Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

Executives

Ray Dillon – President and CEO

Ken Mann – VP, Treasurer and CFO

Analysts

Albert Sebastian – Prospect Advisors

John Avon – J West LLC

Steve Chercover – DA Davidson

Robert Holt – Holt Capital Partners

Deltic Timber Corporation (DEL) Q4 2012 Earnings Call February 28, 2013 11:00 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2012 Deltic Timber Earnings Conference Call. My name is Diana and I will be your operator for today.

At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session.

(Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I’d now like to turn the conference over to your host for today, Mr. Ray Dillon, President and Chief Executive Officer. Please go ahead.

Ray Dillon

Good morning. I would like to welcome you to Deltic Timber Corporation’s fourth quarter earnings conference call. I’m joined today by Ken Mann, Vice President and Chief Financial Officer. Ken will begin with an opening statement followed by a review of the financial results released yesterday, and then I will close with some comments on current operations and the outlook for the first quarter and the year of 2013, before we open the line for any questions. Ken?

Ken Mann

Thank you, Ray. Yesterday, Deltic issued its news release announcing earnings for the fourth quarter and year 2012. If you don’t have a copy yet, you could download one from the Investor Relations section of our company website, deltic.com. If you don’t have access to the Internet, call me to request a copy. My direct telephone number is 870-881-6432.

Now, before we begin our prepared comments, there are a couple of items I need to cover. First is that the information recorded on this call speaks only as of today. Therefore, you are advised that any time sensitive information may no longer be accurate as at the date of any replay. In addition to this, some of the comments made during the course of this call will be considered forward-looking statements. These statements will reflect the company’s current views in regard to future events and financial performance. However, no assurance can be given that these events will occur or that the projections will be attained. Certain important risk factors that may cause actual results to differ materially from these forward-looking statements are identified in Deltic’s 2011 Form 10-K on file with the SEC.

For my financial review, I will focus initially on the results for the fourth quarter of 2012 and then I’ll go over the year of 2012 as a whole. For the fourth quarter, Deltic reported net income of $2.4 million, $0.19 a share, this was an improvement of $2.6 million from the fourth quarter of 2011 due mainly to a $4.6 million improvement in the financial results of company’s mail segment. For the quarter, net sales are $36.7 million or 27.3% higher than a year ago.

The Woodlands segment reported 3% higher operating income at $4.2 million in the 2012 quarter compared to $4 million a year ago. The harvest volume of pine sawtimber was 22% higher in the fourth quarter of 2012 when compared to the same quarter last year due to timing. The actual harvest volume in the fourth quarter of 2012 was 101,845 tons some 18,600 tons more than the 83,246 tons harvested in the prior year fourth quarter. The average lumber price received was $1 per ton higher in the fourth quarter of 2011 at $22 per ton.

During 2012 fourth quarter, we harvested 116,441 tons of pine pulpwood at an average price of $8 per ton, compared to 92,934 tons in the prior year fourth quarter, also for $8 per ton. Oil and gas lease rental and royalty income decreased by $300,000, $1.2 million of the current year fourth quarter. We also sold 988 acres of non-strategic recreational-use hardwood bottomland for an average price of $1,500 per acre in the fourth quarter of 2012, while the fourth quarter of 2011 included a 1,125 acres, also sold for an average price of $1,500 per acre.

The Mills segment generated operating income of $5.2 million compared to income of $600,000 in the 2011 quarter. And average limber sales price up $326, per thousand was $73 or 29% higher in the corresponding quarter of last year. While lumber sales volume increased 17%, to 69.2 million board feet in 2012’s fourth quarter.

Residential lot sales increased from a year ago and we sold 12 lots in the fourth quarter of 2012 compared to 9 lots a year ago. The average price of $70,000 a lot compares to an average of $58,700 for lot in last year’s fourth quarter.

Results for the fourth quarter of 2011 included the sale of 1.38 acres of commercial real estate property at an average price of $411,600 per acre, while there were no commercial acreage sales during 2012 in the fourth quarter. As a result of this, the Real Estate segment reported an operating loss of $400,000 in the fourth quarter of 2012, compared to operating income of a $100,000 in the fourth quarter of 2011.

