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Deltic Timber Corporation
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NEWS RELEASE
 
210 EAST ELM STREET EL DORADO, AR 71730 NYSE: DEL

FOR RELEASE    IMMEDIATELY    
February 14, 2018            


Deltic Announces Preliminary Fourth Quarter 2017 Results

EL DORADO, AR - Deltic Timber Corporation (NYSE-DEL), a natural resources company, today announced financial results for the fourth quarter of 2017.

Fourth Quarter 2017 Highlights

•
Net sales totaled $72.1 million, compared to $58.5 million for fourth quarter 2016

•
Net income was $.2 million, or $.02 per diluted share for the fourth quarter of 2017, compared to net income of $3.1 million, or $.26 per diluted share, for the same period of 2016

•
Fourth quarter 2017 Adjusted Net income1, which excludes Potlatch merger-related costs, was $11.3 million, or $.92 per diluted share, compared to net income of $3.1 million, or $.26 per diluted share, for the same period of 2016

Financial results for the fourth quarter of 2017 benefited from increased operating income in the Woodlands and Manufacturing segments as demand for the Company's timber and wood products remained strong during the fourth quarter, but were offset by significantly increased corporate general and administration expenses related to the Agreement and Plan of Merger agreed upon by Deltic and Potlatch on October 22, 2017.


Woodlands Segment
Fourth Quarter 2017 Highlights
•
Sold 327,570 tons of pine sawtimber, 83% above Q4 2016
•
Pine sawtimber prices averaged $28/ton, an increase of $1/ton from previous-year fourth quarter
•
Sold 185,200 tons of pine pulpwood, 74% above Q4 2016
•
Pine pulpwood prices averaged $7/ton, a decrease of $1/ton from previous-year fourth quarter
•
Sold approximately 851 acres of Higher Better Use ("HBU") timberland for $2,400/acre, compared to no sales in Q4 2016





Woodlands Segment Financial Results

($ in millions)
 
Q4 2017
 
Q4 2016
 
Q3 2017
Segment net sales
 
$
18.8

 
 
9.3

 
 
11.3

 
Segment operating income
 
$
9.9

 
 
4.2

 
 
5.4

 

Woodlands segment operating income increased in fourth quarter of 2017 compared to fourth quarter 2016 due to higher volumes of sawtimber and pulpwood sold combined with sales of 851 acres of HBU timberland. The increase in timber volume sold was mainly due to Company sales of timber through timber deeds as part of the Company's strategic initiatives.
 
Manufacturing Segment

Fourth Quarter 2017 Highlights
•
Sold 68.1 million board feet of lumber, 7% above Q4 2016
•
Lumber prices averaged $22/MBF higher than Q4 2016
•
Sold 24.7 million square feet of Medium Density Fiberboard ("MDF"), 4% above Q4 2016
•
MDF prices increased $8/MSF compared to Q4 2016

Manufacturing Segment Financial Results

($ in millions)
 
Q4 2017
 
Q4 2016
 
Q3 2017
Segment net sales
 
$
45.8

 
 
40.7

 
 
48.3

 
 
Segment operating income
 
$
5.2

 
 
3.2

 
 
3.7

 
 

Manufacturing segment operating income increased in fourth quarter 2017 compared to fourth quarter 2016, principally as a result of increased lumber sales volumes and price per MBF sold, combined with a higher sales volume of MDF and lower per-unit cost at the MDF plant.













Real Estate Segment

Fourth Quarter 2017 Highlights

•
Sold 78 residential lots compared to 77 lots in Q4 2016
•
Residential lot sales prices averaged $98,000/lot, an increase of 19% from Q4 2016, due to mix
•
Sold 4.8 acres of commercial acreage, which included the 35,000-square-foot retail center,
compared to 23 acres in Q4 2016
•
Commercial sales price averaged $1,068,000 per acre, compared to $232,000 per acre in Q4 2016

Real Estate Segment Financial Results

($ in millions)
 
Q4 2017
 
Q4 2016
 
Q3 2017
Segment net sales
 
$
13.9

 
 
13.6

 
 
6.2

 
 
Segment operating income/(loss)
 
$
5.1

 
 
6.4

 
 
1.0

 
 

Real Estate segment operating income was lower in the fourth quarter of 2017 compared to fourth quarter 2016 as increased revenue from residential lot sales was offset by a write-down to the basis of the Company's speculative homes in our Red Oak Ridge development. Lot sales reflect the closings of successful lot offerings in three Chenal Valley neighborhoods and in the Wildwood development during the fourth quarter of 2017.

