##### Table of Contents





UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended September 30, 2010

OR



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

Commission file number 1-12147

DELTIC TIMBER CORPORATION

(Exact name of registrant as specified in its charter)



|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Delaware                                                       |  | 71-0795870                             
|(State or other jurisdiction of 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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x    No  ̈ .

Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 to Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes  ̈    No  ̈.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |                                                |  |                           |  |  
|----------------------- |  | ---------------------------------------------- |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                              |  | Accelerated filer         |  | x
|Non-accelerated filer   |  |  ̈  (Do not check if a
small reporting company) |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ̈        No x.

Number of shares of Common Stock, $.01 Par Value, outstanding at October 29, 2010, was 12,491,171.









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##### Table of Contents



TABLE OF
CONTENTS  THIRD QUARTER 2010 FORM 10-Q REPORT



|           |  |                                                                                       |  |            |    | 
|---------- |  | ------------------------------------------------------------------------------------- |  | ---------- | -- | 
|           |  |                                                                                       |  | PageNumber |   
|           |  | PART I  Financial Information                                                        |  |            |   
|           |  |                                                                                      
|Item 1.    |  | Financial Statements                                                                  |  |            | 1  | 
|           |  |                                                                                      
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  |            | 18 | 
|           |  |                                                                                      
|Item 3.    |  | Quantitive and Qualitative Disclosures About Market Risk                              |  |            | 32 | 
|           |  |                                                                                      
|Item 4.    |  | Controls and Procedures                                                               |  |            | 32 | 
|           |  |                                                                                      
|           |  | PART II  Other Information                                                           |  |            |    | 
|           |  |                                                                                      
|Item 1.    |  | Legal Proceedings                                                                     |  |            | 33 | 
|           |  |                                                                                      
|Item 1A.   |  | Risk Factors                                                                          |  |            | 33 | 
|           |  |                                                                                      
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  |            | 33 | 
|           |  |                                                                                      
|Item 3.    |  | Defaults Upon Senior Securities                                                       |  |            | 33 | 
|           |  |                                                                                      
|Item 4.    |  | (Removed and Reserved)                                                                |  |            | 33 | 
|           |  |                                                                                      
|Item 5.    |  | Other Information                                                                     |  |            | 33 | 
|           |  |                                                                                      
|Item 6.    |  | Exhibits                                                                              |  |            | 34 | 
|           |  |                                                                                      
|Signatures |  |                                                                                       |  |            | 35 | 



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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)



|                                                                                               |  |                          |         |   |                  |  |         |  
|---------------------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---------------- |  | ------- | -
|                                                                                               |  | (Unaudited)Sept. 30,2010 |         |   | December 31,2009 | 
|Assets                                                                                         |  |                          |         |   |                  |  |         |  
|Current assets                                                                                 |  |                          |         |   |                  |  |         |  
|Cash and cash equivalents                                                                      |  | $                        | 7,122   |   |                  |  | 4,783   |  
|Trade accounts receivable, net of allowance for doubtful accounts of $51 and $68, respectively |  |                          | 5,444   |   |                  |  | 4,888   |  
|Other receivables                                                                              |  |                          | 71      |   |                  |  | 86      |  
|Inventories                                                                                    |  |                          | 6,955   |   |                  |  | 5,917   |  
|Prepaid expenses and other current assets                                                      |  |                          | 3,503   |   |                  |  | 2,842   |  
|                                                                                               |  |                          |         |   |                  |  |         |  
|Total current assets                                                                           |  |                          | 23,095  |   |                  |  | 18,516  |  
|                                                                                               |  |                         
|Investment in real estate held for development and sale                                        |  |                          | 54,492  |   |                  |  | 56,096  |  
|Investment in Del-Tin Fiber                                                                    |  |                          | 8,654   |   |                  |  | 9,104   |  
|Other investments and noncurrent receivables                                                   |  |                          | 1,982   |   |                  |  | 4,882   |  
|Timber and timberlands  net                                                                   |  |                          | 226,821 |   |                  |  | 228,893 |  
|Property, plant, and equipment  net                                                           |  |                          | 32,391  |   |                  |  | 33,886  |  
|Deferred charges and other assets                                                              |  |                          | 1,070   |   |                  |  | 826     |  
|                                                                                               |  |                          |         |   |                  |  |         |  
|Total assets                                                                                   |  | $                        | 348,505 |   |                  |  | 352,203 |  
|                                                                                               |  |                          |         |   |                  |  |         |  
|                                                                                               |  |                         
|Liabilities and Stockholders Equity                                                           |  |                          |         |   |                  |  |         |  
|Current liabilities                                                                            |  |                          |         |   |                  |  |         |  
|Trade accounts payable                                                                         |  | $                        | 3,228   |   |                  |  | 2,824   |  
|Current maturities of long-term debt                                                           |  |                          | 1,111   |   |                  |  | 1,111   |  
|Accrued taxes other than income taxes                                                          |  |                          | 3,068   |   |                  |  | 1,824   |  
|Income taxes payable                                                                           |  |                          | 947     |   |                  |  | 362     |  
|Deferred revenues and other accrued liabilities                                                |  |                          | 12,992  |   |                  |  | 6,981   |  
|                                                                                               |  |                          |         |   |                  |  |         |  
|Total current liabilities                                                                      |  |                          | 21,346  |   |                  |  | 13,102  |  
|                                                                                               |  |                         
|Long-term debt, excluding current maturities                                                   |  |                          | 69,667  |   |                  |  | 91,222  |  
|Deferred tax liabilities  net                                                                 |  |                          | 4,381   |   |                  |  | 5,448   |  
|Other noncurrent liabilities                                                                   |  |                          | 27,617  |   |                  |  | 26,132  |  
|Commitments and contingencies                                                                  |  |                          |        |   |                  |  |        |  
|Stockholders equity                                                                           |  |                          |         |   |                  |  |         |  
|Cumulative preferred stock  $.01 par, authorized 20,000,000 shares, none issued               |  |                          |        |   |                  |  |        |  
|Common stock  $.01 par, authorized 50,000,000 shares, 12,813,879 shares issued                |  |                          | 128     |   |                  |  | 128     |  
|Capital in excess of par value                                                                 |  |                          | 78,281  |   |                  |  | 78,290  |  
|Retained earnings                                                                              |  |                          | 163,014 |   |                  |  | 155,638 |  
|Treasury stock                                                                                 |  |                          | (10,867 | ) |                  |  | (12,548 | )
|Accumulated other comprehensive loss                                                           |  |                          | (5,062  | ) |                  |  | (5,209  | )
|                                                                                               |  |                          |         |   |                  |  |         |  
|Total stockholders equity                                                                     |  |                          | 225,494 |   |                  |  | 216,299 |  
|                                                                                               |  |                          |         |   |                  |  |         |  
|                                                                                               |  |                         
|Total liabilities and stockholders equity                                                     |  | $                        | 348,505 |   |                  |  | 352,203 |  
|                                                                                               |  |                          |         |   |                  |  |         |  

See accompanying notes to consolidated financial statements.



1



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##### Table of Contents



DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

(Thousands of dollars,
except per share amounts)



|                                                             |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |        |  
|------------------------------------------------------------ |  | ------------------------------- | ------ | - | ------------------------------ |  | ------ | ---- |  |  | ------- | - |  |  | ------ | -
|                                                             |  | Three Months EndedSeptember 30, |        |   | Nine Months EndedSeptember 30, | 
|                                                             |  | 2010                            |        |   | 2009                           |  |        | 2010 |  |  | 2009    |  
|Net sales                                                    |  | $                               | 37,050 |   |                                |  | 28,987 |      |  |  | 107,922 |   |  |  | 80,970 |  
|                                                             |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |        |  
|Costs and expenses                                           |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |        |  
|Cost of sales                                                |  |                                 | 24,181 |   |                                |  | 21,754 |      |  |  | 69,281  |   |  |  | 60,408 |  
|Depreciation, amortization, and cost of fee timber harvested |  |                                 | 3,794  |   |                                |  | 3,179  |      |  |  | 10,213  |   |  |  | 9,871  |  
|General and administrative expenses                          |  |                                 | 3,942  |   |                                |  | 3,599  |      |  |  | 12,426  |   |  |  | 9,980  |  
|                                                             |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |        |  
|                                                             |  |                                 |        |  
|Total costs and expenses                                     |  |                                 | 31,917 |   |                                |  | 28,532 |      |  |  | 91,920  |   |  |  | 80,259 |  
|                                                             |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |        |  
|                                                             |  |                                 |        |  
|Operating income                                             |  |                                 | 5,133  |   |                                |  | 455    |      |  |  | 16,002  |   |  |  | 711    |  
|                                                             |  |                                 |        |  
|Equity in earnings of Del-Tin Fiber                          |  |                                 | 978    |   |                                |  | 522    |      |  |  | 3,669   |   |  |  | 2,157  |  
|Interest income                                              |  |                                 | 12     |   |                                |  | 24     |      |  |  | 140     |   |  |  | 33     |  
|Interest and other debt expense                              |  |                                 | (847   | ) |                                |  | (890   | )    |  |  | (2,669  | ) |  |  | (2,718 | )
|Interest capitalized                                         |  |                                 | 20     |   |                                |  | 24     |      |  |  | 53      |   |  |  | 125    |  
|Other income/(expenses)                                      |  |                                 | (10    | ) |                                |  | (89    | )    |  |  | 42      |   |  |  | 41     |  
|                                                             |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |        |  
|                                                             |  |                                 |        |  
|Income before income taxes                                   |  |                                 | 5,286  |   |                                |  | 46     |      |  |  | 17,237  |   |  |  | 349    |  
|                                                             |  |                                 |        |  
|Income taxes                                                 |  |                                 | (2,008 | ) |                                |  | 157    |      |  |  | (6,113  | ) |  |  | (348   | )
|                                                             |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |        |  
|Net income                                                   |  | $                               | 3,278  |   |                                |  | 203    |      |  |  | 11,124  |   |  |  | 1      |  
|                                                             |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |        |  
|                                                             |  |                                 |        |  
|Earnings per common share                                    |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |        |  
|Basic                                                        |  | $                               | .26    |   |                                |  | .02    |      |  |  | .89     |   |  |  |       |  
|Diluted                                                      |  | $                               | .26    |   |                                |  | .02    |      |  |  | .89     |   |  |  |       |  
|                                                             |  |                                 |        |  
|Dividends per common share                                   |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |        |  
|Paid                                                         |  | $                               | .075   |   |                                |  | .075   |      |  |  | .225    |   |  |  | .225   |  
|Declared                                                     |  | $                               | .075   |   |                                |  | .075   |      |  |  | .300    |   |  |  | .300   |  
|                                                             |  |                                 |        |  
|Weighted average common shares outstanding (thousands)       |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |        |  
|Basic                                                        |  |                                 | 12,368 |   |                                |  | 12,323 |      |  |  | 12,362  |   |  |  | 12,314 |  
|Diluted                                                      |  |                                 | 12,417 |   |                                |  | 12,399 |      |  |  | 12,419  |   |  |  | 12,409 |  

See accompanying notes to consolidated financial
statements.



2



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(Thousands of dollars)



