Deltic Timber announces 2017 first quarter financial results
EL DORADO — Deltic Timber Corp., a natural resources company, announced financial results
for the first quarter of 2017 on Thursday. Highlights of the first quarter include:
net sales totaled $53.2 million, up 5 percent from $50.6 million for the prior-year first quarter and
net income was $1.1 million, or nine cents per diluted
share, versus net income of $.4 million, or three cents per diluted share, for the same period of 2016.
Also, Income tax expense for the first quarter of 2017 was $1.4 million, an effective tax rate of 57 percent, which reflects the discrete impact of the change in the method of accounting for the tax effects of the vesting
of share-based compensation, which increased the effective tax rate by 20 percent in the quarter.
The improved financial results for the first quarter of 2017 were primarily due to
increased operating income in the company’s manufacturing segment resulting from a higher average sales price for both lumber and medium density fiberboard (“MDF”), increased lumber
sales volume and improved operating performance at the company’s MDF plant,
according to a news release from the company. In addition, interest
expense was $1.1 million less in the first quarter of
2017 than the same quarter of 2016 due to a lower average interest rate, combined with a $.5 million patronage refund from one of Deltic’s lenders that was accounted
for as a reduction to interest expense.
“Deltic continues to benefit from its well-positioned asset base and solid team,
which have allowed the Company to improve financial performance over the prior year’s first quarter,” commented John D. Enlow,
Deltic’s president and chief executive officer.
“Our average sales price for lumber sold increased 10 percent, along with slightly
higher sales volumes compared to the first quarter a year ago. Stronger lumber demand and uncertainty over the Canada-U.S. trade dispute and duties favorably impacted our markets. In addition, improved operating metrics at our MDF
plant lowered per-unit
costs for MDF when com
pared to last year’s first quarter. As discussed last
quarter, facility’s we near-term anticipate performance the will be negatively impacted by worn press chains, which are sched
uled to be replaced in the third quarter of this year,”
he said. “Currently in our Real Estate segment, we are
developing new residential lot offerings in our Chenal Valley and Wildwood developments to fulfill demand, and expect
to have a successful lot offering in the Wildwood development during the second quarter of 2017. We
are also encouraged by the increased interest in commercial properties. The
company’s Woodlands segment increased pine sawtimber harvest three percent to serve strengthening mill demand. Pine chip-nsaw harvest volumes also
increased 156 percent over the first quarter of 2016 as the company’s Ola Mill
small-log line began to utilize the most efficient blend of small-log resources. “The current quarter’s
pine pulpwood harvest volume decreased 56,921 tons mainly due to the first quarter 2016 timber deed sales.
“Since my appointment as Deltic’s president and chief executive officer, my initial
focus has been to evaluate the company’s assets, com
petitive position and market risks and opportunities with a goal to develop a strategic vision that is laser focused on achieving strong operational performance,
driving shareholder value and delivering best-in-class
returns,” Enlow said. The Woodlands segment
reported operating income of $5.2 million for the first quarter of 2017, compared to $5.3 million for the same period of 2016. The pine sawtimber harvest for the first quarter of 2017 was 211,056 tons, a 3 percent increase when compared to the 205,608 tons harvested in the prior-year period, while the average pine sawtimber sales price was $28 per ton in the first quarter of both 2017 and 2016.
The average per-ton sales price for the pine pulpwood harvested in the first quarter of 2017 was $9 per ton, compared to $8 per ton a year ago. The decrease in the volume of pine pulpwood sold was mainly due to softer pulpwood markets, the mix of timber on the tracts harvested, and the lack of timber deed sales when compared to 2016. Oil and gas revenues, consisting of lease rentals and net royalties, were $.5 million for the first quarter of 2017 versus $.4 million in first quarter 2016.
The company’s Manufacturing segment reported operating income of $4 million for the first quarter of 2017, compared to operating income of $3.3 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 lumber. The average lumber sales price for the first quarter of 2017 of $373 per thousand board feet was 10 percent higher when compared to $338 per thousand board feet a year ago. MDF sales volume was 26 million square feet for the first quarter of both 2017 and 2016. The average sales price for MDF sold during the first quarter of 2017 was $553 per thousand square feet, compared to $547 per thousand square feet in the prior-year quarter.
The company’s Real Estate segment reported an operating loss of $.9 million in the first quarter of 2017, compared to an operating loss of $.6 million for the same period of 2016. The company sold one residential lot in the current year’s first quarter, compared to six residential lots sold in first quarter 2016. The average per-lot sales price in the first quarter of 2017 was $51,900, compared to $85,200 per lot for first quarter of 2016. The decrease in the average sales price per lot was due to the mix of lots sold during the respective periods. There were no commercial real estate acreage sales in the first quarter of either year.
Corporate segment general and administrative expense was $4.5 million, compared to $4.7 million for the same period of 2016. Interest expense in 2017’s first quarter was $1.6 million compared to $2.7 million for the same period of 2016. The $1.1 million decrease in interest expense was due to a lower average interest rate combined with a $.5 million patronage refund from one of Deltic’s lenders, which was accounted for as a reduction to interest expense.
Capital expenditures were $7.8 million in the first quarter 2017 compared to $8.7 million for the first quarter of 2016. There were no timberland acquisition expenditures in the first quarter of 2017 while the Company had timberland acquisition expenditures of $.1 million during the same period of 2016.
Regarding the outlook for the second quarter and full year of 2017, company officials said they anticipate the pine sawtimber harvest to be 200,000 to 230,000 tons and 765,000 to 790,000 tons, respectively, depending on weather conditions in Deltic’s operating area. Finished lumber sales volume is estimated to be 70 to 80 million board feet for the second quarter of 2017 and 290 to 315 million board feet for full-year 2017. MDF sales volume for the second quarter and year of 2017 is forecast to be 20 to 30 million square feet and 90 to 115 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 second 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.
Deltic held a conference call on Thursday, online replays of the call are available through the Deltic website, and a recording of the call will be available until May 11, by dialing 1-888-8437419 and referencing replay passcode identification number 44757200.
Deltic Timber Corp. 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, the company’s operations are located primarily in Arkansas and north Louisiana.