Deltic Timber Corporation (NYSE: DEL):
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DELTIC TIMBER CORPORATION
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CONSOLIDATED FINANCIAL DATA SUMMARY
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THIRD QUARTER
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2015
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2014
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Net sales
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$
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50,150,000
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58,301,000
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Net income
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38,000
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5,974,000
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Earnings per common share
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Basic
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-
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.47
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Assuming dilution
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-
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.47
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Average common shares outstanding
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Basic
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12,438,507
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12,447,686
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Assuming dilution
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12,490,883
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12,495,265
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YEAR-TO-DATE
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2015
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2014
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Net sales
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$
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144,210,000
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172,285,000
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Net income
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2,782,000
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16,183,000
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Earnings per common share
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Basic
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.22
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1.28
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Assuming dilution
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.22
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1.27
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Average common shares outstanding
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Basic
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12,454,052
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12,516,277
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Assuming dilution
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12,512,165
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12,570,828
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Deltic Timber Corporation (NYSE: DEL) announced today that net income
for the third quarter of 2015 was $.1 million, compared to net income of
$6 million for the third quarter of 2014. The decrease was primarily due
to reduced operating income from Deltic’s Manufacturing segment, mainly
because of soft markets for both lumber and medium density fiberboard
(“MDF”). These market conditions were primarily the result of a
prolonged weak housing market recovery combined with the impact of
excess inventory of wood products in the United States, resulting in
decreased sales prices for both lumber and MDF. For the first nine
months of 2015, net income was $2.8 million, $.22 a share, compared to
net income of $16.2 million, $1.28 a share for the first nine months of
2014. Net cash provided by operating activities for 2015’s third quarter
was $9 million, compared to $10.3 million in the third quarter of 2014.
For the nine months ended September 30, 2015, net cash provided by
operating activities was $23.6 million, compared to $25.1 million for
the first nine months of 2014.
Commenting on the results, President and Chief Executive Officer, Ray C.
Dillon, stated, “Deltic’s assets continued to produce positive financial
results despite the significant negative impact that weak markets for
both lumber and medium density fiberboard had on sales prices for these
products manufactured in the Company facilities. While some wood
products manufacturers increased their production in anticipation of a
stronger U.S. housing market for the second half of 2015, the actual
recovery continued to be slower than expected, adding to the downward
pressure on lumber prices in the third quarter. In addition, exports of
logs and lumber manufactured on the West Coast of the United States to
the Far East have decreased. As a result, there was simply more
wood-product inventory available in the Company’s primary market areas
during the third quarter than required to meet current demand.
“With this operating environment, we focused on further improving
operating efficiency in our manufacturing facilities and on reducing
cost, while also making investments to position the Company to
capitalize on future market opportunities. During the third quarter, we
continued to make progress on capital projects in our sawmills that we
began earlier in 2015, as well as to develop additional lots in our
Chenal Valley development to offer later this year. We also entered into
a new $100 million term note for ten years, at a favorable fixed
interest rate, further ensuring the Company’s ability to finance future
growth opportunities. During the quarter, we utilized $9.6 million of
capital to repurchase Deltic stock under our authorized share repurchase
program, consistent with our stated strategy of increasing net asset
value per share for our stockholders.”
The Woodlands segment reported operating income of $4.5 million for the
third quarter of 2015, compared to $5 million in 2014’s third quarter,
primarily because of reduced timberland sales and decreased oil and gas
related income, partially offset by a benefit from income from
additional pine sawtimber and pine pulpwood harvested at improved
prices. The pine sawtimber harvest in the third quarter of 2015 was
179,376 tons, a 17 percent increase from the 153,930 tons harvested
during the third quarter of 2014. The average per-ton sales price for
pine sawtimber in 2015’s third quarter was $27, a 13 percent increase
from the $24 per ton received during the third quarter of 2014. The
increase in volume of pine sawtimber harvested was a planned benefit of
strategic timberland acquisitions made by the Company in recent years.
During the third quarter of 2015, Deltic harvested 91,905 tons of pine
pulpwood, which compares to 2014’s third quarter harvest of 87,755 tons.
The average per-ton sales price received for pine pulpwood in the second
quarter of 2015 was $9, a 13 percent increase when compared to $8 per
ton for the third quarter of 2014. Oil and gas lease rental and royalty
income totaled $.7 million in the third quarter of 2015 versus $1.5
million for the same period of 2014. The decrease was primarily due to
lower natural gas prices received for the Company’s royalty share of gas
production, partially offset by the benefit of an increase in the volume
of natural gas produced from wells in which Deltic has a royalty
interest. The reduction in royalty income was combined with a decrease
in oil and gas lease rental income, as the amortization of previously
received lease rental payments expired with the acreage being held by
production. During the current quarter, Deltic sold 2 acres of
non-strategic timberland at an average per-acre price of $4,300,
compared to 2014’s third quarter sales of timberland of 127 acres at an
average sales price of $5,000 per acre.
The Manufacturing segment reported operating income of $2 million for
the third quarter of 2015, which compares to $9.1 million in 2014’s
third quarter. The decrease was primarily due to lower average sales
prices for both lumber and MDF. Furthermore, an increased cost for the
logs used as raw material in Deltic’s sawmills resulting from the
increased pine sawtimber prices, decreased MDF production due to
unscheduled plant-maintenance downtime, and higher per-unit
manufacturing cost for MDF resulting from the plant downtime and the
related unplanned maintenance expenses negatively impacted the segment’s
financial results. In Deltic’s sawmill operations, the average lumber
sales price was $321 per thousand board feet in the third quarter of
2015, a 19 percent decrease from the $398 per thousand board feet
reported in the third quarter of 2014. During the third quarter of 2015,
the Company sold 71.2 million board feet, compared to the third quarter
of 2014’s sales of 70.3 million board feet. The average sales price for
MDF for 2015’s third quarter was $557 per thousand square feet, a four
percent decrease when compared to the average sales price of $583 per
thousand square feet sold in the third quarter of 2014. For the third
quarter of 2015, Deltic sold 25.5 million square feet of MDF, a six
percent decrease when compared to 2014’s third quarter MDF sales of 27.1
million square feet. Deltic continued to manage the number of operating
hours in its manufacturing facilities during the current-year quarter to
match production of both lumber and MDF with market demand, and the
Company will continue to do so in future periods.
