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BUSINESS SEGMENTS
 9 Months Ended
Sep. 30, 2018
BUSINESS SEGMENTS
BUSINESS SEGMENTS

Reportable business segments are determined based on the company’s "management approach," as defined by ASC Topic 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
SEPTEMBER 2018
 
SEPTEMBER 2017
 
SEPTEMBER 2018
 
SEPTEMBER 2017
Sales to unaffiliated customers:
 
 
 
 
 
 
 
Timberlands
$
468

 
$
491

 
$
1,455

 
$
1,446

Real Estate & ENR
96

 
82

 
205

 
181

Wood Products
1,346

 
1,299

 
4,180

 
3,746

 
1,910

 
1,872

 
5,840

 
5,373

Intersegment sales:
 
 
 
 
 
 
 
Timberlands
185

 
179

 
598

 
544

 
 
 
 
 


 


Total sales
2,095

 
2,051

 
6,438

 
5,917

Intersegment eliminations
(185
)
 
(179
)
 
(598
)
 
(544
)
Total
$
1,910

 
$
1,872

 
$
5,840

 
$
5,373

Net contribution to earnings:
 
 
 
 
 
 
 
Timberlands(1) 
$
126

 
$
131

 
$
476

 
$
267

Real Estate & ENR
36

 
47

 
83

 
96

Wood Products(2)
213

 
40

 
812

 
389

 
375

 
218

 
1,371

 
752

Unallocated items(3)
(42
)
 
(17
)
 
(172
)
 
(113
)
Net contribution to earnings
333

 
201

 
1,199

 
639

Interest expense, net of capitalized interest
(93
)
 
(98
)
 
(278
)
 
(297
)
Earnings before income taxes
240

 
103

 
921

 
342

Income taxes
15

 
27

 
(80
)
 
(31
)
Net earnings
$
255

 
$
130

 
$
841

 
$
311



(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 $25 million recovery and a $25 million charge recorded in the year-to-date period ended September 30, 2018, and $190 million and $240 million charges recorded in the quarter and year-to-date period ended September 30, 2017, respectively. We did not receive any insurance recoveries or record additional charges in third quarter 2018. These changes were recorded to accrue for estimated costs to remediate an issue with certain I-joists coated with our former 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.