The Company’s principal products are timber, timberland, softwood lumber
products (primarily finished lumber), MDF, residual wood products, hunting land
leases, oil and gas lease rentals and royalties, and real estate.
Timber. Timber harvested from the timberlands is utilized by the Company’s
sawmills or sold to third parties. The Company competes in the domestic timber
market with numerous private industrial and non-industrial land and timber owners.
Competitive factors with respect to the domestic timber market generally include
price, species and grade, proximity to wood manufacturing facilities, and accessibility.
Land Sales. Timberland sold by the Company to third parties consists of both
non-strategic timberland, including hardwood bottomland suitable for recreational
use, and lands with potential for higher and better use and amounted to less
than one percent of consolidated net sales.
Lumber and MDF Products. The Company’s sawmills produce a wide variety
of products, including dimension lumber, boards, and timbers. Lumber is sold
primarily to wholesaler distributors, lumber treaters, and truss manufacturers
in the South and Midwest and is used in residential construction, roof trusses,
and laminated beams.
The forest products market is highly competitive with respect to price and quality
of products. In particular, competition in the commodity-grade lumber and MDF
markets in which the Company competes is primarily based on price and availability.
Deltic competes with other publicly held forest products companies operating
in the U.S., many of which have significantly greater financial resources than
the Company, as well as privately held lumber producers. The Company also competes
with producers in Canada and overseas.
Deltic’s management expects the Company’s products to experience
additional increased competition from engineered wood products and other substitute
products. However, due to the geographic location of Deltic’s timberlands
and its high-quality timber, the Company’s active timber management program,
strategically located and efficient sawmill operations, and highly motivated
workforce, Deltic has been able to compete effectively.
Residual Wood Products. The Company’s sawmills produce wood chips, shavings,
sawdust, and bark as by-products of the conversion process. During 2015, 2014,
and 2013, third-party sales of these residual products accounted for five percent,
four percent, and six percent, respectively, of Deltic’s consolidated
net sales. Wood chips are the primary source of residual sales and are typically
used at the MDF plant or sold to paper mills. In 2015 Deltic’s sawmills
produced 340,841 tons of wood chips and a significant portion of these wood
chips are used by the Company in its manufacture of MDF.
Hunting Land Leases. Deltic leases hunting rights for its Woodlands to individuals
and groups with its main competitors being other landowners. Per-acre price
and location are the primary factors in leasing woodland hunting rights. Once
production begins, oil and gas royalty payments are received. Oil and gas lease
rental payments are recognized as income over the term of the lease, and oil
and gas royalty payments are recognized as income when received.
Real Estate. The Company develops and markets residential lots and commercial
sites and also sells undeveloped acreage. Residential lots are sold to homebuilders
and individuals, while commercial sites are sold to developers and businesses.
Deltic generally provides the supporting infrastructure as part of the development.
Other landowners or developers are Deltic’s competitors in its real estate
markets and are seeking the same customer base, with each competitor marketing
the benefits of its site locations, related infrastructure, or amenities.
