|DELTIC TIMBER CORPORATION CONSOLIDATED FINANCIAL DATA SUMMARY|
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Commenting on the results, Mr. Dillon stated, “Our excellent portfolio of diverse assets continued to respond well in these difficult times, and we reported profitable financial results for the seventh consecutive quarter, despite the overall depressed environment for both the forest and building products and residential and commercial real estate development businesses. The Company’s financial results for 2010 were outstanding, especially when current economic conditions are taken into account. Among the significant highlights for the year were: (1) an increase in the pine sawtimber harvest level as a result of recent acquisitions and biological growth; (2) the sale of 4,061 acres of recreational-use hardwood bottomland; (3) a $1.7 million increase in oil and gas revenues, as more gas wells were drilled in the Fayetteville Shale area; (4) the ability to capitalize on a temporary supply-side driven improvement in lumber prices, as we were able to supply logs to our mills from our fee timberlands enabling the mills to operate additional hours and increase production in response to market demand; (5) the ability of Del-Tin Fiber, our medium density fiberboard joint venture, to increase production of MDF to be used in moldings after an earthquake in Chile interrupted the supply of moldings normally imported into the United States; and (6) the 19-acre commercial real estate sale in Chenal Valley to a major healthcare provider, the second of a two-part transaction in which the buyer previously purchased 17.76 acres in the fourth quarter of 2009. These sales are bringing additional interest to our acreage adjacent to this site and will further increase the value of our real estate holdings.”The Woodlands segment reported operating income of $7.9 million in the fourth quarter of 2010, compared to $6.7 million for the same period of 2009. The Company’s pine sawtimber harvest volume in the current period of 2010 was 134,602 tons, a 15,362-ton increase over the 119,240 tons harvested in the fourth quarter of 2009. The average per-ton sales price was $28 in the fourth quarter of both periods. During 2010’s fourth quarter, Deltic harvested 94,365 tons of pine pulpwood at an average price of $9 per ton, compared to 63,963 tons at an average price of $12 per ton for the same period of 2009. The lower pine pulpwood harvest volume in 2009 was caused by unusually wet weather conditions, while the current-quarter’s per-ton average sales price was 25 percent lower because of reduced demand from area papermills because of an increased pine pulpwood supply as a result of the extremely dry logging conditions experienced late in the year. Oil and gas revenues from lease rentals and royalties were $1.4 million for the fourth quarter of 2010 versus $1.2 million in 2009’s fourth quarter. The Company sold approximately 2,939 acres of recreational-use hardwood bottomland at a per-acre average sales price of $1,500 in 2010’s fourth quarter versus 2,400 acres sold at an average sales price of $1,600 per acre for the same period of 2009.
The Mills segment reported an operating loss of $1.1 million in the fourth quarter of 2010 compared to a loss of $.4 million for the same period of 2009. The increased loss was mainly due to a lower per-unit average sales price, partially offset by increased hourly production rates and improved operating efficiencies. The average lumber sales price was $245 per thousand board feet for the current quarter of 2010, which was a $20, or 8 percent, decrease when compared to $265 per thousand board feet for the same period a year ago. The lumber sales volume for the fourth quarter of 2010 was 68.2 million board feet, an increase of 37 percent when compared to 2009’s fourth quarter volume of 49.7 million board feet. The volume increase was the result of year-over-year improved hourly productivity rates and an increase in the hours of operation as the Company continued to match production with market demand.The Company’s Real Estate segment reported an operating loss of $.6 million in the fourth quarter of 2010 compared to income of $2.4 million for the same period of 2009. Residential lot sales totaled 15 lots in 2010’s current period, an increase of 10 lots when compared to the corresponding quarter of 2009. Due to the sales mix, the current-quarter’s average sales price was $68,900 per lot, a $32,000 per-lot decrease when compared to 2009’s fourth quarter average sales price of $100,900 per lot. There were no sales of commercial real estate acreage during the fourth quarter of 2010, while the Company sold 17.76 acres of commercial property for $225,000 per acre in the prior-year fourth quarter. Corporate operating expense was $4.4 million for 2010’s fourth quarter, which compares to $3.4 million for the same period of 2009. The increase is due to higher general and administrative expenses, mainly employee incentive plan expenses due to improved financial results for 2010. Deltic’s equity in earnings of Del-Tin Fiber was $.4 million for the current-year quarter versus break-even results for the same period of 2009. The Company’s income tax expense for the fourth quarter of 2010 was $.2 million compared to $.8 million in 2009’s corresponding quarter. The 2010 income tax rate benefitted from an out-of-period true-up of deferred state income taxes, while the 2009 tax rate benefitted from a reduced federal income tax rate on qualified timber sale gains that was not extended to 2010.
