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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-12147
DELTIC TIMBER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 71-0795870
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
210 East Elm Street, P. O. Box 7200, El Dorado, Arkansas 71731-7200
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (870) 881-9400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $.01 Par Value New York Stock Exchange, Inc.
Series A Participating Cumulative New York Stock Exchange, Inc.
Preferred Stock Purchase Rights
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No .
--- ---
Number of shares of Common Stock, $.01 Par Value, outstanding at April 30, 2002,
was 11,915,204.
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TABLE OF CONTENTS - FIRST QUARTER 2002 FORM 10-Q REPORT
Page
Number
------
PART I - Financial Information
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
PART II - Other Information
Item 1. Legal Proceedings 17
Item 2. Changes in Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
-------------------------------------
(Thousands of dollars)
March 31, Dec. 31,
2002 2001
------------ ----------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 2,465 6,122
Trade accounts receivable - net 5,253 4,319
Other receivables 2,937 2,938
Inventories 4,180 5,565
Prepaid expenses and other current assets 1,542 1,428
---------- ----------
Total current assets 16,377 20,372
Investment in real estate held for development and sale 37,840 36,698
Investment in Del-Tin Fiber 11,999 11,600
Other investments and noncurrent receivables 3,008 2,907
Timber and timberlands - net 209,842 211,754
Property, plant, and equipment - net 40,731 41,774
Deferred charges and other assets 2,624 3,275
---------- ----------
Total assets $ 322,421 328,380
========== ==========
Liabilities and Stockholders' Equity
Current liabilities
Current maturities of long-term debt $ 64 74
Trade accounts payable 2,521 3,524
Accrued taxes other than income taxes 1,530 1,190
Deferred revenues and other accrued liabilities 3,030 2,569
---------- ----------
Total current liabilities 7,145 7,357
Long-term debt 78,174 84,190
Deferred tax liabilities - net 19,961 19,669
Other noncurrent liabilities 6,217 6,365
Redeemable preferred stock 30,000 30,000
Stockholders' equity
Preferred stock - -
Common stock 128 128
Capital in excess of par value 68,858 68,766
Retained earnings 132,545 133,034
Unamortized restricted stock awards (219) (264)
Treasury stock (20,388) (20,865)
---------- ----------
Total stockholders' equity 180,924 180,799
---------- ----------
Total liabilities and stockholders' equity $ 322,421 328,380
========== ==========
See accompanying notes to consolidated financial statements.
3
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
Three Months Ended March 31,
------------------------------------------------
(Thousands of dollars, except per share amounts)
2002 2001
---------- ----------
Net sales $ 27,095 22,494
---------- ----------
Costs and expenses
Cost of sales 15,047 11,775
Depreciation, amortization, and cost of fee timber harvested 5,264 4,465
General and administrative expenses 2,047 1,648
---------- ----------
Total costs and expenses 22,358 17,888
---------- ----------
Operating income 4,737 4,606
Equity in loss of Del-Tin Fiber (2,393) (2,489)
Interest income 36 618
Interest and other debt expense (1,148) (1,595)
Other income/(expense) 144 73
---------- ----------
Income from continuing operations before income taxes 1,376 1,213
Income taxes (555) (238)
---------- ----------
Income from continuing operations 821 975
Discontinued operations, net - 8,212
---------- ----------
Net income $ 821 9,187
========== ==========
Earnings per common share
Basic
Continuing operations $ 02 03
Discontinued operations - 69
---------- ----------
Net income $ 02 72
========== ==========
Assuming dilution
Continuing operations $ 02 03
Discontinued operations - 69
---------- ----------
Net income $ 02 72
========== ==========
Dividends declared per common share $ 0625 0625
========== ==========
Average common shares outstanding (thousands) 11,897 11,922
========== ==========
See accompanying notes to consolidated financial statements.
