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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549



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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 June 30, 2003



OR



 ̈ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Commission file number 1-12147



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DELTIC TIMBER CORPORATION

(Exact name of registrant as specified in its charter)



|Delaware                                                       |  | 71-0795870                             
|-------------------------------------------------------------- |  | ---------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)
|                                                               | 
|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 xNo  ̈.



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes xNo  ̈.



Number of shares of Common Stock, $.01 Par Value, outstanding at June 30, 2003, was 11,899,797.

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##### Table of Contents

TABLE OF CONTENTSSECOND QUARTER 2003 FORM 10-Q REPORT



|                             |  |                                                                                       |  | PageNumber
|---------------------------- |  | ------------------------------------------------------------------------------------- |  | ----------
|PART IFinancial Information
|                             |  |                                                                                      
|Item 1.                      |  | Financial Statements                                                                  |  | 3         
|                             |  |                                                                                      
|Item 2.                      |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 16        
|                             |  |                                                                                      
|Item 3.                      |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 22        
|                             |  |                                                                                      
|Item 4.                      |  | Controls and Procedures                                                               |  | 22        
|PART IIOther Information   
|                             |  |                                                                                      
|Item 1.                      |  | Legal Proceedings                                                                     |  | 23        
|                             |  |                                                                                      
|Item 2.                      |  | Changes in Securities and Use of Proceeds                                             |  | 23        
|                             |  |                                                                                      
|Item 3.                      |  | Defaults Upon Senior Securities                                                       |  | 23        
|                             |  |                                                                                      
|Item 4.                      |  | Submission of Matters to a Vote of Security Holders                                   |  | 23        
|                             |  |                                                                                      
|Item 5.                      |  | Other Information                                                                     |  | 23        
|                             |  |                                                                                      
|Item 6.                      |  | Exhibits and Reports on Form 8-K                                                      |  | 24        
|                             |  |                                                                                      
|Signatures                   |  |                                                                                       |  | 25        





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##### Table of Contents

PART IFINANCIAL INFORMATION



Item 1. Financial Statements



DELTIC TIMBER
CORPORATION

AND SUBSIDIARIES

Consolidated Balance Sheets

(Thousands of dollars)



|                                                                                      |  | June 30, 2003 |         |   | Dec. 31,2002 |        
|------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ------------ | -------
|                                                                                      |  | (unaudited)   |         |   |              |        
|Assets                                                                                |  |               |         |   |              |        
|Current assets                                                                        |  |               |         |   |              |        
|Cash and cash equivalents                                                             |  | $             | 1,438   |   |              | 1,057  
|Trade accounts receivablenet                                                         |  |               | 4,815   |   |              | 3,230  
|Other receivables                                                                     |  |               | 2,360   |   |              | 2,321  
|Inventories                                                                           |  |               | 5,117   |   |              | 6,257  
|Prepaid expenses and other current assets                                             |  |               | 1,547   |   |              | 1,607  
|                                                                                      |  |               |         |   |              |        
|Total current assets                                                                  |  |               | 15,277  |   |              | 14,472 
|                                                                                      |  |              
|Investment in real estate held for development and sale                               |  |               | 39,993  |   |              | 42,551 
|Other investments and noncurrent receivables                                          |  |               | 2,212   |   |              | 2,558  
|Timber and timberlandsnet                                                            |  |               | 218,106 |   |              | 209,317
|Property, plant, and equipmentnet                                                    |  |               | 37,987  |   |              | 39,572 
|Deferred charges and other assets                                                     |  |               | 1,452   |   |              | 2,076  
|                                                                                      |  |               |         |   |              |        
|Total assets                                                                          |  | $             | 315,027 |   |              | 310,546
|                                                                                      |  |               |         |   |              |        
|Liabilities and Stockholders Equity                                                  |  |               |         |   |              |        
|Current liabilities                                                                   |  |               |         |   |              |        
|Current maturities of long-term debt                                                  |  | $             | 64      |   |              | 70     
|Notes payable                                                                         |  |               | 215     |   |              |       
|Trade accounts payable                                                                |  |               | 2,138   |   |              | 3,316  
|Accrued taxes other than income taxes                                                 |  |               | 1,704   |   |              | 1,194  
|Bank overdraft                                                                        |  |               |        |   |              | 913    
|Income taxes payable                                                                  |  |               | 1,453   |   |              |       
|Deferred revenues and other accrued liabilities                                       |  |               | 4,687   |   |              | 6,854  
|                                                                                      |  |               |         |   |              |        
|Total current liabilities                                                             |  |               | 10,261  |   |              | 12,347 
|                                                                                      |  |              
|Long-term debt                                                                        |  |               | 121,088 |   |              | 116,120
|Deferred tax liabilitiesnet                                                          |  |               | 10,973  |   |              | 11,955 
|Other noncurrent liabilities                                                          |  |               | 7,905   |   |              | 7,162  
|Stockholders equity                                                                  |  |               |         |   |              |        
|Cumulative preferred stock$.01 par, authorized 20,000,000 shares, zero shares issued |  |               |        |   |              |       
|Common stock$.01 par, authorized 50,000,000 shares, 12,813,879 shares issued         |  |               | 128     |   |              | 128    
|Capital in excess of par value                                                        |  |               | 69,075  |   |              | 69,075 
|Retained earnings                                                                     |  |               | 116,309 |   |              | 114,165
|Unamortized restricted stock awards                                                   |  |               | (62     | ) |              | (133   
|Treasury stock                                                                        |  |               | (20,650 | ) |              | (20,273
|                                                                                      |  |               |         |   |              |        
|Total stockholders equity                                                            |  |               | 164,800 |   |              | 162,962
|                                                                                      |  |               |         |   |              |        
|Total liabilities and stockholders equity                                            |  | $             | 315,027 |   |              | 310,546
|                                                                                      |  |               |         |   |              |        



See
accompanying notes to consolidated financial statements.



