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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549



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FORM 10-Q



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(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, 2004



OR



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



Commission file number 1-12147



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DELTIC TIMBER CORPORATION

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|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



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Securities registered pursuant to Section 12(b) of the Act:



|                                                                  |  |                                          
|----------------------------------------------------------------- |  | -----------------------------------------
|Title of each class                                               |  | Name of each exchange on which registered
|Common Stock, $.01 Par Value                                      |  | New York Stock Exchange, Inc.            
|                                                                  | 
|Series A Participating Cumulative Preferred Stock Purchase Rights |  | New York Stock Exchange, Inc.            



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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 is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934).    Yesx    No ̈.



Number of shares of Common Stock, $.01 Par Value, outstanding at March 31, 2004, was 12,094,627.



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##### Table of Contents

TABLE OF CONTENTS - FIRST QUARTER 2004 FORM 10-Q REPORT



|           |  |                                                                                       |  |            
|---------- |  | ------------------------------------------------------------------------------------- |  | -----------
|           |  |                                                                                       |  | Page Number
|           |  |                                                                                       |  |            
|           |  | PART I - Financial Information                                                        |  |            
|           |  |                                                                                      
|Item 1.    |  | Financial Statements                                                                  |  | 3          
|           |  |                                                                                      
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 15         
|           |  |                                                                                      
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 24         
|           |  |                                                                                      
|Item 4.    |  | Controls and Procedures                                                               |  | 24         
|           |  |                                                                                      
|           |  | PART II - Other Information                                                           |  |            
|           |  |                                                                                      
|Item 1.    |  | Legal Proceedings                                                                     |  | 25         
|           |  |                                                                                      
|Item 2.    |  | Changes in Securities, Use of Proceeds, and Issuer Purchases of Equity Securities     |  | 25         
|           |  |                                                                                      
|Item 3.    |  | Defaults Upon Senior Securities                                                       |  | 25         
|           |  |                                                                                      
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  | 25         
|           |  |                                                                                      
|Item 5.    |  | Other Information                                                                     |  | 25         
|           |  |                                                                                      
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                      |  | 25         
|           |  |                                                                                      
|Signatures |  |                                                                                       |  | 26         



2



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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)



|                                                                                 |  |                |         |   |               |         |  
|-------------------------------------------------------------------------------- |  | -------------- | ------- | - | ------------- | ------- | -
|                                                                                 |  | March 31, 2004 |         |   | Dec. 31, 2003 |        
|                                                                                 |  | (unaudited)    |         |   |               |        
|Assets                                                                           |  |                |         |   |               |         |  
|Current assets                                                                   |  |                |         |   |               |         |  
|Cash and cash equivalents                                                        |  | $              | 1,476   |   |               | 1,687   |  
|Trade accounts receivable - net                                                  |  |                | 5,722   |   |               | 4,350   |  
|Allowance for doubtful accounts                                                  |  |                | (115    | ) |               | (107    | )
|Other receivables                                                                |  |                | 857     |   |               | 1,041   |  
|Inventories                                                                      |  |                | 5,288   |   |               | 5,778   |  
|Prepaid expenses and other current assets                                        |  |                | 1,399   |   |               | 1,461   |  
|                                                                                 |  |                |         |   |               |         |  
|Total current assets                                                             |  |                | 14,627  |   |               | 14,210  |  
|                                                                                 |  |               
|Investment in real estate held for development and sale                          |  |                | 39,756  |   |               | 40,539  |  
|Investments and noncurrent receivables                                           |  |                | 4,723   |   |               | 6,660   |  
|Timber and timberlands - net                                                     |  |                | 216,198 |   |               | 215,040 |  
|Property, plant, and equipment - net                                             |  |                | 35,773  |   |               | 36,882  |  
|Deferred charges and other assets                                                |  |                | 941     |   |               | 979     |  
|                                                                                 |  |                |         |   |               |         |  
|Total assets                                                                     |  | $              | 312,018 |   |               | 314,310 |  
|                                                                                 |  |                |         |   |               |         |  
|Liabilities and Stockholders Equity                                             |  |                |         |   |               |         |  
|Current liabilities                                                              |  |                |         |   |               |         |  
|Current maturities of long-term debt                                             |  | $              | 64      |   |               | 64      |  
|Trade accounts payable                                                           |  |                | 1,865   |   |               | 2,772   |  
|Accrued taxes other than income taxes                                            |  |                | 1,587   |   |               | 1,246   |  
|Income taxes payable                                                             |  |                | 408     |   |               | 151     |  
|Deferred revenues and other accrued liabilities                                  |  |                | 3,471   |   |               | 2,843   |  
|                                                                                 |  |                |         |   |               |         |  
|Total current liabilities                                                        |  |                | 7,395   |   |               | 7,076   |  
|                                                                                 |  |               
|Long-term debt                                                                   |  |                | 108,040 |   |               | 115,056 |  
|Deferred tax liabilities - net                                                   |  |                | 12,786  |   |               | 12,559  |  
|Other noncurrent liabilities                                                     |  |                | 9,690   |   |               | 9,385   |  
|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                                                   |  |                | 70,344  |   |               | 69,459  |  
|Retained earnings                                                                |  |                | 120,413 |   |               | 119,888 |  
|Unamortized restricted stock awards                                              |  |                | (405    | ) |               | (14     | )
|Treasury stock                                                                   |  |                | (16,249 | ) |               | (19,103 | )
|Accumulated other comprehensive income                                           |  |                | (124    | ) |               | (124    | )
|                                                                                 |  |                |         |   |               |         |  
|Total stockholders equity                                                       |  |                | 174,107 |   |               | 170,234 |  
|                                                                                 |  |                |         |   |               |         |  
|Total liabilities and stockholders equity                                       |  | $              | 312,018 |   |               | 314,310 |  
|                                                                                 |  |                |         |   |               |         |  



See accompanying notes to consolidated
financial statements.



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##### Table of Contents

DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Income (Unaudited)

Three Months Ended March 31,

(Thousands
of dollars, except per share amounts)



|                                                             |  |      |        |   |      |        |  
|------------------------------------------------------------ |  | ---- | ------ | - | ---- | ------ | -
|                                                             |  | 2004 |        |   | 2003 |       
|Net sales                                                    |  | $    | 27,811 |   |      | 32,429 |  
|                                                             |  |      |        |   |      |        |  
|Costs and expenses                                           |  |      |        |   |      |        |  
|Cost of sales                                                |  |      | 18,197 |   |      | 21,558 |  
|Depreciation, amortization, and cost of fee timber harvested |  |      | 2,913  |   |      | 3,532  |  
|General and administrative expenses                          |  |      | 2,809  |   |      | 1,900  |  
|                                                             |  |      |        |   |      |        |  
|Total costs and expenses                                     |  |      | 23,919 |   |      | 26,990 |  
|                                                             |  |      |        |   |      |        |  
|Operating income                                             |  |      | 3,892  |   |      | 5,439  |  
|                                                             |  |     
|Equity in Del-Tin Fiber                                      |  |      | (234   | ) |      | (1,845 | )
|Interest income                                              |  |      | 58     |   |      | 28     |  
|Interest and other debt expense                              |  |      | (1,583 | ) |      | (1,623 | )
|Other income/(expense)                                       |  |      | (4     | ) |      | 45     |  
|                                                             |  |      |        |   |      |        |  
|Income before income taxes                                   |  |      | 2,129  |   |      | 2,044  |  
|                                                             |  |     
|Income taxes                                                 |  |      | (854   | ) |      | (830   | )
|                                                             |  |      |        |   |      |        |  
|Net income                                                   |  | $    | 1,275  |   |      | 1,214  |  
|                                                             |  |      |        |   |      |        |  
|Earnings per common share                                    |  |      |        |   |      |        |  
|Basic                                                        |  | $    | .11    |   |      | .10    |  
|Assuming dilution                                            |  | $    | .11    |   |      | .10    |  
|                                                             |  |     
|Dividends declared per common share                          |  | $    | .0625  |   |      | .0625  |  
|                                                             |  |      |        |   |      |        |  
|Average common shares outstanding (thousands)                |  |      | 12,021 |   |      | 11,907 |  
|                                                             |  |      |        |   |      |        |  



See accompanying notes to consolidated
financial statements.



