Deltic Timber : Preliminary Fourth quarter and Year of 2016 results

Deltic Timber Corporation

NEWS RELEASE

210 EAST ELM STREET EL DORADO, AR 71730 NYSE: DEL

FOR RELEASE IMMEDIATELY

February 27, 2017

Deltic Announces Preliminary Fourth Quarter and Full-Year 2016 Results

Separately Announced Appointment of John D. Enlow as President and Chief Executive Officer Appoints Byrom L. Walker as Interim Chief Financial Officer

Company to Hold its Conference Call at 7:30 AM CT Today

EL DORADO, AR - Deltic Timber Corporation (NYSE-DEL), a vertically integrated natural resources company, today announced financial results for the fourth quarter and full year of 2016.

Fourth Quarter 2016 Financial Highlights

• Net sales totaled $58.5 million, up 17.8 percent from $49.7 million for the prior-year fourth quarter.

• Net income was $3.1 million, or $.26 per diluted share, versus a net loss of $.1 million, or

  $(.01) per diluted share, for the same period of 2015.

• Net cash provided by operating activities was $15.3 million, compared to $6.1 million in the fourth quarter of 2015.

  Full-Year 2016 Financial Highlights

• Net sales totaled $219.4 million, up 13.2 percent from $193.9 million for 2015.

• Net income was $9.2 million, an increase of $6.5 million, or 42 percent, when compared to

  $2.7 million net income for full-year 2015.

• Net income per diluted share was $.76, an increase of $.55 per share, when compared to net income per diluted share for full-year 2015.

• Net cash provided by operating activities was $43.6 million, an increase of $13.9 million from a year ago.

The improved financial results for the fourth quarter of 2016 were primarily due to increased operating income in the Company's Manufacturing and Real Estate segments resulting from: 1) a higher average sales price for both lumber and medium density fiberboard ("MDF"), 2) increased sales volume of MDF, 3) improved operating performance at the Company's MDF plant, 4) the sale of two commercial real estate sites totaling 23.15 acres, and 5) the sale of 77 residential lots during the fourth quarter of 2016. These improvements were partially offset by increased Corporate segment general and administrative expense primarily related to the retirement of the Company's former President and CEO during the quarter.

"With Deltic's well positioned asset base and exceptional team, we achieved another quarter of solid operating and financial performance," commented Mark Leland, Deltic's Interim President and Chief Executive Officer. "In addition, we are very pleased to have separately announced today that John Enlow has been appointed President and Chief Executive Officer of Deltic, effective March 8. John has more than 25 years of experience in the natural resources industry and we are confident he brings valuable expertise and leadership skills to Deltic."

Mr. Leland continued, "We achieved outstanding results in our Real Estate Segment in the fourth quarter, which included closing on the sale of two separate commercial real estate sites in the Company's Chenal Valley development and the sale of 77 residential lots. We are pleased to see demand for our mid- market lots remaining strong and we are currently developing additional lots for sale as soon as late spring. In addition, we further capitalized on the improved markets for lumber and MDF. We achieved a 17 percent increase in average sales price for lumber sold compared to the fourth quarter a year ago.

The slightly higher average sales price received for MDF sold during the fourth quarter of 2016 was on top of a seven percent year-over-year increase in MDF sales volume achieved in the fourth quarter of 2015. Del-Tin Fiber has improved its operating performance, and we expect to see even further improvement following the arrival and installation of the plant's new press chains, which we expect to occur in the third quarter of this year. The new small-log line at our Ola Mill is complete and operating and we are working to process various mixes of pine sawtimber and smallwood to identify the most efficient blend of these raw materials for the mill.

"In the Woodlands segment, we not only achieved our planned annual harvest volume of pine sawtimber, we also took advantage of favorable logging conditions to harvest a small amount in excess of our annual harvest plan from our south Arkansas timberland. While markets for pine pulpwood remained soft, we were able to harvest and sell an increased volume of this fiber, helping to maintain the health of our forest.

"Finally, as part of our commitment to return value to our shareholders, we repurchased 32,309 common shares for $1.9 million during the fourth quarter, bringing our total repurchases for the full year to 309,739 common shares for $17 million."

