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Deltic Announces Preliminary Fourth Quarter 2016 Results

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DELTIC TIMBER CORPORATION
CONSOLIDATED FINANCIAL DATA SUMMARY

 
FOURTH QUARTER 2016 2015
 
Net sales $ 58,493,000 49,641,000
 
Net income 3,143,000 (128,000 )
 
Earnings per common share
Basic .26 (.01 )
Assuming dilution .26 (.01 )
 
Average common shares outstanding
Basic 12,022,689 12,267,512
Assuming dilution 12,110,305 12,321,848
 
 
 
YEAR-TO-DATE 2016 2015
 
Net sales $ 219,363,000 193,851,000
 
Net income 9,245,000 2,654,000
 
Earnings per common share
Basic .76 .21
Assuming dilution .76 .21
 
Average common shares outstanding
Basic 12,009,534 12,407,034
Assuming dilution 12,073,888 12,466,613
 

Deltic Timber Corporation (NYSE-DEL), a vertically integrated natural
resources company, today announced financial results for the fourth
quarter and full year of 2016.

Fourth Quarter 2016 Financial Highlights

  • Net sales totaled $58.5 million, up 17.8 percent from $49.7 million
    for the prior-year fourth quarter.
  • Net income was $3.1 million, or $.26 per diluted share, versus a net
    loss of $.1 million, or $(.01) per diluted share, for the same period
    of 2015.
  • Net cash provided by operating activities was $15.3 million, compared
    to $6.1 million in the fourth quarter of 2015.

Full-Year 2016 Financial Highlights

  • Net sales totaled $219.4 million, up 13.2 percent from $193.9 million
    for 2015.
  • Net income was $9.2 million, an increase of $6.5 million, or 42
    percent, when compared to $2.7 million net income for full-year 2015.
  • Net income per diluted share was $.76, an increase of $.55 per share,
    when compared to net income per diluted share for full-year 2015.
  • Net cash provided by operating activities was $43.6 million, an
    increase of $13.9 million from a year ago.

The improved financial results for the fourth quarter of 2016 were
primarily due to increased operating income in the Company's
Manufacturing and Real Estate segments resulting from: 1) a higher
average sales price for both lumber and medium density fiberboard
("MDF"), 2) increased sales volume of MDF, 3) improved operating
performance at the Company's MDF plant, 4) the sale of two commercial
real estate sites totaling 23.15 acres, and 5) the sale of 77
residential lots during the fourth quarter of 2016. These improvements
were partially offset by increased Corporate segment general and
administrative expense primarily related to the retirement of the
Company's former President and CEO during the quarter.

"With Deltic's well positioned asset base and exceptional team, we
achieved another quarter of solid operating and financial performance,"
commented Mark Leland, Deltic's Interim President and Chief Executive
Officer. "In addition, we are very pleased to have separately announced
today that John Enlow has been appointed President and Chief Executive
Officer of Deltic, effective March 8. John has more than 25 years of
experience in the natural resources industry and we are confident he
brings valuable expertise and leadership skills to Deltic."

Mr. Leland continued, "We achieved outstanding results in our Real
Estate Segment in the fourth quarter, which included closing on the sale
of two separate commercial real estate sites in the Company's Chenal
Valley development and the sale of 77 residential lots. We are pleased
to see demand for our mid-market lots remaining strong and we are
currently developing additional lots for sale as soon as late spring. In
addition, we further capitalized on the improved markets for lumber and
MDF. We achieved a 17 percent increase in average sales price for lumber
sold compared to the fourth quarter a year ago. The slightly higher
average sales price received for MDF sold during the fourth quarter of
2016 was on top of a seven percent year-over-year increase in MDF sales
volume achieved in the fourth quarter of 2015. Del-Tin Fiber has
improved its operating performance, and we expect to see even further
improvement following the arrival and installation of the plant's new
press chains, which we expect to occur in the third quarter of this
year."The new small-log line at our Ola Mill is complete and operating
and we are working to process various mixes of pine sawtimber and
smallwood to identify the most efficient blend of these raw materials
for the mill.

"In the Woodlands segment, we not only achieved our planned annual
harvest volume of pine sawtimber, we also took advantage of favorable
logging conditions to harvest a small amount in excess of our annual
harvest plan from our south Arkansas timberland. While markets for pine
pulpwood remained soft, we were able to harvest and sell an increased
volume of this fiber, helping to maintain the health of our forest.

"Finally, as part of our commitment to return value to our shareholders,
we repurchased 32,309 common shares for $1.9 million during the fourth
quarter, bringing our total repurchases for the full year to 309,739
common shares for $17 million."