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

Three Months Ended March 31,

(Thousands
of dollars)



|                                                                                            |  |      |        |   |      |         |  
|------------------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | ------- | -
|                                                                                            |  | 2004 |        |   | 2003 |        
|Operating activities                                                                        |  |      |        |   |      |         |  
|Net income                                                                                  |  | $    | 1,275  |   |      | 1,214   |  
|Adjustments to reconcile net income to net cash provided/(required) by operating activities |  |      |        |   |      |         |  
|Depreciation, amortization, and cost of fee timber harvested                                |  |      | 2,913  |   |      | 3,532   |  
|Deferred income taxes                                                                       |  |      | 356    |   |      | (98     | )
|Real estate costs recovered upon sale                                                       |  |      | 1,338  |   |      | 2,605   |  
|Timberland costs recovered upon sale                                                        |  |      | 64     |   |      | 330     |  
|Equity in Del-Tin Fiber                                                                     |  |      | 234    |   |      | 1,845   |  
|Net increase/(decrease) in provisions for pension and other postretirement benefits         |  |      | 664    |   |      | 493     |  
|(Increase)/decrease in operating working capital other than cash and cash equivalents       |  |      | (186   | ) |      | (1,674  | )
|Other - net                                                                                 |  |      | (117   | ) |      | 18      |  
|                                                                                            |  |      |        |   |      |         |  
|Net cash provided/(required) by operating activities                                        |  |      | 6,541  |   |      | 8,265   |  
|                                                                                            |  |      |        |   |      |         |  
|Investing activities                                                                        |  |      |        |   |      |         |  
|Capital expenditures requiring cash                                                         |  |      | (3,829 | ) |      | (12,725 | )
|Net change in purchased stumpage inventory                                                  |  |      | 71     |   |      | (840    | )
|Advances to Del-Tin Fiber                                                                   |  |      | (115   | ) |      | (1,845  | )
|(Increase)/decrease in funds held by trustee                                                |  |      | 1,738  |   |      | (29     | )
|Other - net                                                                                 |  |      | 253    |   |      | 279     |  
|                                                                                            |  |      |        |   |      |         |  
|Net cash provided/(required) by investing activities                                        |  |      | (1,882 | ) |      | (15,160 | )
|                                                                                            |  |      |        |   |      |         |  
|Financing activities                                                                        |  |      |        |   |      |         |  
|Proceeds from borrowings                                                                    |  |      |       |   |      | 11,324  |  
|Repayments of notes payable and long-term debt                                              |  |      | (7,016 | ) |      | (3,224  | )
|Treasury stock purchases                                                                    |  |      |       |   |      | (377    | )
|Increase/(decrease) in bank overdraft                                                       |  |      |       |   |      | (304    | )
|Common stock dividends paid                                                                 |  |      | (750   | ) |      | (744    | )
|Proceeds from stock option exercises                                                        |  |      | 2,896  |   |      |        |  
|                                                                                            |  |      |        |   |      |         |  
|Net cash provided/(required) by financing activities                                        |  |      | (4,870 | ) |      | 6,675   |  
|                                                                                            |  |      |        |   |      |         |  
|Net increase/(decrease) in cash and cash equivalents                                        |  |      | (211   | ) |      | (220    | )
|Cash and cash equivalents at January 1                                                      |  |      | 1,687  |   |      | 1,057   |  
|                                                                                            |  |      |        |   |      |         |  
|Cash and cash equivalents at March 31                                                       |  | $    | 1,476  |   |      | 837     |  
|                                                                                            |  |      |        |   |      |         |  



See accompanying notes to consolidated
financial statements.



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Stockholders Equity (Unaudited)

Three Months Ended March 31,

(Thousands
of dollars)



|                                                                                                 |  |      |         |   |      |         |  
|------------------------------------------------------------------------------------------------ |  | ---- | ------- | - | ---- | ------- | -
|                                                                                                 |  | 2004 |         |   | 2003 |        
|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 2004 and 2003 |  |      | 128     |   |      | 128     |  
|                                                                                                 |  |      |         |   |      |         |  
|Capital in excess of par value                                                                   |  |      |         |   |      |         |  
|Balance at beginning of year                                                                     |  |      | 69,459  |   |      | 69,075  |  
|Exercise of stock options                                                                        |  |      | 510     |   |      |        |  
|Tax benefits on stock options                                                                    |  |      | 246     |   |      |        |  
|Restricted stock awards                                                                          |  |      | 129     |   |      |        |  
|                                                                                                 |  |      |         |   |      |         |  
|Balance at end of period                                                                         |  |      | 70,344  |   |      | 69,075  |  
|                                                                                                 |  |      |         |   |      |         |  
|Retained earnings                                                                                |  |      |         |   |      |         |  
|Balance at beginning of year                                                                     |  |      | 119,888 |   |      | 114,165 |  
|Net income                                                                                       |  |      | 1,275   |   |      | 1,214   |  
|Common stock dividends                                                                           |  |      | (750    | ) |      | (744    | )
|                                                                                                 |  |      |         |   |      |         |  
|Balance at end of period                                                                         |  |      | 120,413 |   |      | 114,635 |  
|                                                                                                 |  |      |         |   |      |         |  
|Unamortized restricted stock awards                                                              |  |      |         |   |      |         |  
|Balance at beginning of year                                                                     |  |      | (14     | ) |      | (133    | )
|Stock awards                                                                                     |  |      | (422    | ) |      |        |  
|Amortization to expense                                                                          |  |      | 31      |   |      | 29      |  
|                                                                                                 |  |      |         |   |      |         |  
|Balance at end of period                                                                         |  |      | (405    | ) |      | (104    | )
|                                                                                                 |  |      |         |   |      |         |  
|Treasury stock                                                                                   |  |      |         |   |      |         |  
|Balance at beginning of year  845,600 and 898,175 shares, respectively                          |  |      | (19,103 | ) |      | (20,273 | )
|Shares purchased  15,907 shares in 2003                                                         |  |      |        |   |      | (377    | )
|Shares issued for incentive plans  126,348 shares in 2004                                       |  |      | 2,854   |   |      |        |  
|                                                                                                 |  |      |         |   |      |         |  
|Balance at end of period  719,252 and 914,082 shares, respectively                              |  |      | (16,249 | ) |      | (20,650 | )
|                                                                                                 |  |      |         |   |      |         |  
|Accumulated other comprehensive income                                                           |  |      | (124    | ) |      |        |  
|                                                                                                 |  |      |         |   |      |         |  
|Total stockholders equity                                                                       |  | $    | 174,107 |   |      | 163,084 |  
|                                                                                                 |  |      |         |   |      |         |  



See accompanying notes to consolidated
financial statements.



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2004

(Unaudited, except for
December 31, 2003)



Note 1  Interim Financial Statements



The interim financial information included herein is
unaudited; however, such information reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the Companys financial position, results of operations, and cash flows for the interim periods. All
such adjustments are of a normal, recurring nature. The results of operations for the first three months of the year are not necessarily indicative of the results of operations which might be expected for the entire year.



