##### 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 March 31, 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 March 31, 2010, was 12,499,223.









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##### Table of Contents

TABLE OF CONTENTS  FIRST 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                              |  | 28        
|                               |  |                                                                                      
|Item 4.                        |  | Controls and Procedures                                                               |  | 28        
|                               | 
|PART II  Other Information    |  |                                                                                      
|                               |  |                                                                                      
|Item 1.                        |  | Legal Proceedings                                                                     |  | 29        
|                               |  |                                                                                      
|Item 1A.                       |  | Risk Factors                                                                          |  | 29        
|                               |  |                                                                                      
|Item 2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 29        
|                               |  |                                                                                      
|Item 3.                        |  | Defaults Upon Senior Securities                                                       |  | 29        
|                               |  |                                                                                      
|Item 4.                        |  | (Removed and Reserved)                                                                |  | 29        
|                               |  |                                                                                      
|Item 5.                        |  | Other Information                                                                     |  | 29        
|                               |  |                                                                                      
|Item 6.                        |  | Exhibits                                                                              |  | 30        
|                               | 
|Signatures                     |  | 31                                                                                   



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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)March 31,2010 |         |   | December 31,2009 |        
|Assets                                                                                         |  |                          |         |   |                  |         |  
|Current assets                                                                                 |  |                          |         |   |                  |         |  
|Cash and cash equivalents                                                                      |  | $                        | 5,552   |   |                  | 4,783   |  
|Trade accounts receivable, net of allowance for doubtful accounts of $88 and $68, respectively |  |                          | 7,516   |   |                  | 4,888   |  
|Other receivables                                                                              |  |                          | 48      |   |                  | 86      |  
|Inventories                                                                                    |  |                          | 4,534   |   |                  | 5,917   |  
|Prepaid expenses and other current assets                                                      |  |                          | 2,978   |   |                  | 2,842   |  
|                                                                                               |  |                          |         |   |                  |         |  
|Total current assets                                                                           |  |                          | 20,628  |   |                  | 18,516  |  
|                                                                                               |  |                         
|Investment in real estate held for development and sale                                        |  |                          | 56,064  |   |                  | 56,096  |  
|Investment in Del-Tin Fiber                                                                    |  |                          | 9,579   |   |                  | 9,104   |  
|Other investments and noncurrent receivables                                                   |  |                          | 4,788   |   |                  | 4,882   |  
|Timber and timberlands  net                                                                   |  |                          | 229,355 |   |                  | 228,893 |  
|Property, plant, and equipment  net                                                           |  |                          | 33,171  |   |                  | 33,886  |  
|Deferred charges and other assets                                                              |  |                          | 796     |   |                  | 826     |  
|                                                                                               |  |                          |         |   |                  |         |  
|Total assets                                                                                   |  | $                        | 354,381 |   |                  | 352,203 |  
|                                                                                               |  |                          |         |   |                  |         |  
|                                                                                               |  |                         
|Liabilities and Stockholders Equity                                                           |  |                          |         |   |                  |         |  
|Current liabilities                                                                            |  |                          |         |   |                  |         |  
|Trade accounts payable                                                                         |  | $                        | 3,069   |   |                  | 2,824   |  
|Current maturities of long-term debt                                                           |  |                          | 1,111   |   |                  | 1,111   |  
|Accrued taxes other than income taxes                                                          |  |                          | 2,277   |   |                  | 1,824   |  
|Income taxes payable                                                                           |  |                          | 494     |   |                  | 362     |  
|Deferred revenues and other accrued liabilities                                                |  |                          | 6,692   |   |                  | 6,981   |  
|                                                                                               |  |                          |         |   |                  |         |  
|Total current liabilities                                                                      |  |                          | 13,643  |   |                  | 13,102  |  
|                                                                                               |  |                         
|Long-term debt, excluding current maturities                                                   |  |                          | 91,222  |   |                  | 91,222  |  
|Deferred tax liabilities  net                                                                 |  |                          | 5,542   |   |                  | 5,448   |  
|Other noncurrent liabilities                                                                   |  |                          | 25,642  |   |                  | 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                                                                 |  |                          | 77,286  |   |                  | 78,290  |  
|Retained earnings                                                                              |  |                          | 156,954 |   |                  | 155,638 |  
|Treasury stock                                                                                 |  |                          | (10,876 | ) |                  | (12,548 | )
|Accumulated other comprehensive loss                                                           |  |                          | (5,160  | ) |                  | (5,209  | )
|                                                                                               |  |                          |         |   |                  |         |  
|Total stockholders equity                                                                     |  |                          | 218,332 |   |                  | 216,299 |  
|                                                                                               |  |                          |         |   |                  |         |  
|                                                                                               |  |                         
|Total liabilities and stockholders equity                                                     |  | $                        | 354,381 |   |                  | 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/(Loss)

(Unaudited)

(Thousands of dollars, except per share amounts)



|                                                             |  |                             |        |   |      |        |  
|------------------------------------------------------------ |  | --------------------------- | ------ | - | ---- | ------ | -
|                                                             |  | Three Months EndedMarch 31, |       
|                                                             |  | 2010                        |        |   | 2009 |       
|                                                             |  |                            
|Net sales                                                    |  | $                           | 31,935 |   |      | 22,862 |  
|                                                             |  |                             |        |   |      |        |  
|Costs and expenses                                           |  |                             |        |   |      |        |  
|Cost of sales                                                |  |                             | 21,464 |   |      | 17,447 |  
|Depreciation, amortization, and cost of fee timber harvested |  |                             | 3,049  |   |      | 3,416  |  
|General and administrative expenses                          |  |                             | 3,763  |   |      | 3,208  |  
|                                                             |  |                             |        |   |      |        |  
|                                                             |  |                            
|Total costs and expenses                                     |  |                             | 28,276 |   |      | 24,071 |  
|                                                             |  |                             |        |   |      |        |  
|                                                             |  |                            
|Operating income/(loss)                                      |  |                             | 3,659  |   |      | (1,209 | )
|                                                             |  |                            
|Equity in earnings of Del-Tin Fiber                          |  |                             | 488    |   |      | 757    |  
|Interest income                                              |  |                             | 98     |   |      | 2      |  
|Interest and other debt expense                              |  |                             | (913   | ) |      | (903   | )
|Interest capitalized                                         |  |                             | 16     |   |      | 63     |  
|Other income/(expense)                                       |  |                             | 2      |   |      | 133    |  
|                                                             |  |                             |        |   |      |        |  
|                                                             |  |                            
|Income/(loss) before income taxes                            |  |                             | 3,350  |   |      | (1,157 | )
|                                                             |  |                            
|Income tax expense                                           |  |                             | (1,097 | ) |      | (17    | )
|                                                             |  |                             |        |   |      |        |  
|Net income/(loss)                                            |  | $                           | 2,253  |   |      | (1,174 | )
|                                                             |  |                             |        |   |      |        |  
|                                                             |  |                            
|Income/(loss) per common share                               |  |                             |        |   |      |        |  
|Basic                                                        |  | $                           | .18    |   |      | (.09   | )
|Diluted                                                      |  | $                           | .18    |   |      | (.09   | )
|                                                             |  |                            
|Dividends declared per common share                          |  | $                           | .075   |   |      | .075   |  
|                                                             |  |                             |        |   |      |        |  
|                                                             |  |                            
|Weighted average common shares outstanding (thousands)       |  |                             |        |   |      |        |  
|Basic                                                        |  |                             | 12,349 |   |      | 12,299 |  
|Diluted                                                      |  |                             | 12,396 |   |      | 12,299 |  