Deltic’s equity in the financial results of Del-Tin Fiber for the fourth quarter of 2012 was $400,000. This is a $1 million improvement from reporting negative equity of $600,000 a year ago.

The plant’s average sales price increased $57 compared to the fourth quarter of 2011 to $541 per 1,000 square feet. While sales volume increased 15% to 29 million square feet for the fourth quarter of 2012.

Corporate operating expense for the fourth quarter of 2012 of $4.5 million was $800,000 higher in the same period of 2011. The increase was due to higher employee incentive plan expenses as a result of increased net income for 2012 versus 2011, combined with an increase in pension and postretirement benefit obligations due to continued low interest rates.

Deltic recorded income tax expense of $1.6 million in the current period compared to an income tax benefit of $200,000 in the fourth quarter of 2011, mainly due to the increased pre-tax income abound with permanent tax differences, providing a lot of benefit in 2011 fourth quarter.

Turning now to the year 2012, Delta’s net income was $9.2 million, $0.73 a share, compared to income in the 2011 period of $2.7 million, $0.21 a share. Net sales increased 15.6% to $140.9 million.

The Woodlands segment contributed operating income of $18.4 million, which was $2 million lower than in 2011. The volume of pine sawtimber harvest pine was 606,859 tons, an increase of 568 tons, with the average sales price per ton was $22, a decrease of $1 dollar ton.

We harvested 424,834 tons on pulpwood at an average price of $8 per ton during 2012. But we harvested 449,000 tons in 2011 also for $8 per ton.

Oil and gas, lease rental and royalty income decreased from $6.4 million in 2011 to $4.9 million in 2012. During 2012, we sold 1,776 acres of nonstrategic hardwood bottomland for $1,600 per acre compared to 2700 – 2726 acres of timberland sold for $1500 per acre in 2011.

For the Mills segment, operating results were income of $18.1 million compared to income of $1 million in 2011, a $17.1 million increase. This was largely due to the impact of an increased sales price of $309 per 1,000 square, some $55 million or 1,000 – excuse me board feet, $55 per 1,000 board feet or 21.6% higher than last year.

Lumber sales volume was about 7.3% more than last year, and totaled $272.9 million board feet. Real estate operation reported an operating loss of $2.1 million for 2012, compared to breakeven results a year ago. We sold 50 residential lot at an average price of 69,000, $600 a lot compared to 31 lots, which averaged 63,000, $500 a lot in 2011.

During 2011, we sold 27.36 acres of commercial real estate at an average price of $116,700 per acre, while we had no sales of commercial real estate acreage in 2012.

Deltic’s equity in Del-Tin Fiber for 2012 was $1 million. This compares to $300,000 for 2011. The average sales price for 2012 was $523 a thousand, compared to $493 a thousand in 2011. Our sales volume was some 3.3% higher.

Corporate operating expense for 2012 of $17.4 million was $3.1 million higher than in 2011. The increase was primary due to higher incentive plan expenses, as a result of the increased net income result for 2012 versus 2011, combined with higher pension and post-retirement benefit obligations.

Income tax expense for 2012 of $4.8 million, was $3.7 million more than 2011, mainly due to the increased level of pre-tax income. Capital expenditures increased $8.3 million to $24 million for 2012, compared to $15.7 million during 2011. This was due to additional timberland acquisition in 2012, if we purchased about 10,000 acres for $14.5 million.

At the end of 2012, the company’s balance – cash and working capital both $5.6 million. Long-term debt outstanding at December 31 was $63 million. So our long-term debt to capital employed ratio was some 21.3%, still very low for our industry.

On February 21, Deltic’s Board of Directors increased the annual dividend on the company’s common stock from $0.30 a share to $0.40 a share, a 33.3% increase. Working capital on Deltic’s operations and report this additional return to our shareholders without any issue.

And now, I’ll turn the call over to Ray for his comments.

Ray Dillon

Thank you, Ken. Throughout the downturn in the business environment for forest and wood product businesses, Deltic remained committed to its vertical integration strategy of owning well soft fleet timberlands and operating various efficient sawmills to convert the timber harvested from the company’s lands into high-quality wood products.

