<PAGE>
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-12147
DELTIC TIMBER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 71-0795870
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
210 East Elm Street, P. O. Box 7200, El Dorado, Arkansas 71731-7200
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (870) 881-9400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
Common Stock, $.01 Par Value New York Stock Exchange, Inc.
Series A Participating Cumulative New York Stock Exchange, Inc.
Preferred Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No .
--- ---
Number of shares of Common Stock, $.01 Par Value, outstanding at June 30, 1998,
was 12,813,879.
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<PAGE>
TABLE OF CONTENTS - SECOND QUARTER 1998 FORM 10-Q REPORT
Page
Number
------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Change in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security
Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
-------------------------------
(Thousands of dollars)
June 30, Dec. 31,
1998 1997
-------- --------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 14,740 31,045
Trade accounts receivable - net 5,166 3,772
Other receivables 720 297
Inventories 6,889 8,595
Prepaid expenses and other current assets 5,826 2,060
-------- -------
Total current assets 33,341 45,769
Investment in real estate held for development and sale 22,024 20,365
Investment in and advances to Del-Tin Fiber, L.L.C. 6,815 7,383
Timber and timberlands - net 121,585 108,206
Property, plant, and equipment - net 41,341 39,646
Deferred charges and other assets 3,452 4,006
-------- -------
Total assets $228,558 225,375
======== =======
Liabilities and Stockholders' Equity
Current liabilities
Current maturities of long-term debt $ 204 1,801
Notes payable 347 192
Trade accounts payable 2,462 2,542
Accrued taxes other than income taxes 1,506 979
Bank overdraft 718 1,479
Other accrued liabilities 984 805
Income taxes payable - -
-------- -------
Total current liabilities 6,221 7,798
Long-term debt 2,889 1,093
Deferred credits and other noncurrent liabilities 6,220 6,488
Redeemable preferred stock 30,000 30,000
Stockholders' equity
Preferred stock - -
Common stock 128 128
Capital in excess of par value 68,808 68,372
Retained earnings 114,639 111,496
Unamortized restricted stock awards (347) -
-------- -------
Total stockholders' equity 183,228 179,996
-------- -------
Total liabilities and stockholders' equity $228,558 225,375
======== =======
See accompanying notes to consolidated financial statements.
3
<PAGE>
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
------------------------------------------------
(Thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ------------------
1998 1997 1998 1997
---------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $26,211 26,581 53,219 50,945
------- ------ ------ ------
Costs and expenses
Cost of sales 19,459 16,912 36,597 30,567
Depreciation, amortization, and
cost of fee timber harvested 1,735 1,162 3,464 2,422
General and administrative expenses 1,098 1,308 2,850 2,942
------- ------ ------ ------
Total costs and expenses 22,292 19,382 42,911 35,931
------- ------ ------ ------
Operating income 3,919 7,199 10,308 15,014
Equity in loss of Del-Tin Fiber, L.L.C. (1,061) - (1,465) -
Interest income 294 138 621 489
Interest expense (70) (87) (118) (168)
Other income/(expense) 52 65 87 96
------- ------ ------ ------
Income before income taxes 3,134 7,315 9,433 15,431
Income taxes (1,057) (2,771) (3,550) (6,022)
------- ------ ------ ------
Net income $ 2,077 4,544 5,883 9,409
======= ====== ====== ======
Earnings per Common share
Basic $ .12 .36 .37 .74
======= ====== ====== ======
Assuming dilution $ .12 .35 .37 .73
======= ====== ====== ======
Dividends declared per Common share $ .0625 .0625 .125 .125
======= ====== ====== ======
Average Common shares outstanding
(thousands) 12,810 12,798 12,810 12,798
======= ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30,
-------------------------------------------------
(Thousands of dollars)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Operating activities
Net income $ 5,883 9,409
Adjustments to reconcile above income to
net cash provided by operating activities
Depreciation, amortization, and cost of fee timber harvested 3,464 2,422
Deferred and noncurrent income taxes (179) 248
Gains from sales of assets (32) (236)
Real estate costs recovered upon sale 2,234 1,917
Equity in loss of Del-Tin Fiber, L.L.C. 1,465 -
Increase in operating working capital