The financial statements in Deltics 2003 annual report on Form 10-K
include a summary of significant accounting policies of the Company and should be read in conjunction with this Form 10-Q. Certain prior period amounts have been reclassified to conform with 2004 presentation format.



Note 2  Impact of Recently Effective Accounting Pronouncements



In January 2004, the FASB issued a FASB Staff Position regarding SFAS 106,
Employers Accounting for Postretirement Benefits Other than Pensions, (FSP FAS 106-1), Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the
Act), which allowed companies to recognize or defer recognizing the effects of the prescription-drug provisions of the new Medicare Act in their 2003 financial statements. Deltic had a September 30, 2003, measurement date for its benefit plans
and during the first quarter of 2004 elected to defer recognition of the effects of the Act until the Financial Accounting Standards Board issues final guidance on accounting for the provisions of the Act. Such election did not have a material
impact on the Companys financial statements.



Note 3  Earnings
per Common Share



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



|                                                                                                           |  |                              |        |      |       
|---------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | ---- | ------
|                                                                                                           |  | Three Months Ended March 31,
|(Thousands, except per share amounts)                                                                      |  | 2004                         |        | 2003
|Net income                                                                                                 |  | $                            | 1,275  |      | 1,214 
|                                                                                                           |  |                              |        |      |       
|Weighted average number of common shares used in basic EPS                                                 |  |                              | 12,021 |      | 11,907
|Effect of dilutive stock options                                                                           |  |                              | 52     |      | 19    
|                                                                                                           |  |                              |        |      |       
|Weighted average number of common shares and dilutive potential common stock used in EPS assuming dilution |  |                              | 12,073 |      | 11,926
|                                                                                                           |  |                              |        |      |       
|Earnings per common share                                                                                  |  |                              |        |      |       
|Basic                                                                                                      |  | $                            | .11    |      | .10   
|Assuming dilution                                                                                          |  | $                            | .11    |      | .10   



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2004

(Unaudited, except for
December 31, 2003)



Note 4  Stock-Based Compensation



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



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



|                                                                                                                                                                            |  |                              |       |   |      |       |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ----- | - | ---- | ----- | -
|                                                                                                                                                                            |  | Three Months Ended March 31, |      
|(Thousands of dollars, except per share amounts)                                                                                                                            |  | 2004                         |       |   | 2003 |      
|Net income/(loss), as reported                                                                                                                                              |  | $                            | 1,275 |   |      | 1,214 |  
|Plus total stock-based compensation expense determined under the intrinsic value method for awards, net of related tax effects, included in
the determination of net income |  |                              | 163   |   |      | 70    |  
|Less pro forma total stock-based compensation expense determined under the fair value method for all awards, net of related tax
effects                                     |  |                              | (280  | ) |      | (218  | )
|                                                                                                                                                                            |  |                              |       |   |      |       |  
|Pro forma net income/(loss)                                                                                                                                                 |  | $                            | 1,158 |   |      | 1,066 |  
|                                                                                                                                                                            |  |                              |       |   |      |       |  
|Basic earnings per share                                                                                                                                                    |  |                              |       |   |      |       |  
|As reported                                                                                                                                                                 |  | $                            | .11   |   |      | .10   |  
|Pro forma                                                                                                                                                                   |  |                              | .10   |   |      | .09   |  
|                                                                                                                                                                            |  |                             
|Dilutive earnings per share                                                                                                                                                 |  |                              |       |   |      |       |  
|As reported                                                                                                                                                                 |  | $                            | .11   |   |      | .10   |  
|Pro forma                                                                                                                                                                   |  |                              | .10   |   |      | .09   |  



For the pro forma net
income calculation in the preceding table, the fair value of each option on the date of grant was estimated using the Black-Scholes option-pricing model and the following assumptions for awards in 2004 and 2003, respectively: dividend yields of .90
percent and 1.02 percent; expected volatilty of 30.00 percent and 32.69 percent; risk-free interest rates of 4.10 percent and 2.86 percent; and expected lives of five years. Using these assumptions, the weighted average grant-date fair value per
share of options granted in 2004 and 2003 was $9.50 and $7.35, respectively.



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2004

(Unaudited, except for
December 31, 2003)



Note 5  Inventories



Inventories at the balance sheet dates consisted of the following:



|                       |  |               |       |               |      
|---------------------- |  | ------------- | ----- | ------------- | -----
|(Thousands of dollars) |  | Mar. 31, 2004 |       | Dec. 31, 2003
|Logs                   |  | $             | 1,429 |               | 1,741
|Lumber                 |  |               | 3,482 |               | 3,604
|Materials and supplies |  |               | 377   |               | 433  
|                       |  |               |       |               |      
|                       |  | $             | 5,288 |               | 5,778
|                       |  |               |       |               |      



Note 6  Investment in Del-Tin
Fiber



Deltic owns 50 percent of the membership of Del-Tin
Fiber, which completed construction and commenced production operations of a medium density fiberboard (MDF) plant near El Dorado, Arkansas, during 1998.



On April 25, 2002, Deltic announced that Banc One Capital Markets, Inc. had been retained as financial advisor to assist in
the evaluation of strategic alternatives for the Companys investment in Del-Tin Fiber. Subsequently, Deltic announced that following a review of these strategic alternatives, it was determined that the MDF business did not represent a growth
area for the Company and that it intended to exit the MDF business upon the earliest, reasonable opportunity provided by the market. As a result of this decision, the Companys evaluation of possible impairment of the carrying value of its
investment in the equity method investee, as required by APB 18, was based primarily upon the estimated cash flows from a sale of the Companys interest during 2003 and resulted in a determination that the Companys investment was impaired
as of December 31, 2002, and the carrying amount of such investment was written off, to zero, for the Companys 2002 Consolidated Balance Sheet. The write-off, amounting to $18,723,000, $11,440,000 net of related deferred income taxes of
$7,283,000, was included in the 2002 fourth quarter operating results of the Company.



Due to the Companys commitment to fund its share of the facilitys operating working capital needs until the facility was able to consistently generate sufficient funds to meet its cash requirements or
Deltics ownership was sold, the Company continued to recognize its share of Del-Tin Fibers operating losses to the extent of these advances during 2003. For the year, Deltics advances to the facility approximated its equity share
of losses of the plant and amounted to $4,729,000. The Company also continued to utilize its management resources to work with Del-Tins management and the joint-venture partner to improve operating performance at the plant. As a result of
these improvements, on December 11, 2003, Deltics Board of Directors revised its intent regarding the Companys investment in Del-Tin Fiber and ceased efforts to sell the Companys interest in the joint venture while continuing to
improve operating and financial results of the plant. Due to this decision, Deltics evaluation of impairment as of December 31, 2003, was primarily based upon the estimated future net cash flows from Del-Tin Fibers operations over the
remaining life of the plant. Considering the Companys revised intent, the resulting estimated fair value of the Companys investment exceeded the investments carrying value, which was zero as of December 31, 2003, and the Company
resumed recording its equity share of the operating results of Del-Tin Fiber and will record future cash advances, if any, as increases in its investment in the facility.



9



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##### Table of Contents

DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2004

(Unaudited, except for
December 31, 2003)



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



In performing the respective impairment evaluations, the
Companys management made a number of estimates and assumptions related to future operating results for Del-Tin Fiber, the sale of its ownership interest, the expected selling price for its investment if sold, and the ability to refinance the
joint-ventures long-term debt. It is reasonably possible that a change in these estimates and assumptions might occur, which could have a material impact on the Companys future financial statements. The management of Del-Tin Fiber has
performed evaluations of possible impairment of the long-lived assets of the plant in accordance with SFAS 121 and/or SFAS 144, as applicable. To-date, these analyses have indicated that no impairment exists at the Del-Tin Fiber level.