The Real Estate segment reported an operating loss of $.2 million in the
third quarter of 2015, compared to an operating loss of $.3 million for
the same period of 2014. There were 34 residential lots sold in the
third quarter of 2015 versus 15 lots sold in 2014’s third quarter. Due
to the mix of residential lots sold, the current quarter’s average
per-lot sales price was $62,700 compared to an average sales price of
$99,700 per lot in the third quarter of 2014. There were no sales of
commercial acreage during either 2015’s or 2014’s third quarter.
Corporate operating expense was $3.7 million in the third quarter of
2015 compared to $5 million for the third quarter of 2014. The decrease
was due to reduced general and administrative expense, primarily
incentive plan expenses. Interest expense was $1.9 million in the third
quarter of 2015 compared to $1.1 million in the third quarter of 2014.
The increase was mainly due to an increase in the average balance of
outstanding debt for the current-year quarter combined with a slightly
higher weighted-average interest rate for the debt outstanding. Income
tax expense in 2015’s third quarter was $.1 million for the period
compared to $1.9 million in the prior year’s third quarter. The decrease
was primarily due to reduced pretax income.
Capital expenditures were $11.1 million in 2015’s third quarter and
$25.1 million for the first nine months of 2015, primarily due to
investments in projects in the Company’s sawmills to improve efficiency
and hourly productivity and to develop additional lots and improve the
infrastructure in the Company’s Chenal Valley development. Capital
expenditures for the corresponding periods of 2014 were $6.1 million and
$12.6 million, respectively. There were no timberland acquisition
expenditures in the third quarter of 2015, while there were $.6 million
of such expenditures in the first nine months of 2015. For the
corresponding periods of 2014, timberland acquisition expenditures
totaled $.1 million and $118.2 million, respectively.
For the first nine months of 2015, the pine sawtimber harvest was
600,390 tons compared to 534,215 tons during the same period of 2014,
while the average pine sawtimber sales price of $27 per ton increased $3
per ton from the prior-year period. The pine pulpwood harvest for the
first nine months of 2015 was 304,037 tons, at an average price of $10
per ton, compared to 320,471 tons at an average price of $8 per ton in
the first nine months of 2014. Oil and gas lease rental and royalty
income were $2.8 million in the first nine months of 2015 versus $4.5
million in the first nine months of 2014. Sales of timberland for 2015’s
first nine months totaled 60 acres at an average sales price of $2,400
per acre, while in the same period of 2014 Deltic sold 472 acres for an
average per-acre sales price of $2,300. Lumber sales volume decreased
three percent, from 199.6 million board feet in 2014 to 194.4 million
board feet in the first nine months of 2015, while the average sales
price for lumber decreased 13 percent, from $390 per thousand board feet
in 2014 to $341 per thousand board feet for the first nine months of
2015. MDF sales volume was 72.4 million square feet in 2015’s first nine
months, a 16 percent decrease from 86.6 million square feet sold in the
same period of 2014, while the average sales price for MDF decreased
from $581 per thousand square feet for the first nine months of 2014, to
$565 per thousand square feet for the same period in 2015. Residential
lot sales for the first nine months of 2015 totaled 48 lots at an
average sales price per lot of $63,900, compared to 45 lots at $93,000
per lot for the same period of 2014. There were no commercial acreage
sales in the first nine months of 2015, while the Company sold
approximately 1.72 acres of commercial real estate for $500,900 per acre
during the first nine months of 2014.
Concerning the outlook for the fourth quarter and year of 2015, Mr.
Dillon stated, “We currently anticipate the pine sawtimber harvest to be
125,000 to 165,000 tons and 725,000 to 765,000 tons, respectively.
Finished lumber production and sales volume are estimated at 60 to 80
million board feet for the fourth quarter and 255 to 275 million board
feet for the year. MDF sales volumes for the fourth quarter and year of
2015 are forecast to be 20 to 30 million square feet and 90 to 100
million square feet, respectively. Actual sales volumes for both
finished lumber and MDF are dependent upon market conditions.
Residential lot sales are projected to be 27 to 52 lots and 75 to 100
lots for the fourth quarter and year of 2015, respectively. Commercial
acreage within Chenal Valley continues to receive interest from
potential buyers, even so it is difficult for the Company to predict the
timing of closings of any commercial real estate transactions due to
their highly uncertain nature, volatility, and the significant number of
factors related to any sale.”
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, October 22, 2015, at
10:00 a.m. Central Time to discuss third quarter 2015 earnings.
Interested parties may participate in the call by dialing 1-866-515-2915
and referencing participant passcode identification number 15378614. 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, October
29, 2015, by dialing 1-888-286-8010 and referencing replay passcode
identification number 67765608.
About Deltic
Deltic Timber Corporation is a natural resources company focused on the
efficient and environmentally responsible management of its land
holdings. The Company owns approximately 530,000 acres of timberland,
operates two sawmills and a medium density fiberboard plant, and is
engaged in real estate development. Headquartered in El Dorado,
Arkansas, the Company’s operations are located primarily in Arkansas and
north Louisiana.
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