other than cash and cash equivalents (2,836) (1,766)
Other 104 (553)
-------- -------
Net cash provided by operating activities 10,103 11,441
-------- -------
Investing activities
Capital expenditures requiring cash (17,148) (17,556)
Net change in purchased stumpage inventory (5,196) (3,633)
Proceeds from sales of assets 51 328
Investment in and advances to Del-Tin Fiber, L.L.C. - net (870) (4,667)
Other - net 242 57
-------- -------
Net cash required by investing activities (22,921) (25,471)
-------- -------
Financing activities
Proceeds from long-term borrowings 2,000 3,000
Repayments of long-term debt (1,993) (1,738)
Bank overdraft (761) -
Preferred Stock dividends paid (1,131) -
Common Stock dividends paid (1,602) (1,600)
-------- -------
Net cash required by financing activities (3,487) (338)
-------- -------
Net increase/(decrease) in cash and cash equivalents (16,305) (14,368)
Cash and cash equivalents at January 1 31,045 18,162
-------- -------
Cash and cash equivalents at June 30 $ 14,740 3,794
======== =======
Supplemental disclosures
Income taxes paid, net of refunds $ 4,354 6,832
======== =======
Interest paid, net of amounts capitalized $ 220 290
======== =======
Additions to debt - owner financing $ 347 140
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
-----------------------------------------------
(Thousands of dollars)
June 30, Dec. 31,
1998 1997
----------- ---------
(unaudited)
Cumulative Preferred Stock - $.01 par, authorized
20,000,000 shares, 600,000 shares issued as
Redeemable Preferred Stock $ - -
-------- -------
Common Stock - $.01 par, authorized 50,000,000
shares, 12,813,879 shares issued 128 128
-------- -------
Capital in excess of par value
Balance at beginning of year 68,372 68,372
Exercise of stock options 58 -
Restricted stock transactions 378 -
-------- -------
Balance at end of period 68,808 68,372
-------- -------
Retained earnings
Balance at beginning of year 111,496 98,208
Net income 5,883 16,574
Preferred Stock dividends accrued (1,138) (86)
Common Stock dividends declared (1,602) (3,200)
-------- -------
Balance at end of period 114,639 111,496
-------- -------
Unamortized restricted stock awards
Balance at beginning of year - -
Stock awards (378) -
Amortization to expense 31 -
-------- -------
Balance at end of period (347) -
-------- -------
Total stockholders' equity $183,228 179,996
======== =======
6
<PAGE>
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1998
------------------------------------------
(Unaudited)
NOTE 1 - INTERIM FINANCIAL STATEMENTS
The interim financial information included herein is unaudited; however, such
information reflects all adjustments which are, in the opinion of management,
necessary for a fair presentation of the Company's financial position, results
of operations, and cash flows for the interim periods. All such adjustments
are of a normal, recurring nature. The financial statements in Deltic's 1997
annual report on Form 10-K include a summary of significant accounting policies
of the Company and should be read in conjunction with this Form 10-Q. Certain
prior period amounts have been reclassified to conform with 1998 presentation
format.
NOTE 2 - EARNINGS PER COMMON SHARE
The amounts used in computing earnings per share under the provisions of SFAS
128 consisted of the following:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
(Thousands of dollars) 1998 1997 1998 1997
-------- ------- ------- -------
Net income $ 2,077 4,544 5,883 9,409
Less Preferred dividends (572) - (1,138) -
------- ------ ------ ------
Income available to Common
shareholders $ 1,505 4,544 4,744 9,409
======= ====== ====== ======
Weighted average number of
Common shares used in basic EPS 12,810 12,798 12,810 12,798
Effect of dilutive securities
Stock options 24 24 26 22
------- ------ ------ ------
Weighted average number of
Common shares and dilutive
potential Common Stock used
in EPS assuming dilution 12,834 12,822 12,836 12,820
======= ====== ====== ======
Earnings per Common share
Basic $.12 .36 .37 .74
======= ====== ====== ======
Assuming dilution $.12 .35 .37 .73
======= ====== ====== ======
NOTE 3 - INVENTORIES
Inventories at the balance sheet dates consisted of the following:
June 30, Dec. 31,
(Thousands of dollars) 1998 1997
------- -------
Logs $ 2,190 3,278
Finished products 4,430 5,058
Materials and supplies 269 259
------- -------
$ 6,889 8,595
======= =======
7
<PAGE>
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1998
------------------------------------------
(Unaudited)
NOTE 4 - INVESTMENT IN DEL-TIN FIBER, L.L.C.
