Deltic Timber Corp., a natural resources company, announced Thursday that net sales totaled $55.4 million, versus $56.8 million for second quarter 2016. Net income was $2.7 million, or $.22 per diluted share, versus net income of $4.2 million, or $.35 per diluted share, for the same period of 2016.
Financial results for the second quarter of 2017 benefited from increased operating income in Woodlands and lower corporate general and administrative expenses. However, overall the quarter was lower than the previous year due to reduced operating rates in Manufacturing resulting from ongoing capital improvement and maintenance projects. In addition, the company repaid $6 million of debt on their revolving credit facility during the second quarter of 2017.
“Deltic continues to make progress to sharpen our focus on relentless execution and increase shareholder value,” said John D. Enlow, Deltic’s president and chief executive officer. “The Woodlands segment continued to see favorable sawlog demand and benefited from increased pulpwood and chip-n-saw harvests, despite the impact of wet weather conditions in our operating areas during the quarter. Pricing across pulpwood and chip-n-saw grades remained relatively stable, with modest increases in sawlog pricing compared to the same quarter last year.
“In Manufacturing, our average sales price for lumber sold increased 5 percent with continued favorable demand. As expected, the medium density fiberboard plant continued to be adversely impacted during the second quarter 2017, due to worn press chains, which are scheduled to be replaced in August of this year. In our Real Estate segment, we had strong demand for the residential lot offering in our Wildwood development with 69 lots placed under contract, and all are scheduled to close by end of third quarter. We expect to have an additional 104 lots available at various price points in the Chenal Valley and Wildwood developments during the second half of 2017. We also sold a 7.9-acre commercial site during the quarter and remain encouraged by increased interest in our commercial properties,” Enlow said.
“We made significant progress during the quarter evaluating Deltic’s assets, competitive position and market risks and opportunities and are now assessing a comprehensive range of strategic alternatives. We remain committed to developing and communicating in a timely fashion a strategic direction that is laser focused on achieving strong operational performance, driving shareholder value and delivering best-in-class returns,” Enlow added.
During the second quarter 2017, in the Woodlands segment, the company harvested 201,168 tons of pine sawtimber, 1 percent below the second quarter 2016; pine sawtimber prices averaged $28/ton, $1/ton above previous year quarter; the company harvested 122,720 tons of pine pulpwood, 31 percent above the second quarter, 2016; pine pulpwood prices averaged $8 ton, no change from previous year quarter and 20 acres of timberland were sold for $15,000 per acre, versus nine acres at $4,400 per acre during second quarter, 2016.
Woodlands segment net sales for second quarter 2017 included $10.2 million, compared to $9.5 million in 2016 and $10.9 million in the first quarter, 2017.
Woodlands segment operating income increased in second quarter of 2017 compared to second quarter 2016 principally due to $1/ton higher average sawtimber prices, sale of 20 acres of higher and better use timberland, and higher pulpwood harvests, partially offset by modestly lower sawtimber volumes. Wet weather constrained sawtimber harvests in key operating areas during the quarter while market demand remained stable. The increase in volume of pine pulpwood sold was mainly due to the mix of timber on the tracts harvested, and timing of prior-year timber deed sales.
In the Manufacturing segment during the second quarter, 2017, the company sold 66.9 million board feet of lumber – 4 percent below second quarter 2016; lumber prices averaged $17/MBF – higher than 2016 second quarter; sold 26.1 million square feet of MDF, 6 percent below the same time period in 2016; MDF prices averaged $5/MSF, lower than last year’s second quarter, due to product mix.
Manufacturing segment net sales included $45.5 million in second quarter this year – compared to $47.3 in second quarter 2016 and $47 million in first quarter of 2017. Segment operating income was $4 million for second quarter 2017, $7 million in second quarter 2016 and $4 million in first quarter 2017.
In the Real Estate segment for the second quarter 2017, the company sold four residential lots compared to 22 lots in second quarter 2016. Residential lots averaged $65,000 per lot, down 28 percent from second quarter 2016, due to the mix of lots sold. The company sold 7.9 acres for a commercial site for $3.1 million and placed 69 residential lots under contract averaging $62,000 per lot, expected to close by end of third quarter 2017.
Real Estate segment net sales were $5.4 million in second quarter 2017, compared to $5.7 million in second quarter 2016 and $1.3 million in first quarter 2017. Segment operating income/(loss), was $1.8 million in both second quarters in 2017 and 2016 and $.9 million in first quarter 2017.
Corporate segment general and administrative expense was $4.3 million, compared to $4.7 million for the same period of 2016. Interest expense in 2017’s second quarter was $2 million, compared to $2.2 million for the same period of 2016. The decrease in interest expense was primarily due to lower average interest rates. In addition, during the second quarter of 2017, Deltic repaid $6 million of debt. Income tax expense in the second quarter of 2017 was $1.7 million, compared to a $1.9 million in the prior-year’s second quarter.
Capital expenditures were $6.3 million in the second quarter 2017, compared to $10.3 million for the second quarter of 2016. There were no timberland acquisition expenditures in the second quarter of 2017, compared to timberland acquisition expenditures of $.6 million during the same period of 2016.
Regarding the outlook for the third quarter and full year of 2017, Deltic anticipates the pine sawtimber harvest to be 260,000 to 280,000 tons and 765,000 to 790,000 tons, respectively, depending on weather conditions, according to a news release from the company.
Finished lumber sales volume is estimated to be 75 to 85 million board feet for the third quarter of 2017 and 290 to 315 million board feet for full-year 2017. MDF sales volume for the third quarter and year of 2017 is forecast to be 15 to 25 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. MDF operating costs in third quarter of 2017 are expected to be impacted by scheduled maintenance downtime for replacement of press chains and a belt. Residential lot sales are projected at 60 to 70 lots and 130 to 150 lots for the third quarter and full year of 2017, respectively.
Deltic held a conference call Thursday to discuss second quarter 2017 earnings. Online replays of the call also can be accessed through the Investor Relations section of the Deltic website at www.deltic.com. A recording will be available until Aug. 17 by dialing 1-888-843-7419 and referencing replay passcode identification number 45260771.