We sawmills provide a secure market for our valuable pine sawtimber, while the fee lands ensure a steady availability of high-quality saw logs for our mills. The economic leverage of this operating strategy evidenced by the financial results achieved by Deltic for both the fourth quarter and year 2012. In addition, our portfolio of diverse assets continued to perform well and Deltic reported profitable financial results for a 10th consecutive year. Noteworthy accomplishment given the depression in the residential housing market that had negatively impacted each of our business segments.

While housing starts in the United States remained below the historical trend level, indications are that a recovery in the residential housing market has begun. This recovery gained momentum throughout the year due to reduced unemployment, record low interest rates and a tight supply of new and previously occupied homes available for sale.

In addition to increases in new home starts, residential repair and remodeling activity indicates that homeowners that are not currently in the market to replace their homes are beginning to invest in projects to upgrade. As a result of these two factors, increased demand for the dimension lumber used to construct new homes and remodel existing ones resulted in increased prices for lumber received by producers.

With improved lumber consumption and resulting higher pricing levels for lumber, we focused our efforts on maximizing the amount of this value creating opportunity resulting from the financial leverage that exists in our efficiently operated sawmills. With this, the average sales price that we received for the lumber we sold during the fourth quarter of 2012, increased from 29% from the average sales price for the same quarter of 2011, while volumes were up 17%.

Flexibility of Deltic sawmills allowed us to increase operating hours at the mills at every opportunity presented during the quarter. In order to produce all of the lumber that the market would absorb. The benefit of the improved lumber sales price and volume was combined with continued increases in hourly productivity rates and improvement in other operating efficiencies at both of our sawmills. As a result, our mills segment reported very solid financial results for both the fourth quarter and the year of 2012.

In addition, these operations generated excellent cash flows for the company. We will continue to adjust the operating hours in our sawmills to match lumber production with market demand. Improved hourly productivity rate achieved by our facility is very important because this allowed us to produce the volume of lumber that we sold during the quarter in fewer operating hours, as we continue to strive to improve the cost structure in our sawmill.

In regard to the first quarter and year of 2013, we estimate finished lumber sales volume to be 65 million to 75 million board feet and 270 million to 290 million board feet, respectively. Our Woodlands segment, with its mix of timber products in which our cost basis is very low, continued its steady financial performance again this quarter. The harvest level of pine sawtimber during the third quarter was 22% higher than a year ago. Increase was due to timing as the company’s annual harvest for 2012 was essentially unchanged from 2011. The average sales price received for the pine sawtimber we harvested during the quarter was 5% higher than it was a year ago. As increased lumber production caused an increase in the volume of pine sawtimber required for manufacturing facilities, and the resulting price paid for.

In the fourth quarter, our Woodlands segment harvested 116,400 tons of pine pulpwood, which was a 25% increase from a year ago. The average per ton sales price received for the pulpwood harvested of $8 was same as the fourth quarter of 2011.

We are continuing to harvest timber from our timberland on a sustainable yield basis, which allows us to maximize growth rates in our forest and property maintain them. In regard to the first quarter and year of 2013, we estimate our pine sawtimber harvest to be 175,000 to 185,000 ton and 550,000 to 600,000 tons respectively, depending upon weather conditions in Deltic’s operating area.

We continue to see interest in the recreational use hardwood bottomland acreage that exists within our Timberland portfolio. However, the inventory of this nonstrategic land for sale is increasing as planned. This is due to the success of our program to sell these acres and replace them with land for suitable for growing pine sawtimber. Thereby upgrading our Timberland portfolio and adding to our pine sawtimber inventory.

During the fourth quarter, we sold 988 acres as compared to 1,125 acres sold during the fourth quarter of 2011. We will continue to evaluate our Timberland acreage to identify any tracks of this nonstrategic hardwood bottomland available for future sale.

Although natural gas prices remain near decade low levels, our Woodlands segments continued to benefit from oil and gas lease rental and royalty revenues during the fourth quarter of 2012. However, the low gas prices caused a reduction in revenue received from oil and gas royalties when compared to the fourth quarter of 2011. The offsetting beneficial impact from an increase in the number of wells in production from which Deltic received royalty payments, slowed from the fourth quarter – slowed during the fourth quarter of 2012. During the period, Deltic began receiving royalties on an additional four wells, bringing the number of royalty producing wells from which Deltic receives royalty payments to 372.