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)                                                                      



|                                                                                        |  |                             |        |   |      |        |  
|--------------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | ------ | -
|                                                                                        |  | Three Months EndedMarch 31, |       
|                                                                                        |  | 2010                        |        |   | 2009 |       
|Operating activities                                                                    |  |                             |        |   |      |        |  
|Net income/(loss)                                                                       |  | $                           | 2,253  |   |      | (1,174 | )
|Adjustments to reconcile net income/(loss) to net cash provided by operating activities |  |                             |        |   |      |        |  
|Depreciation, amortization, and cost of fee timber harvested                            |  |                             | 3,049  |   |      | 3,416  |  
|Deferred income taxes                                                                   |  |                             | 356    |   |      | 574    |  
|Real estate development
expenditures1                                                   |  |                             | (394   | ) |      | (122   | )
|Real estate costs recovered upon sale                                                   |  |                             | 415    |   |      |       |  
|Timberland costs recovered upon sale                                                    |  |                             | 99     |   |      | 100    |  
|Equity in earnings of Del-Tin Fiber                                                     |  |                             | (488   | ) |      | (757   | )
|Stock-based compensation expense                                                        |  |                             | 480    |   |      | 412    |  
|Net increase in liabilities for pension and other postretirement benefits               |  |                             | 246    |   |      | 247    |  
|Net decrease in deferred compensation for stock-based liabilities                       |  |                             | (625   | ) |      | (1,069 | )
|Increase in operating working capital other than cash and cash equivalents              |  |                             | (817   | ) |      | (1,469 | )
|Other  changes in assets and liabilities                                               |  |                             | (217   | ) |      | 211    |  
|                                                                                        |  |                             |        |   |      |        |  
|Net cash provided by operating activities                                               |  |                             | 4,357  |   |      | 369    |  
|                                                                                        |  |                             |        |   |      |        |  
|                                                                                        |  |                            
|Investing activities                                                                    |  |                             |        |   |      |        |  
|Capital expenditures requiring cash, excluding real estate
development1                 |  |                             | (2,438 | ) |      | (4,598 | )
|Net change in purchased stumpage inventory                                              |  |                             | (453   | ) |      | (502   | )
|Advances to Del-Tin Fiber                                                               |  |                             | (677   | ) |      | (1,850 | )
|Repayments from Del-Tin Fiber                                                           |  |                             | 690    |   |      | 1,385  |  
|Net change in funds held by trustee                                                     |  |                             | (25    | ) |      | 2,765  |  
|Other  net                                                                             |  |                             | 142    |   |      | 435    |  
|                                                                                        |  |                             |        |   |      |        |  
|Net cash required by investing activities                                               |  |                             | (2,761 | ) |      | (2,365 | )
|                                                                                        |  |                             |        |   |      |        |  
|                                                                                        |  |                            
|Financing activities                                                                    |  |                             |        |   |      |        |  
|Proceeds from borrowings                                                                |  |                             |       |   |      | 3,500  |  
|Repayments of notes payable and long-term debt                                          |  |                             |       |   |      | (1,500 | )
|Treasury stock purchases                                                                |  |                             | (26    | ) |      | (1,112 | )
|Common stock dividends paid                                                             |  |                             | (937   | ) |      | (933   | )
|Proceeds from stock option exercises                                                    |  |                             | 154    |   |      | 7      |  
|Excess tax benefits from stock-based compensation expense                               |  |                             | 60     |   |      |       |  
|Other  net                                                                             |  |                             | (78    | ) |      | (75    | )
|                                                                                        |  |                             |        |   |      |        |  
|Net cash required by financing activities                                               |  |                             | (827   | ) |      | (113   | )
|                                                                                        |  |                             |        |   |      |        |  
|Net increase/(decrease) in cash and cash equivalents                                    |  |                             | 769    |   |      | (2,109 | )
|Cash and cash equivalents at January 1                                                  |  |                             | 4,783  |   |      | 2,413  |  
|                                                                                        |  |                             |        |   |      |        |  
|Cash and cash equivalents at March 31                                                   |  | $                           | 5,552  |   |      | 304    |  
|                                                                                        |  |                             |        |   |      |        |  

1Certain
 2009 real estate development expenditures amounts have been revised to conform to the 2010 presentation.

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)



|                                                                                                 |  |                             |         |   |      |         |  
|------------------------------------------------------------------------------------------------ |  | --------------------------- | ------- | - | ---- | ------- | -
|                                                                                                 |  | Three Months EndedMarch 31, |        
|                                                                                                 |  | 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                                                                        |  |                             | (4      | ) |      | (3      | )
|Stock based compensation expense                                                                 |  |                             | 480     |   |      | 412     |  
|Restricted stock awards                                                                          |  |                             | (1,540  | ) |      | (1,859  | )
|Tax effect of stock awards                                                                       |  |                             | 60      |   |      | (255    | )
|                                                                                                 |  |                             |         |   |      |         |  
|Balance at end of period                                                                         |  |                             | 77,286  |   |      | 76,955  |  
|                                                                                                 |  |                             |         |   |      |         |  
|                                                                                                 |  |                            
|Retained earnings                                                                                |  |                             |         |   |      |         |  
|Balance at beginning of period                                                                   |  |                             | 155,638 |   |      | 155,683 |  
|Net income/(loss)                                                                                |  |                             | 2,253   |   |      | (1,174  | )
|Common stock dividends                                                                           |  |                             | (937    | ) |      | (933    | )
|                                                                                                 |  |                             |         |   |      |         |  
|Balance at end of period                                                                         |  |                             | 156,954 |   |      | 153,576 |  
|                                                                                                 |  |                             |         |   |      |         |  
|                                                                                                 |  |                            
|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     | ) |      | (1,111  | )
|Shares issued for incentive plans  49,158 and 52,637 shares, respectively                       |  |                             | 1,698   |   |      | 1,869   |  
|                                                                                                 |  |                             |         |   |      |         |  
|Balance at end of period  314,656 and 395,111 shares, respectively                              |  |                             | (10,876 | ) |      | (13,642 | )
|                                                                                                 |  |                             |         |   |      |         |  
|                                                                                                 |  |                            
|Accumulated other comprehensive loss                                                             |  |                             |         |   |      |         |  
|Balance at beginning of period                                                                   |  |                             | (5,209  | ) |      | (6,907  | )
|Change in other comprehensive income net of tax                                                  |  |                             | 49      |   |      | 90      |  
|                                                                                                 |  |                             |         |   |      |         |  
|Balance at end of period                                                                         |  |                             | (5,160  | ) |      | (6,817  | )
|                                                                                                 |  |                             |         |   |      |         |  
|                                                                                                 |  |                            
|Total stockholders equity                                                                       |  | $                           | 218,332 |   |      | 210,200 |  
|                                                                                                 |  |                             |         |   |      |         |  

See accompanying notes to consolidated financial statements.



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Consolidated
Statements of Other Comprehensive Income/(Loss)

(Unaudited)

(Thousands of
dollars)



|                                                                              |  |                             |       |   |      |        |  
|----------------------------------------------------------------------------- |  | --------------------------- | ----- | - | ---- | ------ | -
|                                                                              |  | Three Months EndedMarch 31, |      
|                                                                              |  | 2010                        |       |   | 2009 |       
|Net income/(loss)                                                             |  | $                           | 2,253 |   |      | (1,174 | )
|                                                                              |  |                             |       |   |      |        |  
|Other comprehensive income                                                    |  |                             |       |   |      |        |  
|Items related to employee benefit plans:                                      |  |                             |       |   |      |        |  
|Reclassification adjustment for gains/(losses) included in net income/(loss): |  |                             |       |   |      |        |  
|Amortization of prior service cost                                            |  |                             | 2     |   |      | 13     |  
|Amortization of actuarial loss                                                |  |                             | 128   |   |      | 184    |  
|Amortization of plan amendment                                                |  |                             | (50   | ) |      | (50    | )
|Income tax expense related to items of other comprehensive income             |  |                             | (31   | ) |      | (57    | )
|                                                                              |  |                             |       |   |      |        |  
|Other comprehensive income                                                    |  |                             | 49    |   |      | 90     |  
|                                                                              |  |                             |       |   |      |        |  
|Comprehensive income/(loss)                                                   |  | $                           | 2,302 |   |      | (1,084 | )
|                                                                              |  |                             |       |   |      |        |  

See accompanying notes to consolidated financial statements.



