<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 MARCH 31, 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 Identification Number)
incorporation or organization)
210 East Elm Street, P. O. Box 7200, 71731-7200
El Dorado, Arkansas
(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 April 30, 1998,
was 12,813,879.
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TABLE OF CONTENTS - FIRST 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 13
Item 2. Change in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
-------------------------------
(Thousands of dollars)
March 31, Dec. 31,
1998 1997
--------- --------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 23,460 31,045
Trade accounts receivable - net 5,054 3,772
Other receivables 1,259 297
Inventories 6,936 8,595
Prepaid expenses and other current assets 2,525 2,060
-------- -------
Total current assets 39,234 45,769
Investment in real estate held for development and sale 20,483 20,365
Investment in and advances to Del-Tin Fiber, L.L.C. 6,911 7,383
Timber and timberlands - net 118,041 108,206
Property, plant, and equipment - net 40,741 39,646
Deferred charges and other assets 3,663 4,006
-------- -------
Total assets $229,073 225,375
======== =======
Liabilities and Stockholders' Equity
Current liabilities
Current maturities of long-term debt $ 204 1,801
Notes payable 356 192
Trade accounts payable 2,988 2,542
Accrued taxes other than income taxes 1,313 979
Bank overdraft 1,631 1,479
Other accrued liabilities 815 805
Income taxes payable 1,626 -
-------- -------
Total current liabilities 8,933 7,798
Long-term debt 889 1,093
Deferred credits and other noncurrent liabilities 6,750 6,488
Redeemable preferred stock 30,000 30,000
Stockholders' equity
Preferred stock - -
Common stock 128 128
Capital in excess of par value 68,834 68,372
Retained earnings 113,935 111,496
Unamortized restricted stock awards (396) -
-------- -------
Total stockholders' equity 182,501 179,996
-------- -------
Total liabilities and stockholders' equity $229,073 225,375
======== =======
See accompanying notes to consolidated financial statements.
3
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DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
Three Months Ended March 31,
-------------------------------------------------------
(Thousands of dollars, except per share amounts)
1998 1997
------- -------
Net sales $27,008 24,364
------- -------
Costs and expenses
Cost of sales 17,138 13,655
Depreciation, amortization, and
cost of fee timber harvested 1,729 1,260
General and administrative expenses 1,752 1,634
------- -------
Total costs and expenses 20,619 16,549
------- -------
Operating income 6,389 7,815
Interest income 327 351
Interest expense (48) (81)
Other income/(expense) (369) 31
------- -------
Income before income taxes 6,299 8,116
Income taxes (2,493) (3,251)
------- -------
Net income $ 3,806 4,865
======= =======
Earnings per Common share
Basic $ .25 .38
======= =======
Assuming dilution $ .25 .38
======= =======
Dividends declared per Common share $ .0625 .0625
======= =======
Average Common shares outstanding (thousands) 12,806 12,798
======= =======
See accompanying notes to consolidated financial statements.
4
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DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31,
------------------------------------------------------------
(Thousands of dollars)
1998 1997
-------- --------
Operating activities
Net income $ 3,806 4,865
Adjustments to reconcile above income to
net cash provided by operating activities
Depreciation, amortization, and cost of
fee timber harvested 1,729 1,260
Deferred income taxes (63) (27)
Gains from sales of assets (11) (30)
Real estate costs recovered upon sale 954 819
Equity in loss of Del-Tin Fiber, L.L.C. 404 -
Decrease in operating working capital
other than cash and cash equivalents 2,325 1,513
Other (226) 279
-------- --------
Net cash provided by operating activities 8,918 8,679
-------- --------
Investing activities
Capital expenditures requiring cash (9,789) (4,910)
Net change in purchased stumpage inventory (3,731) (4,139)
Proceeds from sales of assets 18 51
Investment in and advances to Del-Tin Fiber,
L.L.C. - net 67 (3,000)
Other - net 130 13
-------- --------
Net cash required by investing activities (13,305) (11,985)
-------- --------
Financing activities
Repayments of long-term debt (1,984) (1,738)
Bank overdraft 153 -
Preferred Stock dividends paid (566) -
Common Stock dividends paid (801) (800)
-------- --------
Net cash required by financing activities (3,198) (2,538)
-------- --------
Net decrease in cash and cash equivalents (7,585) (5,844)
Cash and cash equivalents at January 1 31,045 18,162
-------- --------
Cash and cash equivalents at March 31 $ 23,460 12,318
======== ========
Supplemental disclosures
Income taxes paid, net of refunds $ 309 239
======== ========
Interest paid, net of amounts capitalized $ 163 237
======== ========
Additions to debt - owner financing $ 347 95
======== ========
Common Stock dividends declared, not paid $ - 800
======== ========
See accompanying notes to consolidated financial statements.