|                                                                                 |  |                                |         |   |      |  |        |  
|-------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- |  | ------ | -
|                                                                                 |  | Nine Months EndedSeptember 30, |        
|                                                                                 |  | 2010                           |         |   | 2009 | 
|                                                                                 |  |                               
|Operating activities                                                             |  |                                |         |   |      |  |        |  
|Net income                                                                       |  | $                              | 11,124  |   |      |  | 1      |  
|Adjustments to reconcile net income to net cash provided by operating activities |  |                                |         |   |      |  |        |  
|Depreciation, amortization, and cost of fee timber harvested                     |  |                                | 10,213  |   |      |  | 9,871  |  
|Deferred income taxes                                                            |  |                                | (1,299  | ) |      |  | (670   | )
|Real estate development expenditures                                             |  |                                | (1,189  | ) |      |  | (596   | )
|Real estate costs recovered upon sale                                            |  |                                | 2,170   |   |      |  | 861    |  
|Timberland costs recovered upon sale                                             |  |                                | 474     |   |      |  | 650    |  
|Equity in earnings of Del-Tin Fiber                                              |  |                                | (3,669  | ) |      |  | (2,157 | )
|Stock-based compensation expense                                                 |  |                                | 1,474   |   |      |  | 1,293  |  
|Net increase in liabilities for pension and other postretirement benefits        |  |                                | 707     |   |      |  | 864    |  
|Net decrease in deferred compensation for stock-based liabilities                |  |                                | (209    | ) |      |  | (556   | )
|Decrease in operating working capital other than cash and cash equivalents       |  |                                | 5,566   |   |      |  | 3,431  |  
|Other  changes in assets and liabilities                                        |  |                                | 1,124   |   |      |  | (791   | )
|                                                                                 |  |                                |         |   |      |  |        |  
|Net cash provided by operating activities                                        |  |                                | 26,486  |   |      |  | 12,201 |  
|                                                                                 |  |                                |         |   |      |  |        |  
|                                                                                 |  |                               
|Investing activities                                                             |  |                                |         |   |      |  |        |  
|Capital expenditures requiring cash, excluding real estate development           |  |                                | (7,571  | ) |      |  | (9,707 | )
|Net change in purchased stumpage inventory                                       |  |                                | 329     |   |      |  | 220    |  
|Advances to Del-Tin Fiber                                                        |  |                                | (951    | ) |      |  | (3,704 | )
|Repayments from Del-Tin Fiber                                                    |  |                                | 5,070   |   |      |  | 3,955  |  
|Net change in funds held by trustee                                              |  |                                | 2,644   |   |      |  | 2,774  |  
|Other  net                                                                      |  |                                | 781     |   |      |  | 869    |  
|                                                                                 |  |                                |         |   |      |  |        |  
|Net cash provided/(required) by investing activities                             |  |                                | 302     |   |      |  | (5,593 | )
|                                                                                 |  |                                |         |   |      |  |        |  
|                                                                                 |  |                               
|Financing activities                                                             |  |                                |         |   |      |  |        |  
|Proceeds from borrowings                                                         |  |                                | 12,800  |   |      |  | 8,500  |  
|Repayments of notes payable and long-term debt                                   |  |                                | (34,356 | ) |      |  | (7,555 | )
|Treasury stock purchases                                                         |  |                                | (26     | ) |      |  | (1,112 | )
|Common stock dividends paid                                                      |  |                                | (2,812  | ) |      |  | (2,800 | )
|Proceeds from stock option exercises                                             |  |                                | 164     |   |      |  | 833    |  
|Excess tax benefits from stock-based compensation expense                        |  |                                | 57      |   |      |  | 19     |  
|Other  net                                                                      |  |                                | (276    | ) |      |  | (285   | )
|                                                                                 |  |                                |         |   |      |  |        |  
|Net cash required by financing activities                                        |  |                                | (24,449 | ) |      |  | (2,400 | )
|                                                                                 |  |                                |         |   |      |  |        |  
|Net increase in cash and cash equivalents                                        |  |                                | 2,339   |   |      |  | 4,208  |  
|Cash and cash equivalents at January 1                                           |  |                                | 4,783   |   |      |  | 2,413  |  
|                                                                                 |  |                                |         |   |      |  |        |  
|Cash and cash equivalents at September 30                                        |  | $                              | 7,122   |   |      |  | 6,621  |  
|                                                                                 |  |                                |         |   |      |  |        |  

See accompanying notes to consolidated financial statements.



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Stockholders Equity

(Unaudited)

(Thousands of dollars)



|                                                                                                |  |                                |         |   |      |  |         |  
|----------------------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- |  | ------- | -
|                                                                                                |  | Nine Months EndedSeptember 30, |        
|                                                                                                |  | 2010                           |         |   | 2009 | 
|Cumulative preferred stock  $.01 par, authorized 20,000,000 shares, none issued                |  | $                              |        |   |      |  |        |  
|                                                                                                |  |                                |         |   |      |  |         |  
|Common stock $.01 par, authorized 50,000,000 shares, 12,813,879 shares issued in 2010 and 2009 |  |                                | 128     |   |      |  | 128     |  
|                                                                                                |  |                                |         |   |      |  |         |  
|                                                                                                |  |                               
|Capital in excess of par value                                                                  |  |                                |         |   |      |  |         |  
|Balance at beginning of period                                                                  |  |                                | 78,290  |   |      |  | 78,660  |  
|Exercise of stock options                                                                       |  |                                | (3      | ) |      |  | (61     | )
|Stock based compensation expense                                                                |  |                                | 1,474   |   |      |  | 1,293   |  
|Restricted stock awards                                                                         |  |                                | (1,540  | ) |      |  | (1,859  | )
|Restricted stock forfeitures                                                                    |  |                                |        |   |      |  | 4       |  
|Tax effect of stock awards                                                                      |  |                                | 60      |   |      |  | (132    | )
|                                                                                                |  |                                |         |   |      |  |         |  
|Balance at end of period                                                                        |  |                                | 78,281  |   |      |  | 77,905  |  
|                                                                                                |  |                                |         |   |      |  |         |  
|                                                                                                |  |                               
|Retained earnings                                                                               |  |                                |         |   |      |  |         |  
|Balance at beginning of period                                                                  |  |                                | 155,638 |   |      |  | 155,683 |  
|Net income                                                                                      |  |                                | 11,124  |   |      |  | 1       |  
|Common stock dividends declared                                                                 |  |                                | (3,748  | ) |      |  | (3,733  | )
|                                                                                                |  |                                |         |   |      |  |         |  
|Balance at end of period                                                                        |  |                                | 163,014 |   |      |  | 151,951 |  
|                                                                                                |  |                                |         |   |      |  |         |  
|                                                                                                |  |                               
|Treasury stock                                                                                  |  |                                |         |   |      |  |         |  
|Balance at beginning of period  363,208 and 412,177 shares, respectively                       |  |                                | (12,548 | ) |      |  | (14,400 | )
|Shares purchased  606 and 35,571 shares, respectively                                          |  |                                | (26     | ) |      |  | (1,112  | )
|Forfeited restricted stock  none and 123 shares                                                |  |                                |        |   |      |  | (4      | )
|Shares issued for incentive plans  49,421 and 78,240 shares, respectively                      |  |                                | 1,707   |   |      |  | 2,754   |  
|                                                                                                |  |                                |         |   |      |  |         |  
|Balance at end of period  314,393 and 369,631 shares, respectively                             |  |                                | (10,867 | ) |      |  | (12,762 | )
|                                                                                                |  |                                |         |   |      |  |         |  
|                                                                                                |  |                               
|Accumulated other comprehensive loss                                                            |  |                                |         |   |      |  |         |  
|Balance at beginning of period                                                                  |  |                                | (5,209  | ) |      |  | (6,907  | )
|Change in other comprehensive income, net of tax                                                |  |                                | 147     |   |      |  | 266     |  
|                                                                                                |  |                                |         |   |      |  |         |  
|Balance at end of period                                                                        |  |                                | (5,062  | ) |      |  | (6,641  | )
|                                                                                                |  |                                |         |   |      |  |         |  
|Total stockholders equity                                                                      |  | $                              | 225,494 |   |      |  | 210,581 |  
|                                                                                                |  |                                |         |   |      |  |         |  

See accompanying notes to consolidated financial statements.



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Other Comprehensive Income

(Unaudited)

(Thousands of dollars)



|                                                                       |  |                                |        |   |      |  |      |  
|---------------------------------------------------------------------- |  | ------------------------------ | ------ | - | ---- |  | ---- | -
|                                                                       |  | Nine Months EndedSeptember 30, |       
|                                                                       |  | 2010                           |        |   | 2009 | 
|Net income                                                             |  | $                              | 11,124 |   |      |  | 1    |  
|                                                                       |  |                                |        |   |      |  |      |  
|Other comprehensive income                                             |  |                                |        |   |      |  |      |  
|Items related to employee benefit plans:                               |  |                                |        |   |      |  |      |  
|Reclassification adjustment for gains/(losses) included in net income: |  |                                |        |   |      |  |      |  
|Amortization of prior service cost                                     |  |                                | 6      |   |      |  | 38   |  
|Amortization of actuarial loss                                         |  |                                | 385    |   |      |  | 548  |  
|Amortization of plan amendment                                         |  |                                | (149   | ) |      |  | (149 | )
|Income tax expense related to items of other comprehensive income      |  |                                | (95    | ) |      |  | (171 | )
|                                                                       |  |                                |        |   |      |  |      |  
|Other comprehensive income                                             |  |                                | 147    |   |      |  | 266  |  
|                                                                       |  |                                |        |   |      |  |      |  
|Comprehensive income                                                   |  | $                              | 11,271 |   |      |  | 267  |  
|                                                                       |  |                                |        |   |      |  |      |  

See accompanying notes to consolidated financial statements.



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##### Table of Contents



DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to
Consolidated Financial Statements

Note 1  Accounting Policies

Basis of Presentation

The consolidated financial statements have been prepared by Deltic
Timber Corporation (the Company or Deltic). Certain information and accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted pursuant to such rules and regulations of the Securities and Exchange Commission. Although management of the Company believes the disclosures contained herein are adequate to make the information
presented not misleading, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys annual report on Form 10-K for the fiscal year ended
December 31, 2009. Preparation of consolidated financial statements requires management to make estimates and assumptions. These estimates and assumptions affect reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Management believes the accompanying consolidated financial statements contain all adjustments, including normal recurring accruals and
adjustments, which in the opinion of management are necessary to present fairly its financial position as of September 30, 2010, and the results of its operations and cash flows for the three months and nine months ended September 30, 2010
and 2009. These consolidated financial statements are not necessarily indicative of results to be expected for the full year. The Company has evaluated subsequent events through the date the financial statements were issued.

Recently Issued Authoritative Accounting Pronouncements and Guidance

Financial Accounting Standards update No. 2010-06, Improving Disclosures about Fair Value Measurements is effective
January 1, 2010, for the Company and requires more detailed information about valuation techniques, inputs used in determining fair value, and transfers into and out of Level 1 and Level 2 of the fair value hierarchy.

Effective January 1, 2011, the Company must comply with new revenue recognition guidance established by Financial Accounting Standards Update
No. 2009-13, Multiple-Deliverable Revenue Arrangements. The Company believes that the impact of the new guidance upon adoption will not be material to its consolidated financial statements.

Note 2  Inventories

Inventories at
the balance sheet dates consisted of the following:



|                       |  |               |       |  |              |  |       | 
|---------------------- |  | ------------- | ----- |  | ------------ |  | ----- | 
|(Thousands of dollars) |  | Sept. 30,2010 |       |  | Dec. 31,2009 | 
|                       |  |              
|Logs                   |  | $             | 2,463 |  |              |  | 1,367 | 
|Lumber                 |  |               | 3,884 |  |              |  | 4,211 | 
|Materials and supplies |  |               | 608   |  |              |  | 339   | 
|                       |  |               |       |  |              |  |       | 
|                       |  | $             | 6,955 |  |              |  | 5,917 | 
|                       |  |               |       |  |              |  |       | 



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements





Note 3  Prepaid Expenses and Other
Current Assets

Prepaid expenses and other current assets at the balance sheet dates consisted of the following:



|                               |  |               |       |  |              |  |       | 
|------------------------------ |  | ------------- | ----- |  | ------------ |  | ----- | 
|(Thousands of dollars)         |  | Sept. 30,2010 |       |  | Dec. 31,2009 | 
|Short-term deferred tax assets |  | $             | 2,126 |  |              |  | 1,989 | 
|Refundable income taxes        |  |               | 348   |  |              |  |      | 
|Prepaid expenses               |  |               | 522   |  |              |  | 216   | 
|Other current assets           |  |               | 507   |  |              |  | 637   | 
|                               |  |               |       |  |              |  |       | 
|                               |  | $             | 3,503 |  |              |  | 2,842 | 
|                               |  |               |       |  |              |  |       | 

Note 4  Investment in Del-Tin Fiber

The Company owns 50 percent of the membership of Del-Tin Fiber L.L.C. (Del-Tin), which operates a medium density fiberboard (MDF) plant near El Dorado, Arkansas. The Companys
membership in Del-Tin is discussed in more detail in Note 4  Investment in Del-Tin Fiber, in the Companys 2009 annual report on Form 10-K.

On August 26, 2004, the Company executed a guarantee agreement in connection with the refinancing of the debt of Del-Tin, which included both a five-year term loan and a long-term bond obligation. In
connection with the bond obligation, Del-Tin obtained a letter of credit in support of the bond obligation and both Deltic and the other joint venture partner agreed to guarantee Del-Tins performance under the letter of credit at inception.
The Companys guarantee under the letter of credit expires on August 31, 2011. In connection with the issuance of Deltics original guarantee of the letter of credit, the fair value of the guarantee of the bonds was determined to be
de minimus. In reviewing the payment/performance risk associated with this guarantee, Deltic continues to consider the risk minimal based on Del-Tins balance sheet, past performance, and length of time remaining on the guarantee. The
Companys guarantee of the $30,000,000, five-year term loan expired in September of 2009.

At September 30, 2010, and
December 31, 2009, the Companys share of the underlying net assets of Del-Tin exceeded its investment by $16,210,000 and $16,580,000, respectively. The difference relates primarily to the Companys write-off of its carrying amount
for its investment in Del-Tin as of December 31, 2002, which was not recorded by Del-Tin. The equity in earnings of Del-Tin recognized by the Company exceeds its ownership percentage of Del-Tins earnings because the difference in basis
between the Company and Del-Tin is being adjusted to account for Del-Tins operating results as if it were a consolidated subsidiary.



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##### Table of Contents

DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 4  Investment in Del-Tin Fiber (cont.)