Our drilling activity continues in the Fayetteville shale area despite the decade low natural gas prices. Exploration companies have reduced the number of drilling rigs employed in the area, until natural gas prices increase. Many factors including natural gas prices affect the level of drilling activity within this region, making it difficult to forecast the timing and the amount of this ancillary revenue from our land ownership.

Activity related to the potential exploration of the lower Smackover Brown Dense formation continued during the fourth quarter and at least one producer has now drilled a couple of producing wells in the formation in the North Louisiana area. Deltic is yet to receive any royalty payments from our mineral interest in this formation. As we’ve disclosed, we’ve leased about 14,000 net mineral acreage within the boundary of this formation. In addition, we have some additional acreage in the formation that we’ve not leased at this time.

Our Real Estate segment has been negatively affected by the same low level of residential housing starts that affected our Mills segment prior to 2012. We saw increased residential lot sales activity during the fourth quarter, which is consistent with the improvement in the housing market data I noted earlier.

Especially noteworthy has been a return in the financing and construction of spec homes in our Chenal Valley development by builders. As such, we sold 12 lots during the quarter, which was three more than the number of lots sold in the fourth quarter of 2011. In addition, the average sales price per lot sold was almost 10% higher than the same quarter of the last year due to mix of lots sold.

We also completed development of one new neighborhood in December and 16 of the 20 lots offered were put under contract the first day. With this activity, we estimate residential lot sales for the first quarter and year of 2013 at 8 to 12 lots and 40 to 60 lots respectively. There were no sales of commercial real estate acreage in the fourth quarter of 2012, while there were 1.38 acres of commercial property sold for just under $412,000 per acre during in the fourth quarter of 2011.

For the remainder of 2013, we will continue to focus on putting commercial acreage on contract. However, due to the many factors involved, it remains difficult to predict the timing of future commercial real estate transactions. Deltic’s equity and the financial results of built-in fiber, Deltic’s 50% owned joint venture to manufacture medium density fiberboard of $400,000 for the quarter was $1 million favorable to the same quarter a year ago.

Improved residential housing market has also had a positive impact on the MDF market. The facility is currently running in normal schedule, while receiving a higher sales price for the increased volume of board it’s producing. At the plant, we remain focused on achieving efficient operating performance and improving the manufacturing cost structure.

As we have announced, we have entered into an agreement to purchase the 50% membership interest of our partner in the joint venture. This is both a strategic and opportunistic acquisition for Deltic. We’re excited to be able to own a 100% of the plant and utilize our proven ability to be very efficient operators of manufacturing facilities to improve operating performance and efficiencies at the plant.

In addition, it fits our vertical integration strategy well. Since Del-Tin utilizes the residual products generated from Deltic sawmill operations that results from their production of lumber from timber harvested from our well-stock free timberland.

In closing, I am pleased with the financial performance of our assets for both the fourth quarter and the year of 2012. Not only did we report solid income, our operations also generated sufficient cash flows to fund the company’s 2012 capital program which included $14.5 million for timberland acquisition, distributing $3.8 million to our shareholders through dividends and reducing debt outstanding by $2.1 million.

With the ongoing recovery in the residential housing, forest and wood products companies are poised to realize further improvement in their financial performance and resulting cash flows. As such, Deltic’s Board of Directors increased the company’s annual dividend to shareholders at its last meeting. As we have previously announced, from $0.30 a share to $0.40 a share, an increase of 33.3%. This reflects the board’s philosophy of making sustainable increases in distributions to our shareholders over time.

The operating environment for all of our business segments is improving and I’m confident that Deltic is well positioned to take advantage of all favorable opportunities that arrive.

Diana, we can now open the line for any questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question will come from the line of Albert Sebastian, Prospect Advisors. Please go ahead.

Albert Sebastian – Prospect Advisors

Good morning, gentlemen.

Ray Dillon

Good morning, Al.

Albert Sebastian – Prospect Advisors

I just had a question concerning the housing market both sort of in the Little Rock area as well as more regional as well. I’m just a little bit surprised that your outlook isn’t more – a little bit more positive. In terms of the lots sold, you’re looking for flat volumes this year versus last year for lots sold. Why don’t we’re seeing an improvement this year vis-à-vis last year given the type of improvement we saw in 2012 versus 2011?

