LEASES

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

LEASES

LEASES

TIMBERLAND LEASES

U.S. timberland leases typically have initial terms of approximately 30 to 65 years, with renewal provisions in some cases. New Zealand timberland lease terms typically range between 30 and 99 years. New Zealand lease arrangements generally consist of Crown Forest Licenses (“CFLs”), forestry rights and land leases. A CFL is a license arrangement to use government or privately owned land to operate a commercial forest. CFLs generally extend indefinitely and may only be terminated upon a 35-year termination notice. If no termination notice is given, the CFLs renew automatically each year for a one-year term. Alternatively, some CFLs extend for a specific term. Once a CFL is terminated, we may be able to obtain a forestry right from the subsequent owner. A forestry right is a license arrangement with a private entity to use their lands to operate a commercial forest. Forestry rights terminate either upon the issuance of a termination notice (which can last 35 to 45 years), completion of harvest, or a specified termination date.

As of September 30, 2020, the New Zealand subsidiary has two CFLs comprising 9,000 gross acres or 8,000 net plantable acres under termination notice that are being relinquished as harvest activities are concluded, as well as two fixed-term CFLs comprising 3,000 gross acres or 2,000 net plantable acres expiring in 2062. Additionally, the New Zealand subsidiary has two forestry rights comprising 32,000 gross acres or 8,000 net plantable acres under termination notice that are being relinquished as harvest activities are concluded.

OTHER NON-TIMBERLAND LEASES

In addition to timberland holdings, we have leased properties for certain office locations. Significant leased properties include a regional office in Lufkin, Texas; a Pacific Northwest Timber office in Hoquiam, Washington and a New Zealand Timber and Trading headquarters in Auckland, New Zealand.

LEASE MATURITIES, LEASE COST AND OTHER LEASE INFORMATION

The following table details our undiscounted lease obligations as of September 30, 2020 by type of lease and year of expiration:

		Year of Expiration
Lease obligations	Total	Remaining 2020	2021	2022	2023	2024	Thereafter
Operating lease liabilities	$185,030	$4,107	$9,278	$8,384	$8,293	$8,176	$146,792
Total Undiscounted Cash Flows	$185,030	$4,107	$9,278	$8,384	$8,293	$8,176	$146,792
Imputed interest	(84,705)
Balance at September 30, 2020	100,325
Less: Current portion	(9,203)
Non-current portion at September 30, 2020	$91,122

The following table details components of our lease cost for the three and nine months ended September 30, 2020 and September 30, 2019:

	Three Months Ended September 30,		Nine Months Ended September 30,
Lease Cost Components	2020	2019	2020	2019
Operating lease cost	$1,550	$1,959	$4,989	$6,791
Variable lease cost (a)	85	54	299	211
Total lease cost (b)	$1,635	$2,013	$5,288	$7,002

(a)    The majority of timberland leases are subject to increases or decreases based on either the Consumer Price Index, Producer Price Index or market rates.

(b)    Short-term leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense for these leases are expensed on a straight line basis over the lease term. Short-term lease expense was not material for the nine months ended September 30, 2020. 

    The following table provides supplemental cash flow information related to our leases for the nine months ended September 30, 2020 and September 30, 2019:

	Nine Months Ended September 30,
Supplemental cash flow information related to leases:	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$1,516		$2,152
Investing cash flows from operating leases	3,473		4,639
Total cash flows from operating leases	$4,989		$6,791
Weighted-average remaining lease term in years - operating leases	28		28
Weighted-average discount rate - operating leases	5	%	5	%

Lessor lease information

In the Mergers, we acquired income generating commercial and residential leases primarily concentrated in Port Gamble, Washington. Each of these are classified as operating leases.

The following table details our lease income for the three and nine months ended September 30, 2020:

	Three Months Ended September 30,	Nine Months Ended September 30,
Lease Income Components	2020	2020
Operating lease income	$324	$397
Total lease income	$324	$397

Future lease income as of September 30, 2020, based on payments due by period under the lease contracts, are presented in the following table:

		Year of Expiration
Lease assets	Total	Remaining 2020	2021	2022	2023	2024	Thereafter
Operating lease Income	$649	$84	$198	$173	$137	$57	—

We apply the following practical expedients as allowed under ASC 842:

Practical Expedient	Description
Short-term leases	We do not record right-of-use assets or lease liabilities for short-term leases (a lease that at commencement date has a lease term of 12 months or less and does not contain a purchase option that is reasonably certain to be exercised).
Separation of lease and non-lease components	We do not separate non-lease components from the associated lease components if they have the same timing and pattern of transfer and, if accounted for separately, would both be classified as an operating lease.