4
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31,
-------------------------------------------------
(Thousands of dollars)
2002 2001
---------- ----------
Operating activities
Net income $ 821 9,187
Adjustments to reconcile net income to
net cash provided/(required) by operating activities
Depreciation, amortization, and cost of fee timber harvested 5,264 4,465
Deferred income taxes 292 7,075
Gain from disposal of agriculture segment assets - (13,364)
Real estate costs recovered upon sale 870 998
Timberland costs recovered upon sale 104 448
Equity in loss of Del-Tin Fiber 2,393 2,489
Net increase/(decrease) in provisions for pension and
other postretirement benefits 304 228
(Increase)/decrease in operating working capital
other than cash and cash equivalents 253 (1,911)
Other - net 339 (500)
---------- ----------
Net cash provided/(required) by operating activities,
including discontinued operations 10,640 9,115
---------- ----------
Investing activities
Capital expenditures requiring cash (4,071) (32,699)
Net change in purchased stumpage inventory (611) (2,058)
Advances to Del-Tin Fiber (2,749) (3,953)
Proceeds from disposal of agriculture segment assets - 17,831
Increase/(decrease) in farmland sale contract deposits - (1,455)
(Increase)/decrease in funds held by trustee (107) 7,713
Receipts of/(additions to) noncurrent receivables - 8,046
Other - net 246 174
---------- ----------
Net cash provided/(required) by investing activities,
including discontinued operations (7,292) (6,401)
---------- ----------
Financing activities
Proceeds from borrowings - 10,533
Repayments of notes payable and long-term debt (6,026) (6,783)
Treasury stock purchases - (1,026)
Increase/(decrease) in bank overdraft - (1,384)
Preferred stock dividends paid (566) (566)
Common stock dividends paid (744) (746)
Other - net 331 -
---------- ----------
Net cash provided/(required) by financing activities,
including discontinued operations (7,005) 28
---------- ----------
Net increase/(decrease) in cash and cash equivalents (3,657) 2,742
Cash and cash equivalents at January 1 6,122 2,712
---------- ----------
Cash and cash equivalents at March 31 $ 2,465 5,454
========== ==========
See accompanying notes to consolidated financial statements.
5
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Unaudited)
Three Months Ended March 31,
-----------------------------------------------------------
(Thousands of dollars)
2002 2001
---------- ----------
Cumulative preferred stock - $.01 par, authorized 20,000,000 shares, 600,000
shares issued as redeemable preferred stock $ - -
---------- ----------
Common stock - $.01 par, authorized 50,000,000 shares,
12,813,879 shares issued in 2002 and 2001 128 128
---------- ----------
Capital in excess of par value
Balance at beginning of year 68,766 68,757
Exercise of stock options 58 -
Tax benefits on stock options 34 -
---------- ----------
Balance at end of period 68,858 68,757
---------- ----------
Retained earnings
Balance at beginning of year 133,034 128,290
Net income 821 9,187
Preferred stock dividends accrued (566) (566)
Common stock dividends declared (744) (746)
---------- ----------
Balance at end of period 132,545 136,165
---------- ----------
Unamortized restricted stock awards
Balance at beginning of year (264) (472)
Stock awards - -
Amortization to expense 45 53
---------- ----------
Balance at end of period (219) (419)
---------- ----------
Treasury stock
Balance at beginning of year - 925,725 and 878,556 shares,
respectively (20,865) (19,869)
Shares purchased - 48,500 shares in 2001 - (1,026)
Shares issued for incentive plans - 21,175 shares in 2002 477 -
---------- ----------
Balance at end of period - 904,550 and 927,056 shares,
respectively (20,388) (20,895)
---------- ----------
Total stockholders' equity $ 180,924 183,736
========== ==========
See accompanying notes to consolidated financial statements.
6
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
------------------------------------------
(Unaudited, except for December 31, 2001)
Note 1 - Interim Financial Statements
The interim financial information included herein is unaudited; however,
such information reflects all adjustments which are, in the opinion of
management, necessary for a fair presentation of the Company's financial
position, results of operations, and cash flows for the interim periods. All
such adjustments are of a normal, recurring nature. The financial statements
in Deltic's 2001 annual report on Form 10-K include a summary of significant
accounting policies of the Company and should be read in conjunction with
this Form 10-Q. Certain prior period amounts have been reclassified to
conform with 2002 presentation format.
Note 2 - Discontinued Agriculture Segment
During the first quarter of 2001, the remaining 18,400 net acres of farmland
and the agriculture operational assets, previously reported in Property,
Plant, and Equipment in the Consolidated Balance Sheet, were sold and
closed, resulting in a pretax gain on the disposal of the former agriculture
segment of $13,522,000 (net of related costs). Income tax expense for
discontinued operations totaled $5,310,000. Since the Company disposed of
the agriculture segment in a tax-deferred exchange, the sales proceeds were
deposited with a qualified intermediary and used the acquire replacement
property. During the first quarter of 2001, the Company acquired, utilizing
these funds, approximately 22,800 acres of pine timberland, designated as
replacement properties, with capital expenditures of $28,348,000, which
completed the tax-deferred land exchanges for Ashly Plantation, an undivided
interest operation of which Deltic previously owned a majority interest. As
part of the transaction, an advance in the form of an interest-bearing note
from the intermediate accommodating title holders and a note from the
minority owners of Ashly Plantation were repaid to the Company, amounting to
$6,574,000.