Ray Dillon

Al, what I would say is that with weather being, I’ll call it early in the year and with the uncertainties exist as far as quite frankly national policies as it relates to taxes. The environment and the uncertainty just probably dampens the outlook we’re willing to give today.

Albert Sebastian – Prospect Advisors

Okay, okay. And in terms of the Little Rock area, how does that – how is the real estate market there compared to the country as a whole, is the real estate market seeing similar improvement in Little Rock versus other areas in the country?

Ray Dillon

Yes, yes. Quite frankly, it was specially Central Arkansas is very much a reflection of what you see in other areas.

Albert Sebastian – Prospect Advisors

Okay. And with regards to your timber harvest, you’re looking for your timber harvest to be down about 5% this year, using the midpoint. Is there a particular reason for that or is that just being somewhat conservative or do you expect it to be really kind of more in line with the sustainable 600,000 tons per year?

Ray Dillon

I would characterize the reason for the range is probably more weather related and the unpredictability of whether we get summer rains et cetera that might affect the ability to harvest. But our intention is to harvest at levels that you’ve seen in the past couple of years. And I would characterize the range reflects the unknown associated with the weather component.

Albert Sebastian – Prospect Advisors

Okay. Let me ask one last question and I’ll get back in the queue. With regards to lumbar, do you – I mean you’re only looking for sort of a slight increase in lumbar sales. Do you think this year, is there a particular reason for that if you think this year might see an improvement similar to the improvement we saw last year?

Ray Dillon

I would say that the forecast today is probably tempered a little bit by the uncertainty that I described. We’re certainly going to produce all the lumbar that the market will accept and we can maintain the margins that we need to be profitable there.

Albert Sebastian – Prospect Advisors

Okay. I’m out. And I’ll get back in the queue. Thank you, gentlemen.

Ray Dillon

Al, Thank you for your questions.

Operator

Your next question comes from the line of Ryan (inaudible).

Unidentified Analyst

Hey guys. How’re you doing? Congrats on the quarter.

Ray Dillon

Thank you. Just a question on pricing in the lumber side. It seems like from the public data that’s out there, so far in Q1 there’s been kind of like a 15% o 25% price increases, is that fair?

Ken Mann

I would – the indexes would suggest that, yes.

Unidentified Analyst

Okay. How do I think about that sequentially? I mean, if you guys are getting that pricing, I mean, how much – how accretive is that to EPS, if we assume the midpoint of the board feet guidance?

Ken Mann

I guess we don’t have that number readily available. Certainly Ken can go through the metrics within. Ken?

Unidentified Analyst

Okay. Is it fair to assume that if, I mean given that it’s pricing, it should pretty much flow through to operating income?

Ken Mann

That’s correct.

Unidentified Analyst

Okay. Okay and just another question on capacity. Is there any update you could give us on capacity in the mills, quarter-to-date?

Ray Dillon

Other than the guidance that we gave, no, there is no additional guidance today.

Unidentified Analyst

Okay. Okay and one last question. The expectations for timber pricing, what have you guys – can you guys talk a little bit about that and how you expect it to play out?

Ray Dillon

Sure. Certainly with housing demand continuing to improve absence some external shock, we would expect mill operating rates to continue to increase and mills that have been idle probably will come back into the market. And we would expect to see pressure in the various wood baskets where mills are getting back to what we would call normal operating schedules. So we would expect to see timber prices increase over time, and it will vary from wood basket to wood basket and it will also vary depending upon the weather conditions.

Unidentified Analyst

Okay, okay. That’s so creative to the Woodlands segment.

Ray Dillon

That’s correct.

Unidentified Analyst

Okay. All right. I’ll jump back in queue. Thanks guys.

Ray Dillon

Thank you.

Operator

Your next question comes from the line of John Avon, J. West LLC.

John Avon – J West LLC

Can you just talk a little bit about I guess on the mill segment again and I was curious just to understand kind of how much capacity you are using in the fourth quarter. And then, what would you need to see from the market to basically increase your capacity at your mill segment?