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Income (Unaudited)

(Thousands of dollars, except per share amounts)



|                                                             |  | Three Months EndedJune 30, |        |   | Six Months Ended June 30, |       
|------------------------------------------------------------ |  | -------------------------- | ------ | - | ------------------------- | ------
|                                                             |  | 2003                       |        |   | 2002                      |       
|Net sales                                                    |  | $                          | 34,960 |   |                           | 28,106
|                                                             |  |                            |        |   |                           |       
|                                                             |  |                            |        |  
|Costs and expenses                                           |  |                            |        |   |                           |       
|Cost of sales                                                |  |                            | 23,455 |   |                           | 17,726
|Depreciation, amortization, and cost of fee timber harvested |  |                            | 3,467  |   |                           | 4,238 
|General and administrative expenses                          |  |                            | 1,924  |   |                           | 2,118 
|                                                             |  |                            |        |   |                           |       
|Total costs and expenses                                     |  |                            | 28,846 |   |                           | 24,082
|                                                             |  |                            |        |   |                           |       
|Operating income                                             |  |                            | 6,114  |   |                           | 4,024 
|                                                             |  |                            |        |  
|Equity in Del-Tin Fiber                                      |  |                            | (547   | ) |                           | (2,933
|Interest income                                              |  |                            | 16     |   |                           | 27    
|Interest and other debt expense                              |  |                            | (1,923 | ) |                           | (1,098
|Other income/(expense)                                       |  |                            | 56     |   |                           | 97    
|                                                             |  |                            |        |   |                           |       
|                                                             |  |                            |        |  
|Income/(loss) before income taxes                            |  |                            | 3,716  |   |                           | 117   
|                                                             |  |                            |        |  
|Income taxes                                                 |  |                            | (1,299 | ) |                           | (127  
|                                                             |  |                            |        |   |                           |       
|Net income/(loss)                                            |  | $                          | 2,417  |   |                           | (10   
|                                                             |  |                            |        |   |                           |       
|                                                             |  |                            |        |  
|Earnings per common share                                    |  |                            |        |   |                           |       
|Basic                                                        |  | $                          | .20    |   |                           | (.05  
|Assuming dilution                                            |  |                            | .20    |   |                           | (.05  
|                                                             |  |                            |        |  
|Dividends declared per common share                          |  | $                          | .0625  |   |                           | .0625 
|                                                             |  |                            |        |   |                           |       
|                                                             |  |                            |        |  
|Average common shares outstanding (thousands)                |  |                            | 11,900 |   |                           | 11,923
|                                                             |  |                            |        |   |                           |       



See accompanying notes to consolidated financial
statements.



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

Six Months Ended June
30,

(Thousands of dollars)



|                                                                                            |  | 2003 |         |   | 2002 |        
|------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | -------
|Operating activities                                                                        |  |      |         |   |      |        
|Net income                                                                                  |  | $    | 3,631   |   |      | 811    
|Adjustments to reconcile net income to net cash provided/(required) by operating activities |  |      |         |   |      |        
|Depreciation, amortization, and cost of fee timber harvested                                |  |      | 6,999   |   |      | 9,502  
|Deferred income taxes                                                                       |  |      | (982    | ) |      | 565    
|Real estate costs recovered upon sale                                                       |  |      | 4,804   |   |      | 2,122  
|Timberland costs recovered upon sale                                                        |  |      | 600     |   |      | 217    
|Equity in Del-Tin Fiber                                                                     |  |      | 2,392   |   |      | 5,326  
|Net increase/(decrease) in provisions for pension and other postretirement benefits         |  |      | 1,037   |   |      | 689    
|(Increase)/decrease in operating working capital other than cash and cash equivalents       |  |      | 731     |   |      | (1,113 
|Othernet                                                                                   |  |      | 287     |   |      | 686    
|                                                                                            |  |      |         |   |      |        
|Net cash provided/(required) by operating activities                                        |  |      | 19,499  |   |      | 18,805 
|                                                                                            |  |      |         |   |      |        
|Investing activities                                                                        |  |      |         |   |      |        
|Capital expenditures requiring cash                                                         |  |      | (16,186 | ) |      | (9,344 
|Net change in purchased stumpage inventory                                                  |  |      | (1,787  | ) |      | (570   
|Advances to Del-Tin Fiber                                                                   |  |      | (4,561  | ) |      | (6,269 
|(Increase)/decrease in funds held by trustee                                                |  |      | 372     |   |      | 2,139  
|Othernet                                                                                   |  |      | 645     |   |      | 431    
|                                                                                            |  |      |         |   |      |        
|Net cash provided/(required) by investing activities                                        |  |      | (21,517 | ) |      | (13,613
|                                                                                            |  |      |         |   |      |        
|Financing activities                                                                        |  |      |         |   |      |        
|Proceeds from borrowings                                                                    |  |      | 11,539  |   |      | 500    
|Repayments of notes payable and long-term debt                                              |  |      | (6,362  | ) |      | (9,042 
|Treasury stock purchases                                                                    |  |      | (377    | ) |      |       
|Increase/(decrease) in bank overdraft                                                       |  |      | (913    | ) |      |       
|Preferred stock dividends paid                                                              |  |      |        |   |      | (1,131 
|Common stock dividends paid                                                                 |  |      | (1,488  | ) |      | (1,490 
|Proceeds from stock option exercises                                                        |  |      |        |   |      | 1,224  
|                                                                                            |  |      |         |   |      |        
|Net cash provided/(required) by financing activities                                        |  |      | 2,399   |   |      | (9,939 
|                                                                                            |  |      |         |   |      |        
|Net increase/(decrease) in cash and cash equivalents                                        |  |      | 381     |   |      | (4,747 
|Cash and cash equivalents at January 1                                                      |  |      | 1,057   |   |      | 6,122  
|                                                                                            |  |      |         |   |      |        
|                                                                                            |  |     
|Cash and cash equivalents at June 30                                                        |  | $    | 1,438   |   |      | 1,375  
|                                                                                            |  |      |         |   |      |        



See accompanying notes to consolidated financial
statements.



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Stockholders Equity (Unaudited)

Six Months Ended June
30,

(Thousands of dollars)



|                                                                                                                                                |  | 2003 |         |   | 2002 |        
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | -------
|Cumulative preferred stock$.01 par, authorized 20,000,000 shares, 600,000 shares issued as redeemable preferred stock at end of period
in 2002 |  | $    |        |   |      |       
|                                                                                                                                                |  |      |         |   |      |        
|Common stock$.01 par, authorized 50,000,000 shares, 12,813,879 shares issued at end of period in 2003 and 2002                                 |  |      | 128     |   |      | 128    
|                                                                                                                                                |  |      |         |   |      |        
|Capital in excess of par value                                                                                                                  |  |      |         |   |      |        
|Balance at beginning of year                                                                                                                    |  |      | 69,075  |   |      | 68,766 
|Exercise of stock options                                                                                                                       |  |      |        |   |      | 159    
|Tax benefits on stock options                                                                                                                   |  |      |        |   |      | 113    
|                                                                                                                                                |  |      |         |   |      |        
|Balance at end of period                                                                                                                        |  |      | 69,075  |   |      | 69,038 
|                                                                                                                                                |  |      |         |   |      |        
|Retained earnings                                                                                                                               |  |      |         |   |      |        
|Balance at beginning of year                                                                                                                    |  |      | 114,165 |   |      | 133,034
|Net income                                                                                                                                      |  |      | 3,631   |   |      | 811    
|Preferred stock dividends accrued                                                                                                               |  |      |        |   |      | (1,131 
|Common stock dividends declared                                                                                                                 |  |      | (1,487  | ) |      | (1,490 
|                                                                                                                                                |  |      |         |   |      |        
|Balance at end of period                                                                                                                        |  |      | 116,309 |   |      | 131,224
|                                                                                                                                                |  |      |         |   |      |        
|Unamortized restricted stock awards                                                                                                             |  |      |         |   |      |        
|Balance at beginning of year                                                                                                                    |  |      | (133    | ) |      | (264   
|Stock awards                                                                                                                                    |  |      |        |   |      |       
|Amortization to expense                                                                                                                         |  |      | 71      |   |      | 73     
|                                                                                                                                                |  |      |         |   |      |        
|Balance at end of period                                                                                                                        |  |      | (62     | ) |      | (191   
|                                                                                                                                                |  |      |         |   |      |        
|Treasury stock                                                                                                                                  |  |      |         |   |      |        
|Balance at beginning of year  898,175 and 925,725 shares, respectively                                                                         |  |      | (20,273 | ) |      | (20,865
|Shares purchased  15,907 shares in 2003                                                                                                        |  |      | (377    | ) |      |       
|Shares issued for incentive plans  57,325 shares in 2002                                                                                       |  |      |        |   |      | 1,292  
|                                                                                                                                                |  |      |         |   |      |        
|Balance at end of period  914,082 and 868,400 shares, respectively                                                                             |  |      | (20,650 | ) |      | (19,573
|                                                                                                                                                |  |      |         |   |      |        
|Total stockholders equity                                                                                                                      |  | $    | 164,800 |   |      | 180,626
|                                                                                                                                                |  |      |         |   |      |        