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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.

The Company has changed the cash flow classification of operating activities to include real estate development
capital expenditures. Previously, real estate development capital expenditures were reported as investing activities. The Company believes that this classification is preferable because the cash inflows and cash outflows associated with real estate
assets held for sale should be classified in a consistent manner and that classification within operating activities better reflects the fact that these cash outflows are directly related to the Companys operations of developing and selling
real estate. Certain accounts in the prior-year statement of cash flow have been revised for comparative purposes to conform to the presentation in the current-year financial statements.

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 March 31, 2010, and the results of its operations and cash flows for the three months ended March 31, 2010 and 2009. These
consolidated financial statements are not necessarily indicative of results to be expected for the full year.

Recently issued
Accounting Pronouncements

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.



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to
Consolidated Financial Statements



Note 2  Inventories

Inventories at the balance sheet dates consisted of the following:



|                       |  |               |       |              |      
|---------------------- |  | ------------- | ----- | ------------ | -----
|(Thousands of dollars) |  | March 31,2010 |       | Dec. 31,2009
|                       |  |              
|Logs                   |  | $             | 801   |              | 1,367
|Lumber                 |  |               | 3,255 |              | 4,211
|Materials and supplies |  |               | 478   |              | 339  
|                       |  |               |       |              |      
|                       |  | $             | 4,534 |              | 5,917
|                       |  |               |       |              |      

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)         |  | March 31,2010 |       | Dec. 31,2009
|                               |  |              
|Short-term deferred tax assets |  | $             | 1,695 |              | 1,989
|Refundable income taxes        |  |               | 346   |              | 353  
|Prepaid expenses               |  |               | 507   |              | 216  
|Other current assets           |  |               | 430   |              | 284  
|                               |  |               |       |              |      
|                               |  | $             | 2,978 |              | 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 has issued 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.



7



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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.)



At March 31, 2010, and December 31, 2009, the Companys share of the underlying net
assets of Del-Tin exceeded its investment by $16,348,000 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.

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



|                                       |  |                             |        |   |             |        |  
|-------------------------------------- |  | --------------------------- | ------ | - | ----------- | ------ | -
|(Thousands of dollars)                 |  | March 31,2010               |        |   | Jan. 2,2010 |       
|Condensed Balance Sheet Information    |  |                             |        |   |             |        |  
|Current assets                         |  | $                           | 9,279  |   |             | 7,396  |  
|Property, plant, and equipment  net   |  |                             | 74,471 |   |             | 75,438 |  
|Other noncurrent assets                |  |                             | 53     |   |             | 63     |  
|                                       |  |                             |        |   |             |        |  
|Total assets                           |  | $                           | 83,803 |   |             | 82,897 |  
|                                       |  |                             |        |   |             |        |  
|                                       |  |                            
|Current liabilities                    |  | $                           | 2,949  |   |             | 2,528  |  
|Long-term debt                         |  |                             | 29,000 |   |             | 29,000 |  
|Members capital                       |  |                             | 51,854 |   |             | 51,369 |  
|                                       |  |                             |        |   |             |        |  
|Total liabilities and members capital |  | $                           | 83,803 |   |             | 82,897 |  
|                                       |  |                             |        |   |             |        |  
|                                       | 
|                                       |  | Three Months EndedMarch 31, |       
|                                       |  | 2010                        |        |   | 2009        |       
|Condensed Income Statement Information |  |                             |        |   |             |        |  
|Net sales                              |  | $                           | 15,416 |   |             | 13,863 |  
|                                       |  |                             |        |   |             |        |  
|Costs and expenses                     |  |                             |        |   |             |        |  
|Cost of sales                          |  |                             | 12,810 |   |             | 10,740 |  
|Depreciation                           |  |                             | 1,293  |   |             | 1,175  |  
|General and administrative expenses    |  |                             | 597    |   |             | 555    |  
|                                       |  |                             |        |   |             |        |  
|Total costs and expenses               |  |                             | 14,700 |   |             | 12,470 |  
|                                       |  |                             |        |   |             |        |  
|                                       |  |                            
|Operating income                       |  |                             | 716    |   |             | 1,393  |  
|Interest income                        |  |                             | 40     |   |             | 26     |  
|Interest and other debt expense        |  |                             | (177   | ) |             | (257   | )
|Other loss                             |  |                             | (8     | ) |             |       |  
|                                       |  |                             |        |   |             |        |  
|Net income                             |  | $                           | 571    |   |             | 1,162  |  
|                                       |  |                             |        |   |             |        |  



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##### Table of Contents

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)                                                    |  | March 31,2010 |         |   | Dec. 31,2009 |        
|Purchased stumpage inventory                                              |  | $             | 2,902   |   |              | 2,449   |  
|Timberlands                                                               |  |               | 91,688  |   |              | 92,032  |  
|Fee timber                                                                |  |               | 225,584 |   |              | 224,002 |  
|Logging facilities                                                        |  |               | 2,331   |   |              | 2,301   |  
|                                                                          |  |               |         |   |              |         |  
|                                                                          |  |               | 322,505 |   |              | 320,784 |  
|Less accumulated cost of fee timber harvested and facilities depreciation |  |               | (95,256 | ) |              | (94,096 | )
|                                                                          |  |               |         |   |              |         |  
|Strategic timber and timberlands                                          |  |               | 227,249 |   |              | 226,688 |  
|Non-strategic timber and timberlands                                      |  |               | 2,106   |   |              | 2,205   |  
|                                                                          |  |               |         |   |              |         |  
|                                                                          |  | $             | 229,355 |   |              | 228,893 |  
|                                                                          |  |               |         |   |              |         |  

In 1999, the Company initiated a program to identify non-strategic timberlands for possible sale. As of March 31,
2010 and December 31, 2009, approximately 5,700 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 $263,000
and $308,000 for the three months ended March 31, 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)        |  | March 31,2010 |         |   | Dec. 31,2009 |        
|Land                          |  | $             | 125     |   |              | 125     |  
|Land improvements             |  |               | 5,596   |   |              | 5,463   |  
|Buildings and structures      |  |               | 11,056  |   |              | 11,056  |  
|Machinery and equipment       |  |               | 95,967  |   |              | 94,993  |  
|                              |  |               |         |   |              |         |  
|                              |  |               | 112,744 |   |              | 111,637 |  
|Less accumulated depreciation |  |               | (79,573 | ) |              | (77,751 | )
|                              |  |               |         |   |              |         |  
|                              |  | $             | 33,171  |   |              | 33,886  |  
|                              |  |               |         |   |              |         |  

Note 7  Income Taxes

The Companys effective tax rate for the three months ended March 31, 2010, was 33 percent. The Companys policy is to recognize
interest expense related to unrecognized tax benefits in interest expense and penalties in other expenses. During the three months ended March 31, 2010, the Company recognized $1,000 in interest expense from these items. The Company had
approximately $18,000 accrued in deferred revenues and other accrued liabilities for interest and penalties at March 31, 2010. If the Company were to prevail on all unrecognized tax benefits recorded on the balance sheet, approximately
$1,833,000 would benefit the effective rate.



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##### Table of Contents

DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to
Consolidated Financial Statements

Note 7  Income Taxes (cont.)



The Company is no longer subject to U.S. federal and state examinations by tax authorities for
years before 2006.