The financial position for
Del-Tin as of the balance sheet dates and results of operations consisted of the following:

Condensed Balance Sheet Information



|                                       |  |               |        |  |             |  |        | 
|-------------------------------------- |  | ------------- | ------ |  | ----------- |  | ------ | 
|(Thousands of dollars)                 |  | Sept. 30,2010 |        |  | Jan. 2,2010 | 
|Current assets                         |  | $             | 8,309  |  |             |  | 7,396  | 
|Property, plant, and equipment  net   |  |               | 72,977 |  |             |  | 75,438 | 
|Other noncurrent assets                |  |               | 33     |  |             |  | 63     | 
|                                       |  |               |        |  |             |  |        | 
|Total assets                           |  | $             | 81,319 |  |             |  | 82,897 | 
|                                       |  |               |        |  |             |  |        | 
|Current liabilities                    |  | $             | 2,591  |  |             |  | 2,528  | 
|Long-term debt                         |  |               | 29,000 |  |             |  | 29,000 | 
|Members capital                       |  |               | 49,728 |  |             |  | 51,369 | 
|                                       |  |               |        |  |             |  |        | 
|Total liabilities and members capital |  | $             | 81,319 |  |             |  | 82,897 | 
|                                       |  |               |        |  |             |  |        | 

Condensed Income Statement Information



|                                    |  |                                 |        |   |                                |  |        |      |  |  |        |   |  |  |        |  
|----------------------------------- |  | ------------------------------- | ------ | - | ------------------------------ |  | ------ | ---- |  |  | ------ | - |  |  | ------ | -
|                                    |  | Three Months EndedSeptember 30, |        |   | Nine Months EndedSeptember 30, | 
|(Thousands of dollars)              |  | 2010                            |        |   | 2009                           |  |        | 2010 |  |  | 2009   |  
|Net sales                           |  | $                               | 15,664 |   |                                |  | 12,313 |      |  |  | 52,129 |   |  |  | 39,376 |  
|                                    |  |                                 |        |   |                                |  |        |      |  |  |        |   |  |  |        |  
|Costs and expenses                  |  |                                 |        |   |                                |  |        |      |  |  |        |   |  |  |        |  
|Cost of sales                       |  |                                 | 12,072 |   |                                |  | 9,606  |      |  |  | 39,594 |   |  |  | 30,147 |  
|Depreciation                        |  |                                 | 1,291  |   |                                |  | 1,124  |      |  |  | 4,108  |   |  |  | 3,452  |  
|General and administrative expenses |  |                                 | 590    |   |                                |  | 513    |      |  |  | 1,934  |   |  |  | 1,579  |  
|                                    |  |                                 |        |   |                                |  |        |      |  |  |        |   |  |  |        |  
|Total costs and expenses            |  |                                 | 13,953 |   |                                |  | 11,243 |      |  |  | 45,636 |   |  |  | 35,178 |  
|                                    |  |                                 |        |   |                                |  |        |      |  |  |        |   |  |  |        |  
|Operating income                    |  |                                 | 1,711  |   |                                |  | 1,070  |      |  |  | 6,493  |   |  |  | 4,198  |  
|Interest income                     |  |                                 | 52     |   |                                |  | 29     |      |  |  | 150    |   |  |  | 81     |  
|Interest and other debt expenses    |  |                                 | (197   | ) |                                |  | (312   | )    |  |  | (566   | ) |  |  | (913   | )
|Other loss                          |  |                                 | (27    | ) |                                |  | (77    | )    |  |  | (81    | ) |  |  | (83    | )
|                                    |  |                                 |        |   |                                |  |        |      |  |  |        |   |  |  |        |  
|Net income                          |  | $                               | 1,539  |   |                                |  | 710    |      |  |  | 5,996  |   |  |  | 3,283  |  
|                                    |  |                                 |        |   |                                |  |        |      |  |  |        |   |  |  |        |  



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements





Note 5  Timber and Timberlands

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



|                                                                          |  |               |         |   |              |  |         |  
|------------------------------------------------------------------------- |  | ------------- | ------- | - | ------------ |  | ------- | -
|(Thousands of dollars)                                                    |  | Sept. 30,2010 |         |   | Dec. 31,2009 | 
|Purchased stumpage inventory                                              |  | $             | 2,116   |   |              |  | 2,449   |  
|Timberlands                                                               |  |               | 92,098  |   |              |  | 92,032  |  
|Fee timber                                                                |  |               | 227,062 |   |              |  | 224,002 |  
|Logging facilities                                                        |  |               | 2,543   |   |              |  | 2,301   |  
|                                                                          |  |               |         |   |              |  |         |  
|                                                                          |  |               | 323,819 |   |              |  | 320,784 |  
|Less accumulated cost of fee timber harvested and facilities depreciation |  |               | (98,729 | ) |              |  | (94,096 | )
|                                                                          |  |               |         |   |              |  |         |  
|Strategic timber and timberlands                                          |  |               | 225,090 |   |              |  | 226,688 |  
|Non-strategic timber and timberlands                                      |  |               | 1,731   |   |              |  | 2,205   |  
|                                                                          |  |               |         |   |              |  |         |  
|                                                                          |  | $             | 226,821 |   |              |  | 228,893 |  
|                                                                          |  |               |         |   |              |  |         |  

In 1999, the Company initiated a program to identify non-strategic timberlands for possible sale. As of
September 30, 2010 and December 31, 2009, approximately 4,800 and 6,000 acres of non-strategic timberlands were available for sale, respectively. Included in the Woodlands operating income are gains from sales of non-strategic hardwood
bottomland of $388,000 and $813,000 for the three months ended September 30, 2010 and 2009, respectively, and $1,507,000 and $2,347,000 for the nine months ended September 30, 2010 and 2009, respectively.

Note 6  Property, Plant, and Equipment

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



|                              |  |               |         |   |              |  |         |  
|----------------------------- |  | ------------- | ------- | - | ------------ |  | ------- | -
|(Thousands of dollars)        |  | Sept. 30,2010 |         |   | Dec. 31,2009 | 
|Land                          |  | $             | 125     |   |              |  | 125     |  
|Land improvements             |  |               | 6,104   |   |              |  | 5,463   |  
|Buildings and structures      |  |               | 11,323  |   |              |  | 11,056  |  
|Machinery and equipment       |  |               | 97,537  |   |              |  | 94,993  |  
|                              |  |               |         |   |              |  |         |  
|                              |  |               | 115,089 |   |              |  | 111,637 |  
|Less accumulated depreciation |  |               | (82,698 | ) |              |  | (77,751 | )
|                              |  |               |         |   |              |  |         |  
|                              |  | $             | 32,391  |   |              |  | 33,886  |  
|                              |  |               |         |   |              |  |         |  



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements





Note 7  Income Taxes

The Companys effective tax rate for the three months and nine months ended September 30, 2010, was 38 percent and 35
percent, respectively. The Companys policy is to recognize interest expense related to unrecognized tax benefits in interest expense and penalties in other expenses. If the Company were to prevail on all unrecognized tax benefits recorded on
the balance sheet, approximately $2,479,000 would benefit the effective rate.

The Company is no longer subject to U.S. federal and
state examinations by tax authorities for years before 2007.

Note 8  Deferred Revenues and Other Accrued Liabilities

Deferred revenues and other accrued liabilities at the balance sheet dates consisted of the following:



|                              |  |               |        |  |              |  |       | 
|----------------------------- |  | ------------- | ------ |  | ------------ |  | ----- | 
|(Thousands of dollars)        |  | Sept. 30,2010 |        |  | Dec. 31,2009 | 
|                              |  |              
|Deferred revenues  current   |  | $             | 6,597  |  |              |  | 3,614 | 
|Dividend payable              |  |               | 937    |  |              |  |      | 
|Vacation accrual              |  |               | 1,019  |  |              |  | 938   | 
|Deferred compensation         |  |               | 2,458  |  |              |  | 1,054 | 
|All other current liabilities |  |               | 1,981  |  |              |  | 1,375 | 
|                              |  |               |        |  |              |  |       | 
|                              |  | $             | 12,992 |  |              |  | 6,981 | 
|                              |  |               |        |  |              |  |       | 

Note 9  Other Noncurrent Liabilities

Other noncurrent liabilities at the balance sheet dates consisted of the following:



|                                              |  |               |        |  |              |  |        | 
|--------------------------------------------- |  | ------------- | ------ |  | ------------ |  | ------ | 
|(Thousands of dollars)                        |  | Sept. 30,2010 |        |  | Dec. 31,2009 | 
|                                              |  |              
|Accumulated postretirement benefit obligation |  | $             | 8,869  |  |              |  | 8,355  | 
|Accrued pension liability                     |  |               | 8,738  |  |              |  | 8,877  | 
|Deferred revenue  long term portion          |  |               | 1,402  |  |              |  | 1,494  | 
|Other noncurrent liabilities                  |  |               | 8,608  |  |              |  | 7,406  | 
|                                              |  |               |        |  |              |  |        | 
|                                              |  | $             | 27,617 |  |              |  | 26,132 | 
|                                              |  |               |        |  |              |  |        | 



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements





Note 10  Employee and Retiree
Benefit Plans

Components of net periodic retirement expense and other postretirement benefits expense consisted of the following:



|                                          |  |                                 |      |   |                                |  |      |      |  |  |        |   |  |  |       |  
|----------------------------------------- |  | ------------------------------- | ---- | - | ------------------------------ |  | ---- | ---- |  |  | ------ | - |  |  | ----- | -
|                                          |  | Three MonthsEnded September 30, |      |   | Nine MonthsEnded September 30, | 
|(Thousands of dollars)                    |  | 2010                            |      |   | 2009                           |  |      | 2010 |  |  | 2009   |  
|Funded qualified retirement plan          |  |                                 |      |   |                                |  |      |      |  |  |        |   |  |  |       |  
|Service cost                              |  | $                               | 282  |   |                                |  | 277  |      |  |  | 847    |   |  |  | 830   |  
|Interest cost                             |  |                                 | 407  |   |                                |  | 396  |      |  |  | 1,221  |   |  |  | 1,189 |  
|Expected return on plan assets            |  |                                 | (361 | ) |                                |  | (297 | )    |  |  | (1,083 | ) |  |  | (893  | )
|Amortization of prior service cost        |  |                                 | 5    |   |                                |  | 15   |      |  |  | 14     |   |  |  | 46    |  
|Amortization of actuarial loss            |  |                                 | 109  |   |                                |  | 171  |      |  |  | 325    |   |  |  | 514   |  
|                                          |  |                                 |      |   |                                |  |      |      |  |  |        |   |  |  |       |  
|Net retirement expense                    |  | $                               | 442  |   |                                |  | 562  |      |  |  | 1,324  |   |  |  | 1,686 |  
|                                          |  |                                 |      |   |                                |  |      |      |  |  |        |   |  |  |       |  
|                                          |  |                                 |      |  
|Unfunded nonqualified retirement plan     |  |                                 |      |   |                                |  |      |      |  |  |        |   |  |  |       |  
|Service cost                              |  | $                               | 33   |   |                                |  | 28   |      |  |  | 100    |   |  |  | 84    |  
|Interest cost                             |  |                                 | 57   |   |                                |  | 49   |      |  |  | 171    |   |  |  | 148   |  
|Amortization of prior service cost        |  |                                 | (3   | ) |                                |  | (2   | )    |  |  | (8     | ) |  |  | (8    | )
|Amortization of actuarial loss            |  |                                 | 20   |   |                                |  | 11   |      |  |  | 60     |   |  |  | 34    |  
|                                          |  |                                 |      |   |                                |  |      |      |  |  |        |   |  |  |       |  
|Net retirement expense                    |  | $                               | 107  |   |                                |  | 86   |      |  |  | 323    |   |  |  | 258   |  
|                                          |  |                                 |      |   |                                |  |      |      |  |  |        |   |  |  |       |  
|                                          |  |                                 |      |  
|Other postretirement benefits             |  |                                 |      |   |                                |  |      |      |  |  |        |   |  |  |       |  
|Service cost                              |  | $                               | 81   |   |                                |  | 81   |      |  |  | 245    |   |  |  | 243   |  
|Interest cost                             |  |                                 | 118  |   |                                |  | 119  |      |  |  | 351    |   |  |  | 358   |  
|Amortization of plan amendment            |  |                                 | (50  | ) |                                |  | (50  | )    |  |  | (149   | ) |  |  | (149  | )
|                                          |  |                                 |      |   |                                |  |      |      |  |  |        |   |  |  |       |  
|Net other postretirement benefits expense |  | $                               | 149  |   |                                |  | 150  |      |  |  | 447    |   |  |  | 452   |  
|                                          |  |                                 |      |   |                                |  |      |      |  |  |        |   |  |  |       |  

The Company made contributions to its qualified plan of $1,125,000 during the first nine months of 2010, and expects
to continue to fund the plan at the same monthly level over the remainder of 2010.

U.S. health care legislation enacted earlier in the
year is expected to affect companies that offer post-employment benefits to employees. Based on managements current understanding of this new legislation and the types of benefits currently offered by the benefit plan, the financial impact to
the Company was immaterial and did not require a remeasurement of its other post-retirement benefits obligation.



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements





Note 11  Stock-Based Compensation

The Consolidated Statement of Income for the three months ended September 30, 2010 and 2009, included $497,000 and $438,000,
respectively, of stock-based compensation expense reflected in general and administrative expenses. For the nine months ended September 30, 2010 and 2009, the amounts were $1,474,000 and $1,293,000, respectively.

