Deltic Timber Corp. Reports Operating Results (10-Q)
Deltic Timber Corp. has a market cap of $588.2 million; its shares were traded at around $47.06 with a P/E ratio of 49.5 and P/S ratio of 5.3. The dividend yield of Deltic Timber Corp. stocks is 0.6%.DEL is in the portfolios of John Keeley of Keeley Fund Management, Jean-Marie Eveillard of First Eagle Investment Management, LLC, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations: The Company recorded net income of $5.5 million for the second quarter of 2010, compared to $1 million for the same period of 2009. The Woodlands segment, Deltics core operation, reported operating income of $6.4 million during the second quarter of both 2010 and 2009. The Mills segment posted strong results in the current-year quarter of $6.2 million, an improvement of $8.1 million from the $1.9 million loss reported a year ago. The increase in Mills operating income was primarily due to a $105 per thousand board feet higher unit sales price and a six percent increase in the volume of lumber sold. The Real Estate segment recorded a loss of $.5 million in 2010s second quarter compared to a loss of $.4 million in 2009 due to decreases in both the average sales price per residential lot sold and the number of lots sold. The Corporate segments general and administrative expenses were $1.5 million higher during the current-year quarter than the same period a year ago, mainly due to higher employee incentive plan expenses resulting from the significantly improved net income. Deltic owns a 50 percent interest in Del-Tin Fiber, L.L.C. and recorded equity income of $2.2 million for the second quarter of 2010, an increase from $.8 million for the same quarter of 2009. The increase is largely the result of an earthquake in Chile on February 27, 2010, that interrupted the supply of MDF moldings normally imported from there, hence increasing domestic demand and sales prices.
For the second quarter of 2010, the pine sawtimber harvest increased 2,684 tons, to 169,290 tons, when compared to the 2009 second quarter harvest of 166,606 tons. The average per-ton sales price decreased seven percent, to $28 per ton, from the 2009 second quarter per-ton price of $30. While stumpage prices are lower than they were a year ago, pine sawtimber prices have been trending upward since the beginning of 2010. The pine pulpwood harvest of 96,095 tons was an increase of 18,901 tons from the harvest in the second quarter of 2009. Because of low fiber inventories at area papermills during the current-year quarter, the average sales price received for pine pulpwood sold increased $3 per ton when compared to a year ago, to $13 per ton. The Company sold approximately 520 acres of recreational-use hardwood bottomland at an average sales price of $2,085 per acre during the second quarter of 2010 compared to sales of 724 acres at an average price of $2,089 per acre for the same period of 2009. Hunting lease income of $.5 million was reported for the second quarters of both 2010 and 2009.
Total mineral revenues, consisting of lease rentals and oil and gas royalties for the second quarter of 2010 were $1.6 million, compared to $1 million in the second quarter of 2009. The majority of this revenue comes from an area known as the Fayetteville Shale Play, an unconventional natural gas reservoir now being developed in the state of Arkansas. The Company has under lease or held by production approximately 31,600 net mineral acres in the Fayetteville Shale Play. During the second quarter of 2010, the Company received net royalty payments of $.7 million from the defined Fayetteville Shale Play, compared to $.3 million received in the second quarter of 2009. The increase is due to a larger number of wells in production when compared to a year ago. The total of all oil and gas net royalty
income, inclusive of the Fayetteville Shale Play, was $.9 million and $.4 million for the second quarter of 2010 and 2009, respectively. Total income from mineral lease rentals was $.5 million in the second quarter of both 2010 and 2009. In addition, there has recently been renewed interest in extracting oil found in the lower portion of the Smackover limestone formation in some of the Arkansas counties and Louisiana parishes located along the Arkansas/Louisiana border. Deltic has been approached regarding the possibility of leasing the lands in this area on which it owns the mineral interests. The ultimate benefit to Deltic from mineral leases remains speculative and unknown to the Company and is contingent on the level of crude oil and natural gas prices and the successful extraction of oil and natural gas from these areas.
Operating income increased $5.7 million. The Woodlands segment operating income was unchanged from the prior year. Increased revenues from pine pulpwood sales and net oil and gas royalties were primarily offset by a decreased net margin from timberland sold, lower revenues from pine sawtimber sales, increased maintenance expense for roads on the Companys fee timberlands, and an increased cost of fee timber harvested. The Mills segments operating income improved $8.1 million mainly due to a $105, or 44 percent, increase in the average unit sales price per MBF of lumber sold, combined with a six percent increase in the lumber sales volume. The Real Estate segments results decreased $.1 million mainly due to reduced sales activity. Corporate expense increased $1.5 million due to higher general and administrative expenses.
Operating income increased $10.6 million from 2009. The Woodlands segment decreased $.6 million due to decreased revenues from pine sawtimber sales, fewer acres of timberland sold, and increased maintenance expense for roads on the Companys fee timberlands in 2010. The Mills segment increased $14.2 million due to a higher average unit lumber sales price and increased sales volumes. The Real Estate segments operating loss decreased $.2 million due to an increase in residential lots sold and to a higher average per-lot sales price. Corporate expenses increased $2.1 million mainly due to higher general and administrative expenses.
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