7
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
------------------------------------------
(Unaudited, except for December 31, 2001)
Note 3 - Earnings per Common Share
The amounts used in computing earnings per share consisted of the following:
Three Months Ended
March 31,
--------------------------------
(Thousands, except per share amounts) 2002 2001
--------- ---------
Income from continuing operations $ 821 975
Discontinued operations, net - 8,212
Less preferred dividends (566) (566)
--------- ---------
Income available to common shareholders $ 255 8,621
========= =========
Weighted average number of common shares
used in basic EPS 11,897 11,922
Effect of dilutive stock options 46 12
--------- ---------
Weighted average number of common shares
and dilutive potential common stock used
in EPS assuming dilution 11,943 11,934
========= =========
Earnings per common share
Basic
Continuing operations $ .02 .03
Discontinued operations - .69
--------- ---------
Net income $ .02 .72
========= =========
Assuming dilution
Continuing operations $ .02 .03
Discontinued operations - .69
--------- ---------
Net income $ .02 .72
========= =========
Note 4 - Inventories
Inventories at the balance sheet dates consisted
of the following:
Mar. 31, Dec. 31,
(Thousands of dollars) 2002 2001
---------- ----------
Logs $ 785 1,246
Lumber 3,090 3,859
Materials and supplies 305 460
---------- ----------
$ 4,180 5,565
========== ==========
8
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
------------------------------------------
(Unaudited, except for December 31, 2001)
Note 5 - Investment in Del-Tin Fiber
The Company owns 50 percent of the membership interest of Del-Tin Fiber. The
Company's investment in Del-Tin Fiber is carried at cost, adjusted for the
Company's proportionate share of undistributed earnings or losses.
The financial position for Del-Tin Fiber as of the balance sheet dates and
results of operations for the three months ended March 31 consisted of the
following:
Mar. 31, Dec. 31,
(Thousands of dollars) 2002 2001
---------- ----------
Condensed Balance Sheet Information
Current assets $ 4,710 5,218
Debt service reserve funds 3,558 3,543
Bond sinking funds 7,924 6,072
Property, plant, and equipment - net 100,304 100,907
Other noncurrent assets 920 982
---------- ----------
Total assets $ 117,416 116,722
========== ==========
Current liabilities $ 4,043 4,419
Long-term debt 89,000 89,000
Other noncurrent liabilities 5 6
Members' capital/(deficit) 24,368 23,657
Accumulated other comprehensive income - (360)
---------- ----------
Total liabilities and members' capital/(deficit) $ 117,416 116,722
========== ==========
Condensed Income Statement Information
Net sales $ 7,825 2,014
---------- ----------
Costs and expenses
Cost of sales 9,969 4,849
Depreciation 975 520
General and administrative expenses 436 217
---------- ----------
Total costs and expenses 11,380 5,586
---------- ----------
Operating income/(loss) (3,555) (3,572)
Interest income 30 44
Interest and other debt expense (1,260) (1,449)
---------- ----------
Net income/(loss) (4,785) (4,977)
Other comprehensive income 360 -
---------- ----------
Comprehensive income/(loss) $ (4,425) (4,977)
========== ==========
* The Del-Tin facility was shut down from late January to early June 2001 to
modify its heat energy system. Direct operating costs during the shutdown
period were expensed as incurred and are included in Cost of Sales. Deltic
Timber Corporation has retained a financial advisor to assist in the
evaluation of strategic alternatives for the Company's investment in
Del-Tin Fiber with all options being considered.
