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BUSINESS SEGMENTS
 6 Months Ended
Jun. 30, 2018
BUSINESS SEGMENTS
BUSINESS SEGMENTS

Reportable business segments are determined based on the company’s "management approach," as defined by FASB ASC 280, “Segment Reporting.” The management approach is based on the way the chief operating decision maker organizes the segments within a company for making decisions about resources to be allocated and assessing their performance.

We are principally engaged in growing and harvesting timber; manufacturing, distributing, and selling products made from trees; maximizing the value of every acre we own through the sale of higher and better use (HBU) properties; and monetizing reserves of minerals, oil, gas, coal, and other natural resources on our timberlands. The following is a brief description of each of our reportable business segments and activities:
•
Timberlands – which includes logs, timber and leased recreational access;
•
Real Estate & ENR – which includes sales of timberlands; rights to explore for and extract hard minerals, oil and gas production and coal; and equity interests in our Real Estate Development Ventures; and
•
Wood Products – which includes softwood lumber, engineered wood products, structural panels, medium density fiberboard and building materials distribution.

A reconciliation of our business segment information to the respective information in the Consolidated Statement of Operations is as follows:
 
QUARTER ENDED
 
YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS
JUNE 2018
 
JUNE 2017
 
JUNE 2018
 
JUNE 2017
Sales to unaffiliated customers:
 
 
 
 
 
 
 
Timberlands
$
482

 
$
469

 
$
987

 
$
955

Real Estate & ENR
58

 
46

 
109

 
99

Wood Products
1,525

 
1,293

 
2,834

 
2,447

 
2,065

 
1,808

 
3,930

 
3,501

Intersegment sales:
 
 
 
 
 
 
 
Timberlands
185

 
163

 
413

 
365

 
 
 
 
 


 


Total sales
2,250

 
1,971

 
4,343

 
3,866

Intersegment eliminations
(185
)
 
(163
)
 
(413
)
 
(365
)
Total
$
2,065

 
$
1,808

 
$
3,930

 
$
3,501

Net contribution to earnings:
 
 
 
 
 
 
 
Timberlands(1) 
$
161

 
$
(12
)
 
$
350

 
$
136

Real Estate & ENR
22

 
23

 
47

 
49

Wood Products(2)
329

 
177

 
599

 
349

 
512

 
188

 
996

 
534

Unallocated items(3)
(38
)
 
(30
)
 
(130
)
 
(96
)
Net contribution to earnings
474

 
158

 
866

 
438

Interest expense, net of capitalized interest
(92
)
 
(100
)
 
(185
)
 
(199
)
Earnings before income taxes
382

 
58

 
681

 
239

Income taxes
(65
)
 
(34
)
 
(95
)
 
(58
)
Net earnings
$
317

 
$
24

 
$
586

 
$
181



(1)
Net contribution to earnings for the Timberlands segment includes a noncash pretax impairment charge of $147 million, recorded during second quarter 2017. This impairment was a result of our agreement to sell our Uruguayan operations, as announced during June 2017. Refer to Note 15: Charges for Integration and Restructuring, Closures and Asset Impairments.
(2)
Net contribution to earnings for the Wood Products segment includes a $20 million and $5 million recovery recorded during first quarter 2018 and second quarter 2018, respectively, and a $25 million and $50 million charge recorded during second quarter 2018 and second quarter 2017, respectively, to accrue for estimated costs to remediate an issue with certain I-joists coated with our Flak Jacket® Protection product. Refer to Note 16: Charges (Recoveries) for Product Remediation, Net for additional details.
(3)
Unallocated items are gains or charges not related to, or allocated to, an individual operating segment. They include a portion of items such as: share-based compensation expenses, pension and postretirement costs, foreign exchange transaction gains and losses and the elimination of intersegment profit in inventory and LIFO.