Assumptions for the valuation of 2010 stock options and restricted stock performance units consisted of the following:



|                                                      |  |      |       |  
|----------------------------------------------------- |  | ---- | ----- | -
|                                                      |  | 2010 |      
|Expected term of options (in years)                   |  |      | 6.27  |  
|Weighted expected volatility                          |  |      | 34.57 | %
|Dividend yield                                        |  |      | .61   | %
|Risk-free interest rate performance restricted shares |  |      | 2.13  | %
|Risk-free interest rate  options                     |  |      | 3.92  | %
|Stock price as of valuation date                      |  | $    | 44.84 |  

Stock Options  A summary of
stock options as of September 30, 2010, and changes during the nine-month period then ended are presented below:



|                                  |  |        |         |   |                              |   |       |                                                 |  |  |                               |  |  |   |     | 
|--------------------------------- |  | ------ | ------- | - | ---------------------------- | - | ----- | ----------------------------------------------- |  |  | ----------------------------- |  |  | - | --- | 
|Options                           |  | Shares |         |   | WeightedAverageExercisePrice |   |       | WeightedAverageRemainingContractualTerm (Years) |  |  | AggregateIntrinsicValue($000) | 
|Outstanding at January 1, 2010    |  |        | 168,914 |   |                              | $ | 42.97 |                                                 |  |  |                               |  |  |   |     | 
|                                  |  |        |         |  
|Granted                           |  |        | 32,159  |   |                              |   | 44.84 |                                                 |  |  |                               |  |  |   |     | 
|Exercised                         |  |        | (4,858  | ) |                              |   | 33.78 |                                                 |  |  |                               |  |  |   |     | 
|                                  |  |        |         |   |                              |   |       |                                                 |  |  |                               |  |  |   |     | 
|Outstanding at September 30, 2010 |  |        | 196,215 |   |                              | $ | 43.51 |                                                 |  |  | 6.4                           |  |  | $ | 900 | 
|                                  |  |        |         |   |                              |   |       |                                                 |  |  |                               |  |  |   |     | 
|                                  |  |        |         |  
|Exercisable at September 30, 2010 |  |        | 111,496 |   |                              | $ | 43.38 |                                                 |  |  | 4.9                           |  |  | $ | 607 | 
|                                  |  |        |         |   |                              |   |       |                                                 |  |  |                               |  |  |   |     | 

The aggregate intrinsic value in the table above is the sum of the amounts by which the quoted market price of the
Companys common stock exceeded the exercise price of the options at September 30, 2010, for those options for which the quoted market price was in excess of the exercise price. This amount changes over time based on changes in the fair
market value of the Companys stock. As of September 30, 2010, there was $880,000 of unrecognized compensation cost related to nonvested stock options. That cost is expected to be recognized over a weighted-average period of 1.9 years.



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 11  Stock-Based Compensation (cont.)





Restricted Stock and
Restricted Stock Units A summary of nonvested restricted stock as of September 30, 2010, and changes during the nine-month period then ended are presented below:



|                                |  |        |         |   |                                     |   |       | 
|------------------------------- |  | ------ | ------- | - | ----------------------------------- | - | ----- | 
|Nonvested Restricted Stock      |  | Shares |         |   | WeightedAverageGrant-DateFair Value |  
|Nonvested at January 1, 2010    |  |        | 70,963  |   |                                     | $ | 46.89 | 
|                                |  |       
|Granted                         |  |        | 20,733  |   |                                     |   | 44.84 | 
|Vested                          |  |        | (12,231 | ) |                                     |   | 53.23 | 
|                                |  |        |         |   |                                     |   |       | 
|                                |  |       
|Nonvested at September 30, 2010 |  |        | 79,465  |   |                                     | $ | 45.38 | 
|                                |  |        |         |   |                                     |   |       | 

As of September 30, 2010, there was $1,609,000 of unrecognized compensation cost related to nonvested
restricted stock. That cost is expected to be recognized over a weighted-average period of 1.9 years.

Performance Units  A
summary of nonvested restricted stock performance units as of September 30, 2010, and changes during the nine months then ended are presented below:



|                                             |  |        |        |   |                                     |   |       | 
|-------------------------------------------- |  | ------ | ------ | - | ----------------------------------- | - | ----- | 
|Nonvested Restricted Stock Performance Units |  | Shares |        |   | WeightedAverageGrant-DateFair Value |  
|Nonvested at January 1, 2010                 |  |        | 46,874 |   |                                     | $ | 51.15 | 
|                                             |  |       
|Granted                                      |  |        | 14,471 |   |                                     |   | 58.66 | 
|Vested                                       |  |        | (9,359 | ) |                                     |   | 55.93 | 
|                                             |  |        |        |   |                                     |   |       | 
|                                             |  |       
|Nonvested at September 30, 2010              |  |        | 51,986 |   |                                     | $ | 52.38 | 
|                                             |  |        |        |   |                                     |   |       | 

As of September 30, 2010, there was $1,368,000 of unrecognized compensation cost related to nonvested
restricted stock performance units. That cost is expected to be recognized over a weighted-average period of 2 years.

Note 12  Contingencies

At various times, the Company may be involved in litigation incidental to its operations. Currently, there are no material legal
proceedings outstanding.



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements





Note 13  Fair Value Measurement

Fair Value Measurement Accounting establishes a fair value hierarchy based on the quality of inputs used to measure fair value, with
Level 1 being the highest quality and Level 3 being the lowest quality. Level 1 inputs are quoted prices in active markets on identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included in Level 1. Level 3
inputs are unobservable inputs which reflect assumptions about pricing by market participants.

Following is a description of the
valuation methodologies used for liabilities measured at fair value.

Nonqualified employee savings plan: Consists of mutual
funds, which are valued at the net asset value of shares held by the plan at the balance sheet date, at quoted market prices.

The fair
value measurements for the Companys financial liabilities accounted for at fair value on a recurring basis at September 30, 2010, are presented in the following table:



|                                   |  |               |     |  |                                                               |  |     |                             |  |  |                               |  |  |  |   | 
|---------------------------------- |  | ------------- | --- |  | ------------------------------------------------------------- |  | --- | --------------------------- |  |  | ----------------------------- |  |  |  | - | 
|                                   |  |               |     |  | Fair Value Measurements at Reporting Date Using               | 
|(Thousands of dollars)             |  | Sept. 30,2010 |     |  | Quoted prices inActive Markets forIdentical LiabilitiesInputs |  |     | SignificantObservableInputs |  |  | SignificantUnobservableInputs | 
|                                   |  | Level 1       |     |  | Level 2                                                       |  |     | Level 3                     | 
|Liabilities                        |  |               |     |  |                                                               |  |     |                             |  |  |                               |  |  |  |   | 
|Nonqualified employee savings plan |  | $             | 706 |  |                                                               |  | 706 |                             |  |  |                              |  |  |  |  | 
|                                   |  |               |     |  |                                                               |  |     |                             |  |  |                               |  |  |  |   | 

Long-term debt, including current liabilities  The fair value is estimated by discounting the scheduled
debt payment streams to present value based on market rates for which the Companys debt could be refinanced.

The following table
presents the carrying amounts and estimated fair values of the Companys financial instruments at September 30, 2010. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current
transaction between willing parties. The table excludes financial instruments included in current assets and liabilities, except current maturities of long-term debt, all of which have fair values approximating carrying values.



|                                              |  |                |        |  |                     |  |        | 
|--------------------------------------------- |  | -------------- | ------ |  | ------------------- |  | ------ | 
|                                              |  | 2010           |       
|(Thousands of dollars)                        |  | CarryingAmount |        |  | EstimatedFair Value | 
|Financial liabilities                         |  |                |        |  |                     |  |        | 
|Long-term debt, including current liabilities |  | $              | 70,778 |  |                     |  | 75,679 | 



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##### Table of Contents

DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements





Note 14  Earnings per Common Share

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



|                                                                                                           |      |                                 |        |      |                                |  |        |  |  |      |        |  |  |  |        | 
|---------------------------------------------------------------------------------------------------------- | ---- | ------------------------------- | ------ | ---- | ------------------------------ |  | ------ |  |  | ---- | ------ |  |  |  | ------ | 
|(Thousands, except per share amounts)                                                                      |      | Three Months EndedSeptember 30, |        |      | Nine Months EndedSeptember 30, | 
|                                                                                                           | 2010 |                                 |        | 2009 |                                |  | 2010   |  |  | 2009 |       
|Net income                                                                                                 |      | $                               | 3,278  |      |                                |  | 203    |  |  |      | 11,124 |  |  |  | 1      | 
|                                                                                                           |      |                                 |        |      |                                |  |        |  |  |      |        |  |  |  |        | 
|                                                                                                           |      |                                 |        |     
|Weighted average number of common shares used in basic EPS                                                 |      |                                 | 12,368 |      |                                |  | 12,323 |  |  |      | 12,362 |  |  |  | 12,314 | 
|Potentially dilutive shares                                                                                |      |                                 | 49     |      |                                |  | 76     |  |  |      | 57     |  |  |  | 95     | 
|                                                                                                           |      |                                 |        |      |                                |  |        |  |  |      |        |  |  |  |        | 
|Weighted average number of common shares and dilutive potential common stock used in EPS assuming dilution |      |                                 | 12,417 |      |                                |  | 12,399 |  |  |      | 12,419 |  |  |  | 12,409 | 
|                                                                                                           |      |                                 |        |      |                                |  |        |  |  |      |        |  |  |  |        | 
|                                                                                                           |      |                                 |        |     
|Earnings per common share                                                                                  |      |                                 |        |      |                                |  |        |  |  |      |        |  |  |  |        | 
|Basic                                                                                                      |      | $                               | .26    |      |                                |  | .02    |  |  |      | .89    |  |  |  |       | 
|Assuming dilution                                                                                          |      | $                               | .26    |      |                                |  | .02    |  |  |      | .89    |  |  |  |       | 

Diluted earnings per common share is
computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of common stock equivalents using the treasury stock method. Options to purchase shares, which were
outstanding but not included in the computation of diluted earnings per share because the options were anti-dilutive, were 129,364 and 78,447 for the three months ended September 30, 2010 and 2009, respectively, and 77,534 and 98,298 for the
nine months ended September 30, 2010 and 2009, respectively. Restricted performance shares, which were outstanding but not included in the computation of diluted earnings per share because they do not meet the metrics established for awarding,
were 30,259 for the three months and nine months ended September 30, 2010 and 16,004 for the three months and nine months ended September 30, 2009.

Note 15  Supplemental Cash Flow Disclosures

Additional information concerning cash flows
is as follows:



|                          |  |                                |       |  |      |  |       | 
|------------------------- |  | ------------------------------ | ----- |  | ---- |  | ----- | 
|                          |  | Nine Months EndedSeptember 30, |      
|(Thousands of dollars)    |  | 2010                           |       |  | 2009 | 
|Income taxes paid in cash |  | $                              | 6,054 |  |      |  | 424   | 
|Interest paid             |  |                                | 1,834 |  |      |  | 1,893 | 



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##### Table of Contents

DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 15  Supplemental Cash Flow Disclosures (cont.)





Non-cash investing and
financing activities excluded from the statement of cash flows include:



|                             |  |                                |       |  |      |  |       | 
|---------------------------- |  | ------------------------------ | ----- |  | ---- |  | ----- | 
|                             |  | Nine Months EndedSeptember 30, |      
|(Thousands of dollars)       |  | 2010                           |       |  | 2009 | 
|Issuance of restricted stock |  | $                              | 1,540 |  |      |  | 1,859 | 
|Land exchanges               |  |                                |      |  |      |  | 35    | 

(Increases)/decreases in working capital,
other than cash and cash equivalents, consisted of the following:



|                                                |  |                                |        |   |      |  |        |  
|----------------------------------------------- |  | ------------------------------ | ------ | - | ---- |  | ------ | -
|                                                |  | Nine Months EndedSeptember 30, |       
|(Thousands of dollars)                          |  | 2010                           |        |   | 2009 | 
|Trade accounts receivable                       |  | $                              | (555   | ) |      |  | (2,023 | )
|Other receivables                               |  |                                | 15     |   |      |  | 54     |  
|Inventories                                     |  |                                | (1,038 | ) |      |  | 1,607  |  
|Prepaid expenses and other current assets       |  |                                | (513   | ) |      |  | 91     |  
|Trade accounts payable                          |  |                                | 403    |   |      |  | 2,148  |  
|Accrued taxes other than income taxes           |  |                                | 1,245  |   |      |  | 213    |  
|Deferred revenues and other accrued liabilities |  |                                | 6,009  |   |      |  | 1,341  |  
|                                                |  |                                |        |   |      |  |        |  
|                                                |  | $                              | 5,566  |   |      |  | 3,431  |  
|                                                |  |                                |        |   |      |  |        |  

For the nine months ended September 30, 2010 and 2009, the Company recorded $3,584,000 and $226,000,
respectively, in mineral lease rental receipts and deposits on future mineral leases, which were included in cash flows provided by operating activities. These deferred amounts will be recognized over the term of the lease when the leases become
effective.