The Company recorded its 50 percent equity in the $2,931,000 loss to-date of
Del-Tin Fiber, L.L.C. ("Del-Tin Fiber"), consisting primarily of start-up costs
incurred, in the amount of $1,465,000 net to Deltic. For the three months
ended June 30, 1998, this loss was $2,122,000, $1,061,000 net to the Company.
Initial production operations for Del-Tin Fiber commenced April 29, 1998. To
June 30, 1998, sales have not been significant.
NOTE 5 - TIMBER AND TIMBERLANDS
Timber and timberlands at the balance sheet dates consisted of the following:
June 30, Dec. 31,
(Thousands of dollars) 1998 1997
-------- --------
Purchased stumpage inventory $ 15,741 10,545
Timberlands 46,612 44,846
Fee timber 87,901 80,534
Logging facilities 1,601 1,592
-------- --------
151,855 137,517
Less accumulated costs of fee timber harvested
and facilities depreciation $(30,270) (29,311)
-------- --------
121,585 108,206
======== ========
NOTE 6 - PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment at the balance sheet dates consisted of the
following:
June 30, Dec. 31,
(Thousands of dollars) 1998 1997
--------- --------
Land and land improvements $ 7,685 7,452
Buildings and structures 8,328 7,966
Machinery and equipment 61,289 58,138
--------- -------
77,302 73,556
Less accumulated depreciation 35,961) (33,910)
--------- -------
$ 41,341 39,646
========= =======
NOTE 7 - SUBSEQUENT EVENTS
On July 29, 1998, the Company announced that it had signed a contract to
purchase approximately 16,300 acres of strategically located timberland. This
capital expenditure is to be financed by a combination of cash currently on
hand and borrowings under the Company's existing credit facilities. Closing of
this purchase is contingent upon the conveyance of merchantable title and
approval of regulatory authorities, if applicable, and is anticipated prior to
the end of August 1998.
8
<PAGE>
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1998
------------------------------------------
(Unaudited)
NOTE 8 - BUSINESS SEGMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS 131,
Disclosures about Segments of an Enterprise and Related Information. SFAS 131
supersedes and/or amends the business segment disclosures required under
various preceding pronouncements, effective for fiscal years beginning after
December 15, 1997, with earlier application encouraged. This new standard
defines additional information to be disclosed for each reportable segment and
requires that each operating segment for which an enterprise's chief operating
decision maker regularly assesses performance be disclosed as a reportable
segment.
As a result, the Company divided its previous Forest Products segment into two
separate reporting segments, Woodlands and Mills. Deltic also elected to adopt
SFAS 131 effective for the first quarter of 1998. All 1997 business segment
information has been restated for comparative purposes.
Information about the Company's business segments consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ------------------
(Thousands of dollars) 1998 1997 1998 1997
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales
Woodlands $ 6,037 5,620 15,063 12,857
Mills 17,829 19,360 34,836 35,325
Real Estate 3,537 3,127 5,950 5,706
Agriculture 196 243 659 1,346
Eliminations* (1,388) (1,769) (3,289) (4,289)
------- ------ ------ ------
$26,211 26,581 53,219 50,945
======= ====== ====== ======
Income before income taxes
Woodlands $ 4,853 4,672 12,639 10,840
Mills (624) 2,923 (788) 4,248
Real Estate 719 769 948 2,054
Agriculture (40) 15 15 513
Corporate (920) (1,180) (2,501) (2,641)
Eliminations (69) - (5) -
------- ------ ------ ------
Operating income 3,919 7,199 10,308 15,014
Equity in loss of Del-Tin Fiber, L.L.C. (1,061) - (1,465) -
Interest income 294 138 621 489
Interest expense (70) (87) (118) (168)
Other income/(expense) 52 65 87 96
------- ------ ------ ------
$ 3,134 7,315 9,433 15,431
======= ====== ====== ======
</TABLE>
*Intersegment sales of pine sawtimber from Woodlands to Mills
9
<PAGE>
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1998
------------------------------------------
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
(Thousands of dollars) 1998 1997 1998 1997
--------- ------- ------- -------
Depreciation, amortization, and
cost of fee timber harvested
Woodlands $ 492 373 1,121 898
Mills 952 564 1,773 1,109
Real Estate 104 95 201 157
Agriculture 125 120 250 239
Corporate 62 10 119 19
------ ------ ------ ------
$1,735 1,162 3,464 2,422
====== ====== ====== ======
Capital expenditures
Woodlands $2,923 6,510 9,738 10,143
Mills 1,310 4,540 3,274 5,056
Real Estate 2,673 1,136 3,942 1,705
Agriculture 417 294 482 399
Corporate 36 166 59 253
------ ------ ------ ------
$7,359 12,646 17,495 17,556
====== ====== ====== ======
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 COMPARED WITH THREE MONTHS ENDED
JUNE 30, 1997
Net income for the second quarter of 1998 was $2.1 million, $.12 a share,
compared to $4.5 million, $.36 a share, for the second quarter of 1997. Net cash
provided by operating activities was $1.2 million compared to $2.8 million in
the second quarter of 1997.