See
accompanying notes to consolidated financial statements.



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##### Table of Contents

DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30,
2003

(Unaudited, except for December 31, 2002)





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 results of operations for the first six months of the year are not necessarily indicative of the results of operations which might be expected for the entire year.



The financial statements in Deltics 2002 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 the 2003 presentation format.



Note 2  Impact of Recently Effective Accounting Pronouncements



In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 143, Accounting for Asset Retirement Obligations. SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and
associated retirement costs and is effective for financial statements issued for fiscal years beginning after June 15, 2002. Adoption of SFAS 143 did not have a material effect on the Companys financial position, results of operations, or cash
flows.



In June 2002, the FASB issued SFAS 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred, and is effective for exit
or disposal activities that are initiated after December 31, 2002. The Company has not initiated any such exit or disposal activities in 2003; therefore, adoption of SFAS 146 has had no impact on the Companys financial statements.



In November 2002, the FASB issued Financial Accounting Standards Board
Interpretation No. (FIN) 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. It clarified that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The recognition and measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The
Company has issued no such guarantees in 2003.



In December 2002, the
FASB issued SFAS 148, Accounting for Stock-Based Compensation  Transition and Disclosure. SFAS 148 amends SFAS 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value
method of accounting for stock-based compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require more prominent disclosures about the effect of the method used on reported results in both annual and interim
financial statements. The Company currently applies Accounting Principles Board Opinion (APB) 25, Accounting for Stock Issued to Employees, to account for stock-based compensation and has not adopted the measurement provisions of SFAS
123, as amended by SFAS 148; however, it has adopted the disclosure requirements of both SFAS 123 and SFAS 148.



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30,
2003

(Unaudited, except for December 31, 2002)



Note 2  Impact of Recently Effective Accounting Pronouncements (cont.)



In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities.
This interpretation addresses consolidation of certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. The consolidation provisions of FIN 46 apply to variable interest entities created, and to variable interest entities in which an enterprise obtains an interest, after January 31, 2003.
The Company has not created or obtained an interest in any such entities.



In April 2003, the FASB issued SFAS 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments and for hedging activities
under SFAS 133, Accounting for Derivatives and Hedging Activities. This statement (1) clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative, (2) clarifies when a derivative contains a
financing component, and (3) amends the definition of an underlying to conform to FIN 45. SFAS 149 is effective for contracts entered into or modified after June 30, 2003, with all provisions applied prospectively. The Company has no derivative
instruments and is not currently engaged in hedging activities, accordingly, adoption of this statement is not expected to have a material impact on the Companys financial statements.



In May 2003, the FASB issued SFAS 150, Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity. This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer
classify an instrument that is within its scope as a liability. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June
15, 2003. As of June 30, 2003, the Company had no financial instruments within the scope of SFAS 150.



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30,
2003

(Unaudited, except for December 31, 2002)



Note 3  Earnings per Common Share



The amounts used in computing earnings per share consisted of the following:



|                                                                                                           |  | Three Months Ended June 30, |        |      | Six Months Ended June 30, |  
|---------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | ---- | ------------------------- | -
|(Thousands, except per share amounts)                                                                      |  | 2003                        |        | 2002 |                           |  
|Net income/(loss)                                                                                          |  | $                           | 2,417  |      | (10                       | )
|Less preferred dividends                                                                                   |  |                             |       |      | (566                      | )
|                                                                                                           |  |                             |        |      |                           |  
|Income available to common shareholders                                                                    |  | $                           | 2,417  |      | (576                      | )
|                                                                                                           |  |                             |        |      |                           |  
|Weighted average number of common shares used in basic EPS                                                 |  |                             | 11,900 |      | 11,923                    |  
|Effect of dilutive stock options*                                                                          |  |                             | 22     |      |                          |  
|                                                                                                           |  |                             |        |      |                           |  
|Weighted average number of common shares and dilutive potential common stock used in EPS assuming dilution |  |                             | 11,922 |      | 11,923                    |  
|                                                                                                           |  |                             |        |      |                           |  
|Earnings per common share                                                                                  |  |                             |        |      |                           |  
|Basic                                                                                                      |  | $                           | .20    |      | (.05                      | )
|Assuming dilution                                                                                          |  |                             | .20    |      | (.05                      | )



|* |  | Additional potential common shares from stock options outstanding for the second quarter and first six months of 2002, amounting to 58,000 and 53,000 shares, respectively, are excluded from
the calculation of diluted earnings per share since they would result in antidilution due to the negative amount of income available to common shareholders (after deducting preferred dividends).
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30,
2003

(Unaudited, except for December 31, 2002)



Note 4  Stock-Based Compensation



Deltic has a stock-based compensation plan for which the Company applies the recognition and measurement principles of APB 25,
Accounting for Stock Issued to Employees, and related interpretations in accounting for those plans. Stock-based compensation expense is accrued for the intrinsic value, if any, of stock options or restricted stock granted over the applicable
vesting periods using the straight-line method. Options granted by the Company have an exercise price equal to the market value of the underlying common stock on the date of grant.