Capital expenditures were $6.8 million for 2010’s fourth quarter and $15.6 million for the year of 2010. For the corresponding periods of 2009, capital expenditures totaled $22.4 million and $32.7 million, respectively. The decrease was mainly due to fewer acres of timberland being acquired in 2010.For the year 2010, the pine sawtimber harvest was 609,867 tons compared to 578,646 tons for 2009. In 2010, the average pine sawtimber sales price decreased $2 per ton from 2009’s rate, to $27 per ton. Sales of non-strategic timberland for the year of 2010 totaled 4,061 acres with an average sales price of $1,600 per acre, while in 2009 the Company sold 4,051 acres with a per-acre sales price of $1,700. Oil and gas lease rental and royalty income was $5.7 million in 2010 versus $4 million in 2009. Lumber sales volume increased 17 percent from 232.2 million board feet in 2009 to 270.8 million board feet in 2010. The average finished lumber sales price increased $40 per thousand board feet, to $290 per thousand board feet in 2010. Residential lot sales for the current year totaled 28 lots at an average price of $81,400 per lot versus sales of 14 lots in 2009 at $73,100 per lot. Deltic sold 19 acres of commercial real estate at $334,000 per acre in 2010 compared to 17.76 acres for $225,000 per acre in 2009. Equity in earnings of Del-Tin Fiber was $4.1 million for 2010, while 2009’s equity in earnings was $2.2 million. Regarding the outlook for the first quarter and year of 2011, Mr. Dillon stated, “We currently anticipate the pine sawtimber harvest to be 135,000 to 145,000 tons and 550,000 to 600,000 tons, respectively. Finished lumber sales are estimated to be 55 to 65 million board feet for the first quarter and 240 to 280 million board feet for the year, but these volumes are dependent upon market conditions. Residential lot sales are projected at one to three lots and 25 to 50 lots for the first quarter and year of 2011, respectively. Commercial acreage within Chenal Valley continues to receive interest, but due to the volatile nature of commercial real estate transactions and the significant number of factors involved, it is difficult to estimate future closings.”
Statements included herein that are not historical in nature are intended to be, and are hereby identified as, “forward-looking statements” within the meaning of the Federal Securities Laws. Such statements reflect the Company’s current expectations and involve certain risks and uncertainties. Actual results could differ materially from those included in such forward-looking statements. Factors that could cause such differences include, but are not limited to, the cyclical nature of the industry, changes in interest rates, credit availability, general economic conditions, adverse weather, cost and availability of materials used to manufacture the Company’s products, and the other risk factors described from time to time in the reports and disclosure documents filed by the Company with the Securities and Exchange Commission.Deltic will hold a conference call on Thursday, February 24, 2011, at 10:00 a.m. Central Time to discuss fourth quarter and year of 2010 earnings. Interested parties may participate in the call by dialing 1-866-543-6408 and referencing participant passcode identification number 39427176. The call will also be broadcast live over the Internet and can be accessed through the Investor Relations section of the Deltic website, at www.deltic.com . Online replays of the call will be available through the Deltic website, and a recording of the call will be available until Thursday, March 3, 2011, by dialing 1-888-286-8010 and referencing replay passcode identification number 80034700.