Deltic Announces Preliminary Second Quarter 2016 Results

EL DORADO, Ark.--()--Deltic Timber Corporation (NYSE:DEL):

 
DELTIC TIMBER CORPORATION
CONSOLIDATED FINANCIAL DATA SUMMARY
 
 
SECOND QUARTER       2016       2015
 
Net sales $ 56,705,000 45,681,000
 
Net income 4,220,000 831,000
 
Earnings per common share
Basic .35 .07
Assuming dilution .35 .07
 
Average common shares outstanding
Basic 11,974,508 12,470,781
Assuming dilution 12,032,271 12,520,948
 
 
 
 
YEAR-TO-DATE 2016 2015
 
Net sales $ 107,329,000 94,060,000
 
Net income 4,615,000 2,744,000
 
Earnings per common share
Basic .38 .22
Assuming dilution .38 .22
 
Average common shares outstanding
Basic 12,012,476 12,461,953
Assuming dilution 12,077,587 12,517,896
 

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.

Contacts

Deltic Timber Corporation
Kenneth D. Mann, 870-881-6432
Vice President of Finance and Administration and CFO

Contacts

Deltic Timber Corporation
Kenneth D. Mann, 870-881-6432
Vice President of Finance and Administration and CFO