The effect on net income/(loss) and earnings per share if the Company had applied the fair value recognition provisions of the
Financial Accounting Standards Boards Statement of Financial Accounting Standards (SFAS) 123, Accounting for Stock-Based Compensation, consisted of the following:



|                                                                                                                                                                            |  | Three Months Ended June 30, |       |   | Six Months Ended June 30, |     
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ----- | - | ------------------------- | ----
|(Thousands, except per share amounts)                                                                                                                                       |  | 2003                        |       |   | 2002                      |     
|Net income/(loss), as reported                                                                                                                                              |  | $                           | 2,417 |   |                           | (10 
|Plus total stock-based compensation expense determined under the intrinsic value method for awards, net of related tax effects, included in
the determination of net income |  |                             | 75    |   |                           | 189 
|Less pro forma total stock-based compensation expense determined under the fair value method for all awards, net of related tax
effects                                     |  |                             | (180  | ) |                           | (196
|                                                                                                                                                                            |  |                             |       |   |                           |     
|                                                                                                                                                                            |  |                             |       |  
|Pro forma net income/(loss)                                                                                                                                                 |  | $                           | 2,312 |   |                           | (17 
|                                                                                                                                                                            |  |                             |       |   |                           |     
|Basic earnings per share                                                                                                                                                    |  |                             |       |   |                           |     
|As reported                                                                                                                                                                 |  |                             | .20   |   |                           | (.05
|Pro forma                                                                                                                                                                   |  |                             | .19   |   |                           | (.05
|                                                                                                                                                                            |  |                             |       |  
|Dilutive earnings per share                                                                                                                                                 |  |                             |       |   |                           |     
|As reported                                                                                                                                                                 |  |                             | .20   |   |                           | (.05
|Pro forma                                                                                                                                                                   |  |                             | .19   |   |                           | (.05



For the pro forma net income
calculation in the preceding table, the fair value of each option on the date of grant was estimated using the Black-Scholes option-pricing model and the following assumptions for awards in 2003 and 2002, respectively: dividend yields of 1.02
percent and 1.06 percent; expected volatilty of 32.69 percent and 31.19 percent; risk-free interest rates of 2.86 percent and 4.37 percent; and expected lives of five years. Using these assumptions, the weighted average grant-date fair value per
share of options granted in 2003 and 2002 was $7.35 and $9.26, respectively.



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##### Table of Contents

DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30,
2003

(Unaudited, except for December 31, 2002)



Note 5  Inventories



Inventories at the balance sheet dates consisted of the following:



(Thousands of dollars)

June 30, 2003

Dec. 31, 2002Logs

$
1,087

1,313Lumber


3,742

4,630Materials and supplies


288

314$
5,117

6,257




Note 6  Investment in Del-Tin
Fiber



Deltic owns 50 percent of the membership interest of Del-Tin
Fiber, which completed construction and commenced production operations of a medium density fiberboard (MDF) plant near El Dorado, Arkansas, during 1998. 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. In January 2003, Deltic announced in its fourth quarter earnings news release that following a review of these
strategic alternatives, it was determined that the MDF business did not represent a growth area for the Company. Consequently, the Company intends to exit this business upon the earliest, reasonable opportunity provided by the market. As a result of
this decision, the Companys evaluation of possible impairment of the carrying value of its investment in the equity method investee, as required by APB 18, resulted in a determination that the Companys investment was impaired as of
December 31, 2002, and the carrying amount of such investment was written off, to zero, in the fourth quarter of 2002. The write-off amounted to $18,723,000. In performing this impairment evaluation, the Companys management made a number of
estimates and assumptions related to the timing of the sale of its ownership interest, the expected selling price for its interest, future operating results for Del-Tin Fiber, and the possibility that the joint-ventures long-term debt would be
refinanced. It is reasonably possible that a change in these estimates and assumptions might occur, which could have a material impact on the Companys future financial statements, as well as its intentions regarding the investment. Due to the
Companys commitment to fund its share of any of the facilitys operating working capital needs until the facility is able to consistently generate sufficient funds to meet its cash requirements or Deltics ownership interest in the
facility is sold, the Company will continue to recognize losses related to Del-Tin Fiber to the extent of these advances in excess of the sinking fund requirement for 2003, made to the facility since December 31, 2002. A liability representing the
Companys share of this sinking fund requirement, in the amount of $4,478,000, was accrued as of December 31, 2002. (The balance in this accrued liability at June 30, 2003, was $2,058,000.) Therefore, the amount of equity in Del-Tin Fiber
reported on the Companys Consolidated Statements of Income is not equal to 50 percent of the facilitys reported operating results for the period. Based on the operating results of Del-Tin Fiber, the amount of the Companys equity
loss would have been $2,326,000 for the first half of 2003 versus the $2,392,000 actually reported. The management of Del-Tin Fiber has performed evaluations of possible impairment of the long-lived assets of the plant in accordance with SFAS 121
and/or 144, as applicable. To-date, these analyses have indicated that no impairment exists at the Del-Tin Fiber level.



11



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##### Table of Contents

DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30,
2003

(Unaudited, except for December 31, 2002)



Note 6  Investment in Del-Tin Fiber (cont.)



The maximum potential amount of future payments that could be required of the Company under current contractual guarantees is limited
to $17,500,000 committed under the contingent equity agreement. However, with the Company currently funding its share of Del-Tin Fibers sinking fund contribution on a voluntary basis, potential future payments are estimated at approximately
$33,579,000 should the facilitys long-term debt not be refinanced, its financial results not become sufficient to fund its obligations, or if the Company has not sold its ownership interest by the end of 2005.



The financial position for Del-Tin Fiber as of the balance sheet dates and results of
operations for the periods ended June 30 consisted of the following:



(Thousands of dollars)

June 30,2003

Dec. 31,2002Condensed Balance Sheet InformationCurrent assets

$
7,347

5,874Debt service reserve funds


3,501

3,485Bond sinking funds


18,340

13,950Property, plant, and equipmentnet


97,096

98,230Other noncurrent assets


613

736Total assets

$
126,897

122,275Current liabilities

$
4,319

4,407Long-term debt


89,000

89,000Other noncurrent liabilities


3

3Members capital/(deficit)


33,575

28,865Total liabilities and members capital/(deficit)

$
126,897

122,275




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##### Table of Contents

DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30,
2003

(Unaudited, except for December 31, 2002)



Note 6  Investment in Del-Tin Fiber (cont.)



|                                       |  | Three Months EndedJune 30, |        |   | Six Months EndedJune 30, |       
|-------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | ------
|(Thousands of dollars)                 |  | 2003                       |        |   | 2002                     |       
|                                       |  |                            |        |  
|Condensed Income Statement Information |  |                            |        |   |                          |       
|Net sales                              |  | $                          | 12,153 |   |                          | 6,346 
|                                       |  |                            |        |   |                          |       
|Costs and expenses                     |  |                            |        |   |                          |       
|Cost of sales                          |  |                            | 10,978 |   |                          | 9,568 
|Depreciation                           |  |                            | 1,378  |   |                          | 839   
|General and administrative expenses    |  |                            | 528    |   |                          | 364   
|                                       |  |                            |        |   |                          |       
|Total costs and expenses               |  |                            | 12,884 |   |                          | 10,771
|                                       |  |                            |        |   |                          |       
|Operating income/(loss)                |  |                            | (731   | ) |                          | (4,425
|Interest income                        |  |                            | 40     |   |                          | 32    
|Interest and other debt expense        |  |                            | (820   | ) |                          | (1,022
|Gain/(loss) on disposal of assets      |  |                            |       |   |                          | (451  
|                                       |  |                            |        |   |                          |       
|Net income/(loss)                      |  |                            | (1,511 | ) |                          | (5,866
|Other comprehensive income             |  |                            |       |   |                          |      
|                                       |  |                            |        |   |                          |       
|Comprehensive income/(loss)            |  | $                          | (1,511 | ) |                          | (5,866
|                                       |  |                            |        |   |                          |       