Corporate Segment General and Administrative Expense, Interest Expense, and Income Tax Expense

Corporate segment general and administrative expense was $20.5 million, compared to $8.1 million for the same period of 2016. The increase is primarily due to higher legal and professional fees related to the merger with Potlatch. The provision for income tax was a benefit of $2.8 million, compared to an expense of $.3 million in the prior-year’s fourth quarter. The current year provision included a $2.5 million benefit from the remeasurement of deferred tax liabilities due to the Tax Cuts and Jobs Act of 2017.

Capital Expenditures

Capital expenditures were $4 million in the fourth quarter 2017 compared to $11 million for the fourth quarter of 2016. There were no timberland acquisition expenditures in the fourth quarter of 2017 compared to timberland acquisition expenditures of $.6 million during the same period of 2016.





1Supplemental Disclosure Regarding Non-GAAP Financial Information

The following table sets forth the Company's Adjusted Net Income for the three and twelve months ended December 31, 2017 and 2016. Adjusted Net Income is not a measure that is prepared in accordance with U.S. generally accepted accounting principles (GAAP).

We use Adjusted Net Income in our operational and financial decision-making, believing that the measure is useful to eliminate certain items in order to focus on ongoing operating performance and our ability to generate cash flow from operations. We believe that this Non-GAAP measure, when used in conjunction with our GAAP financials, provides useful information to investors by presenting a key measure that we use internally when making operating decisions and evaluating our overall performance.

 
 
 Three Months Ended
 
 
Twelve Months Ended
 
 
December 31,
 
 
December 31,
(Millions of dollars)
 
2017
 
2016
 
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Net Income
$
0.2

 
3.1

 
$
6.5

 
9.2

Potlatch merger costs
 
16.9

 
—

 
 
16.9

 
 
Income tax effect of merger costs
 
(5.8
)
 
—

 
 
(5.8
)
 
—

1Adjusted Net Income
$
11.3

 
3.1

 
$
17.6

 
9.2

 
 
 
 
 
 
 
 
 
 
Earnings per share assuming dilution
$
0.02

 
0.26

 
 
0.53

 
0.76

Potlatch merger costs
 
1.37

 
—

 
 
1.37

 
—

Income tax effect of merger costs
 
(0.47
)
 
—

 
 
(0.47
)
 
—

2Adjusted Earnings per share assuming dilution
$
0.92

 
0.26

 
$
1.43

 
0.76

 
 
 
 
 
 
 
 
 
 


Forward-Looking Statements

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, pending merger with Potlatch Corporation, 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 volumes produced, 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.









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.

    
CONTACT:    
Anna Torma         
(870) 881-6463
ir@deltic.com
        

        
        
        
        
 




Deltic Timber Corporation
SEGMENT INFORMATION
(Preliminary and Unaudited)
(Millions of dollars)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Three Months Ended
 
 
December 31, 2017
 
December 31, 2016
 
 
 
 
Operating
 
 
 
Operating
 
 
 
 
Income/
 
 
 
Income/
 
 
Sales
 
(Loss)
 
Sales
 
(Loss)
 
 
 
 
 
 
 
 
 
Woodlands
$
18.8

 
9.9

 
9.3

 
4.2

Manufacturing
 
45.8

 
5.2

 
40.7

 
3.2

Real Estate
 
13.9

 
5.1

 
13.6

 
6.4

Corporate
 
—

 
(20.5
)
 
—

 
(8.1
)
Eliminations
 
(6.4
)
 
(0.2
)
 
(5.1
)
 
(0.1
)
    Total net sales/operating income
$
72.1

 
(0.5
)
 
58.5

 
5.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Twelve Months Ended
 
Twelve Months Ended
 
 
December 31, 2017
 
December 31, 2016
 
 
 
 
Operating
 
 
 
Operating
 
 
 
 
Income/
 
 
 
Income/
 
 
Sales
 
(Loss)
 