Note 8  Deferred Revenue and Other Accrued Liabilities

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



|                              |  |               |       |              |      
|----------------------------- |  | ------------- | ----- | ------------ | -----
|(Thousands of dollars)        |  | March 31,2010 |       | Dec. 31,2009
|                              |  |              
|Deferred revenues  current   |  | $             | 3,050 |              | 3,614
|Vacation accrual              |  |               | 966   |              | 938  
|Deferred compensation         |  |               | 659   |              | 1,054
|All other current liabilities |  |               | 2,017 |              | 1,375
|                              |  |               |       |              |      
|                              |  | $             | 6,692 |              | 6,981
|                              |  |               |       |              |      

Note 9  Other Noncurrent Liabilities

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



|                                              |  |               |        |              |       
|--------------------------------------------- |  | ------------- | ------ | ------------ | ------
|(Thousands of dollars)                        |  | March 31,2010 |        | Dec. 31,2009
|                                              |  |              
|Accumulated postretirement benefit obligation |  | $             | 8,542  |              | 8,355 
|Excess retirement plan                        |  |               | 3,757  |              | 3,729 
|Accrued pension liability                     |  |               | 8,830  |              | 8,877 
|Deferred revenue  long term portion          |  |               | 1,126  |              | 1,494 
|Uncertain tax positions liability             |  |               | 2,024  |              | 1,895 
|Other noncurrent liabilities                  |  |               | 1,363  |              | 1,782 
|                                              |  |               |        |              |       
|                                              |  | $             | 25,642 |              | 26,132
|                                              |  |               |        |              |       



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##### Table of Contents

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 March 31, |     
|(Thousands of dollars)                |  | 2010                        |      |   | 2009 |     
|Funded qualified retirement plan      |  |                             |      |   |      |      |  
|Service cost                          |  | $                           | 282  |   |      | 277  |  
|Interest cost                         |  |                             | 407  |   |      | 396  |  
|Expected return on plan assets        |  |                             | (361 | ) |      | (297 | )
|Amortization of prior service cost    |  |                             | 5    |   |      | 15   |  
|Recognized actuarial loss             |  |                             | 108  |   |      | 171  |  
|                                      |  |                             |      |   |      |      |  
|Net retirement expense                |  | $                           | 441  |   |      | 562  |  
|                                      |  |                             |      |   |      |      |  
|                                      |  |                            
|Unfunded nonqualified retirement plan |  |                             |      |   |      |      |  
|Service cost                          |  | $                           | 33   |   |      | 28   |  
|Interest cost                         |  |                             | 57   |   |      | 49   |  
|Amortization of prior service cost    |  |                             | (3   | ) |      | (3   | )
|Recognized actuarial loss             |  |                             | 20   |   |      | 12   |  
|                                      |  |                             |      |   |      |      |  
|Net retirement expense                |  | $                           | 107  |   |      | 86   |  
|                                      |  |                             |      |   |      |      |  
|                                      |  |                            
|Other postretirement benefits         |  |                             |      |   |      |      |  
|Service cost                          |  | $                           | 82   |   |      | 81   |  
|Interest cost                         |  |                             | 117  |   |      | 119  |  
|Amortization of plan amendment        |  |                             | (50  | ) |      | (50  | )
|                                      |  |                             |      |   |      |      |  
|Other postretirement benefits expense |  | $                           | 149  |   |      | 150  |  
|                                      |  |                             |      |   |      |      |  

The Company made contributions to its qualified plan of $375,000 during the first three months of 2010. The expected
long-term rate of return on pension plan assets is 7.50 percent.

Recently enacted U.S. health care reform legislation 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 postretirement benefits.



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##### Table of Contents

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 March 31, 2010 and 2009, included $480,000 and $412,000, respectively, of
stock-based compensation expense reflected in general and administrative expenses.

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 March 31, 2010, and changes during the three-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                      |  | (4,595  | ) |  |                              | 33.55 |                                                 |     |                               |   |    
|Forfeited/expired              |  |        |   |  |                              |      |                                                 |     |                               |   |    
|                               |  |         |   |  |                              |       |                                                 |     |                               |   |    
|Outstanding at March 31, 2010  |  | 196,478 |   |  | $                            | 43.50 |                                                 | 6.9 |                               | $ | 843
|                               |  |         |   |  |                              |       |                                                 |     |                               |   |    
|                               |  |         |   | 
|Exercisable at March 31, 2010  |  | 111,759 |   |  | $                            | 43.37 |                                                 | 5.4 |                               | $ | 571
|                               |  |         |   |  |                              |       |                                                 |     |                               |   |    

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 March 31, 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.



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##### Table of Contents

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 March 31, 2010, and changes during the three-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
|Forfeited                    |  |        |   |  |                                     |     
|                             |  |         |   |  |                                     |      
|                             |  |        
|Nonvested at March 31, 2010  |  | 79,465  |   |  | $                                   | 45.38
|                             |  |         |   |  |                                     |      

As of March 31, 2010, there was $2,053,000 of unrecognized
compensation cost related to nonvested restricted stock. That cost is expected to be recognized over a weighted-average period of 2.4 years.

Performance Units A summary of nonvested restricted stock performance units as of March 31, 2010, and changes during the three
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
|Forfeited                                    |  |       |   |  |                                     |     
|                                             |  |        |   |  |                                     |      
|                                             |  |       
|Nonvested at March 31, 2010                  |  | 51,986 |   |  | $                                   | 52.38
|                                             |  |        |   |  |                                     |      

As of March 31, 2010, there was $1,706,000 of unrecognized
compensation cost related to nonvested restricted stock performance units. That cost is expected to be recognized over a weighted-average period of 2.5 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 March 31, 2010, are presented in the following table:



|                                   |  |               |         |                                                                       |         |                             |         |                               |  
|---------------------------------- |  | ------------- | ------- | --------------------------------------------------------------------- | ------- | --------------------------- | ------- | ----------------------------- | -
|                                   |  |               |         | Fair Value Measurements at Reporting Date Using                      
|                                   |  | March 31,2010 |         | Quoted prices inActive Markets forIdentical
Assets(Liabilities)Inputs |         | SignificantObservableInputs |         | SignificantUnobservableInputs
|(Thousands of dollars)             |  |               | Level 1 |                                                                       | Level 2 |                             | Level 3
|Liabilities                        |  |               |         |                                                                       |         |                             |         |                               |  
|Nonqualified employee savings plan |  | $             | 696     |                                                                       | 696     |                             |        |                               | 
|                                   |  |               |         |                                                                       |         |                             |         |                               |  

The following table presents the carrying amounts and estimated
fair values of financial instruments held by the Company at March 31, 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 |  | $92,333        |  | 96,939             

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 valued.



14



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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:



|                                                                                                           |  |                             |        |      |        |  
|---------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | ---- | ------ | -
|                                                                                                           |  | Three Months EndedMarch 31, |       
|(Thousands, except per share amounts)                                                                      |  | 2010                        |        | 2009 |       
|Net income/(loss)                                                                                          |  | $                           | 2,253  |      | (1,174 | )
|                                                                                                           |  |                             |        |      |        |  
|                                                                                                           |  |                            
|Weighted average number of common shares used in basic EPS                                                 |  |                             | 12,349 |      | 12,299 |  
|Potentially dilutive shares                                                                                |  |                             | 47     |      |       |  
|                                                                                                           |  |                             |        |      |        |  
|Weighted average number of common shares and dilutive potential common stock used in EPS assuming dilution |  |                             | 12,396 |      | 12,299 |  
|                                                                                                           |  |                             |        |      |        |  
|                                                                                                           |  |                            
|Earnings per common share                                                                                  |  |                             |        |      |        |  
|Basic                                                                                                      |  | $                           | .18    |      | (.09   | )
|Assuming dilution                                                                                          |  | $                           | .18    |      | (.09   | )

Options to purchase shares, which
were outstanding but not included in the computation of diluted earnings per share because the options exercise price was greater than the average market price of the common shares, were 77,534 and 102,407 for the three months ended March 31,
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 41,668 and zero at
March 31, 2010 and 2009, respectively.

