Add
DEL to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| DEL > SEC Filings for DEL > Form 10-Q on 2-Nov-2012 | All Recent SEC Filings |
2-Nov-2012
Quarterly Report
Executive Overview
The Company reported net income of $3.2 million for the third quarter of 2012, compared to $.8 million for the same period of 2011. The increase was due primarily to improved operating results for Deltic's Mills segment, which reported operating income of $5.6 million, an improvement of $5.1 million over the third quarter of 2011. The Mills segment continued to benefit from an improved lumber market, which resulted in a $70 per thousand board feet ("MBF") increase in the average lumber sales price along with an increase in lumber sales volume over last year's third quarter. The Woodlands segment reported operating income of $4.7 million, a decrease of $1.4 million from the $6.1 million reported a year ago. This was primarily due to lower revenues from the harvest of pine sawtimber, decreased oil and gas royalty revenue, and reduced sales of non-strategic recreational-use hardwood bottomland acreage. The Real Estate segment had an operating loss of $.6 million compared to a loss of $1 million a year ago. The Corporate segment's general and administrative expenses were $1.4 million higher in the current-year quarter than in the same period a year ago, which was mainly due to increased pension and post-retirement benefit obligations caused by lower interest rates and higher employee incentive plan expenses resulting from the improved financial results for 2012. Deltic owns a 50 percent interest in Del-Tin Fiber LLC ("Del-Tin Fiber") and recorded equity in earnings of $.5 million in the current period, compared to breakeven results in the prior year period. The improvement was mainly due to a 10 percent higher average sales price for medium density fiberboard ("MDF") sold.
Deltic is primarily a wood products producer operating in a commodity-based business environment, but also has a significant diversification in real estate development on a portion of its land holdings. The Company's operations and financial results are influenced by a number of key factors which include, but are not limited to, general economic conditions, U.S. employment levels, interest rates, credit availability and associated costs, lumber and building product imports, foreign exchange rates, housing starts, new and existing home inventories, residential and commercial real estate foreclosures, residential and commercial repair and remodeling, commercial construction, industry capacity and production levels, the availability of raw materials, natural gas pricing, and weather conditions. These factors, combined with the Company's relative size, give it little or no control over pricing or demand levels for its lumber products in a commodity market. Recent economic data suggests the housing recovery may be gaining momentum with the help of low mortgage interest rates. However, persistent employment concerns and weak consumer confidence continue to bring uncertainty to the current business environment. The Company utilizes its vertical integration strategy by managing Deltic's diverse assets to capture market-driven opportunities while increasing hourly productivity and reducing controllable costs and expenses.
In the third quarter of 2012, the pine sawtimber harvest was 175,515 tons, a decrease of 32,262 tons when compared to the 2011 third quarter harvest of 207,777 tons. This was a planned reduction in harvest for the third quarter after benefitting from favorable logging conditions in the first half of 2012 that had the Company slightly ahead of its 2012 sustainable-yield plan. The average sales price for pine sawtimber decreased slightly, to $21 per ton, from the 2011 third quarter per-ton price of $22. The third quarter of 2012's pine pulpwood harvest of 107,494 tons was a decrease of 21,680 tons from the third quarter of 2011. The average sales price for pine pulpwood was $8 per ton for both quarters. The Company sold 195 acres of non-strategic recreational-use hardwood bottomland at an average sales price of $2,042 per acre during the third quarter of 2012 compared to sales of 500 acres at an average price of $1,821 per acre for the same period of 2011. Hunting lease income was $.6 million for the third quarter of 2012 and $.5 million in the same period of 2011.
In addition, the Woodlands segment's financial results include other benefits from land ownership, such as revenues from mineral lease rentals, mineral royalties, and land easements. In the third quarter of both 2012 and 2011, oil and gas lease rental income was $.6 million. Oil and gas royalty payments, which are primarily from the Fayetteville Shale Play, were $.7 million in the third quarter of 2012, a $.4 million decrease from 2011, due to reduced natural gas production and lower natural gas prices that was partially offset by an increase in the number of producing wells. The ultimate benefit to Deltic from mineral leases remains speculative and unknown and is contingent on the level of natural gas and crude oil prices and the successful completion of producing wells drilled on Company lands.