Note 7  Timber and Timberlands



Timber and timberlands at the balance sheet dates consisted of the
following:



|(Thousands of dollars)                                                     |  | June 30,2003 |         |   | Dec. 31,2002 |        
|-------------------------------------------------------------------------- |  | ------------ | ------- | - | ------------ | -------
|Purchased stumpage inventory                                               |  | $            | 9,275   |   |              | 7,488  
|Timberlands                                                                |  |              | 78,545  |   |              | 76,772 
|Fee timber                                                                 |  |              | 191,514 |   |              | 182,906
|Logging facilities                                                         |  |              | 1,721   |   |              | 1,782  
|                                                                           |  |              |         |   |              |        
|                                                                           |  |              | 281,055 |   |              | 268,948
|Less accumulated costs of fee timber harvested and facilities depreciation |  |              | (62,949 | ) |              | (59,631
|                                                                           |  |              |         |   |              |        
|                                                                           |  | $            | 218,106 |   |              | 209,317
|                                                                           |  |              |         |   |              |        



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##### Table of Contents

DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30,
2003

(Unaudited, except for December 31, 2002)



Note 8  Property, Plant, and Equipment



Property, plant, and equipment at the balance sheet dates consisted of the following:



|(Thousands of dollars)        |  | June 30,2003 |         |   | Dec. 31,2002 |        
|----------------------------- |  | ------------ | ------- | - | ------------ | -------
|Land                          |  | $            | 125     |   |              | 125    
|Land improvements             |  |              | 4,164   |   |              | 4,070  
|Buildings and structures      |  |              | 5,075   |   |              | 4,801  
|Machinery and equipment       |  |              | 78,194  |   |              | 76,847 
|                              |  |              |         |   |              |        
|                              |  |              | 87,558  |   |              | 85,843 
|Less accumulated depreciation |  |              | (49,571 | ) |              | (46,271
|                              |  |              |         |   |              |        
|                              |  | $            | 37,987  |   |              | 39,572 
|                              |  |              |         |   |              |        



Note 9  Supplemental Cash Flow
Disclosures



Income taxes paid, net of refunds, were $1,329,000 and
$30,000 in the 2003 and 2002 periods, respectively. Interest paid, net of amounts capitalized, was $3,414,000 and $2,081,000 in the first six months of 2003 and 2002, respectively.



(Increases)/decreases in operating working capital, other than cash and cash equivalents, for the six months ended June 30 consisted
of the following:



|(Thousands of dollars)                          |  | 2003 |        |   | 2002 |       
|----------------------------------------------- |  | ---- | ------ | - | ---- | ------
|Trade accounts receivable                       |  | $    | (1,611 | ) |      | (1,521
|Other receivables                               |  |      | (43    | ) |      | (70   
|Inventories                                     |  |      | 1,140  |   |      | 409   
|Prepaid expenses and other current assets       |  |      | 60     |   |      | (421  
|Trade accounts payable                          |  |      | (799   | ) |      | (473  
|Deferred revenues and other accrued liabilities |  |      | 1,984  |   |      | 963   
|                                                |  |      |        |   |      |       
|                                                |  | $    | 731    |   |      | (1,113
|                                                |  |      |        |   |      |       



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##### Table of Contents

DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30,
2003

(Unaudited, except for December 31, 2002)



Note 10  Business Segments



Information about the Companys business segments consisted of the following:



|                                                             |  | Three Months Ended June 30, |        |   | Six Months Ended June 30, |       
|------------------------------------------------------------ |  | --------------------------- | ------ | - | ------------------------- | ------
|(Thousands of dollars)                                       |  | 2003                        |        |   | 2002                      |       
|Net sales                                                    |  |                             |        |   |                           |       
|Woodlands                                                    |  | $                           | 7,362  |   |                           | 9,479 
|Mills                                                        |  |                             | 20,475 |   |                           | 18,862
|Real Estate                                                  |  |                             | 9,629  |   |                           | 4,188 
|Eliminations*                                                |  |                             | (2,506 | ) |                           | (4,423
|                                                             |  |                             |        |   |                           |       
|                                                             |  | $                           | 34,960 |   |                           | 28,106
|                                                             |  |                             |        |   |                           |       
|Income/(loss) before income tax                              |  |                             |        |   |                           |       
|Operating income                                             |  |                             |        |   |                           |       
|Woodlands                                                    |  | $                           | 4,189  |   |                           | 5,839 
|Mills                                                        |  |                             | (1,627 | ) |                           | (251  
|Real Estate                                                  |  |                             | 5,041  |   |                           | 850   
|Corporate                                                    |  |                             | (1,710 | ) |                           | (1,938
|Eliminations                                                 |  |                             | 221    |   |                           | (476  
|                                                             |  |                             |        |   |                           |       
|Operating income                                             |  |                             | 6,114  |   |                           | 4,024 
|Equity in Del-Tin Fiber                                      |  |                             | (547   | ) |                           | (2,933
|Interest income                                              |  |                             | 16     |   |                           | 27    
|Interest and other debt expense                              |  |                             | (1,923 | ) |                           | (1,098
|Other income/(expense)                                       |  |                             | 56     |   |                           | 97    
|                                                             |  |                             |        |   |                           |       
|                                                             |  | $                           | 3,716  |   |                           | 117   
|                                                             |  |                             |        |   |                           |       
|Depreciation, amortization, and cost of fee timber harvested |  |                             |        |   |                           |       
|Woodlands                                                    |  | $                           | 1,824  |   |                           | 2,653 
|Mills                                                        |  |                             | 1,488  |   |                           | 1,433 
|Real Estate                                                  |  |                             | 133    |   |                           | 106   
|Corporate                                                    |  |                             | 22     |   |                           | 46    
|                                                             |  |                             |        |   |                           |       
|                                                             |  | $                           | 3,467  |   |                           | 4,238 
|                                                             |  |                             |        |   |                           |       
|Capital expenditures                                         |  |                             |        |   |                           |       
|Woodlands                                                    |  | $                           | 446    |   |                           | 896   
|Mills                                                        |  |                             | 809    |   |                           | 811   
|Real Estate                                                  |  |                             | 2,118  |   |                           | 3,534 
|Corporate                                                    |  |                             | 98     |   |                           | 32    
|                                                             |  |                             |        |   |                           |       
|                                                             |  | $                           | 3,471  |   |                           | 5,273 
|                                                             |  |                             |        |   |                           |       



|* |  | Intersegment sales of timber from Woodlands to Mills
|- |  | ----------------------------------------------------



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##### Table of Contents

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations



Results of Operations



Three Months Ended June 30, 2003 Compared with Three Months Ended June 30, 2002



Net income for the second quarter of 2003 was $2.4 million, $.20 a share, compared to break-even results, a loss of $.05 a share after preferred dividends, for the
second quarter of 2002. Net sales for the current quarter totaled $35 million, an increase of $6.9 million when compared to the prior-year quarter. Operating income for the second quarter of 2003 was $6.2 million compared to $4 million for the
corresponding quarter of 2002. Net cash provided by operating activities increased $3 million, from $8.2 million in 2002 to $11.2 million for the 2003 period.