The Company has agreed to a contingent equity contribution agreement with
Del-Tin Fiber and the group of banks from whom Del-Tin Fiber has obtained its $89 million credit facility. Under this agreement, Deltic and the other 50 percent owner of the joint venture have agreed to fund any deficiency in contributions to either
Del-Tin Fibers required sinking fund or debt service reserve, up to a cumulative total of $17.5 million for each owner. In addition, each owner has committed to a production support agreement, under which each owner has agreed to make support
obligation payments to Del-Tin Fiber to provide, on the occurrence of certain events, additional funds for payment of debt service until the plant is able to successfully complete a minimum production test. Both owners have also agreed, in a series
of one-year term commitments, to fund any operating working capital needs until the facility is able to consistently generate sufficient funds to meet its cash requirements. With the Company currently funding its share of Del-Tin Fibers
sinking fund contribution on a voluntary basis, potential future payments are estimated at approximately $29,956,000 if the Company is not able to refinance the facilitys long-term debt by its scheduled maturity date. These payments consist of
the Companys share of remaining sinking fund payments currently required of Del-Tin Fiber, including the $17,500,000 contingent equity, but exclude any future operating working capital needs of Del-Tin Fiber for which an amount, if any, cannot
be reasonably estimated due to recent improvements in the plants financial performance.



The financial position for Del-Tin Fiber as of the balance sheet dates and results of operations for the three months ended March 31 consisted of the following:



|                                                 |  |               |         |               |        
|------------------------------------------------ |  | ------------- | ------- | ------------- | -------
|(Thousands of dollars)                           |  | Mar. 31, 2004 |         | Dec. 31, 2003
|Condensed Balance Sheet Information              |  |               |         |               |        
|Current assets                                   |  | $             | 8,075   |               | 7,330  
|Debt service reserve funds                       |  |               | 3,529   |               | 3,521  
|Bond sinking funds                               |  |               | 25,559  |               | 23,059 
|Property, plant, and equipment - net             |  |               | 93,835  |               | 95,325 
|Other noncurrent assets                          |  |               | 430     |               | 491    
|                                                 |  |               |         |               |        
|Total assets                                     |  | $             | 131,428 |               | 129,726
|                                                 |  |               |         |               |        
|Current liabilities                              |  | $             | 4,716   |               | 3,462  
|Long-term debt                                   |  |               | 89,000  |               | 89,000 
|Members capital/(deficit)                       |  |               | 37,712  |               | 37,264 
|                                                 |  |               |         |               |        
|Total liabilities and members capital/(deficit) |  | $             | 131,428 |               | 129,726
|                                                 |  |               |         |               |        



10



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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2004

(Unaudited, except for
December 31, 2003)



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



|                                       |  |                              |        |   |      |        |  
|-------------------------------------- |  | ---------------------------- | ------ | - | ---- | ------ | -
|                                       |  | Three Months Ended March 31, |       
|(Thousands of dollars)                 |  | 2004                         |        |   | 2003 |       
|Condensed Income Statement Information |  |                              |        |   |      |        |  
|Net sales                              |  | $                            | 14,870 |   |      | 10,255 |  
|                                       |  |                              |        |   |      |        |  
|Costs and expenses                     |  |                              |        |   |      |        |  
|Cost of sales                          |  |                              | 12,104 |   |      | 10,851 |  
|Depreciation                           |  |                              | 1,536  |   |      | 1,237  |  
|General and administrative expenses    |  |                              | 618    |   |      | 506    |  
|                                       |  |                              |        |   |      |        |  
|Total costs and expenses               |  |                              | 14,258 |   |      | 12,594 |  
|                                       |  |                              |        |   |      |        |  
|Operating income/(loss)                |  |                              | 612    |   |      | (2,339 | )
|Interest income                        |  |                              | 62     |   |      | 31     |  
|Interest and other debt expense        |  |                              | (782   | ) |      | (832   | )
|Other income/(loss)                    |  |                              | (65    | ) |      |       |  
|                                       |  |                              |        |   |      |        |  
|Net income/(loss)                      |  | $                            | (173   | ) |      | (3,140 | )
|                                       |  |                              |        |   |      |        |  



Note 7  Timber and
Timberlands



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



|                                                                          |  |               |         |   |               |         |  
|------------------------------------------------------------------------- |  | ------------- | ------- | - | ------------- | ------- | -
|(Thousands of dollars)                                                    |  | Mar. 31, 2004 |         |   | Dec. 31, 2003 |        
|Purchased stumpage inventory                                              |  | $             | 8,617   |   |               | 8,688   |  
|Timberlands                                                               |  |               | 79,827  |   |               | 78,438  |  
|Fee timber                                                                |  |               | 193,110 |   |               | 192,007 |  
|Logging facilities                                                        |  |               | 1,773   |   |               | 1,773   |  
|                                                                          |  |               |         |   |               |         |  
|                                                                          |  |               | 283,327 |   |               | 280,906 |  
|Less accumulated cost of fee timber harvested and facilities depreciation |  |               | (67,129 | ) |               | (65,866 | )
|                                                                          |  |               |         |   |               |         |  
|                                                                          |  | $             | 216,198 |   |               | 215,040 |  
|                                                                          |  |               |         |   |               |         |  



11



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##### Table of Contents

DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2004

(Unaudited, except for
December 31, 2003)



Note 8  Property, Plant, and Equipment



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



|                              |  |               |         |   |               |         |  
|----------------------------- |  | ------------- | ------- | - | ------------- | ------- | -
|(Thousands of dollars)        |  | Mar. 31, 2004 |         |   | Dec. 31, 2003 |        
|Land                          |  | $             | 125     |   |               | 125     |  
|Land improvements             |  |               | 4,006   |   |               | 4,006   |  
|Buildings and structures      |  |               | 5,273   |   |               | 5,273   |  
|Machinery and equipment       |  |               | 71,000  |   |               | 70,520  |  
|                              |  |               |         |   |               |         |  
|                              |  |               | 80,404  |   |               | 79,924  |  
|Less accumulated depreciation |  |               | (44,631 | ) |               | (43,042 | )
|                              |  |               |         |   |               |         |  
|                              |  | $             | 35,773  |   |               | 36,882  |  
|                              |  |               |         |   |               |         |  



Note 9  Employee and Retiree
Benefit Plans



The components of net periodic retirement
expense and other postretirement benefits expense for the three months ended March 31 consisted of the following:



|                                     |  |                  |      |   |                               |      |   |      |     |      |    
|------------------------------------ |  | ---------------- | ---- | - | ----------------------------- | ---- | - | ---- | --- | ---- | ---
|                                     |  | Retirement Plans |      |   | Other Postretirement Benefits
|(Thousands of dollars)               |  | 2004             |      |   | 2003                          |      |   | 2004 |     | 2003
|Service cost                         |  | $                | 196  |   |                               | 200  |   |      | 100 |      | 90 
|Interest cost                        |  |                  | 275  |   |                               | 259  |   |      | 139 |      | 129
|Expected return on plan assets       |  |                  | (223 | ) |                               | (224 | ) |      |    |      |   
|Amortization of prior service cost   |  |                  | 12   |   |                               | (9   | ) |      |    |      |   
|Amortization of net (gain)/loss      |  |                  | 44   |   |                               | 13   |   |      | 45  |      | 42 
|                                     |  |                  |      |   |                               |      |   |      |     |      |    
|Net periodic benefit cost            |  |                  | 304  |   |                               | 282  |   |      | 284 |      | 261
|Cost of special termination benefits |  |                  | 150  |   |                               |     |   |      |    |      |   
|                                     |  |                  |      |   |                               |      |   |      |     |      |    
|Total expense                        |  | $                | 454  |   |                               | 282  |   |      | 284 |      | 261
|                                     |  |                  |      |   |                               |      |   |      |     |      |    



12



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##### Table of Contents

DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2004

(Unaudited, except for
December 31, 2003)



Note 10  Supplemental Cash Flow Disclosures



The Company had neither income tax payments or refunds in
the 2004 period, while a net income tax refund of $49,000 was received in the 2003 period. Interest paid, net of amounts capitalized, was $363,000 and $305,000 in the first three months of 2004 and 2003, respectively.



