Deltic Announces Preliminary Second Quarter 2010 Results

July 27, 2010 by timbercommunity

Deltic Timber Corporation (NYSE-DEL) announced today that net income for the second quarter of 2010 was $5.5 million, $.45 a share, compared to $1 million, $.08 a share, a year ago. The improvement was primarily due to significantly higher sales prices for lumber during the second quarter of 2010 and a sales volume increase to capitalize on the market improvement.

Commenting on the results, President and Chief Executive Officer, Ray C. Dillon, stated, “The economic leverage of Deltic’s ownership of efficient lumber manufacturing operations continued to be evident during the second quarter. Our sawmills not only protect the value of our core timberland assets, they also have the potential to generate outstanding income and cash flows for the Company whenever market conditions present opportunities. Although the lumber market has now softened from the peak that occurred during the second quarter, we will continue to emphasize hourly productivity rates and other operating efficiencies as we adjust operating hours in our facilities to match production levels with
demand.”

Net cash provided by operating activities was $9.6 million for 2010’s second quarter, which compares to $5.1 million a year ago. For the first six months of 2010, net income totaled $7.8 million, $.63 a share, compared to a loss of $.2 million, $.02 a share, for the same period of 2009, and net cash provided by operating activities was $14 million compared to $5.5 million for the first half of 2009.

Concerning the outlook for the third quarter and year of 2010, Mr. Dillon stated, “We currently anticipate the pine sawtimber harvest to be 165,000 to 175,000 tons and 550,000 to 600,000 tons, respectively. Finished lumber production and sales volumes are estimated at 65 to 75 million board feet for the third quarter and 240 to 260 million board feet for the year, depending on market conditions.
Residential lot sales are projected at 2 to 5 and 20 to 30 lots for the third quarter and year of 2010, respectively. Deltic has already closed on the sale of approximately 19 acres of commercial real estate in Chenal Valley during the third quarter of 2010. Any further commercial real estate acreage sales during 2010 is difficult to estimate due to the many factors that are involved.”

The Woodlands segment earned $6.4 million in the second quarter of both 2010 and 2009. The
pine sawtimber harvest level during the current period was 169,290 tons, an increase of 2,684 tons when
compared to 166,606 tons harvested in the second quarter of 2009. The average per-ton sales price for
pine sawtimber decreased seven percent to $28 per ton in the current-year second quarter versus
$30 per ton for the same period of 2009. While the current period’s average sales price was below that of
a year ago, pine sawtimber prices have been trending upward since the beginning of 2010. The
Company’s pine pulpwood harvest for the second quarter of 2010 was 96,095 tons compared to
77,194 tons for the second quarter of 2009. The average per-ton sales price for pine pulpwood was
$13 per ton in the current period versus $10 per ton a year ago. The increase in the pine pulpwood
volume and the per-ton price is due to higher demand in the Company’s operating area combined with
more favorable logging conditions. Oil and gas lease rental and net royalty income was $1.4 million for
the second quarter of 2010 versus $.9 million for the same period of 2009. The improvement was mainly
due to an increase in the number of “Fayetteville Shale” gas wells in production compared to a year ago.
During 2010’s second quarter, Deltic sold approximately 520 acres of recreational-use hardwood
bottomland at an average sales price of $2,100 per acre compared to approximately 724 acres at an
average sales price of $2,100 per acre during the same period a year ago.
Deltic’s Mill segment reported operating income of $6.2 million during 2010’s second quarter
compared to an operating loss of $1.9 million for the same quarter of 2009. The average lumber sales
price was $345 per thousand board feet for the second quarter of 2010, which was a $105, or 44 percent,
increase when compared to the same period a year ago. With the strong lumber market that existed for
most of the second quarter of 2010, the Company operated additional hours in its sawmills and sold
69.8 million board feet during the current quarter, which was a six percent increase compared to
66 million board feet sold during 2009’s second quarter. Because of the historically volatile nature of the
wood products market, Deltic will continue to evaluate market conditions and determine the operating
hours needed to match production with market demand.

The Real Estate segment lost $.5 million in the second quarter of 2010, which compares to a
$.4 million loss for the same period of 2009. There were four residential lot sales for the current period
which was a one lot decrease from 2009’s second quarter. The average per-lot sales price was $48,200,
a decrease of $5,200 when compared to the prior-year period’s average because of the mix of lots sold.
There were no sales of commercial real estate acreage in the second quarter of either year.
Corporate operating expense was $4.4 million in the second quarter of 2010 versus $2.9 million
for the corresponding quarter of 2009. The variance is due to increased general and administrative
expenses for the current-period quarter, primarily employee incentive plan expenses, resulting from the
improved financial results. Deltic’s equity in the earnings of Del-Tin Fiber was $2.2 million, which
compares to $.8 million of equity in earnings for the second quarter of 2009. The improvement was
primarily due to increased demand in MDF resulting from an interruption in the supply of moldings from
Chile caused by an earthquake there on February 27, 2010.

For the first six months of 2010, the pine sawtimber harvest level was 315,778 tons compared to
322,137 tons harvested during the same period of 2009. The average pine sawtimber price of $27 per
ton decreased $2 per ton from the prior-year period. The finished lumber average sales price increased
$90, or 38 percent, from $238 per thousand board feet in 2009 to $328 per thousand board feet in 2010.
The lumber sales volume increased 15.1 million board feet from 118.4 million board feet in 2009 to
133.5 million board feet in 2010. Residential lot sales for the first half of 2010 totaled 10 lots at an
average price of $97,000, which compares to five lots at $53,400 per lot for the corresponding period of
2009. There were no commercial acreage sales during the first six months of either year.
Capital expenditures were $3.3 million for the second quarter of 2010 and $6.1 million for the six
months ended June 30, 2010. For the corresponding periods of 2009, capital expenditures totaled
$2 million and $6.8 million, respectively.