Operating income for the second quarter of 2003 increased $2.2 million (or 55 percent) when compared to the second quarter of 2002. The Woodlands segment
decreased $1.7 million due primarily to reduced pine sawtimber sales from a planned decrease in harvest levels. Mills segment operating results decreased $1.3 million from the same period of 2002 as the average lumber sales price decreased six
percent. Operating income for Real Estate segment operations improved $4.2 million from a year ago due to an increase in commercial development acreage sold.



The Woodlands segment reported net sales of $7.4 million for the current quarter compared to $9.5 million a year ago. Due to the completion, during 2002, of the
Companys three-year harvest plan for previously acquired well-stocked timberland acreage, pine sawtimber harvest levels decreased 39 percent to 123,070 tons. This 77,254 ton reduction, combined with a $1 per ton decrease in sales price to $40
per ton, resulted in a drop in pine sawtimber sales of $3.3 million. Combined sales of hardwood sawtimber and pulpwood (pine and hardwood) rose $.7 million due to increased harvest volumes. Sales of 1,097 acres of timberland produced revenues of $.9
million in the current period, while sales of 431 acres generated $.4 million in the prior-year period. Operating income was $4.2 million in the second quarter of 2003, a decrease of $1.7 million when compared to second quarter 2002 operating income
of $5.9 million resulting primarily from the decrease in net sales for the segment, partially offset by a $.8 million reduction in cost of fee timber harvested.



Mills operations net sales for the second quarter of 2003 were $20.4 million compared to $18.8 million for 2002s second quarter. Finished lumber
sales increased $1.4 million due to a 16 percent increase in sales volume to 58.7 million board feet (MMBF) resulting from increased production at the Companys mills due to improved efficiencies. Average lumber sales price for the
current quarter was $299 per thousand board feet (MBF), $20 lower than a year ago. An operating loss of $1.6 million was reported for the second quarter of 2003, which compares to a loss of $.3 million for the 2002 period. The increased
loss of $1.3 million was due primarily to a $23 per MBF decrease in margin realized on lumber sales as a result of the drop in sales price.



The Real Estate segment recorded net sales of $9.7 million in the second quarter of 2003 compared to $4.2 million in the same period for 2002. The 2003 period
benefited from commercial acreage sales of approximately 23 acres for $6 million, while there were no commercial sales in the 2002 period. Residential lot sales decreased by three lots to 23 in the current quarter, while the average sales price
decreased $13,300 per lot to $82,300 due to the sales mix. Operating income increased $4.2 million, to $5.1 million, due primarily to the margin on the commercial acreage sales in 2003.



Corporate operating expense was $1.7 million in the second quarter of 2003, which compares to $2 million for the same quarter of 2002.
Equity in Del-Tin Fiber recorded by the Company was a loss of $.6 million compared to a loss of $2.9 million a year ago. Following the write-off of the carrying amount of



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##### Table of Contents

the Companys investment as of December 31, 2002, the current-year equity represents the amount of advances to the facility in
excess of sinking fund payment requirements for 2003 versus the Companys share of the plants operating losses in the prior-year period. (For additional information about Del-Tin Fibers operations, refer to Note 6 to the
consolidated financial statements.) Interest expense was $.8 million higher than 2002s second quarter due primarily to an increase in long-term debt resulting from the redemption of the Companys preferred stock at the end of 2002.



The increase in the Companys earnings per share from a loss of
$.05 a share in the second quarter of 2002 to $.20 a share for the current-year quarter is the result of the $2.4 million increase in net income combined with the increase in earnings available to common shareholders due to the redemption of
Deltics preferred stock at the end of 2002. The non-deductible carrying cost of the dividends on these preferred shares was 7.54 percent. While a portion of the Companys increase in interest expense is directly related to the borrowings
incurred to accomplish the redemption, the interest rate on this new fixed-rate obligation of 6.01 percent resulted in a net decrease in carrying cost. In addition, this interest expense is tax deductible, which represents an additional net benefit
of debt versus the former preferred stock.



Income tax expense was $1.4
million in the second quarter of 2003, an increase of $1.3 million from the corresponding period in 2002 due to higher pretax income.



Six Months Ended June 30, 2003 Compared with Six Months Ended June 30, 2002



For the first six months of 2003, net income totaled $3.6 million, $.31 a share, compared to net income for the six months ended June 30, 2002, of $.8 million, a
loss of $.03 a share after preferred dividends. Operating income for the first half of 2003 was $11.6 million, an increase of $2.9 million from 2002. The Companys Woodlands segment decreased $3.1 million as a result of a planned reduction in
pine sawtimber harvest levels. The Mills segment decreased $2.4 million due primarily to a six percent drop in the average lumber sales price. Real Estate operations improved $7.4 million due to commercial acreage sold in 2003. Corporate operating
expense dropped $.5 million.



The Woodlands segment produced net sales of
$16.5 million during the six months ended June 30, 2003, a decrease of $5.1 million when compared to $21.6 million during 2002. Pine sawtimber sales decreased $7 million as a result of a 34 percent decrease in sales volume to 301,100 tons combined
with a $1 per ton drop in the average sales price received for pine sawtimber to $40 per ton. Net sales generated from the sale of non-strategic or higher and better use timberland increased by $1.3 million, as the Company sold approximately 2,283
acres for $2.1 million during the 2003 period compared to about 759 acres for $.8 million in 2002. Operating income was $10 million for the first half of 2003, compared to $13.1 million in 2002. This decrease was due mainly to the reduction in net
sales and a $.4 million increase in the cost of timberland sales, partially offset by a $2.7 million decrease in the cost of fee timber harvested primarily from the reduction in harvest levels.