5
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DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
-----------------------------------------------
(Thousands of dollars)
March 31, 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 404 -
--------- ---------
Balance at end of period 68,834 68,372
--------- ---------
Retained earnings
Balance at beginning of year 111,496 98,208
Net income 3,806 16,574
Preferred Stock dividends accrued (566) (86)
Common Stock dividends declared (801) (3,200)
--------- ---------
Balance at end of period 113,935 111,496
--------- ---------
Unamortized restricted stock awards
Balance at beginning of year - -
Stock awards, less amortization (396) -
--------- ---------
Balance at end of period (396) -
--------- ---------
Total stockholders' equity $ 182,501 179,996
========= =========
6
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DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 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
March 31,
------------------
(Thousands of dollars) 1998 1997
------ ------
Net income $3,806 4,865
Less Preferred dividends (566) -
------ ------
Income available to Common shareholders $3,240 4,865
====== ======
Weighted average number of Common shares
used in basic EPS 12,806 12,798
Effect of dilutive securities
Stock options 27 19
------ ------
Weighted average number of Common shares
and dilutive potential Common Stock used in
EPS assuming dilution 12,833 12,817
====== ======
Earnings per Common share
Basic $ .25 .38
====== ======
Assuming dilution $ .25 .38
====== ======
NOTE 3 - INVENTORIES
Inventories at the balance sheet dates consisted of the following:
Mar. 31, Dec. 31,
1998 1997
-------- --------
(Thousands of dollars)
Logs $1,989 3,278
Finished products 4,652 5,058
Materials and supplies 295 259
------ ------
$6,936 8,595
====== ======
7
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DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998
------------------------------------------
(Unaudited)
NOTE 4 - INVESTMENT IN DEL-TIN FIBER, L.L.C.
Deltic recorded its 50-percent equity in the $808,000 of start-up costs
recorded to-date by Del-Tin Fiber, L.L.C., a development stage company, during
the three months ended March 31, 1998. Such amount, $404,000 net to Deltic,
has been included in Other Income/Expense on the Consolidated Statement of
Income.