Woodlands Segment

The Woodlands segment reported operating income of $4.2 million for the fourth quarter of both 2016 and 2015. The pine sawtimber harvest for the fourth quarter of 2016 was 179,158 tons, a 16 percent increase when compared to the 155,027 tons harvested in the prior-year period, while the average pine sawtimber sales price was $27 per ton in the fourth quarter of both 2016 and 2015. The Company also harvested 115,962 tons of pine pulpwood, a 29 percent increase when compared to 90,128 tons harvested in fourth quarter 2015. The average per-ton sales price for the pine pulpwood harvested in the fourth quarter of 2016 was $8 per ton, compared to $9 per ton a year ago. The increase in the harvest volume for pine sawtimber and pulpwood was mainly due to timing of the annual harvest, the mix of timber on the tracts harvested, and the benefit of favorable logging conditions in the Company's operating region; combined with the impact of a planned increase in pine plantation thinning activity. Oil and gas revenues, consisting of lease rentals and net royalties, were $.4 million for the fourth quarter of 2016 versus $.6 million in fourth quarter 2015. The decrease was due to a lower average sales price for natural gas; a lower volume of natural gas produced from the wells in which the Company has a royalty interest; and a decrease in oil and gas lease rental income, as the amortization period for previously received lease rental payments expired with the acreage becoming held by production. There were no sales of timberland during the 2016 fourth quarter, compared to 703 acres of non-strategic timberland sold in the prior-year quarter, at an average sales price of $1,500 per acre.

Manufacturing Segment

The Company's Manufacturing segment reported operating income of $3.2 million for the fourth quarter of 2016, compared to an operating loss of $.6 million for the same period a year ago. The increase was due primarily to a higher average sales price for both lumber and MDF, combined with an increased sales volume of MDF. In addition, the Company's MDF plant achieved an increase in production uptime and reductions in its cost for raw materials and operating expenses, which led to increased production volume

and lower per-unit manufacturing costs. During the quarter, the Company sold 63.5 million board feet of lumber, compared to 67.5 million board feet of lumber sold in the same quarter of 2015. The average lumber sales price for the fourth quarter of 2016 of $360 per thousand board feet was 17 percent higher when compared to $307 per thousand board feet a year ago. MDF sales volume was 23.8 million square feet, a seven percent increase from the 22.4 million square feet sold during the fourth quarter of 2015.

The average sales price for MDF sold during the fourth quarter of 2016 was $550 per thousand square feet, compared to $547 per thousand square feet in the prior-year quarter.

Real Estate Segment

The Company's Real Estate segment reported operating income of $6.4 million in the fourth quarter of 2016, compared to $1.7 million for the same period of 2015. Residential sales totaled 77 lots, compared to 52 residential lots sold in fourth quarter 2015. The average per-lot sales price in the fourth quarter of 2016 was $82,600, compared to $101,700 per lot for fourth quarter 2015. The decrease in the average sales price per lot was due to the mix of lots sold during the respective periods. During the fourth quarter of 2016, the Company also sold two commercial real estate sites, totaling 23.15 acres, for a total of $5.4 million, or an average per-acre sales price of $232,500; compared to no commercial real estate acreage sales in the prior-year fourth quarter.

Corporate Segment General and Administrative Expense, Interest Expense, and Income Tax Expense

Corporate segment general and administrative expense was $8.1 million, compared to $3.9 million for the same period of 2015. The $4.2 million increase was mainly due to costs related to the retirement of the Company's former President and CEO. Interest expense was $2.3 million for the fourth quarter of both 2016 and 2015. Income tax expense in fourth quarter of 2016 was $.3 million, compared to a $.5 million income tax benefit in the prior-year's fourth quarter. The increase was the result of higher pretax income, partially offset by increases in permanent tax benefits.

Full-Year 2016 Results

For full-year 2016, the pine sawtimber harvest level was 777,182 tons, compared to 755,417 tons harvested in 2015; while the average pine sawtimber sales price in 2016 increased to $28 per ton, from