The average lumber sales price in the third quarter of 2012 was $321 per thousand board feet, an increase of $70 per thousand board feet, or 28 percent, when compared to the same period in 2011. The Mills segment sold 68.3 million board feet ("MMBF") in the third quarter of 2012, an increase of .4 million board feet when compared to 67.9 million board feet sold in the third quarter a year ago. Additionally, the segment benefitted from lower raw material log costs and higher hourly productivity rates, along with the improved pricing. These factors have enabled the Mills segment to show improved operating results over the third quarter of 2011. 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 20 residential lots during the third quarter of 2012 compared to eight in the third quarter of 2011. The average per-lot sales price was $71,300 in the third quarter of 2012, an increase of $13,500 when compared to the same period of 2011. The higher average per-lot sales price was a result of the mix of lots sold. Though there were no commercial real estate sales in the third quarter of either year, 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.
Operating results for Del-Tin Fiber are affected by the overall MDF market and the plant's operating performance. Equity in earnings of Del-Tin Fiber was $.5 million during the third quarter of 2012, an increase from the breakeven results for the third quarter of 2011. This increase was primarily due to an improved average per-unit sales price, which was partially offset by increased manufacturing costs. Regarding the Company's equity position in Del-Tin Fiber, Deltic continues to reduce depreciation expense related to the add-back per thousand square feet ("MSF") manufactured, which relates to the impairment taken by the Company in 2002 that was not recorded at the Del-Tin Fiber level. The difference in basis between the Company and Del-Tin Fiber is being adjusted to account for Del-Tin Fiber's operating results as if it were a consolidated subsidiary. (For further discussion, refer to Note 4 to the consolidated financial statements.)
Results of Operations
Three Months Ended September 30, 2012 Compared with Three Months Ended
September 30, 2011
In the following tables, Deltic's net sales and results of operations are
presented for the quarters ended September 30, 2012 and 2011. Explanations of
significant variances and additional analyses for the Company's consolidated and
segment operations follow the tables.
Quarter Ended Sept. 30,
(Millions of dollars, except per share amounts) 2012 2011
Net sales
Woodlands $ 9.5 11.4
Mills 27.6 22.3
Real Estate 3.2 2.3
Eliminations (3.8 ) (4.7 )
Net sales $ 36.5 31.3
Operating income
Woodlands $ 4.7 6.1
Mills 5.6 .5
Real Estate (.6 ) (1.0 )
Corporate (4.9 ) (3.5 )
Eliminations .3 .1
Operating income 5.1 2.2
Equity in earnings of Del-Tin Fiber .5 -
Interest and other debt expense (1.0 ) (1.1 )
Other income/(loss) (.1 ) -
Income taxes (1.3 ) (.3 )
Net income $ 3.2 .8
Earnings per common share
Basic and diluted $ .25 .06
|
Consolidated
The $2.4 million increase in net income in the current year quarter was due to improved operating results for the Mills and Real Estate segments, along with higher equity in earnings of Del-Tin Fiber. These improvements were partially offset by reduced operating income for the Woodlands segment, and higher Corporate general and administrative expenses. In addition, income tax expense increased in 2012 due to higher pretax income.
Operating income increased $2.9 million compared to the third quarter of 2011. The Woodlands segment's operating income was $1.4 million less than the prior year primarily due to fewer tons of pine sawtimber harvested and a lower per-ton sales price, reduced oil and gas royalty revenues, and a decrease in the number of acres of non-strategic recreational-use hardwood bottomland sold. The Mills segment's operating income improved $5.1 million in the current-year quarter due to a higher average sales price per MBF of lumber sold, and a lower per-unit manufacturing cost. The Real Estate segment's results increased $.4 million, primarily due to increased sales of residential lots in 2012. Equity in earnings of Del-Tin Fiber increased by $.5 million and Corporate expense increased $1.4 million due to higher general and administrative expenses.
Woodlands
Selected financial and statistical data for the Woodlands segment is shown in
the following table.