Sales
 
(Loss)
 
 
 
 
 
 
 
 
 
Woodlands
$
51.2

 
25.5

 
38.3

 
18.0

Manufacturing
 
186.6

 
16.9

 
178.3

 
19.2

Real Estate
 
26.8

 
7.0

 
24.8

 
7.4

Corporate
 
—

 
(33.4
)
 
—

 
(22.9
)
Eliminations
 
(22.3
)
 
—

 
(22.0
)
 
(0.1
)
    Total net sales/operating income
$
242.3

 
16.0

 
219.4

 
21.6






Deltic Timber Corporation
CONSOLIDATED STATEMENTS OF INCOME
(Preliminary and Unaudited)
(Thousands of dollars, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Three Months Ended
 
Twelve Months Ended
 
 
December 31,
 
December 31,
 
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
Net sales
$
72,041

 
58,493

 
242,265

 
219,363

 
 
 
 
 
 
 
 
 
Costs and expenses
 
 
 
 
 
 
 
 
    Cost of sales
 
42,304

 
38,431

 
161,139

 
150,326

    Depreciation, amortization, and
 
 
 
 
 
 
 
 
      cost of fee timber harvested
 
7,626

 
6,004

 
26,870

 
23,406

    General and administrative expenses
 
22,648

 
8,425

 
38,306

 
23,991

        Total costs and expenses
 
72,578

 
52,860

 
226,315

 
197,723

 
 
 
 
 
 
 
 
 
        Operating income/(loss)
 
(537
)
 
5,633

 
15,950

 
21,640

 
 
 
 
 
 
 
 
 
Interest income
 
21

 
4

 
47

 
14

Interest and other debt expense, net
 
 
 
 
 
 
 
 
  of capitalized interest
 
(2,176
)
 
(2,259
)
 
(8,028
)
 
(9,392
)
Other income
 
137

 
38

 
446

 
258

 
 
 
 
 
 
 
 
 
Income/(loss) before income taxes
 
(2,555
)
 
3,416

 
8,415

 
12,520

 
 
 
 
 
 
 
 
 
Income tax expense/(benefit)
 
2,744

 
(273
)
 
(1,927
)
 
(3,275
)
 
 
 
 
 
 
 
 
 
Net income
$
189

 
3,143

 
6,488

 
9,245

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per common share
 
 
 
 
 
 
 
 
    Basic
$
.02

 
.26

 
.53

 
.76

    Assuming dilution
$
.02

 
.26

 
.53

 
.76

 
 
 
 
 
 
 
 
 
Dividends per common share declared
$
.10

 
—

 
.40

 
.40

Dividends per common share paid
$
.10

 
.10

 
.40

 
.40

 
 
 
 
 
 
 
 
 
Weighted average common shares
 
 
 
 
 
 
 
 
    outstanding (thousands)
 
 
 
 
 
 
 
 
    Basic
 
12,078

 
12,023

 
12,070

 
12,009

    Assuming dilution
 
12,163

 
12,110

 
12,150

 
12,074






Deltic Timber Corporation
CONSOLIDATED BALANCE SHEETS
(Preliminary and Unaudited)
(Thousands of dollars)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dec. 31,
 
Dec. 31,
 
 
 
 
 
 
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 Current assets
 
 
 
 
 
 
 
 
 
   Cash and cash equivalents
 
 
 
 
 
$
10,153

 
5,773

   Trade accounts receivable, net of allowance
 
 
 
 
11,710

 
8,667

   Inventories
 
 
 
 
 
 
14,560

 
12,228

   Prepaid expenses and other current assets
 
 
 
 
8,572

 
3,334

     Total current assets
 
 
 
 
 
 
44,995

 
30,002

 
 
 
 
 
 
 
 
 
 
 Investment in real estate held for development and sale
 
 
 
54,935

 
59,111

 Timber and timberlands - net
 
 
 
 
 
 
352,388

 
360,183

 Property, plant, and equipment - net
 
 
 
 
 
 
102,711

 
102,890

 Deferred charges and other assets
 
 
 
 
 
 
2,495

 
2,507

 
 
 
 
 
 
 
 
 
 
     Total assets
 
 
 
 
 
$
557,524

 
554,693

 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
 
 
 
