Deltic Timber Corp. Reports Operating Results (10-Q)
Deltic Timber Corp has a market cap of $814.5 million; its shares were traded at around $61.99 with a P/E ratio of 195 and P/S ratio of 6.7. The dividend yield of Deltic Timber Corp stocks is 0.5%.
Highlight of Business Operations:The Company reported net income of $3.5 million for the second quarter of 2012, compared to $2 million for the same period of 2011. The increase was due to significantly improved operating results for Deltics Mills segment which reported operating income of $5.7 million, an improvement of $6.5 million over the second quarter of 2011. The Mills segment benefitted from a $72 per thousand board feet (MBF) increase in the average lumber sales price combined with a 5.4 million board feet increase in lumber sales volume. The Woodlands segment reported operating income of $4.7 million, a decrease of $.9 million from the $5.6 million reported a year ago. This was primarily due to lower revenues from the harvest of pine sawtimber, decreased net oil and gas royalty revenue, and reduced sales of nonstrategic recreational-use hardwood bottomland. The Real Estate segment had an operating loss of $.3 million compared to income of $1.7 million a year ago. The decrease was due to no sales of commercial real estate in the second quarter of 2012 versus the sale of a 26-acre commercial site in 2011. The Corporate segments general and administrative expenses were $.6 million higher in the current-year quarter than in the same period a year ago, mainly due to increased employee incentive plan expenses that are impacted by the market performance of Deltics equity combined with increased pension and post-retirement benefit obligations caused by lower interest rates. Deltic owns a 50 percent interest in Del-Tin Fiber LLC (Del-Tin Fiber) and recorded breakeven results for the second quarter of 2012, a $.4 million decrease from the same period of 2011. The decrease was due primarily to higher manufacturing costs.
The Woodlands segment is the Companys core operating segment, providing the foundation for Deltics other operations. In the second quarter of 2012, the pine sawtimber harvest was 156,512 tons, a decrease of 12,687 tons when compared to the 2011 second quarter harvest of 169,199 tons. While the current quarter included a slight decrease in pine sawtimber harvest volume, this was primarily the result of favorable logging conditions in the first quarter of 2012, as the Company achieved a greater percentage of its annual harvest plan than anticipated. The average sales price for pine sawtimber decreased eight percent, to $22 per ton, from the 2011 second quarter per-ton price of $24 due to the impact of lower demand for stumpage by sawmills in Deltics operating area. The second quarter of 2012s pine pulpwood harvest of 115,965 tons was an increase of 14,043 tons from the harvest in the second quarter of 2011. The average sales price for pine pulpwood was $8 per ton for both quarters. The Company sold 322 acres of recreational-use hardwood bottomland at an average sales price of $1,657 per acre during the second quarter of 2012 compared to sales of 794 acres at an average price of $1,474 per acre for the same period of 2011. Hunting lease income was $.6 million for the second quarter of 2012 and $.5 million in the same period of 2011.
The average lumber sales price in the second quarter of 2012 was $317 per thousand board feet, an increase of $72 per thousand board feet, or 29 percent, when compared to the same period in 2011. The Mills segment sold 70.3 million board feet in the second quarter of 2012, an increase of 5.4 million board feet when compared to 64.9 million board feet sold in the second quarter a year ago, as the Company capitalized on increased demand. Additionally, the segment benefitted from lower raw material log costs and higher hourly productivity rates. However, as with any commodity market, the Company expects the historical lumber market volatility to continue in the future. As such, Deltic will continue to adjust production levels to meet market demand.
The Real Estate segment sold 11 residential lots during the second quarters of both 2012 and 2011, with an average per-lot sales price of $68,000 in 2012 compared to an average per-lot sales price of $65,500 in 2011s second quarter. During the second quarter of 2012, there were no commercial acreage sales, while in the second quarter of 2011 there was a commercial real estate sale of 26 acres with an average sales price of $101,000 per acre. Commercial real estate acreage within Chenal Valley continues to receive interest, especially for the property located near The Promenade at Chenal, an upscale shopping center that includes internationally branded retailers, and property located adjacent to St. Vincent West, a medical center that opened recently. However, due to the unpredictable nature of commercial real estate sales activity, the Company cannot predict the timing of closing of any commercial real estate transaction.
Net sales decreased $1.2 million in the second quarter of 2012 when compared to the 2011 second quarter. Sales of pine sawtimber decreased $.7 million due to a lower average sales price of $22 per ton, which was eight percent less than the $24 per ton received in the second quarter of 2011. In addition, the volume of pine sawtimber harvested declined 12,687 tons, a seven percent decrease when compared to 2011s harvest volume. Oil and gas royalty revenue decreased $.3 million due to lower prices for natural gas, which were partially offset by an increase in the number of producing wells. Sales of nonstrategic recreational-use timberland decreased $.7 million mainly due to a decrease in the number of acres sold in the current quarter. Operating income was $4.7 million in the second quarter of 2012 compared to $5.6 million in the second quarter of 2011. This was mainly due to the same factors that decreased current-period net sales, but was partially offset by lower cull timber removal expense and reduced cost of fee timber harvested.
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