Note 15  Supplemental Cash Flow Disclosures

Additional information concerning cash flows are as follows:



|                                                                                               |                              |                        |      |                             |  |                |       |                             |   |  |  |   
|---------------------------------------------------------------------------------------------- | ---------------------------- | ---------------------- | ---- | --------------------------- |  | -------------- | ----- | --------------------------- | - |  |  | --
|                                                                                               |                              |                        |      | Three Months EndedMarch 31,
|                                                                                               | (Thousands of dollars)       |                        | 2010 |                             |  | 2009          
|                                                                                               | Income taxes paid in cash    |                        | $    | 506                         |  |                | 14   
|                                                                                               | Interest paid                |                        |      | 185                         |  |                | 190  
|Non-cash investing and financing activities excluded from the
statement of cash flows include:
|                                                                                               |                              |                        |      |                             |  |                |       | Three Months EndedMarch 31,
|                                                                                               |                              | (Thousands of dollars) |      | 2010                        |  |                | 2009 
|                                                                                               | Issuance of restricted stock |                        | $    | 1,540                       |  |                | 1,859
|                                                                                               |                              |                        |      |                             |  | Land exchanges |       |                             |  |  |  | 35



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##### Table of Contents

DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to
Consolidated Financial Statements

Note 15  Supplemental Cash Flow Disclosures (cont.)



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



|                                                |  |                             |        |   |      |        |  
|----------------------------------------------- |  | --------------------------- | ------ | - | ---- | ------ | -
|                                                |  | Three Months EndedMarch 31, |       
|(Thousands of dollars)                          |  | 2010                        |        |   | 2009 |       
|Trade accounts receivable                       |  | $                           | (2,628 | ) |      | (1,556 | )
|Other receivables                               |  |                             | 38     |   |      | 10     |  
|Inventories                                     |  |                             | 1,383  |   |      | 607    |  
|Prepaid expenses                                |  |                             | (440   | ) |      | (1,240 | )
|Trade accounts payable                          |  |                             | 245    |   |      | 411    |  
|Accrued taxes other than income taxes           |  |                             | 453    |   |      | 433    |  
|Deferred revenues and other accrued liabilities |  |                             | 132    |   |      | (134   | )
|                                                |  |                             |        |   |      |        |  
|                                                |  | $                           | (817   | ) |      | (1,469 | )
|                                                |  |                             |        |   |      |        |  

Note 16  Variable Interest Entity

The acquisition of certain timberlands in Calhoun County, Arkansas, in October 2009, was structured to qualify as the first step of a reverse
like-kind exchange under Internal Revenue Code Section 1031 and Internal Revenue Service (IRS), Revenue Procedure 2000-37. Prior to closing on the purchase, the Company assigned all of its right and duties under the purchase and
sale agreement to Hampton Acquisition, LLC (Hampton) a company unaffiliated with Deltic. Hampton, as an exchange accommodation titleholder, acquired the timberlands. Deltic loaned to Hampton an amount equal to the purchase price of the
assets.

Hampton will hold the assets pursuant to a qualified exchange accommodation agreement until the second step of the like-kind
exchange is completed. As of the date of the closing, the assets held by Hampton are under lease to Deltic in a net lease whereby Deltic has the benefits and risks of all revenues and costs attributed to the properties.

Based on the provisions of the FASB codification related to consolidations of variable interest entities, FASC 810-10, the Company determined that
Hampton is a variable interest entity for which Deltic is the primary beneficiary. Accordingly, Hampton was consolidated into Deltic subsequent to the completion of the purchase of timberlands on October 7, 2009. As a result of the
consolidation, Deltic included $6,100,000 on the balance sheet in timber and timberland assets, and recognized on the income statement the revenues and expenses attributed to the property.

The second step of this reverse like-kind exchange was concluded on April 14, 2010, and all assets were transferred to Deltic on that date.



16



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to
Consolidated Financial Statements



Note 17  Business Segments

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



|                                                             |  |                             |        |   |      |        |  
|------------------------------------------------------------ |  | --------------------------- | ------ | - | ---- | ------ | -
|                                                             |  | Three Months EndedMarch 31, |       
|(Thousands of dollars)                                       |  | 2010                        |        |   | 2009 |       
|Net sales                                                    |  |                             |        |   |      |        |  
|Woodlands                                                    |  | $                           | 9,023  |   |      | 9,895  |  
|Mills                                                        |  |                             | 24,615 |   |      | 16,028 |  
|Real Estate                                                  |  |                             | 2,296  |   |      | 1,572  |  
|Eliminations*                                                |  |                             | (3,999 | ) |      | (4,633 | )
|                                                             |  |                             |        |   |      |        |  
|                                                             |  | $                           | 31,935 |   |      | 22,862 |  
|                                                             |  |                             |        |   |      |        |  
|                                                             |  |                            
|Income/(loss) before income taxes                            |  |                             |        |   |      |        |  
|Operating income                                             |  |                             |        |   |      |        |  
|Woodlands                                                    |  | $                           | 5,079  |   |      | 5,674  |  
|Mills                                                        |  |                             | 2,499  |   |      | (3,552 | )
|Real Estate                                                  |  |                             | (714   | ) |      | (1,025 | )
|Corporate                                                    |  |                             | (3,469 | ) |      | (2,890 | )
|Eliminations                                                 |  |                             | 264    |   |      | 584    |  
|                                                             |  |                             |        |   |      |        |  
|Operating income/(loss)                                      |  |                             | 3,659  |   |      | (1,209 | )
|Equity in earnings of Del-Tin Fiber                          |  |                             | 488    |   |      | 757    |  
|Interest income                                              |  |                             | 98     |   |      | 2      |  
|Interest and other debt expense                              |  |                             | (913   | ) |      | (903   | )
|Interest capitalized                                         |  |                             | 16     |   |      | 63     |  
|Other income/expense                                         |  |                             | 2      |   |      | 133    |  
|                                                             |  |                             |        |   |      |        |  
|                                                             |  | $                           | 3,350  |   |      | (1,157 | )
|                                                             |  |                             |        |   |      |        |  
|                                                             |  |                            
|Depreciation, amortization, and cost of fee timber harvested |  |                             |        |   |      |        |  
|Woodlands                                                    |  | $                           | 1,219  |   |      | 1,390  |  
|Mills                                                        |  |                             | 1,697  |   |      | 1,867  |  
|Real Estate                                                  |  |                             | 112    |   |      | 137    |  
|Corporate                                                    |  |                             | 21     |   |      | 22     |  
|                                                             |  |                             |        |   |      |        |  
|                                                             |  | $                           | 3,049  |   |      | 3,416  |  
|                                                             |  |                             |        |   |      |        |  
|                                                             |  |                            
|Capital expenditures                                         |  |                             |        |   |      |        |  
|Woodlands                                                    |  | $                           | 1,423  |   |      | 3,966  |  
|Mills                                                        |  |                             | 825    |   |      | 579    |  
|Real Estate                                                  |  |                             | 535    |   |      | 168    |  
|Corporate                                                    |  |                             | 49     |   |      | 42     |  
|                                                             |  |                             |        |   |      |        |  
|                                                             |  | $                           | 2,832  |   |      | 4,755  |  
|                                                             |  |                             |        |   |      |        |  

*Primarily intersegment sales of timber from Woodlands to Mills.