For the current quarter, operating income decreased $3.3 million. The
Company's Woodlands segment increased $.2 million due to significantly higher
hardwood sawtimber sales volume, partially offset by a seven percent decrease in
pine sawtimber harvest levels and a five percent decrease in the average price
for pine sawtimber sold. The Mills segment operating results decreased $3.5
million as a result of a 14 percent decrease in the average finished lumber
sales price and a nine percent increase in the manufacturing cost of finished
lumber sold. Real Estate and Agriculture operations results were virtually the
same for both periods and the cost of corporate functions decreased $.2 million
from a year ago.
Woodlands operations reported net sales of $6.1 million in the current
quarter compared to $5.7 million a year ago. Sales of hardwood sawtimber
increased $.7 million due to the timing of harvest activity. Sales of pine
sawtimber decreased $.6 million as a result of a .9 million board feet - Doyle
scale ("MMBF-DS") decrease in harvest volume to 11.4 MMBF-DS combined with a $21
per thousand board feet - Doyle Scale ("MBF-DS") drop in sales price from $404
per MBF-DS. Pine pulpwood sales increased $.3 million due to increased harvest
levels as the Company thinned its maturing pine plantations. Operating income
was $4.8 million for the second quarter of 1998 compared to $4.6 million in the
second quarter of 1997, primarily the result of the increase in sales of
hardwood sawtimber and pine pulpwood, partially offset by reduced sales of pine
sawtimber.
The Mills segment produced net sales of $17.8 million for the second
quarter of 1998 compared to $19.3 million for the same quarter of 1997. Finished
lumber sales decreased $2.3 million due to a $57 per thousand board feet ("MBF")
drop in sales price to $361, with a 1.4 million board feet ("MMBF") increase in
sales volume to 42.4 MMBF. Loss from operations of $.6 million for the 1998
period compared to operating income of $2.9 million in 1997 due primarily to the
decreased net sales from finished lumber and a $30 per MBF increase in the cost
of lumber production. The change in the cost of lumber produced resulted from an
increase in the average cost of logs used as raw material by the mills and an
increase in depreciation expense due to recent mill upgrade/expansion projects.
The Real Estate segment recorded net sales of $3.5 million in the current
year quarter compared to $3.1 million in the prior year period. Residential lot
sales for the Company's real estate development operations increased by 25 to 54
lots, but the average sales price decreased from $70,700 to $42,900 per lot due
to the mix of lots sold. No commercial development acreage was sold in either
quarter. Operating income was $.8 million in both periods.
11
<PAGE>
Agriculture operations net sales totaled $.2 million for both quarters with
virtually break-even results in both periods due to the seasonality of the
Company's farming operations. The majority of crops grown are harvested and
sold in the late-summer and fall seasons.
Corporate operating expense was $.9 million in the second quarter of 1998
compared to $1.1 million in 1997, primarily the result of a reduction of general
and administrative expenses for the current quarter.
Equity in the loss of Del-Tin Fiber, L.L.C. ("Del-Tin Fiber"), an
unconsolidated, equity-investee company, was $1.1 million, resulting from start-
up costs incurred by Del-Tin Fiber. This joint-venture to manufacture medium
density fiberboard began limited production operations on April 29, 1998. Sales
recorded through June 30 have not been significant. The Company expects Del-Tin
Fiber to continue to report operating losses during its start-up phase until it
reaches its full production capacity, sometime after the third quarter of 1998.
Income tax expense decreased $1.7 million to $1.1 million for the current
quarter due to lower pretax earnings.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH SIX MONTHS ENDED
JUNE 30, 1997
For the first six months of 1998, net income totaled $5.9 million, $.37 a
share, compared to net income for the six months ended June 30, 1997 of $9.4
million, $.74 a share. The decrease was due primarily to lower operating income
from the Company's Mills segment.