Quarter Ended Sept. 30,
2012 2011
Net sales (millions of dollars)
Pine sawtimber $ 3.8 4.6
Pine pulpwood .9 1.1
Hardwood sawtimber .1 .1
Hardwood pulpwood .3 .2
Oil and gas lease rentals .6 .6
Oil and gas royalties .7 1.1
Hunting leases .6 .5
Sales volume (thousands of tons)
Pine sawtimber 175.5 207.8
Pine pulpwood 107.5 129.2
Hardwood sawtimber 3.3 3.0
Hardwood pulpwood 23.2 33.3
Sales price (per ton)
Pine sawtimber $ 21 22
Pine pulpwood 8 8
Hardwood sawtimber 37 31
Hardwood pulpwood 13 7
Timberland
Net sales (millions of dollars) $ .4 .9
Sales volume (acres) 195 500
Sales price (per acre) $ 2,042 1,821
|
Net sales decreased $1.9 million in the third quarter of 2012 when compared to the 2011 third quarter. Sales of pine sawtimber decreased $.8 million due to a 16 percent, or 32,262 ton, decrease in the harvest volume of pine sawtimber in the current year quarter. In addition, the average sales price of $21 per ton was five percent less than in 2011's third quarter. Pine pulpwood sales revenue decreased $.2 million from the 2011 third quarter due to fewer tons harvested. Oil and gas royalty revenue decreased $.4 million in the third quarter for 2012 due to reduced natural gas production and lower prices for natural gas, which was partially offset by an increase in the number of producing wells. Sales of timberland decreased $.5 million mainly due to a decrease in the number of acres sold in the 2012 third quarter. Operating income was $4.7 million in the third quarter of 2012 compared to $6.1 million in the third quarter of 2011. This was due to the same factors that affected net sales, but was partially offset by reduced cost of fee timber harvested and cost of timberland sold.
Mills
Selected financial and statistical data for the Mills segment is shown in the
following table.
Quarter Ended Sept. 30,
2012 2011
Net sales (millions of dollars)
Lumber $ 21.9 17.1
Residual by-products 4.0 3.9
Lumber
Finished production (MMBF) 69.1 66.1
Sales volume (MMBF) 68.3 67.9
Sales price (per MBF) $ 321 251
|
Net sales in the third quarter of 2012 increased $5.3 million, or 24 percent, due to a higher average lumber sales price and an increased lumber sales volume. The average lumber sales price in the third quarter of 2012 increased 28 percent, or $70 per MBF, compared to the third quarter of 2011, and the lumber sales volume increased .4 million board feet. Operating income increased $5.1 million due to the same factors affecting net sales combined with lower raw material log cost and the benefit of improved operating efficiencies.
Real Estate
Selected financial and statistical data for the Real Estate segment is shown in
the following table.
Quarter Ended Sept. 30,
2012 2011
Net sales (millions of dollars)
Residential lots $ 1.4 .5
Chenal Country Club 1.6 1.7
Sales volume
Residential lots 20 8
Average sales price (thousands of dollars)
Residential lots $ 71 58
|
Net sales for the third quarter of 2012 increased $.9 million from the third quarter of 2011 due to an increase in the number of residential lots sold at a higher average sales price per lot. The current-period operating income was $.4 million more than in 2011 due to the same factors affecting net sales.
Corporate
The $1.4 million increase in Corporate expense was due primarily to higher general and administrative expenses, mainly expenses associated with pension and post-retirement benefits and employee incentive plan expenses resulting from improved financial results for 2012.
Eliminations
Intersegment sales of timber from Deltic's Woodlands to the Mills segment decreased $.9 million to $3.8 million in 2012. The decrease was due to a lower transfer price and smaller harvest volume from the Woodlands segment's fee timberlands. Transfer prices are approximately that of market which were higher in the same quarter last year.
Equity in Del-Tin Fiber
For the third quarter of 2012, Deltic's equity in earnings of Del-Tin Fiber was $.5 million compared to breakeven for the same period of 2011. The $.5 million increase was primarily due to a higher average sales price per MSF sold, but was partially offset by increased manufacturing cost, mainly raw material resin. Additional selected financial and statistical data for Del-Tin Fiber is shown in the following table.
Quarter Ended Sept. 30,
2012 2011
Net sales (millions of dollars) $ 16.6 15.1
Finished production - million square feet ("MMSF") 30.3 28.4
Sales volume (MMSF) 30.5 30.6
Sales price (per MSF) $ 542 494
|
Income Taxes
The effective income tax rate was 30 percent for 2012 and 32 percent for 2011. The decrease in the effective income tax rate was due primarily to permanent differences and the recognition of a tax benefit due to changes in balances of uncertain tax liabilities in 2012 when compared to the same period of 2011.
Nine Months Ended September 30, 2012 Compared with Nine Months Ended
September 30, 2011
In the following tables, Deltic's net sales and results of operations are
presented for the nine months ended September 30, 2012 and 2011. Explanations of
significant variances and additional analyses for the Company's consolidated and
segment operations follow the tables.