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##### Table of Contents

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

Executive Overview

The Company
recorded net income of $2.3 million for the first quarter of 2010, compared to a loss of $1.2 million for the same period of 2009. While the Woodlands segment continued its role as the established core operation of the Company during the first
quarter and provided $5.1 million in operating income, this was $.6 million below the same period in 2009. The decrease was the result of lower pine sawtimber harvest volume and average stumpage prices. The Mills segment reported operating income of
$2.5 million, an improvement of $6.1 million when compared to the first quarter of 2009. The Mills improvement reflects benefits from supply-side market factors, the result of which was increased lumber prices, and production efficiencies during the
current quarter. The Real Estate segment reported a loss of $.7 million in the current-year quarter compared to a loss of $1 million for the same period of 2009. The improvement is due to an increase in residential lot sales activity in the current
year. Corporate segment expense was $.6 million higher in the first quarter of 2010 versus the corresponding period of 2009, a result of higher general and administrative expenses. This was primarily from additional accrued taxes on employee
incentive plan expenses, which were due to the increase in the market value of share-based awards. Deltic owns a 50 percent interest in Del-Tin Fiber, LLC and recorded related equity in income of $.5 million in the current quarter, a $.3 million
decrease from the first quarter of 2009 due largely to a lower average sales price for MDF and increased resin cost.

Deltic is
primarily a wood products producer operating in a commodity-based business environment, with a major diversification in real estate development. This environment is affected by a number of factors including general economic conditions, 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 material, and weather conditions. Most recently, the United States economy and the housing sector have been gradually moving toward recovery. Along with this positive trend the wood
products sector has been experiencing increased sales realizations for its products due to supply-side market factors caused by poor logging conditions because of wet weather in much of the southern United States. As the wet weather conditions abate
and logging conditions improve, resulting in increased mill sawlog inventories, lumber production may increase potentially causing lumber prices to moderate from current levels. However, given its relative size and the nature of most commodity
markets, the Company has little or no control over pricing levels for its lumber products. However, the Company continues its efforts to increase operating efficiencies, reduce controllable manufacturing costs, manage production levels to match
market demand, and to seek other cost reducing measures.

Wet weather conditions influenced logging harvest activities in the first
quarter of 2010. The pine sawtimber harvest decreased 9,043 tons to 146,488 tons when compared to the 2009 first quarter harvest of 155,531 tons. The average price received for pine sawtimber was $26 per ton in the current quarter of 2010, a
decrease of $3 per ton from the 2009 first quarter. However, the per-ton prices for pine stumpage began to move upward during the current quarter due to the reduced harvest volumes and the increased demand for pine stumpage related to improved
lumber market conditions. The pine pulpwood harvest of 79,379 tons in the first quarter of 2010 was 10,454 tons fewer than the 89,833 tons harvested in the first quarter of 2009. Because of low fiber supplies at area papermills, the price received
for pine pulpwood increased $5 per ton to $16 per ton, when compared to a year ago. The Company also sold approximately 232 acres of recreational-use hardwood bottomland at an average sales price of $1,587 per acre during the first quarter of 2010
compared to sales of approximately 277 acres at an average price of $1,485 per acre for the same period of 2009. In addition, the Woodlands segment reported hunting lease income of $.5 million in the first quarters of 2010 and 2009.

Deltics Woodlands segment also receives revenues from mineral lease rentals and mineral royalty payments. In the first quarters of 2010 and
2009, income from mineral lease rentals was $.5 million. The Company has under lease approximately 31,600 net mineral acres in the area known as the Fayetteville Shale Play, an unconventional natural gas reservoir now being developed in
the state of Arkansas. In the first 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 first quarter of 2009.



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##### Table of Contents

The total of all royalty income, including the Fayetteville Shale Play, was $.9 million and $.4 million for the first quarter of 2010 and 2009, respectively. The ultimate benefit to Deltic from
these mineral leases remains speculative and unknown to the Company and is contingent on the level of natural gas prices and the successful extraction and sale of natural gas from the area.

The Mills segment benefited from an improved lumber market this quarter, which was primarily due to the reduced lumber supply, as most mills were
unable to obtain adequate sawlog inventories due to poor logging conditions. The average sales price of $310 per MBF in the first quarter of 2010 was a 32 percent increase from $234 per MBF received in the first quarter of 2009. Lumber sales were
63.7 million board feet in the current period of 2010, an increase of 22 percent compared to 52.3 million board feet for the same period of 2009. Due to log availability from Company-owned lands, the Mills were able to increase production
to match market requirements. Approximately one-half of stumpage supplied to its sawmills comes from Company fee timberlands. However, as with any commodity market, the Company expects the historical lumber market volatility to continue in the
future. Deltic will continue to manage production levels to meet that of market demand, while controlling operating costs.

The Real
Estate segment closed six residential lot sales during the first quarter of 2010 with an average per-lot sales price of $129,600 compared to no sales in 2009s first quarter. In response to current market demands, one neighborhood of
smaller-sized lots was offered in the first quarter of 2010. Development of this neighborhood will begin in the second quarter of 2010 and all 20 lots have been placed under contract. No commercial sales occurred in either the first quarter of 2010
or 2009. The commercially zoned acreage near the area of The Promenade at Chenal, an upscale shopping center within Chenal Valley and a planned lifestyle medical center, continues to receive interest as this area becomes more fully
developed. Commercial real estate sales activity is by nature less predictable than residential activity.

Operating results for Del-Tin
are affected by the overall medium density fiberboard (MDF) market and the plants operating performance. Del-Tins operational income decreased $.3 million, to $.5 million during the first quarter of 2010, when compared to
2009, due primarily to lower prices for MDF sold and resin glue cost increases, partially offset by increased sales volume. The MDF market trended upward during the month of March due to supply-side factors related to decreased imports from Chile
following a major earthquake there on February 27, 2010. With regard to the Companys equity position in Del-Tin, Deltic continues to reduce depreciation expense related to the add-back per thousand square feet manufactured, 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.)



19



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##### Table of Contents

Results of Operations

In the following tables, Deltics net sales and results of operations are presented for the quarters ended March 31, 2010 and 2009.
Explanations of significant variances and additional analyses for the Companys consolidated and segment operations follow the tables.



|                                                |  |                         |      |   |      |      |  
|----------------------------------------------- |  | ----------------------- | ---- | - | ---- | ---- | -
|                                                |  | Quarter Ended March 31, |     
|(Millions of dollars, except per share amounts) |  | 2010                    |      |   | 2009 |     
|Net sales                                       |  |                         |      |   |      |      |  
|Woodlands                                       |  | $                       | 9.0  |   |      | 9.9  |  
|Mills                                           |  |                         | 24.6 |   |      | 16.0 |  
|Real Estate                                     |  |                         | 2.3  |   |      | 1.6  |  
|Eliminations                                    |  |                         | (4.0 | ) |      | (4.6 | )
|                                                |  |                         |      |   |      |      |  
|Net sales                                       |  | $                       | 31.9 |   |      | 22.9 |  
|                                                |  |                         |      |   |      |      |  
|                                                |  |                        
|Operating income/(loss)                         |  |                         |      |   |      |      |  
|Woodlands                                       |  | $                       | 5.1  |   |      | 5.7  |  
|Mills                                           |  |                         | 2.5  |   |      | (3.6 | )
|Real Estate                                     |  |                         | (.7  | ) |      | (1.0 | )
|Corporate                                       |  |                         | (3.5 | ) |      | (2.9 | )
|Eliminations                                    |  |                         | .3   |   |      | .6   |  
|                                                |  |                         |      |   |      |      |  
|Operating income/(loss)                         |  |                         | 3.7  |   |      | (1.2 | )
|Equity in earnings of Del-Tin Fiber             |  |                         | .5   |   |      | .8   |  
|Interest income                                 |  |                         | .1   |   |      |     |  
|Interest and other debt expense                 |  |                         | (.9  | ) |      | (.9  | )
|Other income                                    |  |                         |     |   |      | .1   |  
|Income taxes                                    |  |                         | (1.1 | ) |      |     |  
|                                                |  |                         |      |   |      |      |  
|Net income/(loss)                               |  | $                       | 2.3  |   |      | (1.2 | )
|                                                |  |                         |      |   |      |      |  
|                                                |  |                        
|Income/(loss) per common share                  |  |                         |      |   |      |      |  
|Basic and diluted                               |  | $                       | .18  |   |      | (.09 | )

Consolidated

The $3.5 million increase in net income was the result of improved financial results for the Companys Mills and Real Estate segments,
partially offset by decreased operating income from the Woodlands segment and increased Corporate general and administrative expenses.

