Deltic Timber Corporation (NYSE:DEL):
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DELTIC TIMBER CORPORATION
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CONSOLIDATED FINANCIAL DATA SUMMARY
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SECOND QUARTER
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2016
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2015
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Net sales
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$
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56,705,000
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45,681,000
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Net income
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4,220,000
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831,000
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Earnings per common share
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Basic
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.35
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.07
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Assuming dilution
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.35
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.07
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Average common shares outstanding
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Basic
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11,974,508
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12,470,781
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Assuming dilution
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12,032,271
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12,520,948
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YEAR-TO-DATE
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2016
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2015
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Net sales
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$
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107,329,000
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94,060,000
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Net income
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4,615,000
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2,744,000
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Earnings per common share
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Basic
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.38
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.22
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Assuming dilution
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.38
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.22
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Average common shares outstanding
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Basic
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12,012,476
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12,461,953
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Assuming dilution
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12,077,587
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12,517,896
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Deltic Timber Corporation (NYSE:DEL) announced today that net income for
the second quarter of 2016 was $4.2 million, $.35 a share, which
compares to results for the second quarter of 2015 of $.8 million, $.07
a share. The increase was primarily due to increased operating income
from the Company’s Manufacturing and Real Estate segments, mainly the
result of an improved lumber market combined with increased residential
lot sales and the benefit of a commercial real estate acreage sale. Net
cash provided by operating activities was $17.2 million for 2016’s
second quarter, compared to $5.4 million in the second quarter of 2015.
For the first six months of 2016, net income was $4.6 million, $.38 a
share, compared to net income of $2.7 million, $.22 a share for the
first six months of 2015. Net cash provided by operating activities for
the first half of 2016 was $20 million, compared to $14.6 million for
the same period of 2015.
Commenting on the results, President and Chief Executive Officer, Ray C.
Dillon, stated, “The Company’s financial performance for the second
quarter is indicative of the potential income and cash flow that
Deltic’s excellent group of operating assets can produce, even when
markets are only marginally favorable. In the Woodlands segment, we
continue to achieve a sustainable harvest volume of our pine sawtimber;
however, pine pulpwood markets remain weak. Our investment in a new
small-log line at our Ola Mill, that will be operational in October,
will allow us to better utilize smallwood from our forest-maintenance
thinning activity in our sawmill. In the Manufacturing segment, we saw
an improvement in the lumber market during the quarter, allowing us to
run additional hours and sell more lumber at a higher average sales
price, while maintaining our market share and balancing supply with
demand. Both operating and financial performance at our MDF plant
continue to improve, and the plant generated increased operating income
and cash flow from the first quarter of 2016. In our Real Estate
segment, we closed the sale of several of the lots that were offered
during the first quarter of 2016 in a neighborhood in our Chenal Valley
development, resulting in sales of 22 lots during the second quarter at
an attractive average sales price per lot. We also closed on the sale of
a 10.8-acre commercial real estate site during the quarter, indicating
the increased interest in our mix of properties in Chenal Valley that
are zoned for commercial development.
“Deltic’s financial results also continue to benefit from the capital
gains treatment for income from our timber harvesting activity due to a
provision of the TREE Act that applies to C-corporations, such as
Deltic, thus reducing the Company’s effective income tax rate for 2016.
We are also benefiting from the bonus depreciation deduction that is
available to us due to the capital investments we are making in our
manufacturing facilities.”
The Woodlands segment reported operating income of $4.4 million for the
second quarter of 2016, compared to $4.9 million in 2015’s second
quarter, primarily due to decreased oil and gas-related income. The pine
sawtimber harvest in the second quarter of 2016 was 203,773 tons, an
eight percent increase from the 189,480 tons harvested during the second
quarter of 2015. The average per-ton sales price for pine sawtimber was
$27 per ton for the second quarter of both 2016 and 2015. The increase
in the volume of pine sawtimber harvested was due to the timing of
harvesting the Company’s 2016 planned annual volume. In the second
quarter of 2016, Deltic harvested 103,128 tons of pine pulpwood, a 14
percent decrease when compared to 2015’s second quarter harvest of
120,459 tons. The average per-ton sales price received for pine pulpwood
in the second quarter of 2016 was $9, compared to $10 per ton for the
second quarter of 2015. The decrease in the pine pulpwood volume and
average per-ton sales price was due to softer markets for pulpwood in
the Company’s operating area during the quarter. Oil and gas lease
rental and net royalty income totaled $.3 million in the second quarter
of 2016 versus $.8 million for the same period of 2015. The decrease was
due primarily to lower natural gas prices received for the Company’s
royalty share of gas production combined with the impact of declining
natural gas production from aging existing wells and a lack of new
drilling activity due to the low gas prices. During the current quarter,
Deltic sold 9 acres of non-strategic timberland at an average per-acre
price of $4,400, compared to sales of 38 acres in 2015’s second quarter
at an average sales price of $2,500 per acre.
The Manufacturing segment reported operating income of $7 million for
the second quarter of 2016, compared to $3.5 million in 2015’s second
quarter. The increase was mainly due to an increased sales volume and a
higher average sales price for lumber, as market conditions in 2016’s
second quarter were improved from the prior year’s second quarter.