(Increases)/decreases in operating working capital, other than cash and cash
equivalents, for the three months ended March 31 consisted of the following:



|                                                |  |      |        |   |      |        |  
|----------------------------------------------- |  | ---- | ------ | - | ---- | ------ | -
|(Thousands of dollars)                          |  | 2004 |        |   | 2003 |       
|Trade accounts receivable                       |  | $    | (1,365 | ) |      | (1,767 | )
|Other receivables                               |  |      | 190    |   |      | 51     |  
|Inventories                                     |  |      | 490    |   |      | 367    |  
|Prepaid expenses and other current assets       |  |      | (65    | ) |      | 157    |  
|Trade accounts payable                          |  |      | (908   | ) |      | (1,433 | )
|Deferred revenues and other accrued liabilities |  |      | 1,472  |   |      | 951    |  
|                                                |  |      |        |   |      |        |  
|                                                |  | $    | (186   | ) |      | (1,674 | )
|                                                |  |      |        |   |      |        |  



13



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##### Table of Contents

DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2004

(Unaudited,
except for December 31, 2003)



Note 11  Business Segments



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



|                                                             |  |                              |        |   |      |        |  
|------------------------------------------------------------ |  | ---------------------------- | ------ | - | ---- | ------ | -
|                                                             |  | Three Months Ended March 31, |       
|(Thousands of dollars)                                       |  | 2004                         |        |   | 2003 |       
|Net sales                                                    |  |                              |        |   |      |        |  
|Woodlands                                                    |  | $                            | 8,194  |   |      | 9,095  |  
|Mills                                                        |  |                              | 20,512 |   |      | 19,269 |  
|Real Estate                                                  |  |                              | 3,830  |   |      | 7,852  |  
|Eliminations*                                                |  |                              | (4,725 | ) |      | (3,787 | )
|                                                             |  |                              |        |   |      |        |  
|                                                             |  | $                            | 27,811 |   |      | 32,429 |  
|                                                             |  |                              |        |   |      |        |  
|Income before income taxes                                   |  |                              |        |   |      |        |  
|Operating income                                             |  |                              |        |   |      |        |  
|Woodlands                                                    |  | $                            | 5,449  |   |      | 5,859  |  
|Mills                                                        |  |                              | 291    |   |      | (2,286 | )
|Real Estate                                                  |  |                              | 592    |   |      | 3,422  |  
|Corporate                                                    |  |                              | (2,570 | ) |      | (1,635 | )
|Eliminations                                                 |  |                              | 130    |   |      | 79     |  
|                                                             |  |                              |        |   |      |        |  
|Operating income                                             |  |                              | 3,892  |   |      | 5,439  |  
|Equity in Del-Tin Fiber                                      |  |                              | (234   | ) |      | (1,845 | )
|Interest income                                              |  |                              | 58     |   |      | 28     |  
|Interest and other debt expense                              |  |                              | (1,583 | ) |      | (1,623 | )
|Other income/(expense)                                       |  |                              | (4     | ) |      | 45     |  
|                                                             |  |                              |        |   |      |        |  
|                                                             |  | $                            | 2,129  |   |      | 2,044  |  
|                                                             |  |                              |        |   |      |        |  
|Depreciation, amortization, and cost of fee timber harvested |  |                              |        |   |      |        |  
|Woodlands                                                    |  | $                            | 1,373  |   |      | 1,901  |  
|Mills                                                        |  |                              | 1,349  |   |      | 1,483  |  
|Real Estate                                                  |  |                              | 154    |   |      | 128    |  
|Corporate                                                    |  |                              | 37     |   |      | 20     |  
|                                                             |  |                              |        |   |      |        |  
|                                                             |  | $                            | 2,913  |   |      | 3,532  |  
|                                                             |  |                              |        |   |      |        |  
|Capital expenditures                                         |  |                              |        |   |      |        |  
|Woodlands                                                    |  | $                            | 2,586  |   |      | 10,782 |  
|Mills                                                        |  |                              | 164    |   |      | 346    |  
|Real Estate                                                  |  |                              | 1,011  |   |      | 1,539  |  
|Corporate                                                    |  |                              | 68     |   |      | 58     |  
|                                                             |  |                              |        |   |      |        |  
|                                                             |  | $                            | 3,829  |   |      | 12,725 |  
|                                                             |  |                              |        |   |      |        |  

---

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



14



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##### Table of Contents

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



Executive Overview



With the exception of its diversification in real estate development, Deltic is primarily a wood products producer operating in a commodity-based business
environment. This environment is affected by a number of factors, including general economic conditions, interest rates, foreign exchange rates, housing starts, residential repair and remodeling activity, commercial construction, industry production
and capacity levels, the availability of raw material, and weather conditions. Consumption levels for softwood lumber has continued to remain high. Imports from Canada have been decreasing since the third quarter of 2003 due to significant fires and
work stoppages in the Province of British Columbia in the second half of 2003 and to the weakening of the U.S. dollar. These factors have resulted in reduced oversupply, leading to significant improvements in lumber prices that have continued into
the first quarter of 2004. Given its relative size and the nature of commodity markets, the Company has little or no control over pricing levels for its wood products. Sales of real estate are affected by general economic conditions and interest
rates, specifically as such factors are manifested in the Companys operating area of central Arkansas. A continued strong housing market, helped by relatively low interest rates and an improving economy, has resulted in continued strong demand
in the Companys residential real estate operations thus far in 2004.



For the first quarter of 2004, the pine sawtimber harvest level decreased four percent compared to last years period, from 178,000 tons to 171,000 tons. Sales prices remained relatively stable. The
Companys ability to sell pine sawtimber at acceptable prices in the future will be largely dependent upon the market for manufactured lumber and other wood products. Woodlands segment operating results for the first quarter of 2004 reflect
decreased sales of timberland for higher and better use. During the quarter, the Company sold 238 acres of non-strategic timberland at an average price of $994 per acre. Non-strategic timberland is composed primarily of tracts too small to allow
efficient timber management, those geographically isolated from other Company fee lands, and acreage otherwise not deemed strategic to Deltics operations or growth.



For the Mills segment, the improvement in lumber prices significantly impacted operating strategies and financial results.
As with any commodity market, the Company expects the historical volatility of lumber prices to continue in the future; however, a resolution of the trade dispute with Canada regarding imports of softwood lumber could help to stabilize the markets
for the Companys lumber products. Deltic continued its efforts to improve sales realizations through product and customer mix enhancement as well as production efficiencies and the cost structure at its lumber mills. As a result of the
improved market conditions, the Company modified the operating-hours structure at its Ola Mill, in April, to generate increased production volume from this mill. The Company continues to anticipate that a significant percentage of logs supplied to
both of its sawmills will come from strategically located Company fee timberlands.



