NOTE 17. SEGMENT INFORMATION

Our businesses are organized into three reportable operating segments: Resource, Wood Products and Real Estate. Management activities in the Resource segment include planting and harvesting trees and building and maintaining roads. The Resource segment also generates revenues from non-timber resources such as hunting leases, recreation permits and leases, mineral rights leases, oil and gas royalties, biomass production and carbon sequestration. The Wood Products segment manufactures and markets lumber, plywood and MDF. The business of our Real Estate segment includes the sale of land holdings deemed non-strategic or identified as having higher and better use alternatives. The Real Estate segment also engages in master planned communities and development activities.

Effective February 20, 2018, we changed our operating segment disclosures in order to reflect the new measure of operating profit discussed below that management uses to allocate resources and assess performance. Management adopted the new measure due to the merger with Deltic. The significant increase in the company’s post-merger assets and the related fair value purchase accounting adjustments to acquired Deltic assets created a lack of comparability associated with the historical performance measures. This change has been reflected in the segment information for the three and six months ended June 30, 2018. The segment information presented for comparative purposes for the three and six months ended June 30, 2017 has also been revised to reflect this change.

The reporting segments follow the same accounting policies used for our Condensed Consolidated Financial Statements, with the exception of the valuation of inventories. All segment inventories are reported using the average cost method and the LIFO reserve is recorded at the corporate level. Management primarily evaluates the performance of its segments and allocates resources to them based upon Adjusted EBITDDA. EBITDDA is calculated as net income (loss) before interest expense, income taxes, basis of real estate sold, depreciation, depletion and amortization. Adjusted EBITDDA excludes certain specific items that are considered to hinder comparison of the performance of our businesses either year-on-year or with other businesses. Although Adjusted EBITDDA is not a measure of financial condition or performance determined in accordance with GAAP, the company uses Adjusted EBITDDA to compare the operating performance of its segments on a consistent basis and to evaluate the performance and effectiveness of its operational strategies. The company’s calculation of Adjusted EBITDDA may not be comparable to that reported by other companies.

The following table summarizes information on revenues, Adjusted EBITDDA, depreciation, depletion and amortization and basis of real estate sold for each of the company’s reportable segments and includes a reconciliation of total Adjusted EBITDDA to income before income taxes:

	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2018			2017			2018			2017
Revenues:
Resource	$	92,511		$	55,924		$	169,017		$	107,692
Wood Products		193,585			114,529			333,400			210,121
Real Estate		16,431			8,136			26,986			22,640
		302,527			178,589			529,403			340,453
Intersegment Resource revenues¹		(34,294	)		(15,360	)		(61,273	)		(27,543	)
Consolidated revenues	$	268,233		$	163,229		$	468,130		$	312,910

Adjusted EBITDDA:
Resource	$	43,691		$	23,823		$	81,388		$	43,166
Wood Products		51,566			23,496			80,516			34,265
Real Estate		12,300			6,779			20,302			20,239
Corporate		(11,264	)		(9,009	)		(19,980	)		(16,701	)
Eliminations and adjustments		(2,085	)		988			(3,286	)		2,028
Total Adjusted EBITDDA		94,208			46,077			158,940			82,997
Basis of real estate sold		(2,820	)		(982	)		(6,425	)		(5,772	)
Depreciation, depletion and amortization		(20,950	)		(6,271	)		(33,146	)		(12,600	)
Interest expense, net		(9,356	)		(7,348	)		(15,016	)		(12,318	)
Non-operating pension and other postretirement employee benefits		(1,908	)		(1,286	)		(3,765	)		(3,192	)
Gain (loss) on fixed assets		(3	)		(30	)		1			(16	)
Gain on lumber price swap		—			3,265			—			3,265
Inventory purchase price adjustment in cost of goods sold²		—			—			(1,849	)		—
Deltic merger-related costs³		(1,018	)		—			(20,273	)		—
Income before income taxes	$	58,153		$	33,425		$	78,467		$	52,364

Depreciation, depletion and amortization:
Resource	$	14,598		$	4,274		$	23,244		$	8,658
Wood Products		6,069			1,839			9,423			3,666
Real Estate		77			—			117			1
Corporate		206			158			362			275
		20,950			6,271			33,146			12,600
Bond discounts and deferred loan fees⁴		655			370			1,094			743
Total depreciation, depletion and amortization	$	21,605		$	6,641		$	34,240		$	13,343

Basis of real estate sold:
Real Estate	$	2,896		$	1,047		$	6,619		$	5,856
Eliminations and adjustments		(76	)		(65	)		(194	)		(84	)
Total basis of real estate sold	$	2,820		$	982		$	6,425		$	5,772

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

²	The effect on cost of goods sold for fair value adjustments to the carrying amounts of inventory acquired in business combinations.

³	For integration and restructuring costs related to the merger with Deltic see Note 14: Merger, Integration and Other Costs.

⁴	Bond discounts and deferred loan fees are reported within interest expense, net on the Condensed Consolidated Statement of Income.

A reconciliation of our business segment total assets to total assets in the Condensed Consolidated Balance Sheet is as follows:

(Dollars in thousands)	June 30, 2018		December 31, 2017
Total assets:
Resource¹	$	1,725,559	$	670,240
Wood Products		457,370		154,479
Real Estate²		89,595		—
		2,272,524		824,719
Corporate		124,625		128,360
Total consolidated assets	$	2,397,149	$	953,079

¹We do not report rural real estate separate from Resource as we do not report these assets separately to management.

²Real Estate assets primarily consist of real estate development acquired with the Deltic merger.