Deltic Timber Corp. Reports Operating Results (10-Q)
Deltic Timber Corp. has a market cap of $639.6 million; its shares were traded at around $51.18 with a P/E ratio of 88.2 and P/S ratio of 5.8. 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 Arnhold & S. Bleichroeder Advisers, LLC, Chuck Royce of Royce& Associates.
Highlight of Business Operations: The Company recorded net income of $2.3 million for the first quarter of 2010, compared to a loss of $1.2 million for the same period of 2009. While the Woodlands segment continued its role as the established core operation of the Company during the first quarter and provided $5.1 million in operating income, this was $.6 million below the same period in 2009. The decrease was the result of lower pine sawtimber harvest volume and average stumpage prices. The Mills segment reported operating income of $2.5 million, an improvement of $6.1 million when compared to the first quarter of 2009. The Mills improvement reflects benefits from supply-side market factors, the result of which was increased lumber prices, and production efficiencies during the current quarter. The Real Estate segment reported a loss of $.7 million in the current-year quarter compared to a loss of $1 million for the same period of 2009. The improvement is due to an increase in residential lot sales activity in the current year. Corporate segment expense was $.6 million higher in the first quarter of 2010 versus the corresponding period of 2009, a result of higher general and administrative expenses. This was primarily from additional accrued taxes on employee incentive plan expenses, which were due to the increase in the market value of share-based awards. Deltic owns a 50 percent interest in Del-Tin Fiber, LLC and recorded related equity in income of $.5 million in the current quarter, a $.3 million decrease from the first quarter of 2009 due largely to a lower average sales price for MDF and increased resin cost.
Wet weather conditions influenced logging harvest activities in the first quarter of 2010. The pine sawtimber harvest decreased 9,043 tons to 146,488 tons when compared to the 2009 first quarter harvest of 155,531 tons. The average price received for pine sawtimber was $26 per ton in the current quarter of 2010, a decrease of $3 per ton from the 2009 first quarter. However, the per-ton prices for pine stumpage began to move upward during the current quarter due to the reduced harvest volumes and the increased demand for pine stumpage related to improved lumber market conditions. The pine pulpwood harvest of 79,379 tons in the first quarter of 2010 was 10,454 tons fewer than the 89,833 tons harvested in the first quarter of 2009. Because of low fiber supplies at area papermills, the price received for pine pulpwood increased $5 per ton to $16 per ton, when compared to a year ago. The Company also sold approximately 232 acres of recreational-use hardwood bottomland at an average sales price of $1,587 per acre during the first quarter of 2010 compared to sales of approximately 277 acres at an average price of $1,485 per acre for the same period of 2009. In addition, the Woodlands segment reported hunting lease income of $.5 million in the first quarters of 2010 and 2009.
Operating income increased $4.9 million. The Woodlands segment decreased $.6 million due primarily to a decreased pine sawtimber harvest and lower average per-ton sales price combined with lower other income mainly from well-site damages. These were partially offset by increased revenues from oil and gas royalties and pine pulpwood sales. The Mills segment operations improved $6.1 million mainly due to a $76 per MBF, or 32 percent increase, in the average lumber sales price combined with a 22 percent increase in lumber sales volume. The Real Estate segments results improved $.3 million mainly due to increased sales of residential lots. Corporate expense increased $.6 million due to higher general and administrative expenses.
Net cash provided by operating activities total $4.4 million for the first three months of 2010 compared to $.4 million for the same period of 2009. Changes in operating working capital, other than cash and cash equivalents, required cash of $.8 million and $1.5 million in 2010 and 2009, respectively. The Companys accompanying Consolidated Statements of Cash Flows identifies other differences between net income and cash provided by operating activities for each reporting period.
The net change in purchased stumpage inventory to be utilized in the Companys sawmill operations used cash of $.5 million in both 2010 and 2009. The Company advanced Del-Tin Fiber $.7 million in the first quarter of 2010, and received repayments of $.7 million. This compares to a net advance to Del-Tin of $.5 million for the same period of 2009. Funds held by trustees to be used for acquisitions of timberland designated as replacement property for income tax purposes, as required for tax-deferred exchanges, were unchanged in the first quarter of 2010 versus a decrease of $2.8 million for the same period of 2009. Deltic received proceeds from other investing activities of $.1 and $.4 million in 2010 and 2009, respectively. Deltic had no borrowings or repayments in 2010 versus net borrowings of $2 million in 2009. The Company had $1.1 million of treasury stock purchases in 2009, while there were no purchases in 2010. Deltic paid dividends on common stock of $.9 million during both 2010 and 2009. Proceeds from stock option exercises and related tax benefits in 2010 increased $.2 million from 2009 which had no benefit since no options were exercised in that period.
In December 2000, the Companys Board of Directors authorized a stock repurchase program of up to $10 million of Deltic common stock. In December 2007, the Companys Board of Directors expanded the program by $25 million. As of March 31, 2010, the Company had expended $14.6 million under this program, with the purchase of 370,530 shares at an average cost of $39.28 per share; no shares have been purchased in 2010, 35,571 shares were purchased 2009, 129,996 shares were purchased in 2008, 101,914 shares were purchased under this program in 2007, and seven shares in 2006. In its two previous repurchase programs, Deltic purchased 479,601 shares at an average cost of $20.89 and 419,542 shares at a $24.68 per share average cost, respectively.
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