9
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
-----------------------------------------
(Unaudited, except for December 31, 2001)
Note 6 - Timber and Timberlands
Timber and timberlands at the balance sheet dates consisted of the
following:
Mar. 31, Dec. 31,
(Thousands of dollars) 2002 2001
---------- ----------
Purchased stumpage inventory $ 6,277 5,665
Timberlands 76,475 76,468
Fee timber 180,507 179,424
Logging facilities 1,692 1,692
---------- ----------
264,951 263,249
Less accumulated costs of fee timber harvested
and facilities depreciation (55,109) (51,495)
---------- ----------
$ 209,842 211,754
========== ==========
Note 7 - Property, Plant, and Equipment
Property, plant, and equipment at the balance sheet dates consisted of the
following:
Mar. 31, Dec. 31,
(Thousands of dollars) 2002 2001
---------- ----------
Land $ 125 125
Land improvements 3,822 3,265
Buildings and structures 4,468 4,469
Machinery and equipment 73,648 74,168
---------- ----------
82,063 82,027
Less accumulated depreciation (41,332) (40,253)
---------- ----------
$ 40,731 41,774
========== ==========
10
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
-----------------------------------------
(Unaudited, except for December 31, 2001)
Note 8 - Supplemental Cash Flow Disclosures
Income taxes paid, net of refunds, were $251,000 in the 2002 period, while a
net income tax refund of $2,082,000 was received in the first quarter of
2001. Interest paid, net of amounts capitalized, was $449,000 and $451,000
in the first three months of 2002 and 2001, respectively.
(Increases)/decreases in operating working capital, other than cash and cash
equivalents, for the three months ended March 31 consisted of the following:
(Thousands of dollars) 2002 2001
---------- ----------
Trade accounts receivable $ (933) (1,268)
Other receivables 37 (1,446)
Inventories 1,385 958
Prepaid expenses and other current assets (114) (409)
Trade accounts payable (1,002) (1,194)
Deferred revenues and other accrued liabilities 880 1,448
--------- ----------
$ 253 (1,911)
========= ======
11
DELTIC TIMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2002
-----------------------------------------
(Unaudited, except for December 31, 2001)
Note 9 - Business Segments
Information about the Company's business segments consisted of the
following:
Three Months Ended
March 31,
---------------------------------
(Thousands of dollars) 2002 2001
---------- ----------
Net sales
Woodlands $ 12,133 12,809
Mills 17,874 10,550
Real Estate 2,567 3,143
Eliminations* (5,479) (4,008)
---------- ----------
$ 27,095 22,494
========== ==========
Income/(loss) from continuing operations
before income taxes
Operating income
Woodlands $ 7,252 7,900
Mills (1,204) (2,376)
Real Estate 203 591
Corporate (1,829) (1,487)
Eliminations 315 (22)
---------- ----------
Operating income 4,737 4,606
Equity in loss of Del-Tin Fiber (2,393) (2,489)
Interest income 36 618
Interest and other debt expense (1,148) (1,595)
Other income/(expense) 144 73
---------- ----------
$ 1,376 1,213
========== ==========
Depreciation, amortization, and
cost of fee timber harvested
Woodlands $ 3,722 3,016
Mills 1,401 1,333
Real Estate 99 80
Corporate 42 36
---------- ----------
$ 5,264 4,465
========== ==========
Capital expenditures
Woodlands $ 931 29,663
Mills 741 1,273
Real Estate 2,383 1,754
Corporate 16 9
---------- ----------
$ 4,071 32,699
========== ==========
*Intersegment sales of timber from Woodlands to Mills.
12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Net income for the first quarter of 2002 was $.8 million, $.02 a share,
compared to first quarter 2001 earnings of $9.2 million, $.72 a share. Income
from discontinued agriculture operations, net of income taxes, was $8.2 million,
$.69 a share, for 2001's first quarter. For the first three months of 2002,
income from continuing operations was $.8 million, $.02 a share, which compares
to $1 million, $.03 a share, a year ago. Net sales for the current quarter
totaled $27.1 million, an increase of $4.6 million when compared to the
prior-year quarter. Operating income for the first quarter of 2002 was $4.7
million compared to $4.6 million for the corresponding quarter of 2001. Net cash
provided by operating activities increased $1.5 million, from $9.1 million in
2001 to $10.6 million for the 2002 period.
Operating income for the first quarter of 2002 increased $.1 million when
compared to the first quarter of 2001. The Woodlands segment decreased $.7
million due primarily to reduced sales of non-strategic and higher and better
use timberland, partially offset by an increase in pine sawtimber sales which
resulted from a 43 percent increase in harvest levels. Mills segment operating
results improved $1.2 million from the same period of 2001 as lumber sales price
increased eight percent and the Company lowered its lumber production cost per
thousand board feet ("MBF") by eight percent. Operating income for Real Estate
segment operations decreased $.4 million from a year ago because the average
sales price of residential lots decreased $18,300 per lot due to sales mix.