16



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##### Table of Contents

DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements





Note 16  Business Segments

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



|                                                             |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |         |  
|------------------------------------------------------------ |  | ------------------------------- | ------ | - | ------------------------------ |  | ------ | ---- |  |  | ------- | - |  |  | ------- | -
|                                                             |  | Three Months EndedSeptember 30, |        |   | Nine Months EndedSeptember 30, | 
|(Thousands of dollars)                                       |  | 2010                            |        |   | 2009                           |  |        | 2010 |  |  | 2009    |  
|Net sales                                                    |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |         |  
|Woodlands                                                    |  | $                               | 9,939  |   |                                |  | 8,884  |      |  |  | 30,378  |   |  |  | 29,082  |  
|Mills                                                        |  |                                 | 23,126 |   |                                |  | 21,631 |      |  |  | 77,637  |   |  |  | 58,447  |  
|Real Estate                                                  |  |                                 | 8,511  |   |                                |  | 2,238  |      |  |  | 13,239  |   |  |  | 6,865   |  
|Eliminations*                                                |  |                                 | (4,526 | ) |                                |  | (3,766 | )    |  |  | (13,332 | ) |  |  | (13,424 | )
|                                                             |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |         |  
|                                                             |  | $                               | 37,050 |   |                                |  | 28,987 |      |  |  | 107,922 |   |  |  | 80,970  |  
|                                                             |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |         |  
|                                                             |  |                                 |        |  
|Income before income taxes                                   |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |         |  
|Operating income                                             |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |         |  
|Woodlands                                                    |  | $                               | 4,928  |   |                                |  | 4,568  |      |  |  | 16,465  |   |  |  | 16,705  |  
|Mills                                                        |  |                                 | (263   | ) |                                |  | 62     |      |  |  | 8,440   |   |  |  | (5,438  | )
|Real Estate                                                  |  |                                 | 4,011  |   |                                |  | (717   | )    |  |  | 2,760   |   |  |  | (2,194  | )
|Corporate                                                    |  |                                 | (3,658 | ) |                                |  | (3,366 | )    |  |  | (11,570 | ) |  |  | (9,203  | )
|Eliminations                                                 |  |                                 | 115    |   |                                |  | (92    | )    |  |  | (93     | ) |  |  | 841     |  
|                                                             |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |         |  
|Operating income                                             |  |                                 | 5,133  |   |                                |  | 455    |      |  |  | 16,002  |   |  |  | 711     |  
|                                                             |  |                                 |        |  
|Equity in earnings of Del-Tin Fiber                          |  |                                 | 978    |   |                                |  | 522    |      |  |  | 3,669   |   |  |  | 2,157   |  
|Interest income                                              |  |                                 | 12     |   |                                |  | 24     |      |  |  | 140     |   |  |  | 33      |  
|Interest and other debt expense                              |  |                                 | (847   | ) |                                |  | (890   | )    |  |  | (2,669  | ) |  |  | (2,718  | )
|Interest capitalized                                         |  |                                 | 20     |   |                                |  | 24     |      |  |  | 53      |   |  |  | 125     |  
|Other income/(loss)                                          |  |                                 | (10    | ) |                                |  | (89    | )    |  |  | 42      |   |  |  | 41      |  
|                                                             |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |         |  
|                                                             |  | $                               | 5,286  |   |                                |  | 46     |      |  |  | 17,237  |   |  |  | 349     |  
|                                                             |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |         |  
|                                                             |  |                                 |        |  
|Depreciation, amortization, and cost of fee timber harvested |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |         |  
|Woodlands                                                    |  | $                               | 2,001  |   |                                |  | 1,345  |      |  |  | 4,803   |   |  |  | 4,042   |  
|Mills                                                        |  |                                 | 1,659  |   |                                |  | 1,700  |      |  |  | 5,013   |   |  |  | 5,398   |  
|Real Estate                                                  |  |                                 | 110    |   |                                |  | 113    |      |  |  | 334     |   |  |  | 366     |  
|Corporate                                                    |  |                                 | 24     |   |                                |  | 21     |      |  |  | 63      |   |  |  | 65      |  
|                                                             |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |         |  
|                                                             |  | $                               | 3,794  |   |                                |  | 3,179  |      |  |  | 10,213  |   |  |  | 9,871   |  
|                                                             |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |         |  
|                                                             |  |                                 |        |  
|Capital expenditures                                         |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |         |  
|Woodlands                                                    |  | $                               | 1,261  |   |                                |  | 2,780  |      |  |  | 3,595   |   |  |  | 7,524   |  
|Mills                                                        |  |                                 | 998    |   |                                |  | 664    |      |  |  | 3,406   |   |  |  | 2,058   |  
|Real Estate                                                  |  |                                 | 345    |   |                                |  | 74     |      |  |  | 1,560   |   |  |  | 707     |  
|Corporate                                                    |  |                                 | 79     |   |                                |  | 8      |      |  |  | 200     |   |  |  | 50      |  
|                                                             |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |         |  
|                                                             |  | $                               | 2,683  |   |                                |  | 3,526  |      |  |  | 8,761   |   |  |  | 10,339  |  
|                                                             |  |                                 |        |   |                                |  |        |      |  |  |         |   |  |  |         |  

*Primarily intersegment sales of timber from Woodlands to Mills.



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

Executive Overview

Deltic recorded net income of $3.3 million for the third quarter of
2010, compared to income of $.2 million for the same period of 2009. The increase is primarily due to the sale of 19 acres of commercial real estate in Chenal Valley in the third quarter of 2010. This sale benefited the Real Estate segment which
reported income of $4 million during the current period, an improvement of $4.8 million when compared to the $.8 million loss the segment reported in 2009s third quarter. The Woodlands segment reported income of $5 million during the third
quarter of 2010, an increase from $4.6 million in the third quarter of 2009 primarily due to increased harvest volumes and oil and gas royalties. Deltics Mills segment reported an operating loss of $.3 million compared to operating income of
$.1 million in the third quarter of 2009, due mainly to higher raw material log costs. The Corporate segments operating expenses were $.3 million higher during the current-year quarter than the same period a year ago due to increased general
and administrative expenses. Deltic owns a 50 percent interest in Del-Tin Fiber, LLC (Del-Tin) and recorded equity in earnings of $1 million for the third quarter of 2010, an increase from $.6 million for the same period of 2009 due
primarily to increased sales volume.

The majority of Deltics operations are within the commodity-based wood and wood products
sector, with a significant diversification in real estate development on a portion of its landholdings. Deltics robust performance during 2010 highlights the benefits of the Companys diverse asset base and its vertical integration
policies. The Companys operating environments are affected by a number of factors including general economic conditions, employment levels, interest rates, credit availability and associated costs, imports, foreign exchange rates, housing
starts, new and existing home inventories, residential and commercial real estate foreclosures, residential repair and remodeling, commercial construction, industry capacity and production levels, the availability of raw materials, and weather
conditions. Continued high unemployment, tight credit conditions, and foreclosure uncertainties have impacted the recovery of the U.S. economy and have caused an adverse effect on housing and commercial real estate markets. Lumber prices have fallen
from the highs in the first half of this year, as supply-side pressures have eased. Buyers are also carefully managing their inventories of lumber in light of decreased demand due to the weak housing market. Given its relative size and the nature of
the markets it operates in, the Company has little or no control over pricing or demand levels for its lumber products. However, the Company is constantly looking for ways to improve the performance of its manufacturing operations and to reduce
controllable costs, while at the same time managing production levels to match market demand.

For the third quarter of 2010, the pine
sawtimber harvest increased 22,218 tons, to 159,487 tons, when compared to the 2009 third quarter harvest level of 137,269 tons. This increase was due to dryer weather conditions in the current-year period, allowing the Company to accelerate the
harvest of fee timber. The average per-ton sales price increased four percent, to $28 per ton, from the 2009 third quarter per-ton price of $27. The pine pulpwood harvest of 74,573 tons was a decrease of 5,341 tons from the harvest in the third
quarter of 2009, while the average sales price received for the pine pulpwood sold decreased $2 per ton when compared to a year ago, to $8 per ton. The decreased harvest volume and per-ton sales price was due to reduced demand from area papermills
for raw materials. The Company sold approximately 370 acres of recreational-use hardwood bottomland at an average sales price of $1,499 per acre during the third quarter of 2010 compared to sales of 649 acres at an average price of $1,682 per acre
for the same period of 2009. In addition, the segment reported hunting lease income of $.5 million for the third quarters of both 2010 and 2009.

Total mineral revenues, consisting of mineral lease rentals and net oil and gas royalties for the third quarter of 2010 were $1.5 million, compared to $.9 million in the third quarter of 2009. The majority of this
revenue currently comes from an area known as the Fayetteville Shale Play, an unconventional natural gas reservoir now being developed in the state of Arkansas. The Company has under lease or held by production approximately 31,200 net
mineral acres in the Fayetteville Shale Play. During the third quarter of 2010, the Company received net royalty payments of $.8 million from the defined Fayetteville Shale Play, compared to $.4 million received in the third quarter of 2009. The
increase was due to a larger number of wells in production when compared to a year ago. The total of all net oil and gas royalty income, inclusive of the Fayetteville Shale Play, was $1 million and $.4 million for the third quarter of 2010 and 2009,
respectively. Total income from mineral lease rentals was $.5 million in the third quarter of



18



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##### Table of Contents

both 2010 and 2009. In addition, there has been renewed interest in extracting oil found in the lower portion of the Smackover limestone formation in some of the Arkansas counties and Louisiana
parishes located along the Arkansas/Louisiana border. Deltic leased a small portion of this area to producers at the end of the third quarter. The Company has received cash deposits on more acreage in this area and expects to execute leases for
these acres during the fourth quarter of 2010. This revenue will be recognized over the term of the lease rental agreement. (For further discussion, refer to Note 15 to the Consolidated financial statements.) The ultimate benefit to Deltic from
mineral leases remains speculative and unknown to the Company and is contingent on the level of crude oil and natural gas prices and the successful extraction of oil and natural gas from these areas.

The Mills segment reported a $.3 million operating loss during the third quarter of 2010 versus operating income of $.1 million for the same period
of 2009. The variance is due to increased raw material log cost along with a slightly lower average per-unit sales price, which were partially offset by an increased sales volume during the current year. The average sales price received for lumber
sold of $259 per MBF in the third quarter of 2010 was a $2 decrease from the same period a year ago. Lumber sales were 69.2 million board feet in the current period of 2010, an increase of 5.1 million board feet from the third quarter of
2009, as the Company increased operating hours to match demand for lumber. Because of the historically volatile nature of the wood products market and current market conditions, Deltic will continue to evaluate market conditions and adjust operating
hours as needed in order to match production with market demand. In addition, Deltic expects approximately one-half of the required logs for its sawmills to come from Company fee timberlands.

The Real Estate segment sold three residential lots during the third quarter of 2010, with an average per-lot sales price of $92,000 compared to
four lots sold at an average per-lot sales price of $63,000 in 2009s third quarter. Due to the low cost basis in all of its developments, the Company is able to maintain lot sales prices, while waiting for the residential real estate market to
improve. Deltic is currently developing one neighborhood of smaller-sized lots. All 20 of these lots were placed under contract during the first quarter of 2010, prior to the Company beginning construction. Now that construction has been completed,
Deltic anticipates closings to begin in the fourth quarter of 2010. Any future development activity will depend upon the demand for Deltics residential lots and the remaining lot mix in inventory. During the third quarter of 2010, 19 acres of
commercial real estate were sold at an average price of $334,000 per acre to a major health care provider in the second phase of a two-part commercial real estate sale of a site to be developed as a lifestyle medical center. This parcel is located
near the Promenade at Chenal, an upscale shopping center within Chenal Valley and was originally scheduled to close in 2011. There were no commercial sales in the third quarter of 2009. Interest in commercial real estate in Chenal Valley
continues to remain high, especially near the proposed lifestyle medical center and the Promenade at Chenal. Because of the inherent uncertainties related to commercial real estate transactions, they are unpredictable. Due to this, the
Company cannot estimate when the increased interest will result in further commercial acres being sold.

Operating results for Del-Tin
are affected by the overall MDF market and the plants operating performance. Equity in earnings of Del-Tin increased $.4 million, to $1 million during the third quarter of 2010, when compared to 2009, due primarily to increased sales volume.
Recently announced price increases in raw material resin used to make MDF, as well as changes to a reduced formaldehyde resin are expected to impact the manufacturing cost beginning in the fourth quarter. With regard to the Companys equity
position in Del-Tin, Deltic continues to reduce depreciation expense on the basis of the volume of product manufactured at the facility, which relates to the impairment taken by the Company in 2002 that was not recorded at the Del-Tin level. The
difference in basis between the Company and Del-Tin is being adjusted to account for Del-Tins operating results as if it were a consolidated subsidiary. (For further discussion, refer to Note 4 to the consolidated financial statements.)