 
 
 
 Current liabilities
 
 
 
 
 
 
 
 
 
Trade accounts payable
 
 
 
 
 
$
18,095

 
8,583

Accrued taxes other than income taxes
 
 
 
 
 
 
2,028

 
2,052

Income tax payable
 
 
 
 
 
—

 
679

Deferred revenues and other accrued liabilities
 
 
 
 
 
 
9,451

 
8,508

     Total current liabilities
 
 
 
 
 
 
29,574

 
19,822

 
 
 
 
 
 
 
 
 
 
 Long-term debt
 
 
 
 
 
 
228,854

 
240,839

 Deferred tax liabilities - net
 
 
 
 
 
 
3,046

 
1,744

 Other noncurrent liabilities
 
 
 
 
 
 
42,727

 
41,095

 Commitments and contingencies
 
 
 
 
 
 
—

 
—

 Stockholders' equity
 
 
 
 
 
 
 
 
 
   Cummulative perferred stock
 
 
 
 
 
 
—

 
—

   Common stock, 12,813,879 shares issued
 
 
 
 
128

 
128

   Capital in excess of par value
 
 
 
 
 
 
91,962

 
89,090

   Retained earnings
 
 
 
 
 
 
207,958

 
206,344

   Treasury stock
 
 
 
 
 
 
(35,943
)
 
(34,816
)
   Accumulated other comprehensive loss
 
 
 
 
 
(10,782
)
 
(9,553
)
     Total stockholders' equity
 
 
 
 
 
 
253,323

 
251,193

 
 
 
 
 
 
 
 
 
 
     Total liabilities and stockholders' equity
 
 
 
 
$
557,524

 
554,693






Deltic Timber Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Preliminary and Unaudited)
(Thousands of dollars)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Twelve Months Ended
 
 
 
 
 
 
 
December 31,
 
 
 
 
 
 
 
2017
 
2016
Operating activities
 
 
 
 
 
 
 
 
 
   Net income
 
 
 
 
 
$
6,488

 
9,245

   Adjustments to reconcile net income to
 
 
 
 
 
 
 
 
    net cash provided by operating activities:
 
 
 
 
 
 
 
      Depreciation, amortization, and cost of fee timber harvested
 
 
26,870

 
23,406

      Stock-based compensation expense
 
 
 
 
 
 
4,178

 
4,221

      Deferred income taxes
 
 
 
 
 
 
3,422

 
(276
)
      Real estate development capital expenditures
 
 
 
 
(5,721
)
 
(8,368
)
      Real estate costs recovered upon sale
 
 
 
 
 
9,524

 
7,335

      Timberland costs recovered upon sale
 
 
 
 
 
521

 
6

      Net increase in liabilities for pension and other postretirement benefits
 
336

 
2,222

Net decrease in deferred compensation for stock-based liabilities
 
 
—

 
(551
)
      (Increase)/decrease in operating working capital other
 
 
 
 
 
 
 
        than cash and cash equivalents
 
 
 
 
 
 
(2,137
)
 
5,627

      Other - changes in assets and liabilities
 
 
 
 
223

 
726

         Net cash provided by operating activities
 
 
 
 
43,704

 
43,593

 
 
 
 
 
 
 
 
 
 
Investing activities
 
 
 
 
 
 
 
 
 
   Capital expenditures requiring cash, excluding real estate development
 
(20,362
)
 
(38,723
)
   Timberland acquisition expenditures requiring cash
 
 
 
 
(353
)
 
(1,757
)
   Net change in purchased stumpage inventory
 
 
 
 
845

 
(1,246
)
   Net change in funds held by trustee
 
 
 
 
 
 
—

 
1

   Other - net
 
 
 
 
 
 
759

 
415

         Net cash required by investing activities
 
 
 
 
(19,111
)
 
(41,310
)
 
 
 
 
 
 
 
 
 
 
Financing activities
 
 
 
 
 
 
 
 
 
   Proceeds from borrowings
 
 
 
 
 
 
6,000

 
75,000

   Repayments of notes payable and long-term debt
 
 
 
 
(18,000
)
 
(58,000
)
   Treasury stock purchases
 
 
 
 
 
 
(2,816
)
 
(18,286
)
   Common stock dividends paid
 
 
 