Operating income for the first half of 1998 was $10.3 million, a decrease
of $4.7 million from 1997. Woodlands operations increased $1.8 million to $12.6
million as the result of a 1.7 MMBF-DS increase in the pine sawtimber harvest
volume combined with a $12 per MBF-DS rise in average pine sawtimber sales
price. The Company's Mills segment decreased $5 million due to a $39 per MBF
lower average lumber sales price and a $32 higher cost per MBF sold, resulting
in a negative margin, while finished lumber sales volume increased 4.3 million
board feet. Real Estate operations decreased $1.1 million primarily as the
result of the sale of a 13-acre commercial tract at $100,000 per acre during the
first six months of 1997. The Agriculture segment decreased $.5 million due to
the first half of 1997 benefiting from the timing of sales of crops grown during
1996.
The Woodlands segment generated net sales of $15.1 million during the six
months ended June 30, 1998, an increase of $2.2 million when compared to $12.9
million during 1997. Pine sawtimber sales increased $1.1 million as the result
of a six percent increase in sales volume from 28.6 MMBF-DS and a $12 per MBF-DS
increase in the average pine sawtimber sales price to $418 per MBF-DS. Sales of
hardwood sawtimber amounting to $.8 million was $.7 million higher than the
prior year due to the timing of sales. Pine pulpwood sales rose $.4 million as
the result of the previously discussed increased harvest levels. Operating
income was $12.6 million for the first half of 1998 compared to $10.8 million in
1997 due to the increases in pine sawtimber, hardwood sawtimber, and pine
pulpwood sales.
Mills operations recorded net sales of $34.8 million during the first six
months of 1998 compared to $35.3 million during the same period in 1997.
Although sales volume of finished lumber increased 4.3 million board feet from
77.8 MMBF, a $39 per MBF drop in average sales price to $361 per MBF resulted in
a decrease in net sales. A loss from operations for 1998 of $.8 million compared
to operating income of $4.2 million for 1997. The decrease was due primarily to
the reduction in net sales combined with an increase in the cost per MBF sold to
$377 per MBF, partially offset by recording during the first half of 1998 the
settlement of the business interruption
12
<PAGE>
claim resulting from the July 1997 Ola planermill fire. The increase in cost of
lumber produced resulted from the previously discussed increases in log cost and
depreciation expense.
The Company's Real Estate operations reported net sales of $5.9 million
during the first half of 1998 compared to $5.7 million during 1997. Residential
lot sales total 94 lots compared to 47 in 1997, but the average sales price of
$41,900 was down $25,700 per lot. The first six months of 1997 also benefited
from the sale of a 13-acre commercial tract at $100,000 per acre, while no
commercial sales were closed during 1998. Operating income of $1 million in
1998 decreased $1.1 million from the first half of 1997, primarily the result of
the $1.3 million commercial sale in the prior year.
The Agriculture segment produced net sales of $.7 million in the first six
months of 1998 compared to $1.3 million a year ago. The prior year benefited
from the timing of product sales. Break-even results for 1998 compared to
operating income of $.5 million in 1997 due primarily to the previously
discussed seasonality of the Company's farming operations.
Equity in the loss of Del-Tin Fiber recorded by the Company during the
first half of 1998 was $1.5 million. Income tax expense decreased $2.5 million
to $3.6 million for the first six months of 1998 due to reduced pretax income.
FINANCIAL CONDITION
For the first six months of 1998, net cash provided by operating activities
totaled $10.1 million compared to $11.4 million during the same period in 1997.
Changes in operating working capital, other than cash and cash equivalents,
required cash of $2.8 million for the first half of 1998 and $1.8 million for
the six months ended June 30, 1997.
Capital expenditures required cash of $17.1 million in the current year-to-
date period and $17.6 million a year ago. Capital expenditures by segment
consisted of the following:
<TABLE>
<CAPTION>
--------------------------------------------------
Six Months
Ended June 30,
--------------------------------------------------
(Thousands of dollars) 1998 1997
--------------------------------------------------
<S> <C> <C>
Woodlands $ 9,738 10,143
Mills 3,274 5,056
Real Estate 3,942 1,705
Agriculture 482 399
Corporate 59 253
------------------------------- ------- ------
Total capital expenditures 17,495 17,556
Owner-financed expenditures (347) -
------------------------------- ------- ------
Expenditures requiring cash $17,148 17,556
=============================== ======= ======
</TABLE>
The net change in purchased stumpage inventory to be utilized in the
Company's sawmill operations required cash of $5.2 million in the first six
months of 1998 and $3.6 million in the first half of 1997. During the first half
of 1998, the Company advanced $1 million to Del-Tin Fiber, L.L.C. and paid
dividends of $2.7 million, $1.6 million for Common Stock and $1.1 million for
Redeemable Preferred Stock. Borrowings under Deltic's credit facilities provided
$2 million and repayments of debt utilized $2 million. A reduction in the
Company's bank overdraft utilized $.8 million. These net
13
<PAGE>
uses of funds were the primary factors in the $10.9 million reduction in
Deltic's working capital from $38 million at December 31, 1997.
