NOTE 16. 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 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 nine months ended September 30, 2018. The segment information presented for comparative purposes for the three and nine months ended September 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 September 30,						Nine Months Ended September 30,
(Dollars in thousands)	2018			2017			2018			2017
Revenues:
Resource	$	111,421		$	94,705		$	280,438		$	202,397
Wood Products		199,025			116,487			532,425			326,608
Real Estate		11,233			3,282			38,219			25,922
		321,679			214,474			851,082			554,927
Intersegment Resource revenues¹		(32,480	)		(24,033	)		(93,753	)		(51,576	)
Consolidated revenues	$	289,199		$	190,441		$	757,329		$	503,351

Adjusted EBITDDA:
Resource	$	58,680		$	48,034		$	140,068		$	91,200
Wood Products		46,446			24,395			126,962			58,660
Real Estate		7,467			2,094			27,769			22,333
Corporate		(8,989	)		(9,108	)		(28,969	)		(25,809	)
Eliminations and adjustments		(1,794	)		(3,180	)		(5,080	)		(1,152	)
Total Adjusted EBITDDA		101,810			62,235			260,750			145,232
Basis of real estate sold		(4,248	)		(579	)		(10,673	)		(6,351	)
Depreciation, depletion and amortization		(18,836	)		(8,196	)		(51,982	)		(20,796	)
Interest expense, net		(10,109	)		(7,336	)		(25,125	)		(19,654	)
Non-operating pension and other postretirement employee benefits		(1,942	)		(1,596	)		(5,707	)		(4,788	)
Gain (loss) on fixed assets		(12	)		—			(11	)		(16	)
Lumber price swap²		—			(3,066	)		—			199
Inventory purchase price adjustment in cost of goods sold³		—			—			(1,849	)		—
Environmental charges for Avery Landing		—			(4,978	)		—			(4,978	)
Deltic merger-related costs⁴		(972	)		(27	)		(21,245	)		(27	)
Income before income taxes	$	65,691		$	36,457		$	144,158		$	88,821

Depreciation, depletion and amortization:
Resource	$	12,730		$	6,207		$	35,974		$	14,865
Wood Products		5,827			1,821			15,250			5,487
Real Estate		81			—			198			1
Corporate		198			168			560			443
		18,836			8,196			51,982			20,796
Bond discounts and deferred loan fees⁵		609			369			1,703			1,112
Total depreciation, depletion and amortization	$	19,445		$	8,565		$	53,685		$	21,908

Basis of real estate sold:
Real Estate	$	4,267		$	618		$	10,886		$	6,474
Eliminations and adjustments		(19	)		(39	)		(213	)		(123	)
Total basis of real estate sold	$	4,248		$	579		$	10,673		$	6,351

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

²	Includes change in unrealized (gain) loss and $1 million in cash settlements.

³	The effect on cost of goods sold for fair value adjustments to the carrying amounts of inventory acquired in business combinations.

⁴	For integration and restructuring costs related to the merger with Deltic see Note 13: Merger, Integration and Other Costs.

⁵	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)	September 30, 2018		December 31, 2017
Total assets:
Resource¹	$	1,719,703	$	670,240
Wood Products		468,622		154,479
Real Estate²		89,190		—
		2,277,515		824,719
Corporate		135,556		128,360
Total consolidated assets	$	2,413,071	$	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.