Woodlands Segment

The Woodlands segment reported operating income of $4.2 million for the
fourth quarter of both 2016 and 2015. The pine sawtimber harvest for the
fourth quarter of 2016 was 179,158 tons, a 16 percent increase when
compared to the 155,027 tons harvested in the prior-year period, while
the average pine sawtimber sales price was $27 per ton in the fourth
quarter of both 2016 and 2015.

The Company also harvested 115,962 tons of pine pulpwood, a 29 percent
increase when compared to 90,128 tons harvested in fourth quarter 2015.
The average per-ton sales price for the pine pulpwood harvested in the
fourth quarter of 2016 was $8 per ton, compared to $9 per ton a year
ago. The increase in the harvest volume for pine sawtimber and pulpwood
was mainly due to timing of the annual harvest, the mix of timber on the
tracts harvested, and the benefit of favorable logging conditions in the
Company's operating region; combined with the impact of a planned
increase in pine plantation thinning activity. Oil and gas revenues,
consisting of lease rentals and net royalties, were $.4 million for the
fourth quarter of 2016 versus $.6 million in fourth quarter 2015. The
decrease was due to a lower average sales price for natural gas; a lower
volume of natural gas produced from the wells in which the Company has a
royalty interest; and a decrease in oil and gas lease rental income, as
the amortization period for previously received lease rental payments
expired with the acreage becoming held by production. There were no
sales of timberland during the 2016 fourth quarter, compared to 703
acres of non-strategic timberland sold in the prior-year quarter, at an
average sales price of $1,500 per acre.

Manufacturing Segment

The Company's Manufacturing segment reported operating income of $3.2
million for the fourth quarter of 2016, compared to an operating loss of
$.6 million for the same period a year ago. The increase was due
primarily to a higher average sales price for both lumber and MDF,
combined with an increased sales volume of MDF. In addition, the
Company's MDF plant achieved an increase in production uptime and
reductions in its cost for raw materials and operating expenses, which
led to increased production volume and lower per-unit manufacturing
costs. During the quarter, the Company sold 63.5 million board feet of
lumber, compared to 67.5 million board feet of lumber sold in the same
quarter of 2015. The average lumber sales price for the fourth quarter
of 2016 of $360 per thousand board feet was 17 percent higher when
compared to $307 per thousand board feet a year ago. MDF sales volume
was 23.8 million square feet, a seven percent increase from the 22.4
million square feet sold during the fourth quarter of 2015. The average
sales price for MDF sold during the fourth quarter of 2016 was $550 per
thousand square feet, compared to $547 per thousand square feet in the
prior-year quarter.

Real Estate Segment

The Company's Real Estate segment reported operating income of $6.4
million in the fourth quarter of 2016, compared to $1.7 million for the
same period of 2015. Residential sales totaled 77 lots, compared to 52
residential lots sold in fourth quarter 2015. The average per-lot sales
price in the fourth quarter of 2016 was $82,600, compared to $101,700
per lot for fourth quarter 2015. The decrease in the average sales price
per lot was due to the mix of lots sold during the respective periods.
During the fourth quarter of 2016, the Company also sold two commercial
real estate sites, totaling 23.15 acres, for a total of $5.4 million, or
an average per-acre sales price of $232,500; compared to no commercial
real estate acreage sales in the prior-year fourth quarter.

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

Corporate segment general and administrative expense was $8.1 million,
compared to $3.9 million for the same period of 2015. The $4.2 million
increase was mainly due to costs related to the retirement of the
Company's former President and CEO. Interest expense was $2.3 million
for the fourth quarter of both 2016 and 2015. Income tax expense in
fourth quarter of 2016 was $.3 million, compared to a $.5 million income
tax benefit in the prior-year's fourth quarter. The increase was the
result of higher pretax income, partially offset by increases in
permanent tax benefits.

Full-Year 2016 Results

For full-year 2016, the pine sawtimber harvest level was 777,182 tons,
compared to 755,417 tons harvested in 2015; while the average pine
sawtimber sales price in 2016 increased to $28 per ton, from $27 per ton
in 2015. The pine pulpwood harvest volume was 508,482 tons in 2016,
compared to 394,165 tons in 2015, with a $1 per ton decrease in the
average sales price, to $8 per ton. The total increase in the harvest
volume for pine sawtimber and pulpwood was mainly due to the mix of
timber on the tracts harvested and a planned increase in pine plantation
thinning activity. In addition to these factors, the Company slightly
increased its harvest of pine sawtimber beyond the Company's annual
harvest plan due to favorable logging conditions in the Company's
operating region during the month of December. Oil and gas lease rental
and net royalty income totaled $1.6 million in 2016, compared to $3.4
million in 2015, the decrease is due to lower average sales prices and
volumes, combined with lower lease rental income as the acreage is held
by production. Sales of non-strategic timberland for the year of 2016
totaled 9 acres, with an average sales price of $4,400 per acre, while
the Company sold 763 acres in 2015 at a per-acre sales price of $1,500.