On July 29, 1998, Deltic announced that it had signed a contract to
purchase approximately 16,300 acres of strategically located timberland.
Closing of this purchase is contingent upon the conveyance of merchantable title
and approval of regulatory authorities, if applicable, and is anticipated prior
to the end of August 1998. If this purchase materializes, the resulting capital
expenditure is to be financed by a combination of cash currently on hand and
borrowings under the Company's existing credit facilities. The Company believes
that the amounts available under its credit facilities, and future debt or
equity financings will be sufficient to meet its expected cash needs and planned
capital expenditures, including this contingent timberland purchase and those
resulting from Deltic's continued timberland acquisition program, for the
forseeable future.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation incidental to
its business. Currently, there are no material legal proceedings.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of the stockholders of Deltic Timber Corporation
("Deltic" or "the Company") was held on April 28, 1998. Pursuant to
the Company's Amended and Restated Certificate of Incorporation, its
Board of Directors consist of three classes who holds office for
staggered terms of three years. Set forth below is a listing of the
directors elected at the April 28, 1998 annual meeting, the results of
such election and the names of directors whose term of office
continued after the meeting.
Director Votes for Votes Withheld
-------- --------- --------------
Eric M. Heiner 11,616,052 92,803
William L. Rosoff 11,612,468 96,387
John C. Shealy 11,614,092 94,763
O. H. Darling, Jr. (Term expires in 1999)
Christoph Keller, III (Term expires in 1999)
R. Madison Murphy (Term expires in 1999)
Alex R. Lieblong (Term expires in 2000)
Robert C. Nolan (Term expires in 2000)
Ron L. Pearce (Term expires in 2000)
In addition to the election of three Class II directors at the April
28, 1998 annual meeting, the prior appointment of KPMG Peat Marwick
LLP by the Board of Directors as Deltic's independent auditors for
1998 was ratified with 11,693,484 shares voted in favor, 5,390 shares
voted against and 9,981 shares withheld.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DELTIC TIMBER CORPORATION
By: /s/Ron L. Pearce Date: August 3, 1998
----------------------------------- -----------------------------------
Ron L. Pearce, President
(Principal Executive Officer)
/s/Clefton D. Vaughan Date: August 3, 1998
- -------------------------------------- -----------------------------------
Clefton D. Vaughan, Vice President,
Finance and Administration
(Principal Financial Officer)
/s/Emily R. Evers Date: August 3, 1998
- -------------------------------------- -----------------------------------
Emily R. Evers, Controller
(Principal Accounting Officer)
16
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<PAGE>
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<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 14,740 2,572
<SECURITIES> 0 1,222
<RECEIVABLES> 6,027 6,219
<ALLOWANCES> 141 159
<INVENTORY> 6,889 6,224
<CURRENT-ASSETS> 33,341 21,885
<PP&E> 77,302 66,239
<DEPRECIATION> 35,961 32,676
<TOTAL-ASSETS> 228,558 192,368
<CURRENT-LIABILITIES> 6,221 8,416
<BONDS> 0 0
30,000 0
0 0
<COMMON> 128 128
<OTHER-SE> 183,100 174,389
<TOTAL-LIABILITY-AND-EQUITY> 228,558 192,368
<SALES> 53,219 50,945
<TOTAL-REVENUES> 53,927 51,530
<CGS> 36,597 30,567
<TOTAL-COSTS> 42,911 32,989
<OTHER-EXPENSES> 1,465 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 118 168
<INCOME-PRETAX> 9,433 15,431
<INCOME-TAX> 3,550 6,022
<INCOME-CONTINUING> 5,883 9,409
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,883 9,409
<EPS-PRIMARY> 0.37 0.74
<EPS-DILUTED> 0.37 0.74
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