Segment Information

3 Months Ended

Mar. 31, 2019

NOTE 6. 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 contracts, oil and gas royalties, biomass production and carbon sequestration. The Wood Products segment manufactures and markets lumber and plywood. 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, development activities and includes the Chenal Country Club.

The reportable segments follow the same accounting policies used for our Condensed Consolidated Financial Statements, with the exception of the valuation of inventories. For most of our operations, we use the last-in, first-out (LIFO) method of valuing inventory. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Interim LIFO calculations are based on management’s best estimates of expected year-end inventory levels and costs and are subject to the final year-end LIFO inventory valuation. Inventories not valued under LIFO are recorded at the lower of average cost or net realizable value. All segment inventories are reported using the average cost method. The LIFO reserve and intersegment eliminations are 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 further excludes certain specific items that are considered to hinder comparison of the performance of our businesses either year-on-year or with other businesses. Our calculation of Adjusted EBITDDA may not be comparable to that reported by other companies.

The following table summarizes information on revenues, intersegment eliminations, Adjusted EBITDDA, depreciation, depletion and amortization, basis of real estate sold, total assets and capital expenditures for each of the company’s reportable segments and includes a reconciliation of Total Adjusted EBITDDA to income before income taxes. Corporate information is included to reconcile segment data to the Condensed Consolidated Financial Statements.

	Three Months Ended March 31,
(in thousands)	2019			2018
Revenues:
Resource	$	68,158		$	76,506
Wood Products		132,306			139,815
Real Estate		6,164			10,555
		206,628			226,876
Intersegment Resource revenues¹		(24,912	)		(26,979	)
Consolidated revenues	$	181,716		$	199,897

Adjusted EBITDDA:
Resource	$	26,850		$	37,697
Wood Products		7,226			28,950
Real Estate		2,703			8,002
Corporate		(10,654	)		(8,716	)
Eliminations and adjustments		2,127			(1,201	)
Total Adjusted EBITDDA		28,252			64,732
Basis of real estate sold		(1,556	)		(3,605	)
Depreciation, depletion and amortization		(15,797	)		(12,196	)
Interest expense, net²		(5,464	)		(5,660	)
Loss on extinguishment of debt		(5,512	)		—
Non-operating pension and other postretirement employee benefits		(980	)		(1,857	)
Gain on fixed assets		32			4
Gain on sale of facility		9,176			—
Inventory purchase price adjustment in cost of goods sold³		—			(1,849	)
Deltic merger-related costs⁴		—			(19,255	)
Income before income taxes	$	8,151		$	20,314

Depreciation, depletion and amortization:
Resource	$	10,265		$	8,646
Wood Products		5,042			3,354
Real Estate		209			40
Corporate		281			156
		15,797			12,196
Bond discounts and deferred loan fees²		477			439
Total depreciation, depletion and amortization	$	16,274		$	12,635

Basis of real estate sold:
Real Estate	$	1,588		$	3,723
Eliminations and adjustments		(32	)		(118	)
Total basis of real estate sold	$	1,556		$	3,605

¹	Intersegment revenues represent logs sold by our Resource segment to the Wood Products segment.

²	Bond discounts and deferred loan fees are reported within interest expense, net on the Condensed Consolidated Statement of Income.

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

⁴	For integration and restructuring costs related to the merger with Deltic see Note 3: Merger with Deltic.

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

(in thousands)	March 31, 2019		December 31, 2018
Total assets:
Resource¹	$	1,686,471	$	1,693,162
Wood Products		385,534		456,306
Real Estate²		93,526		93,208
		2,165,531		2,242,676
Corporate		107,683		83,176
Total consolidated assets	$	2,273,214	$	2,325,852

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

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