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##### Table of Contents



Results of Operations

Three Months Ended September 30, 2010 Compared with Three Months Ended September 30, 2009

In the following tables, Deltics net sales and results of operations are presented for the quarters ended September 30, 2010 and 2009.
Explanations of significant variances and additional analyses for the Companys consolidated and segment operations follow the tables.



|                                                |  |                         |      |   |      |  |      |  
|----------------------------------------------- |  | ----------------------- | ---- | - | ---- |  | ---- | -
|                                                |  | Quarter Ended Sept. 30, |     
|(Millions of dollars, except per share amounts) |  | 2010                    |      |   | 2009 | 
|Net sales                                       |  |                         |      |   |      |  |      |  
|Woodlands                                       |  | $                       | 9.9  |   |      |  | 8.9  |  
|Mills                                           |  |                         | 23.1 |   |      |  | 21.6 |  
|Real Estate                                     |  |                         | 8.5  |   |      |  | 2.3  |  
|Eliminations                                    |  |                         | (4.5 | ) |      |  | (3.8 | )
|                                                |  |                         |      |   |      |  |      |  
|Net sales                                       |  | $                       | 37.0 |   |      |  | 29.0 |  
|                                                |  |                         |      |   |      |  |      |  
|                                                |  |                        
|Operating income                                |  |                         |      |   |      |  |      |  
|Woodlands                                       |  | $                       | 5.0  |   |      |  | 4.6  |  
|Mills                                           |  |                         | (.3  | ) |      |  | .1   |  
|Real Estate                                     |  |                         | 4.0  |   |      |  | (.8  | )
|Corporate                                       |  |                         | (3.7 | ) |      |  | (3.4 | )
|Eliminations                                    |  |                         | .1   |   |      |  | (.1  | )
|                                                |  |                         |      |   |      |  |      |  
|Operating income                                |  |                         | 5.1  |   |      |  | .4   |  
|                                                |  |                        
|Equity in earnings of Del-Tin Fiber             |  |                         | 1.0  |   |      |  | .6   |  
|Interest and other debt expense                 |  |                         | (.9  | ) |      |  | (.9  | )
|Interest capitalized                            |  |                         | .1   |   |      |  |     |  
|Other income                                    |  |                         |     |   |      |  | (.1  | )
|Income taxes                                    |  |                         | (2.0 | ) |      |  | .2   |  
|                                                |  |                         |      |   |      |  |      |  
|Net income                                      |  | $                       | 3.3  |   |      |  | .2   |  
|                                                |  |                         |      |   |      |  |      |  
|                                                |  |                        
|Earnings per common share                       |  |                         |      |   |      |  |      |  
|Basic and diluted                               |  | $                       | .26  |   |      |  | .02  |  

Consolidated

The $3.1 million increase in net income was primarily attributed to improved financial results for the Companys Woodlands and Real Estate
segments and increased equity in earnings of Del-Tin Fiber, partially offset by decreased operating income from the Mills segment and increased Corporate general and administrative expenses.

Operating income increased $4.7 million. The Woodlands segment operating income increased $.4 million, primarily due to higher harvest volumes and
increased per-ton sales prices for pine sawtimber and hardwood sawtimber, and increased net revenues from oil and gas royalties, partially offset by a decreased margin from timberland sold. The Mills segments operating income decreased $.4
million due mainly to increased log cost and a lower average sales price per MBF of lumber sold. The Real Estate segment results improved $4.8 million due to the sale of 19 acres of commercial real estate at an average price of $334,000 per acre.
Corporate expense increased by $.3 million due to higher general and administrative expenses.



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Woodlands

Selected financial and statistical data for the Woodlands segment is shown in the following table.



|                                 |  |                         |       |  |      |  |       | 
|-------------------------------- |  | ----------------------- | ----- |  | ---- |  | ----- | 
|                                 |  | Quarter Ended Sept. 30, |      
|                                 |  | 2010                    |       |  | 2009 | 
|Net sales (millions of dollars)  |  |                         |       |  |      |  |       | 
|Pine sawtimber                   |  | $                       | 4.5   |  |      |  | 3.7   | 
|Pine pulpwood                    |  |                         | .6    |  |      |  | .8    | 
|Hardwood sawtimber               |  |                         | .5    |  |      |  | .4    | 
|Hardwood pulpwood                |  |                         | .3    |  |      |  | .4    | 
|Oil and gas lease rentals        |  |                         | .5    |  |      |  | .5    | 
|Oil and gas royalties (gross)    |  |                         | 1.1   |  |      |  | .5    | 
|Hunting leases                   |  |                         | .5    |  |      |  | .5    | 
|                                 |  |                        
|Sales volume (thousands of tons) |  |                         |       |  |      |  |       | 
|Pine sawtimber                   |  |                         | 159.5 |  |      |  | 137.3 | 
|Pine pulpwood                    |  |                         | 74.6  |  |      |  | 79.9  | 
|Hardwood sawtimber               |  |                         | 13.9  |  |      |  | 11.1  | 
|Hardwood pulpwood                |  |                         | 41.5  |  |      |  | 46.1  | 
|                                 |  |                        
|Sales price (per ton)            |  |                         |       |  |      |  |       | 
|Pine sawtimber                   |  | $                       | 28    |  |      |  | 27    | 
|Pine pulpwood                    |  |                         | 8     |  |      |  | 10    | 
|Hardwood sawtimber               |  |                         | 37    |  |      |  | 32    | 
|Hardwood pulpwood                |  |                         | 8     |  |      |  | 9     | 
|                                 |  |                        
|Timberland                       |  |                         |       |  |      |  |       | 
|Net sales (millions of dollars)  |  | $                       | .6    |  |      |  | 1.1   | 
|Sales volume (acres)             |  |                         | 370   |  |      |  | 649   | 
|Sale price (per acre)            |  | $                       | 1,499 |  |      |  | 1,682 | 

Net sales increased $1 million in 2010
when compared to the 2009 third quarter. Sales of pine sawtimber increased $.8 million due to a 16 percent increase in harvest volume and a higher average sales price of $28 per ton, which was four percent higher than 2009s $27 per-ton price.
Sales of pine pulpwood decreased $.2 million due to a 20 percent decrease in the per-ton average sales price and a seven percent decrease in harvest volume. Sales of hardwood sawtimber increased $.1 million due to a 25 percent higher harvest volume
and a 16 percent increase in the average per-ton price. Hardwood pulpwood sales revenue decreased $.1 million due to a ten percent lower harvest volume and an 11 percent lower average per-ton sales price. Third quarter oil and gas royalties
increased $.6 million when compared to the same period of 2009 due to an increased number of producing wells. Revenues from timberland sales decreased $.5 million due to 279 fewer acres sold in 2010 versus 2009 and to a lower average sales price per
acre. Operating income was $5 million in the third quarter of 2010 compared to $4.6 million in the third quarter of 2009. This improvement was due to the same items affecting net sales and to lower silviculture expenses and cost of timberland sold,
partially offset by increased road maintenance expense on the Company fee timberlands and cost of fee timber harvested in the third quarter of 2010 when compared to the third quarter of 2009.



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Mills

Selected financial and statistical data for the Mills segment is shown in the following table.



|                                |  |                         |      |  |      |  |      | 
|------------------------------- |  | ----------------------- | ---- |  | ---- |  | ---- | 
|                                |  | Quarter Ended Sept. 30, |     
|                                |  | 2010                    |      |  | 2009 | 
|Net sales (millions of dollars) |  |                         |      |  |      |  |      | 
|Lumber                          |  | $                       | 17.9 |  |      |  | 16.7 | 
|Residual by-products            |  |                         | 4.0  |  |      |  | 4.0  | 
|                                |  |                        
|Lumber                          |  |                         |      |  |      |  |      | 
|Finished production (MMBF)      |  |                         | 66.0 |  |      |  | 63.5 | 
|Sales volume (MMBF)             |  |                         | 69.2 |  |      |  | 64.1 | 
|Sales price (per MBF)           |  | $                       | 259  |  |      |  | 261  | 

Net sales increased $1.5 million, or
seven percent, due to increased lumber sales volume. The average lumber sales price in the third quarter of 2010 decreased $2 per MBF from the third quarter of 2009, while the lumber sales volume increased eight percent, or 5.1 million board
feet, from the third quarter 2009. The Mills reported an operating loss of $.3 million in the current period compared to income of $.1 million a year ago, as increased raw material log cost more than offset higher net sales revenues.

Real Estate

Selected
financial and statistical data for the Real Estate segment is shown in the following table.



|                                           |  |                         |     |  |      |  |     | 
|------------------------------------------ |  | ----------------------- | --- |  | ---- |  | --- | 
|                                           |  | Quarter Ended Sept. 30, |    
|                                           |  | 2010                    |     |  | 2009 | 
|Net sales (millions of dollars)            |  |                         |     |  |      |  |     | 
|Residential lots                           |  | $                       | .3  |  |      |  | .3  | 
|Commercial sites                           |  |                         | 6.3 |  |      |  |    | 
|Chenal Country Club                        |  |                         | 1.7 |  |      |  | 1.9 | 
|                                           |  |                        
|Sales volume                               |  |                         |     |  |      |  |     | 
|Residential lots                           |  |                         | 3   |  |      |  | 4   | 
|Commercial acres                           |  |                         | 19  |  |      |  |    | 
|                                           |  |                        
|Average sales price (thousands of dollars) |  |                         |     |  |      |  |     | 
|Residential lots                           |  | $                       | 92  |  |      |  | 63  | 
|Commercial acres                           |  |                         | 334 |  |      |  |    | 

Net sales for the third quarter 2010
increased $6.2 million from the third quarter 2009 due to an increase in commercial acres sold and an increased average sales price on residential lots sold in the current-year quarter. Operating income for the third quarter of 2010 increased $4.8
million compared to the third quarter of 2009 due to increased commercial acreage sales and higher margin on residential lots sold, partially offset by decreased results from Chenal Country Club.

Corporate

The $.3 million
increase in operating expense for Corporate functions was due primarily to higher general and administrative expenses.



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##### Table of Contents



Eliminations

Intersegment sales of timber from Deltics Woodlands to the Mills segment increased $.7 million to $4.5 million. The increase was due to a
higher transfer price and log volume from the Woodlands segment. Transfer prices are approximately that of market which were lower in the same quarter last year.

Equity in Del-Tin Fiber

For the third quarter of 2010, Deltics equity in Del-Tin was $1
million compared to $.6 million for the same period of 2009. The $.4 million increase was due to increased sales volume. Additional selected financial and statistical data for Del-Tin is shown in the following table.



|                                |  |                        |      |  |      |  |      | 
|------------------------------- |  | ---------------------- | ---- |  | ---- |  | ---- | 
|                                |  | Quarter EndedSept. 30, |     
|                                |  | 2010                   |      |  | 2009 | 
|Net sales (millions of dollars) |  | $                      | 15.7 |  |      |  | 12.3 | 
|Finished production (MMSF)      |  |                        | 31.2 |  |      |  | 25.1 | 
|Board sales (MMSF)              |  |                        | 31.8 |  |      |  | 24.9 | 
|Sales price (per MSF)           |  | $                      | 493  |  |      |  | 495  | 

Income Taxes

The effective income tax rate was 38 percent for the third quarter of 2010. The expected income tax expense for the three months ended
September 30, 2009 was offset by certain benefits from the reconciliation of the 2008 tax returns to the financial income tax accrual for 2008 and by other permanent deductions occurring in the period.

Nine Months Ended September 30, 2010 Compared with Nine Months Ended September 30, 2009

In the following tables, Deltics net sales and results of operations are presented for the nine months ended September 30, 2010 and 2009.
Explanations of significant variances and additional analyses for the Companys consolidated and segment operations follow the tables.



|                                                |  |                             |       |   |      |  |       |  
|----------------------------------------------- |  | --------------------------- | ----- | - | ---- |  | ----- | -
|                                                |  | Nine Months Ended Sept. 30, |      
|(Millions of dollars, except per share amounts) |  | 2010                        |       |   | 2009 | 
|Net sales                                       |  |                             |       |   |      |  |       |  
|Woodlands                                       |  | $                           | 30.4  |   |      |  | 29.1  |  
|Mills                                           |  |                             | 77.6  |   |      |  | 58.4  |  
|Real Estate                                     |  |                             | 13.2  |   |      |  | 6.9   |  
|Eliminations                                    |  |                             | (13.3 | ) |      |  | (13.4 | )
|                                                |  |                             |       |   |      |  |       |  
|Net sales                                       |  | $                           | 107.9 |   |      |  | 81.0  |  
|                                                |  |                             |       |   |      |  |       |  



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##### Table of Contents

|                                                |  |                             |       |   |      |  |      |  
|----------------------------------------------- |  | --------------------------- | ----- | - | ---- |  | ---- | -
|                                                |  | Nine Months Ended Sept. 30, |      
|(Millions of dollars, except per share amounts) |  | 2010                        |       |   | 2009 | 
|Operating income                                |  |                             |       |   |      |  |      |  
|Woodlands                                       |  | $                           | 16.5  |   |      |  | 16.7 |  
|Mills                                           |  |                             | 8.4   |   |      |  | (5.4 | )
|Real Estate                                     |  |                             | 2.8   |   |      |  | (2.2 | )
|Corporate                                       |  |                             | (11.6 | ) |      |  | (9.2 | )
|Eliminations                                    |  |                             | (.1   | ) |      |  | .8   |  
|                                                |  |                             |       |   |      |  |      |  
|Operating income                                |  |                             | 16.0  |   |      |  | .7   |  
|Equity in earnings of Del-Tin Fiber             |  |                             | 3.7   |   |      |  | 2.2  |  
|Interest income                                 |  |                             | .1    |   |      |  |     |  
|Interest and other debt expense                 |  |                             | (2.7  | ) |      |  | (2.7 | )
|Interest capitalized                            |  |                             | .1    |   |      |  | .1   |  
|Income taxes                                    |  |                             | (6.1  | ) |      |  | (.3  | )
|                                                |  |                             |       |   |      |  |      |  
|Net income                                      |  | $                           | 11.1  |   |      |  |     |  
|                                                |  |                             |       |   |      |  |      |  
|Earnings per common share                       |  |                             |       |   |      |  |      |  
|Basic and diluted                               |  | $                           | .89   |   |      |  |     |  

Consolidated

The $11.1 million increase in net income is primarily due to improved operating results from the Mills and Real Estate segments and increased equity
in earnings from Del-Tin Fiber, partially offset by decreased operating results for the Woodlands segment and higher Corporate general and administrative expenses.