Operating income increased $4.9 million. The Woodlands segment decreased $.6 million due primarily to a decreased pine sawtimber harvest and lower
average per-ton sales price combined with lower other income mainly from well-site damages. These were partially offset by increased revenues from oil and gas royalties and pine pulpwood sales. The Mills segment operations improved $6.1 million
mainly due to a $76 per MBF, or 32 percent increase, in the average lumber sales price combined with a 22 percent increase in lumber sales volume. The Real Estate segments results improved $.3 million mainly due to increased sales of
residential lots. Corporate expense increased $.6 million due to higher general and administrative expenses.



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##### Table of Contents

Woodlands

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



|                                  |  |                         |       |      |      
|--------------------------------- |  | ----------------------- | ----- | ---- | -----
|                                  |  | Quarter Ended March 31,
|                                  |  | 2010                    |       | 2009
|Gross sales (millions of dollars) |  |                         |       |      |      
|Pine sawtimber                    |  | $                       | 3.8   |      | 4.5  
|Pine pulpwood                     |  |                         | 1.2   |      | 1.0  
|Hardwood sawtimber                |  |                         |      |      | .1   
|Hardwood pulpwood                 |  |                         | .2    |      | .3   
|Oil and gas lease rentals         |  |                         | .5    |      | .5   
|Oil and gas royalties (gross)     |  |                         | 1.0   |      | .5   
|Hunting leases                    |  |                         | .5    |      | .5   
|                                  |  |                        
|Sales volume (thousands of tons)  |  |                         |       |      |      
|Pine sawtimber                    |  |                         | 146.5 |      | 155.5
|Pine pulpwood                     |  |                         | 79.4  |      | 89.8 
|Hardwood sawtimber                |  |                         | 1.0   |      | 3.4  
|Hardwood pulpwood                 |  |                         | 13.3  |      | 33.2 
|                                  |  |                        
|Sales price (per ton)             |  |                         |       |      |      
|Pine sawtimber                    |  | $                       | 26    |      | 29   
|Pine pulpwood                     |  |                         | 16    |      | 11   
|Hardwood sawtimber                |  |                         | 31    |      | 33   
|Hardwood pulpwood                 |  |                         | 14    |      | 8    
|                                  |  |                        
|Timberland                        |  |                         |       |      |      
|Net sales (millions of dollars)   |  | $                       | .4    |      | .4   
|Sales volume (acres)              |  |                         | 232   |      | 277  
|Sale price (per acre)             |  | $                       | 1,587 |      | 1,485

Net sales decreased $.9 million in 2010
when compared to the 2009 first quarter. Wet weather contributed to poor logging conditions in Deltics operating area during the first quarter of 2010 and caused harvest volumes to decrease. Sales of pine sawtimber decreased $.7 million due to
a six percent lower harvest volume at a sales price of $26 per ton, which is ten percent lower than 2009s $29 per ton price. Sales of pine pulpwood increased $.2 million mainly due to a 45 percent increase in the per-ton sales price, partially
offset by a 12 percent lower harvest volume. Revenues from hardwood products declined $.2 million. Net oil and gas royalties in the first quarter of 2010 increased $.5 million when compared to the same period of 2009. 2010s revenues from
hauling stumpage to other mills and other income, primarily from well-site damages, decreased $.2 million and $.5 million respectively. The decrease in operating results was due primarily to the decrease in net sales.



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##### Table of Contents

Mills

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



|                                |  |                         |      |      |     
|------------------------------- |  | ----------------------- | ---- | ---- | ----
|                                |  | Quarter Ended March 31,
|                                |  | 2010                    |      | 2009
|Net sales (millions of dollars) |  |                         |      |      |     
|Lumber                          |  | $                       | 19.8 |      | 12.3
|Residual by-products            |  |                         | 3.9  |      | 3.1 
|                                |  |                        
|Lumber                          |  |                         |      |      |     
|Finished production (MMBF)      |  |                         | 60.5 |      | 53.3
|Sales volume (MMBF)             |  |                         | 63.7 |      | 52.3
|Sales price (per MBF)           |  | $                       | 310  |      | 234 

Net sales increased $8.6 million, or 54
percent, due to higher average lumber sales prices and increased lumber sales volume. The average lumber sales price in the first quarter of 2010 increased $76 from the first quarter of 2009. The first quarter of 2010 lumber sales volume increased
22 percent from first quarter 2009. The Mills segment also benefited from lower log costs, due to the lower prices for pine sawtimber stumpage, and improved hourly production rates at the Mills.

Real Estate

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



|                                           |  |                         |     |      |    
|------------------------------------------ |  | ----------------------- | --- | ---- | ---
|                                           |  | Quarter Ended March 31,
|                                           |  | 2010                    |     | 2009
|Net sales (millions of dollars)            |  |                         |     |      |    
|Residential lots                           |  | $                       | .8  |      |   
|Chenal Country Club                        |  |                         | 1.4 |      | 1.5
|                                           |  |                        
|Sales volume                               |  |                         |     |      |    
|Residential lots                           |  |                         | 6   |      |   
|                                           |  |                        
|Average sales price (thousands of dollars) |  |                         |     |      |    
|Residential lots                           |  | $                       | 130 |      |   

Net sales for the first
quarter 2010 increased $.7 million from the first quarter 2009 due to an increase in the number of residential lots closed. The improved operating results were also due to increased residential real estate sales activity.

Corporate

The increase in
operating expense for Corporate functions was due to higher general and administrative expenses, primarily employee incentive plan expenses resulting from additional accrued taxes due to the increase in market value of share-based awards.



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##### Table of Contents

Eliminations

Intersegment sales of timber from Deltics Woodlands to the Mills segment decreased $.6 million to $4 million. The decrease was due to a lower
transfer price from the Woodlands segment and a decrease in the volume of logs coming into Deltic sawmills from its fee timberlands. Transfer prices are approximately that of market which were higher in the same quarter last year.

Equity in Del-Tin Fiber

For
the first quarter of 2010, Deltics equity in Del-Tin was $.5 million compared to $.8 million for the same period of 2009. The $.3 million decrease in the first quarter of 2010 when compared to 2009 was due to a lower sales price per thousand
square feet, (MSF) and increased resin costs partially offset by increased sales volume. Additional selected financial and statistical data for Del-Tin is shown in the following table.



|                                |  |                        |      |      |     
|------------------------------- |  | ---------------------- | ---- | ---- | ----
|                                |  | Quarter EndedMarch 31,
|                                |  | 2010                   |      | 2009
|Net sales (millions of dollars) |  | $                      | 15.4 |      | 13.9
|Finished production (MMSF)      |  |                        | 30.4 |      | 26.5
|Board sales (MMSF)              |  |                        | 31.5 |      | 26.8
|Sales price (per MSF)           |  | $                      | 489  |      | 518 

Income Taxes

The effective income tax rate was 33 percent for 2010 and one percent for 2009. The increase was primarily because 2009s federal tax benefit
was essentially offset by a discrete state tax provision.