Mills operations recorded net sales of $39.7 million for the first six months of 2003
compared to $36.7 million for the corresponding period of 2002. The increase was due mainly to a $2.6 million increase in sales of finished lumber from a 15 percent rise in sales volume to 115 MMBF due to improving efficiencies at both of its mills,
partially offset by a $19 decrease in average sales price per MBF sold to $295. As a result of the increase in production levels, sales of residual by-products of the manufacturing process rose $.5 million. A loss from operations of $3.9 million in
2003 compares to 2002s loss of $1.5 million due primarily to the six percent drop in average sales price per MBF sold, partially offset by a one percent reduction in lumber manufacturing expense per MBF from the improved production
efficiencies.



17



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##### Table of Contents

Real Estate operations reported net sales of $17.5 million during the first half of 2003 compared to $6.8 million
during 2002. The first six months of 2003 benefited from the sales of approximately 52 acres of commercial acreage for $9.6 million, while there were no commercial sales in the 2002 period. Residential lot sales increased by 18 lots to 70 in the
current period, while the average sales price decreased $4,300 per lot to $73,500 due to the sales mix. Operating income of $8.5 million in 2003 increased $7.4 million from a year ago as the result of the increase in net sales, partially offset by
increased sales commission expense.



Corporate operating expense was $3.3
million for the first six months of 2003 compared to $3.8 million for the same period in 2002. The decrease of $.5 million was due reduced costs for the Companys incentive plans. Equity in Del-Tin Fiber recorded by the Company was a loss of
$2.4 million in the current year, which compares to $5.3 million a year ago. Interest expense was $1.3 million higher in 2003 due mainly to increased long-term debt resulting from the redemption of the Companys preferred stock at the end of
2002. Income tax expense increased $1.5 million to $2.2 million due to higher pretax income.



Financial Condition



For the first six months of 2003,
net cash provided by operating activities totaled $19.5 million compared to $18.8 million for the same period in 2002. Changes in operating working capital, other than cash and cash equivalents, provided cash of $.7 million for the first half of
2003 but required $1.1 million for the same period of 2002.



Capital
expenditures required cash of $16.2 million in the current-year period and $9.3 million a year ago. Capital expenditures by segment consisted of the following:



|                       |  | Six Months Ended June 30,
|---------------------- |  | -------------------------
|(Thousands of dollars) |  | 2003                     
|                       |  |                          
|Woodlands*             |  | $                        
|Mills                  |  |                          
|Real Estate            |  |                          
|Corporate              |  |                          
|                       |  |                          
|Capital expenditures   |  | $                        
|                       |  |                          



|* |  | 2003 amount includes $10.4 million for the acquisition of 6,955 acres of timberland of which one acquisition amounted to $9.3 million for 4,979 acres in Calhoun County, Arkansas.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The net change in purchased stumpage inventory to be
utilized in the Companys sawmill operations required cash of $1.8 million in 2003 and $.6 million in 2002. The Company made operating advances to Del-Tin Fiber of $2.4 million during the current period, which decreased from $4.5 million during
the corresponding period of 2002 due to improved operating results at the facility. Advances to Del-Tin Fiber for required debt sinking fund deposits amounted to $2.2 million in 2003, for which a liability was accrued at December 31, 2002 that was
included in the 2002 write-off of the Companys investment in the facility, and $1.8 million in 2002.



The Company borrowed $11.5 million and made debt repayments of $6.4 million during the first half of 2003 compared to borrowings of $.5 million and debt repayments
of $9 million during the first six months of 2002. During the current year, purchases of treasury stock utilized $.4 million and the decrease in bank overdraft was $.9 million. Deltic paid dividends on common stock of $1.5 million in both 2003 and
2002. In the prior-year period, the Company paid dividends for preferred stock of $1.1 million. Proceeds from the exercise of stock options provided cash of $1.2 million during 2002.



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##### Table of Contents

These net sources of funds during the first half of 2003 resulted in a $.4 million increase in the Companys
cash and cash equivalents since December 31, 2002.



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 June 30, 2003, the Company had expended $2.1 million under this program, with the purchase of 96,206 shares at an average cost of $22.34 per share. (No shares were purchased during the second quarter of
2003.)



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. The Company is currently funding its share of Del-Tin Fibers sinking fund obligation on a
voluntary basis. As a result, potential future payments are estimated at approximately $33.6 million should the facilitys long-term debt not be refinanced, its financial results not become sufficient to fund its obligations, or if the Company
has not sold its ownership interest by the end of 2005. 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. 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. While Deltic wrote off its investment in Del-Tin Fiber as of December 31, 2002, the Companys contingent obligations are not reduced as a result of the write-off.



Due to the probable requirement for Deltic to advance to Del-Tin Fiber amounts equal to
its share of the facilitys remaining 2003 quarterly sinking fund obligation, based on the plants 2003 cash flow projections, the Company has a related liability recorded in its accounts, equal to $2 million at June 30, 2003. No liability
for such payments on behalf of the facility after 2003 has been accrued based on the likelihood that no such payments would be required of the Company due to either the projected further improvement in Del-Tin Fibers cash flows, the possible
refinancing of the joint-ventures long-term debt, or to the possible divestment of the Companys ownership interest within the timeframe considered in the current evaluation.



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, 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.



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Critical Accounting Policies and Estimates



Critical accounting policies are defined as those that are reflective of significant judgements and uncertainties and potentially
result in materially different results under different assumptions and conditions. The Company has prepared its consolidated financial statements in conformity with accounting principles generally accepted in the United States, which require
management to make estimates and assumptions that affect the reported amounts in these financial statements and accompanying notes. Actual results could differ from those estimates under different assumptions or conditions. The Company has disclosed
its critical accounting policies in its 2002 annual report on Form 10-K, and this disclosure should be read in conjunction with this Form 10-Q. There have been no changes in these identified critical policies, nor have there been any initially
adopted accounting policies having a material impact on reported financial results.



Impact of Recently Effective Accounting Pronouncements



In August 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 143, Accounting for Asset Retirement Obligations. SFAS 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived assets and associated retirement costs and is effective for financial statements issued for fiscal years beginning after June 15, 2002. Adoption of SFAS 143 did not have
a material effect on the Companys financial position, results of operations, or cash flows.



In June 2002, the FASB issued SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS 146 requires that a liability for a cost associated
with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred, and is effective for exit or disposal activities that are initiated after December 31, 2002. The Company has not initiated any
such exit or disposal activities in 2003; therefore, adoption of SFAS 146 has had no impact on the Companys financial statements.



In November 2002, the FASB issued Financial Accounting Standards Board Interpretation No. (FIN) 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. It clarified that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the
guarantee. The recognition and measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The Company has issued no such guarantees in 2003.



In December 2002, the FASB issued SFAS 148, Accounting for Stock-Based Compensation
 Transition and Disclosure. SFAS 148 amends SFAS 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based compensation. In
addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require more prominent disclosures about the effect of the method used on reported results in both annual and interim financial statements. The Company currently applies Accounting
Principles Board Opinion (APB) 25, Accounting for Stock Issued to Employees, to account for stock-based compensation and has not adopted the measurement provisions of SFAS 123, as amended by SFAS 148; however, it has adopted the
disclosure requirements of both SFAS 123 and SFAS 148.