Operating income increased $15.3 million from 2009. The Woodlands segment decreased $.2 million primarily due to fewer acres of timberland sold, increased cost of fee timber harvested, and increased maintenance
expense for roads on the Companys fee timberlands in 2010, which were partially offset by higher pine pulpwood revenues and net oil and gas royalties. The Mills segment increased $13.8 million due to a higher average per-unit lumber sales
price and increased sales volumes, partially offset by higher raw material log cost. The Real Estate segment increased due to a sale of 19 acres of commercial real estate and a higher average per-lot sales price on residential lots sold. Corporate
expenses increased $2.4 million mainly due to higher general and administrative expenses, primarily employee incentive plan expenses resulting from the improved financial results for the year.



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##### Table of Contents



Woodlands

Selected financial and statistical data for the Woodlands segment is shown in the following table.



|                                 |  |                             |       |  |      |  |       | 
|-------------------------------- |  | --------------------------- | ----- |  | ---- |  | ----- | 
|                                 |  | Nine Months Ended Sept. 30, |      
|                                 |  | 2010                        |       |  | 2009 | 
|Net sales (millions of dollars)  |  |                             |       |  |      |  |       | 
|Pine sawtimber                   |  | $                           | 13.0  |  |      |  | 13.2  | 
|Pine pulpwood                    |  |                             | 3.0   |  |      |  | 2.6   | 
|Hardwood sawtimber               |  |                             | .7    |  |      |  | .6    | 
|Hardwood pulpwood                |  |                             | 1.0   |  |      |  | .9    | 
|Oil and gas lease rentals        |  |                             | 1.5   |  |      |  | 1.5   | 
|Oil and gas royalties (gross)    |  |                             | 3.2   |  |      |  | 1.5   | 
|Hunting leases                   |  |                             | 1.5   |  |      |  | 1.4   | 
|                                 |  |                            
|Sales volume (thousands of tons) |  |                             |       |  |      |  |       | 
|Pine sawtimber                   |  |                             | 475.3 |  |      |  | 459.4 | 
|Pine pulpwood                    |  |                             | 250.0 |  |      |  | 246.9 | 
|Hardwood sawtimber               |  |                             | 19.3  |  |      |  | 19.1  | 
|Hardwood pulpwood                |  |                             | 84.3  |  |      |  | 113.5 | 
|                                 |  |                            
|Sales price (per ton)            |  |                             |       |  |      |  |       | 
|Pine sawtimber                   |  | $                           | 27    |  |      |  | 29    | 
|Pine pulpwood                    |  |                             | 12    |  |      |  | 10    | 
|Hardwood sawtimber               |  |                             | 37    |  |      |  | 31    | 
|Hardwood pulpwood                |  |                             | 12    |  |      |  | 8     | 
|                                 |  |                            
|Timberland                       |  |                             |       |  |      |  |       | 
|Net sales (millions of dollars)  |  | $                           | 2.0   |  |      |  | 3.0   | 
|Sales volume (acres)             |  |                             | 1,121 |  |      |  | 1,650 | 
|Sales price (per acre)           |  | $                           | 1,789 |  |      |  | 1,828 | 

Net sales increased $1.3 million in 2010
when compared to 2009. The pine sawtimber per-ton average sales price decreased seven percent from 2009, but was partially offset by a three percent increase in the harvest volume. Pine pulpwood harvest volume increased one percent from a year ago
and the per-ton price increased 20 percent. The hardwood sawtimber harvest volume in 2010 increased one percent and the per-ton price increased 19 percent from 2009 levels. The per-ton price received for hardwood pulpwood increased 50 percent from
2009, but was partially offset by a 26 percent decrease in the volume of hardwood pulpwood harvested. Oil and gas royalties increased $1.7 million from 2009. Sales of timberland decreased $1 million due to fewer acres sold and a lower sales price
per acre. Woodlands operating income in 2010 decreased $.2 million versus the prior year. Decreases to operating income included increases in the cost of road maintenance on Company fee timberland, oil and gas severance tax expense, and the cost of
fee timber harvested, partially offset by decreased costs of timberland sold.



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##### Table of Contents



Mills

Selected financial and statistical data for the Mills segment is shown in the following table.



|                                |  |                             |       |  |      |  |       | 
|------------------------------- |  | --------------------------- | ----- |  | ---- |  | ----- | 
|                                |  | Nine Months Ended Sept. 30, |      
|                                |  | 2010                        |       |  | 2009 | 
|Net sales (millions of dollars) |  |                             |       |  |      |  |       | 
|Lumber                          |  | $                           | 61.7  |  |      |  | 44.8  | 
|Residual by-products            |  |                             | 12.2  |  |      |  | 11.1  | 
|                                |  |                            
|Lumber                          |  |                             |       |  |      |  |       | 
|Finished production (MMBF)      |  |                             | 197.4 |  |      |  | 178.6 | 
|Sales volume (MMBF)             |  |                             | 202.7 |  |      |  | 182.5 | 
|Sales price (per MBF)           |  | $                           | 305   |  |      |  | 246   | 

Net sales increased $19.2 million in 2010
due to a higher average lumber sales price and volume. The average sales price increased 24 percent from 2009, while sales volume increased 11 percent. Total operating income increased $13.8 million due mainly to the same factors impacting net
sales, partially offset by increased raw material log cost.

Real Estate

Selected financial and statistical data for the Real Estate segment is shown in the following table.



|                                           |  |                             |     |  |      |  |     | 
|------------------------------------------ |  | --------------------------- | --- |  | ---- |  | --- | 
|                                           |  | Nine Months Ended Sept. 30, |    
|                                           |  | 2010                        |     |  | 2009 | 
|Net sales (millions of dollars)            |  |                             |     |  |      |  |     | 
|Residential lots                           |  | $                           | 1.2 |  |      |  | .6  | 
|Speculative home                           |  |                             |    |  |      |  | .6  | 
|Commercial sites                           |  |                             | 6.3 |  |      |  |    | 
|Chenal Country Club                        |  |                             | 5.2 |  |      |  | 5.5 | 
|                                           |  |                            
|Sales volume                               |  |                             |     |  |      |  |     | 
|Residential lots                           |  |                             | 13  |  |      |  | 9   | 
|Speculative home                           |  |                             |    |  |      |  | 1   | 
|Commercial acres                           |  |                             | 19  |  |      |  |    | 
|                                           |  |                            
|Average sales price (thousands of dollars) |  |                             |     |  |      |  |     | 
|Residential lots                           |  | $                           | 96  |  |      |  | 58  | 
|Speculative home                           |  |                             |    |  |      |  | 556 | 
|Commercial acres                           |  |                             | 334 |  |      |  |    | 

Net sales increased $6.3 million due to
the increase in residential lots sold at a higher average sales price per lot, and to an increase in sales of commercial acres, partially offset by decreased sales at Chenal Country Club and decreased revenues from speculative home sales. The
increase in the Real Estate segments operating income was due mainly to the same factors affecting net sales.

Corporate

Operating expenses for Corporate functions were $2.4 million higher due to increased general and administrative expenses, primarily
employee incentive plan expense and professional fees.



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##### Table of Contents



Eliminations

Intersegment sales of timber from Deltics Woodlands to the Mills segment decreased $.1 million to $13.3 million. The decrease was due to a
lower transfer price for logs coming into Company sawmills from fee timberlands, partially offset by a higher volume of logs. Logs supplied by the Woodlands segment to Company sawmills are transferred at prices that approximate market.

Equity in Del-Tin Fiber

For
the first nine months of 2010, equity in earnings of Del-Tin was $3.7 million, an increase of $1.5 million compared to 2009 due mainly to increased sales volume along with a slightly lower raw material cost. The increased sales volume was mainly due
to an interruption of molding imports from Chile during the first half of the year, which was caused by an earthquake on February 27, 2010. Additional selected financial and statistical data for Del-Tin is shown in the following table.



|                                |  |                             |       |  |      |  |      | 
|------------------------------- |  | --------------------------- | ----- |  | ---- |  | ---- | 
|                                |  | Nine Months Ended Sept. 30, |      
|                                |  | 2010                        |       |  | 2009 | 
|Net sales (millions of dollars) |  | $                           | 52.1  |  |      |  | 39.4 | 
|Finished production (MMSF)      |  |                             | 100.9 |  |      |  | 77.6 | 
|Board sales (MMSF)              |  |                             | 103.2 |  |      |  | 77.3 | 
|Sales price (per MSF)           |  | $                           | 505   |  |      |  | 510  | 

Income Taxes

The effective income tax rate was 35 percent for the first nine months ended September 30, 2010, and 100 percent for the same period of 2009.
The effective income tax rate for the nine months ended September 30, 2009 was impacted by a one-time tax expense of $.3 million related to a 2009 change in state tax law, which was partially offset by the reconciliation of the 2008 tax return
to the financial tax accrual for 2008.

Liquidity and Capital Resources

Cash Flows and Capital Expenditures

Net cash provided by operating activities totaled $26.5
million for the first nine months of 2010 compared to $12.2 million for the same period of 2009. Changes in operating working capital, other than cash and cash equivalents, provided cash of $5.6 million in 2010 and $3.4 million in 2009. The
Companys accompanying Consolidated Statements of Cash Flows identifies other differences between net income and cash provided by operating activities for each reporting period.

Capital expenditures required cash of $8.8 million in the current-year period and $10.3 million a year ago. Capital expenditures by segment
consisted of the following:



|                                                |  |                            |       |  |      |  |        |  
|----------------------------------------------- |  | -------------------------- | ----- |  | ---- |  | ------ | -
|                                                |  | Nine Months EndedSept. 30, |      
|(Thousands of dollars)                          |  | 2010                       |       |  | 2009 | 
|Woodlands, including land exchanges             |  | $                          | 3,595 |  |      |  | 7,524  |  
|Mills                                           |  |                            | 3,406 |  |      |  | 2,058  |  
|Real Estate, including development expenditures |  |                            | 1,560 |  |      |  | 707    |  
|Corporate                                       |  |                            | 200   |  |      |  | 50     |  
|                                                |  |                            |       |  |      |  |        |  
|Capital expenditures                            |  |                            | 8,761 |  |      |  | 10,339 |  
|Non-cash land exchanges                         |  |                            |      |  |      |  | (36    | )
|                                                |  |                            |       |  |      |  |        |  
|Capital expenditures requiring cash             |  | $                          | 8,761 |  |      |  | 10,303 |  
|                                                |  |                            |       |  |      |  |        |  



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The net change in purchased
stumpage inventory to be utilized in the Companys sawmilling operations provided cash of $.3 million in 2010 and $.2 million in 2009. Deltic advanced Del-Tin $1 million, and has received repayments of $5 million in 2010. This compares to net
repayments of $.3 million from Del-Tin in 2009. Funds held by trustees to be used for acquisitions of timberland designated as replacement property for income tax purposes, as required for tax-deferred exchanges, decreased $2.6 million
in 2010, and $2.8 million in 2009. The Company has borrowed $12.8 million and repaid $34.4 million of debt in 2010 and had net borrowings of $.9 million in 2009. There have been no treasury stock purchases in 2010, while there were $1.1 million in
treasury stock purchases in 2009. Dividends of $2.8 million were paid in 2010 and 2009. Proceeds from exercises of stock options and the related tax benefits were $.2 million in 2010 and $.8 million in 2009.

Financial Condition

Working
capital totaled $1.7 million at September 30, 2010, and $5.4 million at December 31, 2009. Deltics working capital ratio at September 30, 2010 was 1.08 to 1, compared to 1.41 to 1 at the end of 2009. Cash and cash equivalents at
the end of the third quarter of 2010 was $2.3 million greater than December 31, 2009. Deltics long-term debt to stockholders equity ratio was .309 to 1 at September 30, 2010 and .422 to 1 at December 31, 2009.

Liquidity

The primary
sources of the Companys liquidity are internally generated funds, access to outside financing, and working capital. The Companys current growth strategies include timberland acquisition, expansion of lumber production as market
conditions allow, and developing residential and/or commercial properties at Chenal Valley and Red Oak Ridge.

To facilitate these
growth plans, the Company has an agreement with a group of banks, which provides an unsecured and committed revolving credit facility totaling $300 million, inclusive of a $50 million letter of credit feature. The agreement will expire on
September 9, 2012. As of September 30, 2010, $272 million was available. The credit agreement contains restrictive covenants, including limitations on the incurrence of debt and requirements to maintain certain financial ratios. (For
additional information about the Companys current financing arrangements, refer to Note 9 to the consolidated financial statements included in the Companys 2009 annual report on Form 10-K.)