Ray Dillon

Rounding unless just a say the mills in fourth quarter, we’re operating between 85% and 90% rounding. I don’t have the exact number in front of me, but it’s in that range. And as the market present itself, we will add additional hours as required to fulfill those needs.

John Avon – J West LLC

Okay. Got it. And then, maybe and this is probably more my job than your job. But could you help us just maybe articulate better your thoughts relative to kind of the asset value of the company. I mean, when we do our pencil the paper, it seems like the assets are worth a lot more especially if you think homebuilding and building is going to come back to more normalized level. How do you guys think about it from a big picture standpoint. Especially when you’re putting capital work like the acquisition that you talked about today already.

Ray Dillon

We would agree with you, that’s probably more in your arena than ours, then not something we’ll comment on. Certainly we think, the built-in acquisition first of all was opportunistic. And we think, it will be accretive.

John Avon – J West LLC

Okay, great. Thank you.

Ray Dillon

Thank you.

Operator

Your next question will come from the line of Steve Chercover, DA Davidson.

Ray Dillon

Good morning, Steve.

Steve Chercover – DA Davidson

Hi, Ray. Hi, Ken. I missed the first part of the call. So, I apologize. But just with the purchase of Del-Tin, is that just going to be funded out your revolver?

Ray Dillon

Yes.

Steve Chercover – DA Davidson

Okay. Perfect. You already told it’s accretive. And, I mean, you’ve been pretty much running that day-to-day for some time. But you still think there’s plenty of opportunity to improve it?

Ray Dillon

Certainly. Both partners have been involved in the operation of it since its inception. And, yes, we think there is opportunities and we’re looking forward to closing the transaction and assuming full responsibility.

Steve Chercover – DA Davidson

Great. As I recall, I think you put in machine stress reading device at one of your mills last year. So, has that helped your mill nets or are you able to differentiate price appreciation from the grading as opposed to just the lumber markets going up?

Ray Dillon

Well, certainly. It gives the mill – we didn’t have an MSR machine the ability to now pull MSR and generally sales are at higher price than just the traditional grades. So, yes, it’s had an impact on that mill’s average sales price.

Steve Chercover – DA Davidson

And did your other mill already have one or is that sort of...

Ray Dillon

Yes. Yes.

Steve Chercover – DA Davidson

Okay. And because of some of the grading standards, is that something you feel you had to do just to remain in business so to speak or it has been a good pay off?

Ken Mann

Well, look Steve, we think over time with the new standards that you’ll see more differentiation in the lumber market and there will be more of a premium paid for, the higher quality strong lumber. And so without measuring it you can’t participate.

Steve Chercover – DA Davidson

Got it. Last quick one. I mean you indicated that you’re still interested in deals, are you seeing opportunities in your jurisdiction? I assume you want to stay pretty close to your current Arkansas footprint.

Ray Dillon

No, we would clearly say, we’re probably more focused in the Southeast than other areas of the country. And, the answer is we’re not seeing as many deals as we would like to see, but anyone that we hear about we’re trying to participate in.

Steve Chercover – DA Davidson

All right. Well, best of luck.

Ray Dillon

And, we hear about most of them in the areas that we operate. But, we’re still in the market looking for opportunities.

Steve Chercover – DA Davidson

Well, I’ll sneak one more in then. I mean Ken said that your debt to cap is around 21%. So, what if you found the perfect deal, how big could it be, could you do a couple of hundred million acquisition?

Ray Dillon

I think so. Yes.

Steve Chercover – DA Davidson

Very good. Okay. Thanks Ray.

Ray Dillon

Thank you, Steve.

Operator

Your next question is a follow-up from the line of Albert Sebastian, Prospect Advisors.

Ray Dillon

Go ahead, Al.

Albert Sebastian – Prospect Advisors

Yes, with regards to your mills and your operating rate in the fourth quarter, you said 85% to 90% your operating rate. I assume that that’s given your current shifts. I guess you’re running at two shifts at Waldo and one shift at Ola, is that correct?

Ray Dillon

Correct.

Albert Sebastian – Prospect Advisors

So, what is the potential to increase your output by adding I guess one more shift at the Ola mill?

Ray Dillon

Well, it wouldn’t – naturally you would say well, a possible answer would be increase it by a factor of two. But although, we’re running one shift, we’re running more hours than one shift would normally run. So, it’s hard to predict Al.