Nine Months Ended Sept. 30,
2012 2011
(Millions of dollars, except per share amounts)
Net sales
Woodlands $ 28.8 31.9
Mills 78.1 64.5
Real Estate 8.4 9.4
Eliminations (11.1 ) (12.8 )
Net sales $ 104.2 93.0
Operating income and net income
Woodlands $ 14.2 16.4
Mills 12.9 .4
Real Estate (1.7 ) (.1 )
Corporate (12.9 ) (10.6 )
Eliminations - .2
Operating income 12.5 6.3
Equity in earnings of Del-Tin Fiber .6 .9
Interest and other debt expense (3.1 ) (3.0 )
Income taxes (3.2 ) (1.3 )
Net income $ 6.8 2.9
Earnings per common share
Basic and diluted $ .54 .23
|
Consolidated
Net income in 2012 increased $3.9 million due to improved operating results for the Mills segment, partially offset by reduced financial results for the Woodlands and Real Estate segments, lower equity in earnings of Del-Tin Fiber, and higher Corporate general and administrative expenses. Additionally, income tax expense increased due to higher pretax income.
Operating income increased $6.2 million from 2011. The Woodlands segment decreased $2.2 million in 2012 mainly due to decreased revenues from pine sawtimber sales, reduced oil and gas lease rental and royalty revenue, and fewer sales of non-strategic recreational-use hardwood bottomland. The Mills segment increased $12.5 million in the current year due to a higher average lumber sales price, an increased sales volume, and a lower per-unit manufacturing cost. The Real Estate segment's operating income decreased $1.6 million from 2011, primarily because there were no sales of commercial real estate in the current year, partially offset by increased residential lot sales activity. Equity in earnings of Del-Tin Fiber decreased year-over-year by $.3 million mainly due to higher raw material costs, and Corporate expense increased $2.3 million due to higher general and administrative expenses.
Woodlands
Selected financial and statistical data for the Woodlands segment is shown in
the following table.
Nine Months Ended Sept. 30,
2012 2011
Net sales (millions of dollars)
Pine sawtimber $ 10.9 12.5
Pine pulpwood 3.0 2.9
Hardwood sawtimber .3 .2
Hardwood pulpwood .7 .6
Oil and gas lease rentals 1.7 1.9
Oil and gas royalties 2.6 3.3
Hunting leases 1.7 1.6
Sales volume (thousands of tons)
Pine sawtimber 505.0 523.1
Pine pulpwood 358.4 356.6
Hardwood sawtimber 7.7 8.0
Hardwood pulpwood 57.3 92.1
Sales price (per ton)
Pine sawtimber $ 22 24
Pine pulpwood 8 8
Hardwood sawtimber 37 31
Hardwood pulpwood 13 6
Timberland
Net sales (millions of dollars) $ 1.3 2.5
Sales volume (acres) 788 1,601
Sales price (per acre) 1,681 1,560
|
In 2012, net sales decreased $3.1 million from 2011. Sales of pine sawtimber decreased $1.6 million due to a lower average sales price of $22 per ton, an eight percent decrease from 2011's average of $24 per ton, and to a three percent decrease in harvest volume. Revenues from timberland sales decreased $1.2 million due to fewer acres of recreational-use hardwood bottomland sold in 2012. Oil and gas royalty revenue decreased $.7 million primarily due to lower natural gas prices and reduced production. Operating income was $2.2 million lower in 2012. The decrease was due to the same factors impacting net sales, partially offset by lower cost of fee timber harvested and cost of timberland sold.
Mills
Selected financial and statistical data for the Mills segment is shown in the
following table.
Nine Months Ended Sept. 30,
2012 2011
Net sales (millions of dollars)
Lumber $ 61.9 49.6
Residual by-products 12.1 11.1
|
Nine Months Ended Sept. 30,
2012 2011
Lumber
Finished production (MMBF) 204.3 191.5
Sales volume (MMBF) 203.7 195.2
|
Net sales increased $13.6 million in 2012 due to a higher average lumber sales price and an increased sales volume. The average sales price for lumber increased 20 percent from 2011, while the sales volume increased four percent. Total operating income increased $12.5 million year-over-year due to the same factors impacting net sales, combined with lower raw material log cost and the benefit of increased hourly productivity rates.
Real Estate
Selected financial and statistical data for the Real Estate segment is shown in
the following table.
Nine Months Ended Sept. 30,
2012 2011
Net sales (millions of dollars)
Residential lots $ 2.6 1.4
Commercial acres - 2.6
Speculative homes .5 -
Chenal Country Club 5.0 5.1
Sales volume
Residential lots 38 22
Commercial acres - 26
Speculative homes 1 -
Average sales price (thousands of dollars)
Residential lots $ 70 65
Commercial acres - 101
Speculative homes 491 -
|
Net sales decreased $1 million due to no sales of commercial acres during the first nine months of 2012, partially offset by an increase in the number of . . .
|
|