|DELTIC TIMBER CORPORATION|
|CONSOLIDATED FINANCIAL DATA SUMMARY|
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Commenting on the results, President and Chief Executive Officer, Ray C. Dillon, stated, “All three of Deltic’s operating segments reported improved financial results when compared to the same quarter of 2012, led by the improvement in our Manufacturing segment. For the quarter, this segment’s financial results improved $3 million before consideration of the additional $1.5 million positive impact that the inclusion of the results of Del-Tin Fiber had on the segment. The timing of our Del-Tin Fiber acquisition has proved to be very beneficial. The medium density fiberboard market strengthened during the second quarter, resulting in improved sales prices. As a result of these factors, our commitment to a strategy of vertical integration continued to be beneficial to the financial performance of the Company for the quarter.”The Woodlands segment reported operating income of $4.9 million in the second quarter of 2013 compared to $4.7 million in 2012’s second quarter. The pine sawtimber harvest volume during the current quarter was 159,897 tons, while in the same quarter of 2012, the Company harvested 156,512 tons. The average per-ton sales price for pine sawtimber was $22 per ton for the second quarter of both 2013 and 2012. Deltic’s pine pulpwood harvest volume during the second quarter of 2013 was 80,920 tons compared to 115,965 tons for the same period of 2012, while the average sales price was $8 per ton for both periods. Oil and gas lease rentals and net royalty income amounted to $1.2 million for the second quarter of both 2013 and 2012. During the current quarter, the Company sold 1,082 acres of non-strategic recreational-use hardwood bottomland at an average sales price of $1,400 per acre, compared to 2012’s second quarter sales of 322 acres at an average sales price of $1,700 per acre. Deltic’s Manufacturing segment reported operating income of $10.2 million in 2013’s second quarter, an increase of $4.5 million, when compared to $5.7 million during the same period of 2012. On April 1, 2013, Deltic completed the acquisition of the remaining ownership interest of Del-Tin Fiber from the Company’s former joint venture partner. As a result, the operating and financial results of Del-Tin Fiber have been consolidated into Deltic’s Manufacturing segment beginning in the second quarter of 2013, with the prior-period sales volume and average sales price of medium density fiberboard (“MDF”) for the plant reported for comparison purposes. The average lumber sales price of $399 per thousand board feet was an $82, or 26 percent, increase when compared to the average sales price for the second quarter of last year. The Company sold 55 million board feet of lumber in 2013’s second quarter, which was 15.3 million board feet less than the 70.3 million board feet sold in the same period a year ago, as U.S. lumber supply increased during the course of the quarter and exceeded demand. The average sales price for MDF during the current year’s second quarter was $582 per thousand square feet, an 11 percent increase from 2012’s second quarter average sales price of $522 per thousand square feet. MDF sales volume in the second quarter of 2013 totaled 27.8 million square feet, a decrease of 2.7 million square feet from the 30.5 million square feet a year ago, primarily due to the impact of reduced production from a combination of additional scheduled and unscheduled plant downtime. In addition, the Manufacturing segment benefitted from a $.8 million gain during the second quarter of 2013 on the involuntary conversion of assets. This gain resulted from the receipt of insurance proceeds related to lumber storage sheds at the Company’s Ola Mill that were destroyed by winter storms in December 2012.
The Real Estate segment reported operating income of $.2 million in 2013’s second quarter, which compares to an operating loss of $.3 million for the same period of 2012. The $.5 million improvement was due to increased residential lot sales. There were 22 residential lots sold in the second quarter of 2013 versus 11 lots sold in 2012’s second quarter. The current quarter’s average per-lot sales price was $76,900, which compares to $68,000 for the same period of 2012 due to sales mix. There were no commercial acreage sales in the second quarter of either year.Corporate operating expense was $4.3 million in the second quarter of 2013 compared to $3.7 million for the corresponding period of 2012. The increase was due to higher general and administrative expenses, mainly professional fees related to the acquisition of the other half of Del-Tin Fiber combined with increased incentive plan expenses resulting from the improved financial results for 2013. Other income increased by $3.1 million, to $3.2 million in 2013’s second quarter, as the Company recorded a gain on the step up in basis of its previously held equity investment in Del-Tin Fiber. In addition, Deltic recorded a $3.3 million bargain-purchase gain, net of tax, related to the acquisition of the other half of the ownership of Del-Tin Fiber from its joint venture partner on April 1, 2013. Income tax expense in 2013’s second quarter was $5 million compared to $1.8 million in the prior year’s second quarter, primarily as a result of higher pretax income in 2013. For the first six months of 2013, the pine sawtimber harvest level was 340,966 tons compared to 329,519 tons harvested during the same period of 2012, while the average pine sawtimber sales price of $23 per ton increased $1 per ton from the prior-year period. The finished lumber average sales price increased $105, or 36 percent, from $295 per thousand board feet in 2012 to $400 per thousand board feet in 2013. Lumber sales volume decreased 9.1 million board feet, from 135.3 million board feet in 2012 to 126.2 million board feet in 2013, as Deltic adjusted operating hours to meet market demand. The average sales price for MDF increased $73, or 14 percent, from $504 per thousand square feet in 2012 to $577 per thousand square feet in 2013. MDF sales volume decreased from 60.6 million square feet in 2012 to 56.9 million square feet in 2013. Residential lot sales for the first half of 2013 totaled 34 lots at an average sales price per lot of $76,000, compared to 18 lots at $67,600 per lot for the corresponding period of 2012. The Company had no commercial real estate acreage sales in the first six months of 2013 or 2012.
Capital expenditures were $7.2 million for the second quarter of 2013 and $20.6 million for the six months ended June 30, 2013. For the corresponding periods of 2012, capital expenditures totaled $2.3 million and $6 million, respectively. The quarter-over-quarter increase in capital expenditures was due to increased expenditures in the Manufacturing segment related to projects to increase hourly productivity rates and total production volume in the Company’s sawmill operations. The year-over-year increase was due to the increased Manufacturing segment’s expenditures combined with increased timberland acquisitions.Concerning the outlook for the third quarter and year of 2013, Mr. Dillon stated, “We currently anticipate the pine sawtimber harvest to be 175,000 to 185,000 and 585,000 to 605,000 tons, respectively. Finished lumber production and sales volumes are estimated at 55 to 70 million board feet for the third quarter and 240 to 270 million board feet for the year. MDF sales volumes for the third quarter and year of 2013 are forecast to be 25 to 30 million square feet and 110 to 120 million square feet, respectively. Actual sales volumes for both finished lumber and MDF are dependent upon market conditions. Residential lot sales are projected at 10 to 15 and 50 to 60 lots for the third quarter and year of 2013, respectively. Even as commercial acreage within Chenal Valley continues to receive interest from potential buyers, it is difficult for the Company to predict the timing of closings of any commercial real estate transactions due to their highly uncertain nature and volatility.” 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, natural gas pricing, 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, July 25, 2013, at 10:00 a.m. Central Time to discuss second quarter 2013 earnings. Interested parties may participate in the call by dialing 1-866-515-2908 and referencing participant passcode identification number 61919449. 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, August 1, 2013, by dialing 1-888-286-8010 and referencing replay passcode identification number 13093276.