Albert Sebastian – Prospect Advisors

Okay. Would you – I mean if market conditions improve and you could sell the volume, would it be easy enough to simply add another shift to increase your output?

Ray Dillon

The way I would characterize it if the market conditions continue to improve and we believe it to be sustainable, then, yes, we’d consider adding another shift there. But up to this point in time has not been what we thought would be the right move there yet.

Albert Sebastian – Prospect Advisors

Okay. And just a couple other things, can you kind of give us an idea about CapEx for this year, your tax rate and SG&A?

Ray Dillon

Ken?

Ken Mann

Yeah. CapEx, excuse me, you’ll see them comparable to what we reported the $24 million we reported for 2012, could possibly be up slightly will have – depending upon land acquisition opportunities will be the primary driver in there as well as the fact is we’ve said for a couple of years, we’ve been holding our mills to a maintenance level of capital doing essential projects and there are some projects that that are out there that could help to increase the productivity of the mills on a hourly basis and so, CapEx at or slightly above 2012 level.

Tax rates, obviously, the way we are – our tax rates will be very comparable year versus year. We’ll have some permit tax differences that the more income we make the smaller impact they have and so our tax rate could – you could see a slight decrease in that from the 2012 level. And your last component was G&A I believe it was?

Albert Sebastian – Prospect Advisors

Yeah. Correct. G&A.

Ken Mann

And the biggest item in G&A, I mean, we don’t envision another step change in our benefit obligations, we took the hit for that in 2012 we adjusted that down to a lower discount rate as you can if you will. And then obviously, the other factor is depending upon what the year turns out to be, the other variable is incentive plan expenses.

And so, obviously the better that we perform for our shareholders, there could be an impact for the incentive plan. But realizing that, one of the things you got to look at for 2012 versus 2011, for 2011 there was a very minimal amount of incentive plan expense paid out on a “cash” basis. So, it wasn’t so much that 2012 was high, just that it was higher comparing to 2011. So, you will see that component there as well. So, given the metrics we achieved and performed, you’ll see comparable G&A expenses again through 2012, because while we won’t see additional step change in pensions, we won’t see a step back in costs either. So, it should be very comparable 2012 across the board other than a slight increase in capital expenditures.

Albert Sebastian – Prospect Advisors

Okay. Just let me squeeze in one last question, which is you indicated in the press release that the closing of Del-Tin Fiber, it should be before April 30. And there may be an impact on the first quarter of this year, is that because you might potentially close in the first quarter of this year?

Ray Dillon

Al, I would say that’s a possibility, but we don’t have a closing day today, but I’ll just tell you we’re focused on closing as quickly as we can.

Albert Sebastian – Prospect Advisors

Thank you, gentlemen.

Ray Dillon

Thank you.

Operator

And last question comes from the line of Robert Holt, Holt Capital Partners.

Robert Holt – Holt Capital Partners

Good morning.

Ray Dillon

Good morning, Robert.

Robert Holt – Holt Capital Partners

Can you provide little additional insight into the pine that you’ve sold in hardwood bottomland in contrast with the land that you acquired, which I assume is probably more pine plantation, and just help us, valuation was reasonably similar and I’m just wondering what the historical relative valuation might have been and just additional insight from kind of the forest floor?

Ray Dillon

From a forest floor standpoint, the hardwood bottomland we sold essentially was all hardwood, but very little to no pine. Pine products own it at all. The land that replaced that was a mix of both plantations and some maturing timber. So, it was a mix, but from an overall valuation standpoint, certainly the land we replaced it with is much more strategic to the portfolio and beneficial to us.

Robert Holt – Holt Capital Partners

All right. Thank you.

Operator

There are no more questions at this time. I would now like to turn the call back to Mr. Ray Dillon, President and CEO for closing remarks.

Ray Dillon

Thank you, again for your interest in Deltic and I hope you’ll join us again next quarter.

Operator

Thank you, again, ladies and gentlemen for your participation. This concludes today’s conference call. You may now disconnect and have a great day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Deltic Timber's CEO Discusses Q4 2012 Results - Earnings Call Transcript
This Transcript
All Transcripts