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The table below sets forth the
covenants in the credit facility and status with respect to these covenants as of September 30, 2010 and December 31, 2009.



|                                                                                                                 |  |                       |          |  |                                          |  |           |                                         |  |  |           | 
|---------------------------------------------------------------------------------------------------------------- |  | --------------------- | -------- |  | ---------------------------------------- |  | --------- | --------------------------------------- |  |  | --------- | 
|                                                                                                                 |  | CovenantsRequirements |          |  | Actual Ratio/Percentage atSept. 30, 2010 |  |           | Actual Ratio/Percentage atDec. 31, 2009 | 
|Leverage ratio should be less than:1                                                                             |  |                       | .65 to 1 |  |                                          |  | .277 to 1 |                                         |  |  | .332 to 1 | 
|Fixed charge coverage ratio should be greater than:2                                                             |  |                       | 2.5 to 1 |  |                                          |  | 7.89 to 1 |                                         |  |  | 5.14 to 1 | 
|Total outstanding debt as a percentage of total debt allowed based on the minimum timber market value covenant:3 |  |                       | n/a      |  |                                          |  | 34.24%    |                                         |  |  | 45.00%    | 



| | 1 | The leverage ratio is calculated as total debt divided by total capital. Total debt includes indebtedness for borrowed money, secured liabilities, obligations in
respect of letters of credit, and guarantees. Total capital is the sum of total debt and net worth. Net worth is calculated as total assets minus total liabilities, as reflected on the balance sheet. This covenant is applied at the end of each
quarter.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2 | The fixed charge coverage ratio is calculated as EBITDA (earnings before interest, taxes, depreciation, depletion, and amortization) increased by non-cash
compensation expense and other non-cash expenses, and decreased by dividends paid and income tax paid, divided by the sum of interest expense and scheduled principal payments made on debt during the period. This covenant is applied at the end of the
quarter on a rolling four quarter basis.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3 | Timber market value must be greater than 175% of total debt (as defined in (1) above.) The timber market value is calculated by multiplying the average
price received for sales of timber for the preceding four quarters by the current quarters ending inventory of timber. This covenant is applied at the end of the quarter on a rolling four quarter basis.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Based on managements current operating projections, the Company believes it will remain in compliance with the debt covenants. However,
depending on market conditions and the possibility of economic deterioration, it could become necessary for the Company to request amendments, or waivers for the covenants, or obtain refinancing in future periods. There can be no assurance that the
Company will be able to obtain amendments or waivers, or negotiate agreeable refinancing terms should it become needed.

In December
2000, the Companys Board of Directors authorized a stock repurchase program of up to $10 million of Deltic common stock. In December 2007, the Companys Board of Directors expanded the program by $25 million. As of September 30,
2010, the Company had expended $14.6 million under this program, with the purchase of 370,530 shares at an average cost of $39.28 per share; no shares have been purchased in 2010, 35,571 shares were purchased in 2009, 129,996 shares were purchased
in 2008, 101,914 shares were purchased under this program in 2007, and seven shares in 2006. In its two previous repurchase programs, Deltic purchased 479,601 shares at an average cost of $20.89 and 419,542 shares at a $24.68 per share average cost,
respectively.



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Off-Balance Sheet
Arrangements, Contractual Obligations, and Commitments

On August 26, 2004, Del-Tin refinanced its existing long-term debt by
entering into a credit agreement consisting of a letter of credit and term loan with multiple lending institutions. The funds provided from this credit agreement were used, together with the existing balance in Del-Tins debt service reserve
and bond sinking fund accounts, to redeem $60 million of its $89 million industrial revenue bonds. Under the new credit agreement, the lenders, on September 1, 2004, issued on Del-Tins behalf, a letter of credit in the amount of $29.7
million to support the remaining industrial revenue bonds originally issued in 1998 by Union County, Arkansas. Concurrent with this event, on August 26, 2004, Deltic executed a guarantee agreement in connection with the refinancing of the debt
of Del-Tin. Under Deltics guarantee agreement, Deltic unconditionally guarantees the due and punctual payment of 50 percent ($14.8 million at September 30, 2010) of Del-Tins obligation under its credit agreement. Deltic considers
the current status of the payment/performance risk of this guarantee to be low based on history and the length of time remaining on the guarantee.

The Company has both funded and unfunded noncontributory defined benefit retirement plans that cover the majority of its employees. The plans provide defined benefits based on years of service and final average
salary. Deltic also has other postretirement benefit plans covering substantially all of its employees. The health care plan is contributory with participants contributions adjusted as needed; the life insurance plan is noncontributory. With
regards to all of the Companys employee and retiree benefit plans, Deltic is unaware of any trends, demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in the Companys liquidity
increasing or decreasing in any material way. (For information about material assumptions underlying the accounting for these plans and other components of the plans, refer to Note 15 to the consolidated financial statements included in the
Companys 2009 annual report on Form 10-K.)

Tabular summaries of the Companys contractual cash payment obligations and other commercial
commitment expirations, by period, are presented in the following tables.



|                                                       |  |       |       |  |            |  |     |             |  |  |             |  |  |           |      |  |  |  |      | 
|------------------------------------------------------ |  | ----- | ----- |  | ---------- |  | --- | ----------- |  |  | ----------- |  |  | --------- | ---- |  |  |  | ---- | 
|(Millions of dollars)                                  |  | Total |       |  | During2010 |  |     | 2011to 2012 |  |  | 2013to 2014 |  |  | After2014 |     
|Contractual cash payment obligations                   |  |       |       |  |            |  |     |             |  |  |             |  |  |           |      |  |  |  |      | 
|Real estate development committed capital costs        |  | $     | 3.5   |  |            |  | .2  |             |  |  | .3          |  |  |           | 3.0  |  |  |  |     | 
|Woodlands land acquisition and committed capital costs |  |       | .7    |  |            |  | .7  |             |  |  |            |  |  |           |     |  |  |  |     | 
|Mills committed capital costs                          |  |       | .5    |  |            |  | .5  |             |  |  |            |  |  |           |     |  |  |  |     | 
|Corporate committed capital costs                      |  |       | .1    |  |            |  | .1  |             |  |  |            |  |  |           |     |  |  |  |     | 
|Long-term debt                                         |  |       | 70.8  |  |            |  | .6  |             |  |  | 30.2        |  |  |           |     |  |  |  | 40.0 | 
|Interest on debt*                                      |  |       | 15.8  |  |            |  | .7  |             |  |  | 5.4         |  |  |           | 4.9  |  |  |  | 4.8  | 
|Retirement plans                                       |  |       | 14.5  |  |            |  | .3  |             |  |  | 2.5         |  |  |           | 2.9  |  |  |  | 8.8  | 
|Other postretirement benefits                          |  |       | 4.4   |  |            |  | .1  |             |  |  | .8          |  |  |           | .9   |  |  |  | 2.6  | 
|Unrecognized tax benefits                              |  |       | 3.1   |  |            |  |    |             |  |  | 1.7         |  |  |           | 1.4  |  |  |  |     | 
|Other liabilities                                      |  |       | 5.0   |  |            |  | .9  |             |  |  | 3.6         |  |  |           | .5   |  |  |  |     | 
|                                                       |  |       |       |  |            |  |     |             |  |  |             |  |  |           |      |  |  |  |      | 
|                                                       |  | $     | 118.4 |  |            |  | 4.1 |             |  |  | 44.5        |  |  |           | 13.6 |  |  |  | 56.2 | 
|                                                       |  |       |       |  |            |  |     |             |  |  |             |  |  |           |      |  |  |  |      | 
|Other commercial commitment expirations                |  |       |       |  |            |  |     |             |  |  |             |  |  |           |      |  |  |  |      | 
|Guarantee of indebtedness of Del-Tin Fiber             |  | $     | 14.8  |  |            |  |    |             |  |  | 14.8        |  |  |           |     |  |  |  |     | 
|Timber cutting agreements                              |  |       | .2    |  |            |  |    |             |  |  | .2          |  |  |           |     |  |  |  |     | 
|Letters of credit                                      |  |       | .6    |  |            |  |    |             |  |  | .3          |  |  |           | .1   |  |  |  | .2   | 
|                                                       |  |       |       |  |            |  |     |             |  |  |             |  |  |           |      |  |  |  |      | 
|                                                       |  | $     | 15.6  |  |            |  |    |             |  |  | 15.3        |  |  |           | .1   |  |  |  | .2   | 
|                                                       |  |       |       |  |            |  |     |             |  |  |             |  |  |           |      |  |  |  |      | 



| | * | Interest commitments are estimated using the Companys current interest rates for the respective debt agreements over their remaining terms to expiration.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------



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Outlook

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, real estate development, and stock repurchase programs, additional advances to Del-Tin, and capital
expenditures, for the foreseeable future.

Critical Accounting Policies and Estimates

Critical accounting policies are defined as those that are reflective of significant judgments 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 2009 annual report on Form 10-K, and this disclosure should be read in conjunction with this Form 10-Q.

Impact of
Recently Effective Accounting Pronouncements

(For information regarding the impact of recently effective accounting pronouncements,
refer to Note 1 to the consolidated financial statements.)

Outlook

Pine sawtimber harvest levels are expected to be 75,000 to 125,000 tons in the fourth quarter of 2010 and 550,000 to 600,000 tons for the year. Finished lumber sales volume will continue to be subject to market
conditions, and is estimated at 50 to 70 million board feet for the fourth quarter and 250 to 270 million board feet for the year. Residential lot sales are projected to be 12 to 17 lots and 25 to 30 lots for the fourth quarter and the
year, respectively.

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 2009 annual
report on Form 10-K. Those disclosures should be read in conjunction with this Form 10-Q.



|Item 4. | Controls and Procedures
|------- | -----------------------

Evaluation of Disclosure
Controls and Procedures

Deltic Timber Corporation (the Company or Deltic) has established disclosure
controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the officers who certify the Companys financial reports and to other members of senior management
and the Board of Directors.

Based on their evaluation as of September 30, 2010, the Chief Executive Officer and Chief Financial
Officer of the Company have concluded that the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be
disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and this information was accumulated
and communicated to the Companys Management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

Deltics management, with the
Chief Executive Officer and Chief Financial Officer, have evaluated any changes in the Companys internal control over financial reporting that occurred during the Companys most recent fiscal quarter, and have concluded that there was no
change to Deltics internal control over financial reporting that has materially affected or is reasonably likely to materially affect Deltics internal control over financial reporting.



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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 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in Item 1A of Part I in the Companys 2009 annual report on Form 10-K.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchase of Equity Securities



|                                       |  |                               |  |                            |  |                                                                              |  |                                                                                              
|-------------------------------------- |  | ----------------------------- |  | -------------------------- |  | ---------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------
|Period                                 |  | TotalNumber ofSharesPurchased |  | AveragePrice PaidPer Share |  | Total Number ofShares Purchasedas Part of PubliclyAnnounced Plansor Programs |  | Maximum ApproximateDollar Value of Sharesthat May Yet BePurchased Under thePlans or
Programs1
|July 1 through July 31, 2010           |  |                              |  |                           |  |                                                                             |  | $20,434,011                                                                                  
|August 1 through August 31, 2010       |  |                              |  |                           |  |                                                                             |  | $20,434,011                                                                                  
|September 1 through September 30, 2010 |  |                              |  |                           |  |                                                                             |  | $20,434,011                                                                                  

1In December 2000, the Companys Board of Directors authorized a stock repurchase
plan of up to $10 million of Deltic common stock. In December 2007, this plan was expanded by $25 million. There is no stated expiration date regarding this authorization.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Removed and Reserved

None.

Item 5.    Other Information

None.



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Item 6.    Exhibits



|                   |  |                                                                                                 
|------------------ |  | ------------------------------------------------------------------------------------------------
|Index to Exhibits 
|                   | 
|ExhibitDesignation |  | Nature of Exhibit                                                                               
|                   | 
|31.1               |  | Chief Executive Officer Certification Required by Section 302 of the Sarbanes-Oxley Act of 2002.
|                   | 
|31.2               |  | Chief Financial Officer Certification Required by Section 302 of the Sarbanes-Oxley Act of 2002.
|                   | 
|32                 |  | Certification Required by Section 906 of the Sarbanes-Oxley Act of 2002.                        



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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



|      |  |                  |  |  |  |     |  |                                 
|----- |  | ---------------- |  |  |  | --- |  | --------------------------------
|Date: |  | November 5, 2010 |  |  |  | By: |  | /s/ Ray C. Dillon               
|      |  |                  |  |  |  |     |  | Ray C. Dillon, President        
|      |  |                  |  |  |  |     |  | (Principal Executive Officer)   
|      |  |                  |  | 
|Date: |  | November 5, 2010 |  |  |  | By: |  | /s/ Kenneth D. Mann             
|      |  |                  |  |  |  |     |  | Kenneth D. Mann, Vice President,
|      |  |                  |  |  |  |     |  | Finance and Administration      
|      |  |                  |  |  |  |     |  | (Principal Financial Officer)   
|      |  |                  |  | 
|Date: |  | November 5, 2010 |  |  |  | By: |  | /s/ Byrom L. Walker             
|      |  |                  |  |  |  |     |  | Byrom L. Walker, Controller     
|      |  |                  |  |  |  |     |  | (Principal Accounting Officer)  



35