The Woodlands segment reported net sales of $12.1 million for the current
quarter compared to $12.8 million a year ago. Sales of 328 acres of timberland
produced revenues of $.5 million in the current period, while sales of 1,478
acres generated $4.6 million in the prior-year period. Sales of pine sawtimber
increased $3.3 million as a result of a 77,529 ton increase in harvest levels to
256,173 tons and an increase in the sales price from $41 per ton to $42.
Operating income was $7.2 million in the first quarter of 2002, a decrease of
$.7 million when compared to first quarter 2001 operating income of $7.9
million, resulting primarily from the decrease in net sales. The cost of fee
timber harvested increased $.7 million as a result of higher harvest levels, but
was more than offset by a reduction in other operating expenses.
Mills operations' net sales for the first quarter of 2002 were $17.9
million compared to $10.6 million for 2001's first quarter. Finished lumber
sales increased $6.5 million due to a 63 percent increase in sales volume to
49.2 million board feet ("MMBF"), as market conditions improved relative to a
year ago. Average lumber sales price for the current quarter was $309 per MBF,
eight percent higher than a year ago. An operating loss of $1.2 million was
reported for the first quarter of 2002, which compares to a loss of $2.4 million
for the 2001 period. The improvement of $1.2 million was due primarily to the
increase in net sales combined with a $28 per MBF reduction in the manufacturing
cost per MBF sold, including a $15 per MBF decrease in the cost of logs used in
the Company's sawmills.
The Real Estate segment recorded net sales of $2.6 million in 2002 compared
to $3.1 million in 2001. Residential lot sales increased by two lots to 26 in
the current quarter; however, the average sales price per lot decreased $18,300
to $60,000 due to the sales mix. Operating income decreased $.4 million, to $.2
million, due primarily to the change in sales mix.
Corporate operating expense was $1.8 million in the first quarter of 2002,
which compares to $1.5 million for the same quarter of 2001. The increase was
primarily the result of higher general and administrative expenses. Equity in
the loss of Del-Tin Fiber recorded by the Company was $2.4 million in 2002
compared to $2.5 million a year ago. (For additional information about Del-Tin
Fiber's operations, refer to Note 5 to the consolidated financial statements.)
Interest income, earned primarily from agricultural asset and timberland sales
proceeds deposited with trustees, decreased $.6 million. Interest expense was
$.5 million lower than 2001's first quarter due mainly to a $6 million reduction
in long-term
13
debt during the first three months of 2002. Income tax expense related to
continuing operations for the current quarter was $.6 million, which compares to
$.2 million for 2001's first quarter. The 2001 period benefited from recording
deferred tax assets arising from state tax loss carryforwards.
Included in the first quarter of 2001 was income from discontinued
agriculture operations, net of income taxes, which totaled $8.2 million. The
sale of approximately 18,400 acres of farmland was recorded at a pretax gain of
$13.4 million. Income tax expense for discontinued operations was $5.3 million
for the period.
Financial Condition
Net cash provided by operating activities totaled $10.6 million during the
first quarter of 2002 compared to $9.1 million a year ago. Changes in operating
working capital, other than cash and cash equivalents, provided cash of $.3
million for the first three months of 2002 but required cash of $1.9 million for
the corresponding period of 2001.
Capital expenditures required cash of $4.1 million in the current quarter
and $32.7 million in the prior year, of which $28.3 million was for the purchase
of replacement timberland properties. Capital expenditures by segment consisted
of the following.
Three Months
Ended March 31,
---------------------------
(Thousands of dollars) 2002 2001
-------- --------
Woodlands $ 931 29,663
Mills 741 1,273
Real Estate 2,383 1,754
Corporate 16 9
-------- --------
Capital expenditures requiring cash $ 4,071 32,699
======== ========
The net change in purchased stumpage inventory to be utilized in the
Company's sawmill operations required cash of $.6 million in 2002 and $2.1
million in 2001. The Company advanced Del-Tin Fiber $2.7 million during the
current quarter and $4 million during the corresponding quarter of 2001.