During the second quarter of 2016, the Company’s sawmill operations sold
69.9 million board feet, a 13 percent increase when compared to sales in
the second quarter of 2015 of 61.9 million board feet. The average
lumber sales price was $371 per thousand board feet in the second
quarter of 2016, a seven percent increase from the $347 per thousand
board feet reported in the second quarter of 2015. For the second
quarter of 2016, the Company sold 27.7 million square feet of MDF, a 35
percent increase when compared to 2015’s second quarter MDF sales of
20.5 million square feet. The increase was mainly due to fire-related
production downtime at the MDF plant during 2015’s first and second
quarter that affected the volume that the plant had available to sell.
The average sales price for MDF for 2016’s second quarter was $561 per
thousand square feet, a slight decrease when compared to an average
sales price of $565 per thousand square feet sold in the second quarter
of 2015. Because the Company’s Manufacturing segment operates in
commodity-based markets, it continually monitors the number of operating
hours in its manufacturing facilities to match its production of both
lumber and MDF with market demand.
The Real Estate segment reported operating income of $1.8 million in the
second quarter of 2016, compared to an operating loss of $.3 million for
the same period of 2015. During 2016’s second quarter, Deltic sold a
10.8-acre commercial real estate site for $1,647,000, or $152,500 per
acre, while there were no sales of commercial real estate in the
corresponding period of 2015. During the second quarter of 2016, there
were sales of 22 residential lots for an average sales price of $90,100
per lot. This compares to sales of 12 residential lots for an average
sales price of $69,500 per lot during the second quarter of 2015. The
average sales price of residential lots sold increased $20,600 per lot
in 2016’s second quarter when compared to the same period in 2015, due
to the mix of residential lots sold.
Corporate operating expense was $4.7 million in the second quarter of
2016, compared to $5.1 million for the second quarter of 2015, due to a
decrease in Deltic’s general and administrative expense. Interest
expense was $2.2 million in the second quarter of 2016 compared to $1.7
million in the second quarter of 2015. The increase was mainly due to
borrowings during the fourth quarter of 2015 and the first quarter of
2016 resulting from increased expenditures related to capital projects
and share repurchases, combined with the impact of a higher
weighted-average interest rate on the debt outstanding. Income tax
expense in 2016’s second quarter was $1.9 million compared to $.4
million in the prior year’s second quarter. The increase was primarily
the result of higher pretax income, partially offset by the benefit of a
lower effective income tax rate due to the gains from timber harvesting
activity being taxed at a capital gains rate for the year of 2016.
Capital expenditures were $10.3 million in 2016’s second quarter and $19
million for the first six months of 2016. Capital expenditures for the
corresponding periods of 2015 were $8.3 million and $14 million,
respectively. Timberland acquisition expenditures were $.6 million in
the second quarter of 2016 and $.7 million for the first six months of
2016. For the corresponding periods of 2015, timberland acquisition
expenditures totaled $.5 million and $.6 million, respectively.
For the first six months of 2016, the pine sawtimber harvest was 409,381
tons, at an average price of $28 per ton, compared to 421,014 tons
during the same period of 2015, at an average price of $27 per ton. The
pine pulpwood harvest for the first six months of 2016 was 263,398 tons,
at an average price of $9 per ton, compared to 212,132 tons at an
average price of $10 per ton in the first six months of 2015. Oil and
gas lease rental and net royalty income was $.8 million in the first six
months of 2016 versus $2 million in the first six months of 2015. Sales
of timberland for 2016’s first six months totaled 9 acres, with an
average sales price of $4,400 per acre, while in the same period of
2015, Deltic sold 58 acres for a per-acre sales price of $2,300. Lumber
sales volume increased 15 percent to 141.5 million board feet in 2016,
while lumber sales were 123.2 million board feet in 2015. The average
sales price for lumber increased slightly in the first six months of
2016, to $354 per thousand board feet, compared to $352 per thousand
board feet in 2015. MDF sales volume increased to 53.7 million square
feet in 2016, a 14 percent increase from 47 million square feet sold in
2015. A fire at the Company’s MDF plant that occurred during the first
quarter of 2015 caused production downtime at the MDF facility and
resulted in a decreased sales volume for the first half of 2015. The
average sales price for MDF decreased three percent to $554 per thousand
square feet in 2016, compared to $569 per thousand square feet in 2015.
Residential lot sales for the first half of 2016 totaled 28 lots at an
average sales price per lot of $89,000, compared to 14 lots at an
average sales price $66,900 per lot for the same period of 2015. The
Company sold 10.8 acres of commercial real estate at an average of
$152,500 per acre during the first six months of 2016 while there were
no commercial acreage sales in the first six months of 2015.
Concerning the outlook for the third quarter and year of 2016, Mr.
Dillon stated, “We currently anticipate the pine sawtimber harvest to be
220,000 to 250,000 tons and 725,000 to 765,000 tons, respectively.
Finished lumber production and sales volume are estimated at 60 to 70
million board feet for the third quarter and 265 to 285 million board
feet for the year. MDF sales volumes for the third quarter and year of
2016 are forecast to be 25 to 35 million square feet and 100 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 to be 20 to 30 lots and 90 to 120
lots for the third quarter and year of 2016, 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, July 28, 2016, at 10:00
a.m. Central Time to discuss second quarter 2016 earnings. Interested
parties may participate in the call by dialing 1-888-771-4371 and
referencing participant passcode identification number 42935543. 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 4,
2016, by dialing 1-888-843-7419 and referencing replay passcode
identification number 42935543.
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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