Real Estate residential lot sales activity levels for the Companys real estate developments are affected by economic conditions that influence the level of housing starts in the central Arkansas region,
including general economic conditions and interest rates. Relatively low mortgage interest rates continued into the first quarter of 2004, and demand for residential lots in the Companys Chenal Valley development remains high. The reduction
from 47 lots sold in the first quarter of 2003 to 31 lots in the first quarter of 2004 was due primarily to the timing of lot offerings. Weather-related delays prevented the Company from offering for sale 128 lots that were planned for completion in
Chenal Valley during the fourth quarter of 2003. This delay, combined with strong demand, reduced available uncommitted inventory in this development to only 11 lots at the end of 2003. Construction of these planned 2003 lots plus an additional 32
lots, for a total of 160 lots in three neighborhoods, was completed in January and offered for sale on January 29, 2004. As of March 31, the Company had purchase commitments on 123 of these. The Company plans to develop another 249 lots during the
remainder of 2004. In Deltics other two



15



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##### Table of Contents

developments, Red Oak Ridge and Chenal Downs, 88 developed lots were uncommitted as of March 31, 2004. The $73,600
average sales price for residential lots sold in the first quarter of 2004 increased six percent when compared to the same period in 2003. The market value of offerings continue to increase over that of previous offerings consistent with the growth
in the central Arkansas real estate market. However, the reported average price for a specific period is largely dependent upon the mix of lot sales closed in that period. Deltics lot development plans provide for a mix of lot offerings that
represent most real estate market segments for planned communities. Of the 31 and 47 lots sold in the first quarter of 2004 and 2003, respectively, six and three, respectively, were located in the first two neighborhoods adjoining Chenal Country
Clubs new 18-hole championship golf course designed by Robert Trent Jones, Jr. Such golf course lots represent the highest market segment in the development.



Commercial real estate sales activity is by nature less predictable than residential activity. With the number of residents
in Chenal Valley, and other west Little Rock areas, growing steadily and with momentum created from previous sales of commercial acreage in the development, interest in remaining commercial offerings is increasing. While such commercial sales only
totaled two acres in the first quarter of 2004 versus 29 acres to Wal-Mart Stores, Inc. in the first quarter of 2003, on April 6, RED Development LLC announced plans for The Promenade at Chenal, a 48-acre, open-air, lifestyle shopping
center with Dillards as the anchor tenant. The terms of the contract schedule the closing of the sale of this commercial acreage before the end of 2004. As of March 31, 2004, about 473, or 67 percent, of the 710 acres of property currently
zoned as commercial in Chenal Valley is available for sale in future periods. No commercial acreage is included in the Chenal Downs development. Red Oak Ridge is planned to include approximately 80 acres of commercial property, which will be offered
for sale as this developments population density increases.



Operating results for Del-Tin Fiber are affected primarily by the overall MDF market and the plants operating performance, and both improved dramatically during the first quarter of 2004. The western composite MDF price reported in
Random Lengths rose from $337 per thousand square feet (MSF) for December 2003 to $376 per MSF for March 2004 as consumption of MDF continues to grow and the weakening U.S. dollar has reduced imports. Operationally, Del-Tin Fiber has
improved its plant uptime to 91.5 percent. Production of premium-grade board improved to a level of just under 96 percent. Wood usage per MSF produced, the largest single component of Del-Tins manufacturing cost, has been reduced. As a result,
daily production volume rose some 13 percent in the first quarter of 2004 when compared to the average for the year of 2003. Future efforts are being concentrated on making additional reductions in the plants manufacturing cost per MSF by
improving the raw material mix for the operations.



Results of Operations



In the following tables, Deltics net sales and
results of operations are presented for the quarters ended March 31, 2004 and 2003. Explanations of significant variances and additional analyses for the Companys consolidated and segmental operations follow the tables.



|                                                |  |                         |      |   |      |      |  
|----------------------------------------------- |  | ----------------------- | ---- | - | ---- | ---- | -
|                                                |  | Quarter Ended March 31, |     
|(Millions of dollars, except per share amounts) |  | 2004                    |      |   | 2003 |     
|Net sales                                       |  |                         |      |   |      |      |  
|Woodlands                                       |  | $                       | 8.2  |   |      | 9.1  |  
|Mills                                           |  |                         | 20.5 |   |      | 19.3 |  
|Real Estate                                     |  |                         | 3.8  |   |      | 7.8  |  
|Eliminations                                    |  |                         | (4.7 | ) |      | (3.8 | )
|                                                |  |                         |      |   |      |      |  
|Net sales                                       |  | $                       | 27.8 |   |      | 32.4 |  
|                                                |  |                         |      |   |      |      |  



16



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##### Table of Contents

|                                                |  |                         |      |   |      |      |  
|----------------------------------------------- |  | ----------------------- | ---- | - | ---- | ---- | -
|                                                |  | Quarter Ended March 31, |     
|(Millions of dollars, except per share amounts) |  | 2004                    |      |   | 2003 |     
|Operating income/(loss) and net income/(loss)   |  |                         |      |   |      |      |  
|Woodlands                                       |  | $                       | 5.5  |   |      | 5.8  |  
|Mills                                           |  |                         | .3   |   |      | (2.3 | )
|Real Estate                                     |  |                         | .6   |   |      | 3.4  |  
|Corporate                                       |  |                         | (2.6 | ) |      | (1.6 | )
|Eliminations                                    |  |                         | .1   |   |      | .1   |  
|                                                |  |                         |      |   |      |      |  
|Operating income                                |  |                         | 3.9  |   |      | 5.4  |  
|Equity in Del-Tin Fiber                         |  |                         | (.2  | ) |      | (1.8 | )
|Interest income                                 |  |                         | .1   |   |      |     |  
|Interest and other debt expense                 |  |                         | (1.6 | ) |      | (1.6 | )
|Other income/(expense)                          |  |                         |     |   |      |     |  
|Income taxes                                    |  |                         | (.9  | ) |      | (.8  | )
|                                                |  |                         |      |   |      |      |  
|Net income                                      |  | $                       | 1.3  |   |      | 1.2  |  
|                                                |  |                         |      |   |      |      |  
|Earnings per common share                       |  |                         |      |   |      |      |  
|Basic                                           |  | $                       | .11  |   |      | .10  |  
|Assuming dilution                               |  | $                       | .11  |   |      | .10  |  



Consolidated



The $.1 million increase in net income was the result of
improved operating results for the Mills segment and Del-Tin Fiber, partially offset by reduced operating results for the Companys Woodlands and Real Estate operating segments and increased Corporate expenses.



Operating income decreased $1.5 million. The Woodlands segment decreased $.3
million due primarily to the decrease in sales of timberland for higher and better use and non-strategic timberland, the planned reduction in pine sawtimber harvest level, and a slightly lower average pine sawtimber price. Deltics Mills
segment operations improved $2.6 million due primarily to a $46 per thousand board feet (MBF) increase in the average lumber sales price. Real Estate operating income decreased $2.8 million, primarily the result of decreased sales of
commercial acreage.



