DELTIC TIMBER CORP.

GOVERNMENT EFFORTS to step up environmental policies will likely continue to affect El Dorado-based Deltic Timber Corp. on two fronts.

More stringent laws relating to the protection of human health and the environment could compel the company to spend more money on compliance. Deltic's previous expenditures to comply with requirements relating to air and water emissions, pesticide and herbicide use and the protection of wetlands and endangered species have not been material.

The company also is expected to be affected by the increased efforts of certain federal agencies -- the major suppliers of timber to the U.S. forest products industry -- to limit the amount of timber they offer for sale.

Deltic's sawmill in Ola will be the most affected by this development.

Timber industry developments in the last couple of years, including an Asian economic crisis that caused Western and Canadian timber companies to flood the market, have caused Deltic's stock value to drop. Deltic's stock reached $28.63 per share in April 1999, but it was hovering at about $21 just one year later.

In addition, Deltic's first quarter net income dropped to $2.2 million in 2000 from $3.9 million, which included a $4.3 million commercial sale in the company's real estate segment, in 1999.

However, the company's net sales increased 6.7 percent, from $31.3 million during the first quarter 1999 to $33.4 million during the same period in 2000.

Deltic Timber Corp., spun off Murphy Oil Corp. in 1996, is engaged primarily in growing and harvesting timber and the manufacture and marketing of lumber, The company owns about 444,000 acres in Arkansas and north Louisiana, including 397,000 acres of timberland.

In addition to its timber and lumber operations, Deltic is engaged in real estate development projects in central Arkansas and owns about 37,000 acres of farmland in northeast Louisiana.