 
 
 
(4,875
)
 
(4,859
)
   Proceeds from stock option exercises
 
 
 
 
 
 
384

 
5,778

   Excess tax provisions from stock-based compensation expense
—

 
(500
)
   Other - net
 
 
 
 
 
 
(906
)
 
(1,072
)
         Net cash required by financing activities
 
 
 
 
(20,213
)
 
(1,939
)
 
 
 
 
 
 
 
 
 
 
Net decrease in cash and cash equivalents
 
 
 
 
 
4,380

 
344

Cash and cash equivalents at January 1
 
 
 
 
 
 
5,773

 
5,429

 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents at December 31
 
 
 
 
 
$
10,153

 
5,773






Deltic Timber Corporation
OTHER DATA
(Preliminary and Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 Three Months Ended
 
 
Twelve Months Ended
 
 
December 31,
 
 
December 31,
(Thousands of dollars)
 
2017
 
2016
 
 
2017
 
2016
Capital expenditures
 
 
 
 
 
 
 
 
 
    Woodlands
$
465

 
967

 
 
3,061

 
3,828

    Manufacturing
 
1,773

 
5,777

 
 
16,934

 
32,340

    Real Estate (includes development
 
 
 
 
 
 
 
 
 
      expenditures)
 
1,767

 
4,211

 
 
5,941

 
8,479

    Corporate
 
20

 
83

 
 
182

 
148

        Total capital expenditures
$
4,025

 
11,038

 
 
26,118

 
44,795

 
 
 
 
 
 
 
 
 
 
Timberland acquisition expenditures
$
—

 
550

 
 
353

 
1,757

 
 
 
 
 
 
 
 
 
 
Woodlands
 
 
 
 
 
 
 
 
 
    Pine sawtimber harvested from
 
 
 
 
 
 
 
 
 
      fee lands - tons
 
327,570

 
179,158

 
 
936,429

 
777,182

    Pine sawtimber price - per ton
$
28

 
27

 
 
28

 
28

 
 
 
 
 
 
 
 
 
 
    Chip-n-saw pulpwood harvested from
 
 
 
 
 
 
 
 
 
       fee lands - tons
 
27,167

 
9,485

 
 
84,530

 
33,777

    Chip-n-saw pulpwood price - per ton
$
16

 
17

 
 
17

 
17

 
 
 
 
 
 
 
 
 
 
    Pine pulpwood harvested from
 
 
 
 
 
 
 
 
 
       fee lands - tons
 
185,200

 
106,477

 
 
554,606

 
474,705

    Pine pulpwood price - per ton
$
7

 
8

 
 
8

 
8

 
 
 
 
 
 
 
 
 
 
    Timberland sales - acres
 
851

 
—

 
 
888

 
9

    Timberland sales price - per acre
$
2,412

 
—

 
 
2,703

 
4,400

 
 
 
 
 
 
 
 
 
 
Manufacturing
 
 
 
 
 
 
 
 
 
    Finished lumber sales -
 
 
 
 
 
 
 
 
 
      thousands of board feet
 
68,056

 
63,500

 
 
287,950

 
274,606

    Finished lumber price -
 
 
 
 
 
 
 
 
 
      per thousand board feet
$
382

 
360

 
 
375

 
361

    Finished MDF sales - (3/4 inch basis)
 
 
 
 
 
 
 
 
 
      thousands of square feet
 
24,693

 
23,846

 
 
100,724

 
103,552

    Finished MDF price - (3/4 inch basis)
 
 
 
 
 
 
 
 
 
      per thousand square feet
$
558

 
550

 
 
557

 
555

 
 
 
 
 
 
 
 
 
 
Real Estate
 
 
 
 
 
 
 
 
 
    Residential
 
 
 
 
 
 
 
 
 
        Lots sold
 
78

 
77

 
 
155

 
130

        Average sales price - per lot
$
98,000

 
82,600

 
 
80,400

 
81,500

 
 
 
 
 
 
 
 
 
 
    Commercial
 
 
 
 
 
 
 
 
 
        Acres sold
 
4.83

 
23.15

 
 
12.73

 
33.95

        Average sales price - per acre
$
1,068,000

 
232,500

 
 
648,817

 
207,000