NOTE 5 - TIMBER AND TIMBERLANDS
Timber and timberlands at the balance sheet dates consisted of the following:
Mar. 31, Dec. 31,
1998 1997
-------- --------
(Thousands of dollars)
Purchased stumpage inventory $ 14,276 10,545
Timberlands 45,101 44,846
Fee timber 86,974 80,534
Logging facilities 1,597 1,592
-------- --------
147,948 137,517
Less accumulated costs of fee timber harvested
and facilities depreciation (29,907) (29,311)
-------- --------
$118,041 108,206
======== ========
NOTE 6 - PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment at the balance sheet dates consisted of the
following:
Mar. 31, Dec. 31,
1998 1997
-------- --------
(Thousands of dollars)
Land and land improvements $ 7,450 7,452
Buildings and structures 7,973 7,966
Machinery and equipment 60,103 58,138
-------- --------
75,526 73,556
Less accumulated depreciation (34,785) (33,910)
-------- --------
$ 40,741 39,646
======== ========
8
<PAGE>
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998
------------------------------------------
(Unaudited)
NOTE 7 - 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 year 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:
Three Months Ended
March 31,
-------------------
(Thousands of dollars) 1998 1997
-------- --------
Net sales
Woodlands $ 9,026 7,237
Mills 17,007 15,965
Real Estate 2,413 2,579
Agriculture 463 1,103
Eliminations* (1,901) (2,520)
-------- --------
$27,008 24,364
======== ========
Income before income taxes
Woodlands $ 7,786 6,168
Mills (164) 1,325
Real Estate 229 1,285
Agriculture 55 498
Corporate (1,581) (1,461)
Eliminations 64 -
-------- --------
Operating income 6,389 7,815
Interest income 327 351
Interest expense (48) (81)
Other income/(expense) (369) 31
-------- --------
$ 6,299 8,116
======== ========
*Intersegment sales of pine sawtimber from Woodlands to Mills
9
<PAGE>
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998
------------------------------------------
(Unaudited)
Three Months Ended
March 31,
------------------
(Thousands of dollars) 1998 1997
------ ------
Depreciation, amortization, and
cost of fee timber harvested
Woodlands $ 629 525
Mills 821 545
Real Estate 97 62
Agriculture 125 119
Corporate 57 9
------- -------
$ 1,729 1,260
======= =======
Capital expenditures
Woodlands $ 6,815 3,633
Mills 1,964 516
Real Estate 1,269 569
Agriculture 65 105
Corporate 23 87
------- -------
$10,136 4,910
======= =======
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net income for the first quarter of 1998 was $3.8 million, $.25 a share, a
decrease of 22 percent when compared to first quarter of 1997 net income of $4.9
million, $.38 a share. Net cash provided by operating activities was $8.9
million, an increase of $.2 million from a year ago.
In the current quarter, operating income decreased $1.4 million. The
Woodlands segment increased $1.6 million due primarily to a 15-percent increase
in the pine sawtimber harvest level and an eight-percent increase in the average
price for pine sawtimber sold. The Company's Mills segment decreased $1.5
million mainly as a result of a six-percent decrease in finished lumber average
sales price combined with a ten-percent increase in the average manufacturing
cost per thousand board feet sold. Real Estate operations decreased $1.1
million due primarily to the sale of a 13-acre commercial tract in the first
quarter of 1997. Agriculture segment results decreased $.4 million primarily as
the result of the timing of product sales.
Woodlands segment generated net sales of $9 million in the current quarter
compared to $7.2 million a year ago. Sales of pine sawtimber increased $1.6
million as the result of a 2.5 million board feet - Doyle scale ("MMBF-DS")
increase in the pine sawtimber harvest level to 18.8 MMBF-DS and a $33 per
thousand board feet - Doyle scale ("MBF-DS") increase in average sales price to
$440 per MBF-DS. Operating income was $7.8 million in 1998 compared to $6.2
million in 1997, a 26-percent increase, primarily the result of the increased
sales of pine sawtimber.
The Company's Mills segment operations recorded net sales of $17 million in
the first quarter of 1998 compared to $16 million in the first quarter of 1997.
The current period included a $.5 million settlement of the business
interruption claim filed as a result of a fire at the Ola Mill during 1997.
Finished lumber sales increased $.4 million due to an eight-percent increase in
sales volume to 39.8 million board feet, partially offset by a $20 per thousand
board feet ("MBF") drop in sales price from $380 per MBF a year ago. Operating
loss in the first quarter of 1998 was $.2 million compared to operating income
in the first quarter of 1997 of $1.3 million due primarily to a $34 per MBF
increase in lumber manufacturing cost, primarily the result of increased log
cost.
Real Estate segment net sales totaled $2.4 million in the current quarter
compared to $2.6 million a year ago. A 13-acre commercial tract was sold in 1997
for $100,000 per acre, while no commercial development acreage was sold during
1998. Residential lot sales at Chenal Valley increased by 22 lots to 40;
however, the average sales price decreased from $62,600 to $40,500 per lot, a
decrease of 36 percent. Operating income was $.2 million in the first quarter of
1998 compared to $1.3 million during the first quarter of 1997 as the result of
the decreased margin from commercial development sales.