Liquidity and Capital Resources

Cash Flows and Capital Expenditures

Net cash provided by operating activities total $4.4 million for the first three months of 2010 compared to $.4 million for the same period of 2009.
Changes in operating working capital, other than cash and cash equivalents, required cash of $.8 million and $1.5 million in 2010 and 2009, respectively. 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 $2.8 million in the current-year period and $4.7 million a year ago. Capital expenditures by segment consisted of the following:



|                                                |  |                             |       |      |       |  
|----------------------------------------------- |  | --------------------------- | ----- | ---- | ----- | -
|                                                |  | Three Months EndedMarch 31, |      
|(Thousands of dollars)                          |  | 2010                        |       | 2009 |      
|Woodlands, including land exchanges             |  | $                           | 1,423 |      | 3,966 |  
|Mills                                           |  |                             | 825   |      | 579   |  
|Real Estate, including development expenditures |  |                             | 535   |      | 168   |  
|Corporate                                       |  |                             | 49    |      | 42    |  
|                                                |  |                             |       |      |       |  
|Capital expenditures                            |  |                             | 2,832 |      | 4,755 |  
|Non-cash land exchange                          |  |                             |      |      | (35   | )
|                                                |  |                             |       |      |       |  
|Capital expenditures requiring cash             |  | $                           | 2,832 |      | 4,720 |  
|                                                |  |                             |       |      |       |  



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##### Table of Contents

The net change in purchased stumpage inventory to be utilized in the Companys sawmill operations
used cash of $.5 million in both 2010 and 2009. The Company advanced Del-Tin Fiber $.7 million in the first quarter of 2010, and received repayments of $.7 million. This compares to a net advance to Del-Tin of $.5 million for the same period of
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, were unchanged in the first quarter of 2010 versus a decrease of
$2.8 million for the same period of 2009. Deltic received proceeds from other investing activities of $.1 and $.4 million in 2010 and 2009, respectively. Deltic had no borrowings or repayments in 2010 versus net borrowings of $2 million in 2009. The
Company had $1.1 million of treasury stock purchases in 2009, while there were no purchases in 2010. Deltic paid dividends on common stock of $.9 million during both 2010 and 2009. Proceeds from stock option exercises and related tax benefits in
2010 increased $.2 million from 2009 which had no benefit since no options were exercised in that period.

Financial Condition

Working capital totaled $7 million at March 31, 2010, and $5.4 million at December 31, 2009. Deltics working capital
ratio at March 31, 2010 was 1.51 to 1, compared to 1.41 to 1 at the end of 2009. Cash and cash equivalents at the end of the first quarter of 2010 increased $.8 million from December 31, 2009. Deltics long-term debt to
stockholders equity ratio was .418 to 1 at March 31, 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 strategy for growth continues to emphasize its timberland acquisition program, in addition to expanding 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 March 31, 2010, $251 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.)

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



|                                                                                                          |  |                       |  |                                |  |                              
|--------------------------------------------------------------------------------------------------------- |  | --------------------- |  | ------------------------------ |  | -----------------------------
|                                                                                                          |  | CovenantsRequirements |  | Actual Ratios atMarch 31, 2010 |  | Actual Ratios atDec. 31, 2009
|Leverage ratio should be less than:                                                                       |  | .65 to 1              |  | .330 to 1                      |  | .332 to 1                    
|Fixed charge coverage ratio should be greater than:                                                       |  | 2.5 to 1              |  | 5.99 to 1                      |  | 5.14 to 1                    
|Minimum timber market value must be greater than 175% of total senior indebtedness, presented as a ratio: |  | 1.75 to 1             |  | 4.13 to 1                      |  | 3.97 to 1                    



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##### Table of Contents

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 the return of economic deterioration, the Company may need 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 March 31, 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 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.

Off-Balance Sheet Arrangements, Contractual Obligations, and Commitments

On August 26, 2004, Del-Tin Fiber 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 Fiber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 Fiber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 Fiber. Under Deltics guarantee agreement,
Deltic unconditionally guarantees the due and punctual payment of 50 percent ($14.5 million at March 31, 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.)



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##### Table of Contents

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        |  | $     | 5.3   |            | .6  |             | 2.4  |             | 2.3  |           |    
|Woodlands land acquisition and committed capital costs |  |       | .2    |            | .2  |             |     |             |     |           |    
|Mills committed capital costs                          |  |       | .7    |            | .7  |             |     |             |     |           |    
|Long-term debt                                         |  |       | 92.3  |            | 1.1 |             | 51.2 |             |     |           | 40.0
|Interest on debt*                                      |  |       | 18.4  |            | 3.0 |             | 5.8  |             | 4.8  |           | 4.8 
|Retirement plans                                       |  |       | 15.0  |            | .8  |             | 2.5  |             | 2.9  |           | 8.8 
|Other postretirement benefits                          |  |       | 4.6   |            | .3  |             | .8   |             | .9   |           | 2.6 
|Unrecognized tax benefits                              |  |       | 1.9   |            |    |             | 1.6  |             | .3   |           |    
|Other long-term liabilities                            |  |       | 2.0   |            | .6  |             | 1.4  |             |     |           |    
|                                                       |  |       |       |            |     |             |      |             |      |           |     
|                                                       |  | $     | 140.4 |            | 7.3 |             | 65.7 |             | 11.2 |           | 56.2
|                                                       |  |       |       |            |     |             |      |             |      |           |     
|Other commercial commitment expirations                |  |       |       |            |     |             |      |             |      |           |     
|Guarantee of indebtedness of Del-Tin Fiber             |  | $     | 14.5  |            |    |             | 14.5 |             |     |           |    
|Timber cutting agreements                              |  |       | .5    |            | .2  |             | .3   |             |     |           |    
|Letters of credit                                      |  |       | .4    |            |    |             | .3   |             | .1   |           |    
|                                                       |  |       |       |            |     |             |      |             |      |           |     
|                                                       |  | $     | 15.4  |            | .2  |             | 15.1 |             | .1   |           |    
|                                                       |  |       |       |            |     |             |      |             |      |           |     

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

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
Fiber, 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 to 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.



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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 140,000 to 150,000 tons in the second quarter of 2010 and 525,000 to 575,000 tons for the year. Finished lumber sales volume will continue to be subject to market conditions, and is estimated at 65 to 75 million board
feet for the second quarter and 240 to 260 million board feet for the year. Residential lot sales are projected to be four to six lots and 20 to 30 lots for the second 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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##### Table of Contents

|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 March 31, 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.

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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##### Table of Contents

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
|Jan. 1 through Jan. 31, 2010 |  |                              |  |                           |  |                                                                             |  | $20,434,011                                                                                  
|Feb. 1 through Feb. 28, 2010 |  | 6062                          |  | $43.00                     |  |                                                                             |  | $20,434,011                                                                                  
|Mar. 1 through Mar. 31, 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.

2Represents
 shares withheld to pay taxes in connection with vesting of restricted stock awards.



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None.



|Item 4. | Removed and Reserved
|------- | --------------------

None.



|Item 5. | Other Information
|------- | -----------------

None.



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##### Table of Contents

|        |  |  |  |                    |  |  |  |                                                                                                 
|------- |  |  |  | ------------------ |  |  |  | ------------------------------------------------------------------------------------------------
|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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##### Table of Contents

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: |  | May 6, 2010 |  |  |  | By: |  | /s/ Ray C. Dillon                                                                        
|      |  |             |  |  |  |     |  | Ray C. Dillon, President
(Principle Executive Officer)                                   
|      |  |             |  | 
|Date: |  | May 6, 2010 |  |  |  | By: |  | /s/ Kenneth D. Mann                                                                      
|      |  |             |  |  |  |     |  | Kenneth D. Mann, Vice President,
Finance and Administration (Principle
Financial Officer)
|      |  |             |  | 
|Date: |  | May 6, 2010 |  |  |  | By: |  | /s/ Byrom L. Walker                                                                      
|      |  |             |  |  |  |     |  | Byrom L. Walker, Controller
(Principal Accounting Officer)                               



31