During 2001, disposal of agricultural segment assets generated proceeds of
$17.8 million, $1.5 million of which had previously been received as farmland
sale contract deposits, that were deposited with a trustee as required for a
tax-deferred exchange. These proceeds, combined with $7.7 million already held
by a trustee from similar transactions recorded in prior periods were utilized
to purchase designated replacement timberland properties and are included in
capital expenditures of the Woodlands segment. Upon completion of one of the two
reverse land exchanges in which Deltic was involved, $8 million previously
advanced to the accommodating title holder required in such reverse exchanges
was repaid to the Company.
The Company borrowed $10.5 million and made repayments of debt of $6.8
million during the first quarter of 2001 compared to debt repayments of $6
million during the first quarter of the current year. During the prior year,
purchases of treasury stock utilized $1 million and the decrease in bank
overdraft was $1.4 million. Deltic paid dividends totaling $1.3 million in both
2002 and 2001, consisting of $.7 million for common stock and $.6 million for
redeemable preferred stock. These net uses of funds during the first quarter of
2002 resulted in a $3.7 million decrease in the Company's cash and cash
equivalents since December 31, 2001.
14
During December 2000, the Company's Board of Directors authorized a stock
repurchase program of up to $10 million of its common stock. Under this program,
the Company can purchase shares through the open market and privately negotiated
transactions at prices deemed appropriate by Deltic's management. As of March
31, 2002, the Company had expended $1 million under this program, with the
purchase of 48,500 shares at an average cost of $21.15 per share during the
first quarter of 2001.
The Company has agreed to a contingent equity contribution agreement with
Del-Tin Fiber and the group of banks from whom Del-Tin Fiber has obtained its
$89 million credit facility. Under this agreement, Deltic and the other 50
percent owner of the joint venture have agreed to fund any deficiency in
contributions to either Del-Tin Fiber's required sinking fund or debt service
reserve, up to a cumulative total of $17.5 million for each owner. In addition,
each owner has committed to a production support agreement, under which each
owner has agreed to make support obligation payments to Del-Tin Fiber to
provide, on the occurrence of certain events, additional funds for payment of
debt service until the plant is able to successfully complete a minimum
production test. In addition, both owners have agreed to fund any operating
working capital needs until the facility is able to consistently generate
sufficient funds to meet its cash requirements.
On April 25, 2002, Deltic announced that Banc One Capital Markets, Inc. had
been retained as financial advisor to assist in the evaluation of strategic
alternatives for the Company's investment in Del-Tin Fiber.
Redemption of the Company's currently outstanding redeemable preferred
stock is mandatory on December 31, 2002, at a price of $30 million. Deltic's
management currently anticipates utilizing amounts available under its revolving
credit facility to fulfill this obligation.
Deltic's management believes that cash provided from its operations and the
remaining amount available under its credit facility will be sufficient to meet
its expected cash needs and planned expenditures, including those of the
Company's continued timberland acquisition and stock repurchase programs,
additional advances to Del-Tin Fiber, preferred stock redemption, and capital
expenditures, for the foreseeable future.
Statements included herein that are not historical in nature are intended
to be, and are hereby identified as, "forward-looking statements" within the
meaning of the federal securities laws. Such statements reflect the Company's
current expectations and involve risks and uncertainties. Actual results could
differ materially from those included in such forward-looking statements.
Factors that could cause such differences include, but are not limited to, the
cyclical nature of the industry, changes in interest rates and general economic
conditions, adverse weather, cost and availability of materials used to
manufacture the Company's products, and the risk factors described from time to
time in the reports and disclosure documents filed by the Company with the
Securities and Exchange Commission.
15
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's market risk has not changed significantly from that set forth
under the caption "Quantitative and Qualitative Disclosures About Market Risk",
in Item 7A of Part II of its 2001 annual report on Form 10-K. Those disclosures
should be read in conjunction with this Form 10-Q.
16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company is involved in litigation incidental to its
business. Currently, there are no material legal proceedings.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DELTIC TIMBER CORPORATION
By: /s/Ron L. Pearce Date: May 10, 2002
----------------------------------------- -------------------------
Ron L. Pearce, President
(Principal Executive Officer)
/s/Clefton D. Vaughan Date: May 10, 2002
- -------------------------------------------- -------------------------
Clefton D. Vaughan, Vice President,
Finance and Administration
(Principal Financial Officer)
/s/Emily R. Evers Date: May 10, 2002
- -------------------------------------------- -------------------------
Emily R. Evers, Controller
(Principal Accounting Officer)
18