. We generally receive payment shortly after products have been received by our customers. As of June 30, 2018 and December 31, 2017 we recorded $3.7 million and $1.7 million, respectively, for contract liabilities related to hunting lease rights. These contract liabilities are being amortized over the term of the contracts, which is typically less than twelve months. Other contract asset and liability balances, such as prepayments, are immaterial. For real estate sales, we typically receive the entire consideration in cash at closing.

Major Products

The following table represents our revenues by major product. For additional information regarding our segments, see Note 17: Segment Information.

	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2018			2017			2018			2017
Resource
Northern region
Sawlogs	$	49,627		$	38,258		$	99,211		$	70,344
Pulpwood		1,299			1,491			3,079			3,445
Stumpage		57			—			136			142
Other		252			253			468			506
		51,235			40,002			102,894			74,437
Southern region
Sawlogs		25,190			7,544			39,220			16,233
Pulpwood		13,468			7,312			22,438			14,954
Stumpage		1,062			148			1,453			230
Other		1,556			918			3,012			1,838
		41,276			15,922			66,123			33,255
Total Resource revenues	$	92,511		$	55,924		$	169,017		$	107,692

Wood Products
Lumber		133,788			81,702			228,781			146,574
Panels		41,239			19,283			70,130			36,978
Residuals		18,558			13,544			34,489			26,569
	$	193,585		$	114,529		$	333,400		$	210,121
Real Estate
Rural real estate		12,669			8,136			21,502			22,640
Development real estate		1,743			—			2,962			—
Other		2,019			—			2,522			—
	$	16,431		$	8,136		$	26,986		$	22,640
Total segment revenues		302,527			178,589			529,403			340,453
Intersegment Resource revenues¹		(34,294	)		(15,360	)		(61,273	)		(27,543	)
Total consolidated revenues	$	268,233		$	163,229		$	468,130		$	312,910

¹ Intersegment revenues are based on prevailing market prices of logs sold by our Resource segment to the Wood Products segment.