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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2004

OR

Commission file number 1-12147

DELTIC TIMBER CORPORATION

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (870) 881-9400

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

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).    Yes  x    No  ¨.

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

Table of Contents

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

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Consolidated Balance Sheets

(Thousands of dollars)

See accompanying notes to consolidated financial statements.

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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Income (Unaudited)

Three Months Ended March 31,

(Thousands of dollars, except per share amounts)

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)

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)

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:

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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:

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:

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.

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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.)

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:

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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.)

Note 7 – Timber and Timberlands

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

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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:

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:

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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:

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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:

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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

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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.

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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.

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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.

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.

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