LEASES

LEASES

TIMBERLAND LEASES

U.S. timberland leases typically have initial terms of approximately 30 to 65 years, with renewal provisions in some cases. New Zealand timberland lease terms typically range between 30 and 99 years. New Zealand lease arrangements generally consist of Crown Forest Licenses (“CFLs”), forestry rights and land leases. A CFL is a license arrangement to use government or privately owned land to operate a commercial forest. CFLs generally extend indefinitely and may only be terminated upon a 35-year termination notice. If no termination notice is given, the CFLs renew automatically each year for a one-year term. Alternatively, some CFLs extend for a specific term. Once a CFL is terminated, we may be able to obtain a forestry right from the subsequent owner. A forestry right is a license arrangement with a private entity to use their lands to operate a commercial forest. Forestry rights terminate either upon the issuance of a termination notice (which can last 35 to 45 years), completion of harvest, or a specified termination date.

As of September 30, 2020, the New Zealand subsidiary has two CFLs comprising 9,000 gross acres or 8,000 net plantable acres under termination notice that are being relinquished as harvest activities are concluded, as well as two fixed-term CFLs comprising 3,000 gross acres or 2,000 net plantable acres expiring in 2062. Additionally, the New Zealand subsidiary has two forestry rights comprising 32,000 gross acres or 8,000 net plantable acres under termination notice that are being relinquished as harvest activities are concluded.

OTHER NON-TIMBERLAND LEASES

In addition to timberland holdings, we have leased properties for certain office locations. Significant leased properties include a regional office in Lufkin, Texas; a Pacific Northwest Timber office in Hoquiam, Washington and a New Zealand Timber and Trading headquarters in Auckland, New Zealand.

LEASE MATURITIES, LEASE COST AND OTHER LEASE INFORMATION

The following table details our undiscounted lease obligations as of September 30, 2020 by type of lease and year of expiration:

		Year of Expiration
Lease obligations	Total	Remaining 2020	2021	2022	2023	2024	Thereafter
Operating lease liabilities	$185,030	$4,107	$9,278	$8,384	$8,293	$8,176	$146,792
Total Undiscounted Cash Flows	$185,030	$4,107	$9,278	$8,384	$8,293	$8,176	$146,792
Imputed interest	(84,705)
Balance at September 30, 2020	100,325
Less: Current portion	(9,203)
Non-current portion at September 30, 2020	$91,122

The following table details components of our lease cost for the three and nine months ended September 30, 2020 and September 30, 2019:

	Three Months Ended September 30,		Nine Months Ended September 30,
Lease Cost Components	2020	2019	2020	2019
Operating lease cost	$1,550	$1,959	$4,989	$6,791
Variable lease cost (a)	85	54	299	211
Total lease cost (b)	$1,635	$2,013	$5,288	$7,002

(a)    The majority of timberland leases are subject to increases or decreases based on either the Consumer Price Index, Producer Price Index or market rates.

(b)    Short-term leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense for these leases are expensed on a straight line basis over the lease term. Short-term lease expense was not material for the nine months ended September 30, 2020. 

    The following table provides supplemental cash flow information related to our leases for the nine months ended September 30, 2020 and September 30, 2019:

	Nine Months Ended September 30,
Supplemental cash flow information related to leases:	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$1,516		$2,152
Investing cash flows from operating leases	3,473		4,639
Total cash flows from operating leases	$4,989		$6,791
Weighted-average remaining lease term in years - operating leases	28		28
Weighted-average discount rate - operating leases	5	%	5	%

Lessor lease information

In the Mergers, we acquired income generating commercial and residential leases primarily concentrated in Port Gamble, Washington. Each of these are classified as operating leases.

The following table details our lease income for the three and nine months ended September 30, 2020:

	Three Months Ended September 30,	Nine Months Ended September 30,
Lease Income Components	2020	2020
Operating lease income	$324	$397
Total lease income	$324	$397

Future lease income as of September 30, 2020, based on payments due by period under the lease contracts, are presented in the following table:

		Year of Expiration
Lease assets	Total	Remaining 2020	2021	2022	2023	2024	Thereafter
Operating lease Income	$649	$84	$198	$173	$137	$57	—

We apply the following practical expedients as allowed under ASC 842:

Practical Expedient	Description
Short-term leases	We do not record right-of-use assets or lease liabilities for short-term leases (a lease that at commencement date has a lease term of 12 months or less and does not contain a purchase option that is reasonably certain to be exercised).
Separation of lease and non-lease components	We do not separate non-lease components from the associated lease components if they have the same timing and pattern of transfer and, if accounted for separately, would both be classified as an operating lease.