In January 2003,
the FASB issued FIN 46, Consolidation of Variable Interest Entities. This interpretation addresses consolidation of certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The consolidation



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provisions of FIN 46 apply to variable interest entities created, and to variable interest entities in which an enterprise obtains
an interest, after January 31, 2003. The Company has not created or obtained an interest in any such entities.



In April 2003, the FASB issued SFAS 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS 149 amends and clarifies financial
accounting and reporting for derivative instruments and for hedging activities under SFAS 133, Accounting for Derivatives and Hedging Activities. This statement (1) clarifies under what circumstances a contract with an initial net investment meets
the characteristic of a derivative, (2) clarifies when a derivative contains a financing component, and (3) amends the definition of an underlying to conform to FIN 45. SFAS 149 is effective for contracts entered into or modified after June 30,
2003, with all provisions applied prospectively. The Company has no derivative instruments and is not currently engaged in hedging activities, accordingly, adoption of this statement is not expected to have a material impact on the Companys
financial statements.



In May 2003, the FASB issued SFAS 150, Accounting
for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.
It requires that an issuer classify an instrument that is within its scope as a liability. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of nonpublic companies. As of June 30, 2003, the Company had no financial instruments within the scope of SFAS 150.



Outlook



Pine sawtimber harvest levels are expected to be 150,000 to 200,000 tons in the third quarter of 2003 and 600,000 to 650,000 tons for
the year. The Companys program to consider sales of timberland identified to be non-strategic or to have a higher and better use will continue, with sales for the year anticipated to be 3,000 to 5,000 acres. Finished lumber production and
sales volume will continue to be subject to market conditions, and is estimated at 50 to 60 million board feet for the third quarter and 200 to 250 million board feet for the year. Residential lot sales are projected to be 20 to 40 lots and 180 to
220 lots, respectively. The Company currently has 146 lots under contract and scheduled to close by the end of 2003, in addition to the 70 lots that have been sold thus far in the year. Under the current evaluation parameters, Deltics equity
loss in Del-Tin Fiber will be equal to any cash advances made to the facility in excess of sinking fund payment requirements for 2003.



The lumber market improved modestly in the latter part of the second quarter as a result of strong demand and low inventory levels. Over the second half of 2003,
demand is expected to remain strong; however, continued improvement in prices will be dependent upon production curtailments and resolution of the Canadian trade issue. The regional pine sawtimber market has been stable since the beginning of the
year. Any significant change in sawtimber prices over the remainder of 2003 is unlikely without a corresponding move in the lumber market. MDF prices have been relatively flat in the first half of the year but are expected to increase over the next
six to 18 months as the overall economy improves.



Certain statements
contained in this report that are not historical in nature constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as expects, anticipates,
intends, plans, estimates, or variations of such words and similar expressions are intended to identify such forward-looking statements. These statements reflect the Companys current expectations and involve
certain risks and uncertainties, including those disclosed elsewhere in this report. Therefore, actual results could differ materially from those included in such forward-looking statements.



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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 2002 annual report on Form 10-K. Those disclosures should be read in conjunction with this Form 10-Q.



Item 4. Controls and Procedures



Deltic
Timber Corporation (the Company) carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures as defined in Rules 13a-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934.
Such evaluation was under the supervision, and with the participation, of the Companys senior management, including the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO). Based on this evaluation, the
Companys CEO and CFO have concluded that the Companys disclosure controls and procedures were effective as of June 30, 2003, in timely alerting them to material information required to be included in any reports that the Company files or
submits under the Securities Exchange Act of 1934, as amended. In addition, such controls have been deemed to be effective in ensuring that the required information is recorded, processed, summarized and reported within the time periods specified in
the Securities and Exchange Commissions rules and forms.



There
were no significant changes during the quarter in internal controls over financial reporting or in any other factors that could significantly affect those internal controls. The Company has not identified any significant deficiency or material
weakness in its internal controls, and therefore, no corrective actions were taken.



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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



The annual meeting of the stockholders of Deltic Timber Corporation (Deltic or the Company) was held on April 24, 2003. Pursuant to the Companys Amended and Restated Certificate of Incorporation,
its Board of Directors consists of three classes who hold office for staggered terms of three years. Set forth below is a listing of the directors elected at the April 24, 2003, annual meeting, the results of such election and the names of directors
whose term of office continued after the meeting.



|Director              |  | Votes for              |  | Votes Withheld
|--------------------- |  | ---------------------- |  | --------------
|                      |  |                        |  |               
|Alex R. Lieblong      |  | 10,124,303             |  | 282,270       
|Robert C. Nolan       |  | 9,890,335              |  | 516,238       
|Ron L. Pearce         |  | 8,860,544              |  | 1,540,009     
|R. Hunter Pierson, Jr |  | (Term expires in 2004) |  |               
|J. Thurston Roach     |  | (Term expires in 2004) |  |               
|John C. Shealy        |  | (Term expires in 2004) |  |               
|O. H. Darling, Jr.    |  | (Term expires in 2005) |  |               
|Christoph Keller, III |  | (Term expires in 2005) |  |               
|R. Madison Murphy     |  | (Term expires in 2005) |  |               



In addition to the election of
three Class I directors at the April 24, 2003, annual meeting, stockholders were requested to ratify the prior appointment of KPMG LLP by the Board of Directors as Deltics independent auditors for 2003. Stockholders ratified the appointment of
KPMG LLP by a vote of 10,243,346 shares in favor and 163,227 shares against or withheld.



Item 5. Other Information



None.



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Item 6. Exhibits and Reports on Form 8-K



|    | 
|--- | 
|(a) | 
|    | 
|    | 
|    | 
|    | 
|    | 
|    | 
|    | 
|(b) | 
|    | 
|    | 
|    | 
|    | 





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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/ Ray C. Dillon                   |  |  |  | Date: |  | July 30, 2003
|--- |  | ----------------------------------- |  |  |  | ----- |  | -------------
|    |  | Ray C. Dillon, President            |  |  |  |       |  |              
|    |  | (Principal Executive Officer)       |  |  |  |       |  |              
|    |  |                                     |  | 
|    |  | /s/ Clefton D. Vaughan              |  |  |  | Date: |  | July 30, 2003
|    |  | Clefton D. Vaughan, Vice President, |  |  |  |       |  |              
|    |  | Finance and Administration          |  |  |  |       |  |              
|    |  | (Principal Financial Officer)       |  |  |  |       |  |              
|    |  |                                     |  | 
|    |  | /s/ Emily R. Evers                  |  |  |  | Date: |  | July 30, 2003
|    |  | Emily R. Evers, Controller          |  |  |  |       |  |              
|    |  | (Principal Accounting Officer)      |  |  |  |       |  |              



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