Woodlands



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



|                                 |  |                         |       |      |      
|-------------------------------- |  | ----------------------- | ----- | ---- | -----
|                                 |  | Quarter Ended March 31,
|                                 |  | 2004                    |       | 2003
|Net sales (millions of dollars)  |  |                         |       |      |      
|Pine sawtimber                   |  | $                       | 6.5   |      | 7.0  
|Pine pulpwood                    |  |                         | .4    |      | .4   
|Hardwood sawtimber               |  |                         | .1    |      |     
|Hardwood pulpwood                |  |                         | .1    |      |     
|                                 |  |                        
|Sales volume (thousands of tons) |  |                         |       |      |      
|Pine sawtimber                   |  |                         | 170.8 |      | 178.0
|Pine pulpwood                    |  |                         | 67.5  |      | 61.3 
|Hardwood sawtimber               |  |                         | 2.0   |      | .2   
|Hardwood pulpwood                |  |                         | 22.9  |      | 13.2 



17



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##### Table of Contents

|                                |  |                         |     |      |      
|------------------------------- |  | ----------------------- | --- | ---- | -----
|                                |  | Quarter Ended March 31,
|                                |  | 2004                    |     | 2003
|Sales price (per ton)           |  |                         |     |      |      
|Pine sawtimber                  |  | $                       | 38  |      | 39   
|Pine pulpwood                   |  |                         | 6   |      | 7    
|Hardwood sawtimber              |  |                         | 31  |      | 26   
|Hardwood pulpwood               |  |                         | 6   |      | 4    
|                                |  |                        
|Timberland                      |  |                         |     |      |      
|Net sales (millions of dollars) |  | $                       | .2  |      | 1.3  
|Sales volume (acres)            |  |                         | 238 |      | 1,186
|Sales price (per acre)          |  | $                       | 994 |      | 1,144



Net sales decreased
$.9 million. Sales of pine sawtimber decreased $.5 million, or seven percent, due to lower sales volume and average sales price. The pine sawtimber harvest volume level decreased four percent in accordance with the Companys planned reduction
in harvest. Sales of timberland decreased $1.1 million due to selling fewer acres at a lower average price. Operating income decreased $.3 million as a result of the decrease in net sales, partially offset by $.3 million less cost of timberland sold
due to reduced acreage sold and to a $.5 million reduction in the cost of fee timber harvested due mainly to the mix of harvest volume by company.



Mills



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



|                                |  |                         |      |      |     
|------------------------------- |  | ----------------------- | ---- | ---- | ----
|                                |  | Quarter Ended March 31,
|                                |  | 2004                    |      | 2003
|Net sales (millions of dollars) |  |                         |      |      |     
|Lumber                          |  | $                       | 17.7 |      | 16.4
|Residual by-products            |  |                         | 2.4  |      | 2.6 
|                                |  |                        
|Lumber                          |  |                         |      |      |     
|Finished production (MMBF)      |  |                         | 51.8 |      | 55.9
|Sales volume (MMBF)             |  |                         | 52.4 |      | 56.3
|Sales price (per MBF)           |  |                         | 337  |      | 291 



Net sales increased
$1.2 million, or six percent, due to higher sales prices, partially offset by reduced sales volume. Average sales price rose $46 per MBF as a result of the improved lumber market, while sales volume decreased seven percent due to a reduction in mill
operating hours and shortages in truck and railcar transportation availability. The improvement in operating results was due primarily to the same factors impacting net sales.



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Real Estate



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



|                                           |  |                         |     |      |    
|------------------------------------------ |  | ----------------------- | --- | ---- | ---
|                                           |  | Quarter Ended March 31,
|                                           |  | 2004                    |     | 2003
|Net sales (millions of dollars)            |  |                         |     |      |    
|Residential lots                           |  | $                       | 2.3 |      | 3.3
|Commercial sites                           |  |                         | .3  |      | 3.6
|Chenal Country Club                        |  |                         | 1.0 |      | .9 
|                                           |  |                        
|Sales volume                               |  |                         |     |      |    
|Residential lots                           |  |                         | 31  |      | 47 
|Commercial acres                           |  |                         | 2   |      | 29 
|                                           |  |                        
|Average sales price (thousands of dollars) |  |                         |     |      |    
|Residential lots                           |  | $                       | 74  |      | 69 
|Commercial acres                           |  |                         | 152 |      | 124



Net sales decreased $4
million or 51 percent. The number of residential lots sold decreased 16 lots due primarily to the delay in lot development from the fourth quarter of 2003 to the end of January 2004, with a seven percent increase in average sales price per lot due
to sales mix. Commercial sales decreased by 27 acres; however, the average price per acre increased 23 percent. The decrease in the Real Estate segments operating income was due primarily to the same factors impacting net sales.



Corporate



The increase in operating expense for Corporate functions of $1 million was
due primarily to special termination benefits awarded to certain employees upon retirement, increased professional fees, and increased incentive plan expenses due to additional income tax liability related to restricted stock shares awarded in 2000
and issued in 2004.



Eliminations



Intersegment sales of timber from Deltics Woodlands segment to the
Mills segment increased $.9 million, to $4.7 million. The increase was due primarily to increased volume as the Companys sawmills increased the percentage of log receipts coming into their log yards from Company fee timberlands.



Equity in Del-Tin Fiber



For the first quarter of 2004, equity loss in Del-Tin Fiber decreased $1.6
million. With its decision to cease efforts to sell its ownership in Del-Tin Fiber, Deltic resumed recording equity equal to its share of the financial results of the facility for the 2004 period. In the 2003 period, the equity loss was equal to
cash operating advances to the plant during the quarter as the decision at that time was to exit the MDF business at the first reasonable opportunity.



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##### Table of Contents

Additional selected financial and statistical data for Del-Tin Fiber is shown in the following table.



|                                |  |                         |      |      |     
|------------------------------- |  | ----------------------- | ---- | ---- | ----
|                                |  | Quarter Ended March 31,
|                                |  | 2004                    |      | 2003
|Net sales (millions of dollars) |  | $                       | 14.9 |      | 10.3
|Finished production (MMSF)      |  |                         | 37.9 |      | 32.2
|Board sales (MMSF)              |  |                         | 40.2 |      | 32.5
|Sales price (per MSF)           |  | $                       | 370  |      | 316 



Average sales price
increased $54 per MSF due to improvements in the MDF market and to a change in product mix to include a greater percentage of thin board and an increase in premium grade production. Manufacturing cost per MSF sold was down nine percent due primarily
to the lowering of certain variable costs of manufacturing and the spreading of the plants fixed costs to the increased production volume.



Income Taxes



The effective income tax rate was 40 percent and 41 percent in the 2004 and 2003 periods, respectively.



Liquidity and Capital Resources



Cash Flows and Capital Expenditures



Net cash provided by operating activities totaled $6.5 million for the first
quarter of 2004 compared to $8.3 million for the same period in 2003. Changes in operating working capital, other than cash and cash equivalents, required cash of $.2 million in the 2004 period and $1.7 million in 2003. The Companys
accompanying Consolidated Statements of Cash Flows identify other differences between net income/(loss) and cash provided by operating activities for each reporting period.



Capital expenditures required cash of $3.8 million in the current-year period and $12.7 million a year ago. Capital
expenditures by segment consisted of the following:



|                                    |  |                              |       |      |       
|----------------------------------- |  | ---------------------------- | ----- | ---- | ------
|                                    |  | Three Months Ended March 31,
|(Thousands of dollars)              |  | 2004                         |       | 2003
|Woodlands*                          |  | $                            | 2,586 |      | 10,782
|Mills                               |  |                              | 164   |      | 346   
|Real Estate                         |  |                              | 1,011 |      | 1,539 
|Corporate                           |  |                              | 68    |      | 58    
|                                    |  |                              |       |      |       
|Capital expenditures requiring cash |  | $                            | 3,829 |      | 12,725
|                                    |  |                              |       |      |       

---

|* | 2003 amount includes $10.2 million for the acquisition of 6,683 acres of timberland, of which one acquisition amounted to $9.3 million for 4,979 acres in Calhoun County, Arkansas.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The net change in purchased stumpage inventory
to be utilized in the Companys sawmill operations provided cash of $.1 million in 2004, but required cash of $1 million in 2003. The Company made advances to Del-Tin Fiber of $.1 million during the current period, which decreased from $1.8
million during the corresponding period of 2003 due to the improved operating results at the facility. During 2004,



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$1.7 million of proceeds from sales of timberland during the fourth quarter of 2003 that were held by a trustee were used
to acquire timberland designated as replacement property for income tax purposes, as required for tax-deferred exchanges. During 2004, Deltic made repayments of previous borrowings under its revolving credit facility of $7 million. In
2003, Deltic borrowed $11.3 million and made repayments of debt of $3.2 million. During 2003, purchases of treasury stock utilized $.4 million and the decrease in bank overdraft was $.3 million. Deltic paid dividends on common stock of $.7 million
in both periods. In 2004, proceeds from stock option exercises amounted to $2.9 million.