Agriculture operations recorded net sales of $.5 million for the first
three months of 1998 compared to $1.1 million during the first three months of
1997 and operating income was $.1 million in the current quarter and $.5 million
a year ago due primarily to the timing of product sales.
The Company recorded its equity in the start-up costs incurred to-date by
Del-Tin Fiber, L.L.C., reported in "Other income/(expense)", in the amount of
$.4 million during the current period. Income tax expense decreased to $2.5
million for the first quarter of 1998 from $3.3 million in the first quarter of
1997 due to lower pretax earnings.
11
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FINANCIAL CONDITION
During the first quarter of 1998, net cash provided by operating activities
totaled $8.9 million compared to $8.7 million during the first quarter of 1997.
Changes in operating working capital, other than cash and cash equivalents,
provided cash of $1.4 million for this first three months of 1998 and $1.5
million for the 1997 period.
Capital expenditures required cash of $9.8 in the current quarter and $4.9
million a year ago. The increase was due primarily to $6.6 million utilized to
acquire timberland acreage. Total capital expenditures are summarized by
segment in the following table.
-------------------------------------------
Three Months
Ended March 31,
-------------------------------------------
(Thousands of dollars) 1998 1997
-------------------------------------------
Woodlands $ 6,815 3,633
Mills 1,964 516
Real Estate 1,269 569
Agriculture 65 105
Corporate 23 87
-------------------------------------------
Capital expenditures $10,136 4,910
===========================================
The net change in purchased stumpage inventory required cash of $3.7
million in the first quarter of 1998 and $4.1 million a year ago. During the
current quarter, the Company paid dividends of $1.4 million, $.8 million for
Common Stock and $.6 million for Redeemable Preferred Stock, compared to $.8
million for Common Stock in the 1997 period. Repayments of debt utilized $2
million. These net uses of funds were the primary factors in the $7.7 million
reduction in working capital from $38 million at December 31, 1997. However,
the Company believes that the amounts available from its Redeemable Preferred
Stock issuance, operating cash flows, funds available under its credit
facilities, and future debt or equity financings will be sufficient to meet its
expected cash needs and planned capital expenditures for the foreseeable future.
12
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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
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule.
(b) Reports on Form 8-K
None.
13
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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: May 8, 1998
------------------------------------ -----------------------
Ron L. Pearce, President
(Principal Executive Officer)
/s/Clefton D. Vaughan Date: May 8, 1998
- - --------------------------------------- -----------------------
Clefton D. Vaughan, Vice President,
Finance and Administration
(Principal Financial Officer)
/s/Emily R. Evers Date: May 8, 1998
- - --------------------------------------- -----------------------
Emily R. Evers, Controller
(Principal Accounting Officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 23,460 12,318
<SECURITIES> 0 0
<RECEIVABLES> 6,430 7,836
<ALLOWANCES> 117 169
<INVENTORY> 6,936 4,965
<CURRENT-ASSETS> 39,234 27,432
<PP&E> 75,526 60,280
<DEPRECIATION> 34,785 31,701
<TOTAL-ASSETS> 229,073 186,111
<CURRENT-LIABILITIES> 8,933 9,871
<BONDS> 0 0
30,000 0
0 0
<COMMON> 128 128
<OTHER-SE> 182,373 169,845
<TOTAL-LIABILITY-AND-EQUITY> 229,073 186,111
<SALES> 27,008 24,364
<TOTAL-REVENUES> 27,370 24,746
<CGS> 17,138 13,655
<TOTAL-COSTS> 20,619 16,549
<OTHER-EXPENSES> 404 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 48 81
<INCOME-PRETAX> 6,299 8,116
<INCOME-TAX> 2,493 3,251
<INCOME-CONTINUING> 3,806 4,865
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,806 4,865
<EPS-PRIMARY> 0.25 0.38
<EPS-DILUTED> 0.25 0.38
</TABLE>