Lumber sales volume increased 12.8 million board feet, from 261.8
million board feet in 2015 to 274.6 million board feet in 2016, due to
the combined benefit of recent capital projects at the Company sawmills
and additional production volume, as Deltic adjusted sawmill operating
hours to meet the market demand for lumber. The average lumber sales
price was $361 per thousand board feet in 2016, an increase of nine
percent when compared to $332 per thousand board feet in 2015. The MDF
sales volume increased 8.7 million square feet, or nine percent, from
94.8 million square feet in 2015 to 103.6 million square feet in 2016.
MDF production was negatively impacted in 2015 by a fire in the press
area of the Company's MDF plant. The average sales price for MDF in 2016
was $555 per thousand square feet, compared to $561 per thousand square
feet in 2015.

Residential sales for full-year 2016 totaled 130 lots at an average
sales price of $81,500 per lot, compared to 100 lots at $83,500 per lot
for the prior year. The Company also sold three commercial real estate
sites in 2016, totaling 33.95 acres, at an average per-acre sales price
of $207,000. There were no commercial acreage sales during 2015.

For full-year 2016, Corporate segment general and administrative expense
was $22.9 million, which compares to $17.3 million for the year of 2015.
The increase was mainly due to costs related to the retirement of the
Company's former President and CEO. The Company's interest expense was
$9.4 million during 2016 compared to interest expense of $7.5 million
for 2015. The increase was mainly due to a higher debt level resulting
from borrowings during the fourth quarter of 2015 and the first quarter
of 2016 to fund both a portion of capital expenditures and share
repurchases, combined with the impact of a higher weighted-average
interest rate on the debt outstanding. For the year 2016, income tax
expense was $3.3 million, compared to prior-year income tax expense of
$1.1 million. The increase was the result of higher pretax income,
partially offset by increases in permanent tax benefits.

Capital Expenditures

Capital expenditures were $11 million in fourth quarter 2016 and $44.8
million for the year of 2016. Capital expenditures for the corresponding
periods of 2015 were $12.7 million and $37.8 million, respectively.
Timberland acquisition expenditures were $.6 million in the fourth
quarter of 2016 and $1.8 million for the year of 2016. For the
corresponding periods of 2015, timberland acquisition expenditures were
$.3 million and $.9 million, respectively.

Outlook

Regarding the outlook for the first quarter and full year of 2017, the
Company currently anticipates the pine sawtimber harvest to be 200,000
to 225,000 tons and 750,000 to 775,000 tons, respectively, depending on
weather conditions in Deltic's operating area. Finished lumber sales
volume is estimated to be 65 to 75 million board feet for the first
quarter of 2017 and 240 to 290 million board feet for full-year 2017.
MDF sales volume for the first quarter and year of 2017 is 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 at
5 to 10 lots and 120 to 140 lots for the first quarter and full year of
2017, respectively. Commercial acreage within Chenal Valley continues to
receive interest, but due to the volatile nature of commercial real
estate transactions and significant number of factors involved, it is
difficult to anticipate future closings.

Byrom L. Walker Appointed as Interim Chief
Financial Officer

Deltic also today announced that Byrom L. Walker has been appointed
Interim Chief Financial Officer, effective immediately. Mr. Walker's
appointment follows the decision by the Board of Directors to terminate
Kenneth D. Mann as Chief Financial Officer. The Company has initiated a
search process to identify a permanent Chief Financial Officer.

Mr. Walker has served as the Controller of Deltic since May, 2007. He
has been with the Company for 11 years, having joined Deltic in 2006 as
Manager of Financial Reporting. Prior to joining Deltic, Mr. Walker
served as the Corporate Controller for Teris, LLC, a division of Suez
S.A. Mr. Walker received his BA degree, with a major in accounting from
Baylor University.

The termination of Mr. Mann was completed after the Board became aware
that he misappropriated certain Company assets for personal use. This
action is not related to the Company's operating or financial
performance and is not expected to have a material impact on Deltic's
previously issued financial statements. Deltic currently intends to file
its Annual Report on Form 10-K for the year ended December 31, 2016 by
the due date of March 16, 2017.

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, 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.

Conference Call Details

As previously announced, Deltic has revised the scheduled start time of
its conference call to review its fourth quarter 2016 results to today
at 7:30 a.m. Central Time. Interested parties may participate in the
call by dialing 1-800-708-4540 and referencing participant passcode
identification number 44184389. 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 Friday, March 3,
2017, by dialing 1-888-843-7419 and referencing replay passcode
identification number 44184389.

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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