Financial Condition



Working capital totaled $7.2 million at March 31, 2004, and $7.1 million at December 31, 2003. Deltics working capital ratio at March 31, 2004, was 1.98 to 1, compared to 2.01 to 1 at the end of 2003. Cash and cash equivalents at the
end of the first quarter of 2004 were $1.5 million compared to $1.7 million at the end of 2003. During the first quarter of 2004, total indebtedness of the Company decreased $7 million to $108.1 million. Deltics long-term debt to
stockholders equity ratio was .621 to 1 at March 31, 2004, compared to .675 to 1 at year-end 2003.



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 both residential and 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, committed revolving credit facility totaling $125 million, inclusive of a $50 million letter of credit feature. The agreement will expire on July 15, 2007. As of March 31, 2004, $87
million was available in excess of all borrowings outstanding under or supported by the facility. The credit agreement contains restrictive covenants, including limitations on the incurrence of debt and requirements to maintain certain financial
ratios.



In December 2000, the Companys Board of
Directors authorized a stock repurchase program of up to $10 million of Deltic common stock. As of March 31, 2004, the Company had expended $2.1 million under this program, with the purchase of 96,206 shares at an average cost of $22.34 per share;
no shares have been purchased in 2004. In its two previously completed 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



The Company has agreed to a contingent equity
contribution agreement with Del-Tin Fiber and the group of banks from whom Del-Tin Fiber has obtained its $89 million credit facility. Under this agreement, Deltic and the other 50 percent owner of the joint venture have agreed to fund any
deficiency in contributions to either Del-Tin Fibers required sinking fund or debt service reserve, up to a cumulative total of $17.5 million for each owner. In addition, each owner has committed to a production support agreement, under which
each owner has agreed to make support obligation payments to Del-Tin Fiber to provide, on the occurrence of certain events, additional funds for payment of debt service until the plant is able to successfully complete a minimum production test. Both
owners have also agreed, in a series of one-year term commitments, to fund any operating working capital needs until the facility is able to consistently generate sufficient funds to meet its cash requirements.



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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 |       | During 2004 |    | 2005 to 2006 |      | 2007 to 2008 |      | After 2008
|Contractual cash payment obligations                   |  |       |       |             |    |              |      |              |      |            |     
|Real estate development infrastructure                 |  | $     | 1.7   |             | .5 |              | 1.2  |              |     |            |    
|Long-term debt                                         |  |       | 108.1 |             | .1 |              |     |              | 78.0 |            | 30.0
|                                                       |  |       |       |             |    |              |      |              |      |            |     
|                                                       |  | $     | 109.8 |             | .6 |              | 1.2  |              | 78.0 |            | 30.0
|                                                       |  |       |       |             |    |              |      |              |      |            |     
|Other commercial commitment expirations                |  |       |       |             |    |              |      |              |      |            |     
|Del-Tin Fiber contingent equity contribution agreement |  | $     | 17.5  |             |   |              | 17.5 |              |     |            |    
|Del-Tin Fiber production support agreement             |  |       | 12.5  |             |   |              | 12.5 |              |     |            |    
|Timber cutting agreements                              |  |       | .1    |             |   |              | .1   |              |     |            |    
|Letters of credit                                      |  |       | 1.0   |             | .4 |              | .5   |              | .1   |            |    
|                                                       |  |       |       |             |    |              |      |              |      |            |     
|                                                       |  | $     | 31.1  |             | .4 |              | 30.6 |              | .1   |            |    
|                                                       |  |       |       |             |    |              |      |              |      |            |     



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 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 judgements and uncertainties and potentially result in materially different results under different assumptions and conditions. The
Company has prepared its consolidated financial statements in conformity with accounting principles generally accepted in the United States, which require management to make estimates and assumptions that affect the reported amounts in these
financial statements and accompanying notes. Actual results could differ from those estimates under different assumptions or conditions. The Company has disclosed its critical accounting policies in its 2003 annual report on Form 10-K, and this
disclosure should be read in conjunction with this Form 10-Q. There have been no changes in these identified critical policies, nor have there been any initially adopted accounting policies having a material impact on reported financial results.



Impact of Recently Effective Accounting Pronouncements



(For information regarding the impact of recently effective accounting
pronouncements, refer to Note 2 to the consolidated financial statements.)



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Outlook



Pine sawtimber harvest levels are expected to be 150,000 to 160,000 tons in the second quarter of 2004 and 550,000 to 575,000 tons for the year. The
Companys program to consider sales of timberland identified to be non-strategic or have a higher and better use will continue, with sales for the year anticipated to be 3,500 to 4,500 acres. Finished lumber production and sales volume will
continue to be subject to market conditions, and is estimated at 55 to 60 million board feet for the second quarter and 230 to 240 million board feet for the year. Residential lot sales are projected to be 50 to 60 lots and 220 to 240 lots for the
second quarter and the year, respectively. The Company had 134 lots under contract as of March 31, 2004.



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



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Item 3. Quantitative and Qualitative Disclosures About Market Risk



The Companys market risk has not changed significantly from that set forth under the caption Quantitative and Qualitative Disclosures About
Market Risk, in Item 7A of Part II of its 2003 annual report on Form 10-K. Those disclosures should be read in conjunction with this Form 10-Q.



Item 4. Controls and Procedures



Deltic Timber Corporation (the Company) carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures as defined in Rules 13a-15(e) and 15(d)-15(e) of the Securities
Exchange Act of 1934. Such evaluation was under the supervision, and with the participation, of the Companys senior management, including the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO). Based on
this evaluation, the Companys CEO and CFO have concluded that the Companys disclosure controls and procedures were effective as of March 31, 2004, in timely alerting them to material information required to be included in any reports
that the Company files or submits under the Securities Exchange Act of 1934, as amended. In addition, such controls have been deemed to be effective in ensuring that the required information is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commissions rules and forms.



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



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##### 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 2. Changes in Securities, Use of Proceeds, and Issuer Purchases of Equity Securities



None.



Item 3. Defaults Upon Senior Securities



None.



Item 4. Submission of Matters to a Vote of Security Holders



None.



Item 5. Other Information



None.



Item 6. Exhibits and Reports on Form 8-K



| | (a) | Exhibits
| | --- | --------



| | 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.
| | -- | ------------------------------------------------------------------------



| | (b) | Reports on Form 8-K
| | --- | -------------------



| | Item 12. | Regulation FD Disclosure  Press release announcing Deltics financial results for the fourth quarter and year of 2003.
| | -------- | -----------------------------------------------------------------------------------------------------------------------



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SIGNATURES



Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



DELTIC TIMBER CORPORATION



|    |  |                                                                                                                    |  |  |  |                  
|--- |  | ------------------------------------------------------------------------------------------------------------------ |  |  |  | -----------------
|By: |  | /s/ Ray C. DillonRay C. Dillon, President (Principal Executive Officer)                                            |  |  |  | Date: May 5, 2004
|    |  |                                                                                                                    | 
|    |  | /s/ Clefton D. VaughanClefton D. Vaughan, Vice President, Finance and
Administration (Principal Financial Officer) |  |  |  | Date: May 5, 2004
|    |  |                                                                                                                    | 
|    |  | /s/ Emily R. EversEmily R. Evers, Controller (Principal Accounting Officer)                                        |  |  |  | Date: May 5, 2004



26